IRLAB Therapeutics AB (publ) (IRLABA) Earnings Call Transcript & Summary

In today's broadcast with research company, IRLAB focusing on the Parkinson's disease, we will get a presentation of the second quarter of 2024, followed by Q&A with equity analysts covering the company. Viewers can ask their questions in the live chat and I will raise as many of them as I can. With that, I agree to CEO, Gunnar Olsson, Executive Vice President, Research and Development; Nicholas Waters; and CFO, Viktor Siewertz. Gunnar, before we start, what is your overall impression of the second quarter?

We've had a great second quarter with several very good advances in our portfolio. So it is a pleasure for me to be here with the team to present the second quarter outcome to you. If we go to the slide, and if we take the next one -- and the next one. So today's agenda, I will give you the highlights and news in the period, and this will be followed by Nicholas Waters to give us an update on the R&D progress. Viktor Siewertz will then take on and give an update on the financials. And I would come back to give some concluding words before we open up the Q&A session. So next slide, please. The positive development in the beginning of the year has continued in the second quarter, as I mentioned, and we've had several important advances. Here, 4 of the key highlights for the quarter: with 757, we entered clinical studies. The first Phase I study was initiated, and this is the study that is funded by the Michael J. Fox Foundation grant. And that means that we now have 3 compounds in clinical testing in IRLAB. We came into a collaboration agreement with MSRD, a company in the Otsuka Group. And that means that we are now aiming to take this compound all the way through to clinical proof of concept. And this means that this compound is now fully financed all the way through clinical proof of concept. For pirepemat, we have the DSMB for the React-PD study. That is our Phase IIb study. We have the second or the DSMB had their second and final review to look for data integrity and safety in the study and the unanimous response and recommendation to us in the company, that is to just continue the study to completion. So that is very positive. And finally, on this slide, the Board appointed Kristina Torfgard as a new CEO for IRLAB, and we are welcoming Kristina in her new role, 1st of August this year. Next slide, please. Some words about the development collaboration with MSRD and Otsuka. The scope of this -- of this agreement that is to take 757 all the way through clinical Proof-of-Concept for the treatment of apathy in 2 populations: individuals with Parkinson's and individuals with Alzheimer's disease. And secondly, this, as I mentioned, it secures all financing through clinical Proof-of-Concept for this compound. For IRLAB, this means that we have received an upfront payment of USD 3 million and there are activity-based milestones of USD 5.5 billion. IRLAB will execute all the development activities and IRLAB will also retain the ownership and all IP rights to the product. For MSRD, in addition to paying upfront and milestones, they are also covering all costs to take the compound to clinical Proof-of-Concept. MSRD may extend this collaboration beyond Proof-of-Concept. But then there is a need to have new negotiations and new deal. And in the event that MSRD decides not to extend the collaboration, but then they are entitled to a low single-digit royalty on future sales of the product. Next slide, please. This deal brings many positive bids to IRLAB. It brings us cash flow USD 8.5 million in the near term. As I mentioned, it secures all the funding to take -- or financing to take this compound into clinical Proof-of-Concept in 2 different populations. And it, of course, provides additional external validation of what we're doing and the science that we are driving. And of course, it particularly also points out the potential of 757 in apathy. We have never communicated the total value of this deal, but just to give you as a benchmark, to take a compound into Phase I and all the way up to a clinical Proof-of-Concept that is estimated in this industry of circa USD 25 billion. Next, please. I'll give you a very brief summary of the progresses in the project. For mesdopetam, we are continuing in preparation for a Phase III start, and we are doing activities that are supporting our business development activities. For pirepemat, as I mentioned, we had the DSMB for the React-PD study, giving unanimous support to continue without changes and just complete the study and get the readout. 757, we entered clinical testing and we have started up the collaboration with MSRD/Otsuka. And for our preclinical compounds, 942 and 1117. Our preclinical projects, they are continuing according to plan. Nicholas will come back and give you more details on the R&D side of what's happening in the projects, but this is the top line summary. Next slide, please. Financial aspects in the quarter. We have now received the upfront payment from MSRD/Otsuka, USD 3 million. We took a decision to draw SEK 25 million from the loan facility provided by Fenja Capital in last December. And we have now full financing of the 757 compound development all the way to and through clinical Proof-of-Concept. The financial position that we have today, that is such that we now will be able to drive through next key value-driving milestones, and that is the mesdopetam partnering for Phase III, and it is bringing pirepemat Phase IIb, the React-PD study all the way to completion and report top line results. Next slide. As a way of bringing more information of our projects out, we are participating and presenting at investor meetings. We've done so also in the second quarter. And here on this slide, you see listed where we participate during the second quarter, So with this, I think it's time now to bring Nicholas to the stage and give you more details about all the progression that we've seen in the pipeline. Please, Nicholas.

Thank you very much, Gunnar, and I'll give you a brief update on the status of our programs. And as you all remember, we have built a pipeline over the past few years, addressing all the different stages of Parkinson's disease and the unmet needs in the disorder next. So with mesdopetam, which is our most advanced compound, ready for Phase III now. We have a drug which treats dyskinesia, which is a huge issue. And there is very poor treatment options today on the market. This is a drug which also has the potential to treat psychosis. So there is ample opportunity for expansion of the indications going forward. Next, please. pirepemat, it's a pioneering drug, which has the potential to treat falls in Parkinson, which is one of the biggest problems, and one of the most costly problems for payers around the world in terms of the direct cost for the disorder and also for the problems and also the cost for the patient that falls. Next, please. 757, addressing apathy, I'll come back to that. Gunnar has talked a little bit about it, but this is the third compound we've now brought into clinical trials. A quite impressive achievement of a small organization like ours to actually be able to push forward 3 programs at the same time. Next, 942, representing an area which is poorly treated in Parkinson's disease, and that is the cognitive aspects of Parkinson's disorder. Next, and then least -- last, but last but not least, 1117, which has the potential to become a mainstay treatment for Parkinson's, the motor symptoms, basic symptoms. All the way from the first diagnosis of PD through the disorder in full. Very interesting program as such. Next, please. go to mesdopetam and talk a little bit about the most recent progress. Next, please. This is a first-in-class compound acting as a D3 receptor antagonist. This is the first D3 receptor antagonist that is actually proven to have efficacy in LIDs in Parkinson's disease. There's lots of data out there in the literature suggesting the D3 receptor as an important player in the genesis of dyskinesias. Not only in Parkinson's disease, but also in other types of neurological disorders. We have built a patent portfolio, which we are expanding at present. We expect to have patent exclusivity or the potential to have patent exclusivity into the 40s. So that's a very long period, very fresh patterns. Mentioning the first-in-class and mentioning the mechanism here is an important aspect of the program from a commercial perspective. Those responsible for actually paying for treatments across the globe, that's in some societies, it's the governments and in some societies, there are insurance companies paying, but they are extremely focusing on novel mechanisms, novel mechanisms that can treat a disorder in a new way. So therefore, this adds value to the program. Next, please. The progress during the past 3 months has been steady as Gunnar implicated. We have -- we are right now in preparation for discussions with European authorities. If you will recall that we had a very successful meeting with the FDA concerning the plans that we have for Phase III full acceptance of our strategy. But here, we also want to have some input from European countries and the EMA of course, at the end of the day. so that we can actually adapt if there are specific aspects that are necessary to do from their perspective. We're also looking at market research activities. I mentioned that briefly before, but we are looking at how to best position mesdopetam in today's treatment algorithm. And we have collected information from payers and from paying organizations, experts around the world, helping us to actually shape the final writings of the protocols for the Phase III program. Then we have the possibility to actually start this program at the end of the year or early '25. It's not very smart to start a study in Christmas times. But in principle, we could start at the end of the year or the turn of the year. There has been some external validation of our internal research on the preclinical side as kind of publication indicating that the efficacy that we have detected in our assays and in our models actually is corroborated by studies done by others. And in addition, the scientists actually discovered that there is a reestablishment of synaptic connections or neural connections in the brain after treatment with mesdopetam. This is a kind of an indication that there could be disease-modifying properties involved in the treatment effect of mesdopetam. This is something we will follow closely over the coming years. Next, pirepemat. Next, please. We have an ongoing randomized study, as you all know, collecting data on falls. Falls is one of the biggest problems, as I said. We have high cost and loss of suffering in the Parkinson's operation due to falling. About half of all patients with PD diagnosis, falls actually recurrently. So the status of the study is that we're running it across European countries right now. We have communicated that we will complete the recruitment in Q3 this year, which means that after the 1-month run-in period where we collect baseline data and then the 3 months randomized treatment period, then we have the follow-up meetings. And then we have the database lock. After that, we can report data. We expect to be able to do that within Q1 next year. Next, please. This is also a first-in-class compound, a novel mechanism with a novel stem name by WHO. I've said that a number of times, but these are really important pieces in the puzzle of building the commercial -- the commercial value of the compound or the program. Next, please. So as Gunnar mentioned, we had the final prespecified meeting -- or not we, but the Drug Safety and Monitoring Board, which is a vehicle responsible for monitoring safety and the data integrity in any clinical trial. And in this case, they did their last prespecified assessment of the study, and they advised us to continue as is, which is very good news for the trial. Next, please. Next? Yes, sorry. Go back one. As I said, we will complete the study in Q3 in terms of randomization, which means that we will be able -- possibly able to deliver data in Q1 next year. So the 757 program, our third program entering into clinical trials, addressing apathy and this is as Gunnar explained a program, which is fully financed. We have prominent collaborators on board, both Michael J. Fox Foundation and MSRD/Otsuka, supporting the program fully financially. And apathy represents today a huge unmet medical need in Parkinson's disease and other neurological disorders. And that's why we are together with MSRD/Otsuka building a strategy for both Parkinson's and possibly Alzheimer's disease or actually Alzheimer's disease. Next, please. This drug has the potential like mesdopetam and pirepemat to be the first drug in a new class to actually treat apathy. We have received regulatory approval during the quarter to start Phase I. We have started the Phase I study. We had a record-breaking time lag between approval and start actually, we're proud of that. So we started Phase I a couple of weeks after the approval. We have, as mentioned, full funding for the program and the joint steering committee that we have set together with the MSRD is now operative, and we are working together to build the protocols for the coming studies. So a very successful start of both the study and the collaboration with MSRD. Next, please. The preclinical programs are running as we have discussed, will come -- next please, we'll go to 942 first, where we have a huge problem for Parkinson's patients is the cognitive decline that occurs during the course of the disease. And there is a huge population out there with this problem. We estimated around 5.8 million patients that are addressable. Similarly, for 1117, we have around 5.7 million patients who could benefit from a drug which treats the hallmark symptoms of Parkinson's disease without the complications. Next, please. The cognitive issues are huge in Parkinson's disease, about 25% to 30% actually have severe forms of dementia. And -- but then also another 25% to 30% have what's called MCI or mild cognitive impairment. And these are difficult to treat today. There is one approved drug to treat these symptoms, but it has also a lot of side effects. So here, we have an opportunity actually to provide something that could help these patients much better. Next, please. With the program development during H1 and Q2, we have developed additional data or generated additional data on the cognitive aspects of the drug improvements. We have started the complex CMC work that is needed, and that is the GMP manufacturing of the drug and we have also initiated the production of drug product for Phase I studies. So next step will be the tox studies when we have the API for those. And the start of those studies is, of course, dependent on availability at CROs. Next, please. for 1117, which is a novel strategy to provide a once daily treatment for Parkinson's disease without the complications that are well known for levodopa and here we have just a graph showing the 24-hour, actually, this is 10 hours, but the sustained efficacy over 24 hours after 1 dose of the drug. It hasn't been seen before with any other type of Parkinson's treatment, this longevity of efficacy. Next, please. So here, we have run through 1117 through a number of very important and predictive models of Parkinson's symptoms, we know that we can treat over a long time period. We know that we can switch from levodopa to 1117 without complications. We know that 1117 in chronic treatment does not generate the complications with fluctuations as you see with levodopa. We have full accountability for the DMPK, the drug distribution in the broad body and the brain, and we know which doses we would go for in tox studies and also in clinical trials. So now right now, we are in the process of developing the synthesis of the dry product. And this is a highly potent compound. So we won't need very much drug over the years. We have calculated that for a lifetime treatment with this drug, this potential drug, around 4 grams would be enough, a fun fact. And also, we have recently filed patents around this, both active patents covering the invention, but then also patents defending the core scope of the invention. Next, please. I will turn over to Viktor and let him go through the financial aspects of the recent period.

Thank you, Nicholas, and we can go to the next slide. This is a slide that we have shown before, and it's important because it shows the value creation that we've been able to find in the 757 project where the green line in the graph represents the likelihood of a project going to launch to be marketed and get sales on the markets. So it also represents the value, of course, of a project. So with 757, we get funding from Michael J. Fox Foundation for the first Phase I studies and then from MSRD through clinical proof of -- excuse me, Proof-of-Concept. So this will take 757 a long way along the green line without IRLAB having to pay anything for it because all costs are covered by our partners in this project. So it is actually a great deal for IRLAB and our shareholders. Next, please. So the numbers for the quarter. Cash position above SEK 98 million. And the most important thing in this slide is probably the graph in the middle, where we can see that the costs have increased quite dramatically from a bit more than SEK 30 million to almost SEK 50 million during the quarter. But you can also see that a lot of it or basically all of it is in the lightest green shade, which means that this is a cost that is covered by our partners on the 757 project. So for IRLAB and our finances are not impacted, so to speak, by the light gray shade, but only by the other -- a bit more than SEK 30 million during the quarter. So that's the most important thing to show on this graph. You can also see that the number of employees is quite stable at around 30 people. And of course, a lot of the costs that we actually do carry ourselves is due to continuing in the Phase IIb study with pirepemat and also the preclinical programs that we run. Mesdopetam also, of course, take some cost to do all the preparations for Phase III. This is just showing the net sales, which is, of course, affected by the $3 million upfront that we got from MSRD for 757. And also that is a bit more than SEK 300 million. The difference, about SEK 10 million is a result of the fact that we get payments or if we take -- we recognize the payments from our partners. We recognize that as income when we have costs that they will cover. So during the quarter, we had about SEK 10 million in cost for 757, which is reflected in the net sales as well. So those SEK 10 million are both in sales and in the cost. Yes, I think that I will leave it to Gunnar to conclude the presentation.

Thank you, Viktor. If we take the next slide, please. So some concluding words from the next slide. I will start with this portfolio slide. I want to highlight once more that this portfolio has been built over some years now with the unique discovery platform ISP. And it is a portfolio of 2 first-in-class drugs aimed to treat symptoms and complications in Parkinson's and other new degenerative diseases that are presently not really available for treatment. So it is really a need to go for very large unmet medical needs. And of course, this also gives the potential -- project for the future. Next slide, please. I return to the key highlights that I repeated it is 757 into Phase I, meaning that we now, as a small company, we have 3 clinical projects. The collaboration with MSRD/Otsuka, meaning that we have full coverage of the costs to take this compound all the way through clinical Proof-of-Concept. The pirepemat study now having passed the second and last prespecified the DSMB review with regard to data integrity and safety. That is very good news because that means that we could continue our time lines for the study. They are even more solid. And lastly, the Board has appointed Kristina Torfgard to come into the company 1st of August. Next. I want also to give some words on all our activities in business development. We have, since almost 1 year now have an intensive activity ongoing in this field. And we do definitely see that many companies around the world is now more aware of IRLAB as a company, our portfolio and our individual projects. And that is, of course, very good news. We do this by continuous and frequent interaction with potential partners. We are discussing partnership across the portfolio, but be sure for the time building, we have a very strong focus on driving activities around mesdopetam. Next slide, please. So we've talked a lot about second quarter. Now let's look forward. Over the next 12 to 18 months, we see multiple possibilities for high value creation by addressing the portfolio. So the key things to keep an eye on that is really mesdopetam. our BD activities come to hopefully having to fruition and start of the Phase III program. For pirepemat to complete the ongoing React study in falls and get the top line results and get started with business development activities to prepare for Phase III funding. 757, complete the ongoing Phase I study and initiate the first patient study to look for efficacy and safety signals. And for our preclinical compounds, 942 and 1117 to progress so that we have them in clinical phase, running Phase I studies. Next slide, please. So IRLAB, we are building on pioneering biology, and we have our unique discovery platform, the ISP, creating first-in-class drugs or compounds to build drugs, I should say. We have a focused strategy and a valid business model, we have proven that we can discover new molecules, take them into development getting to clinical Proof-of-Concept and do deals. We have a broad and solid portfolio, and we are an organization position for success. So with this, I think that we're now moving over to the Q&A session. So, over to you.

Thank you so much, very inspiring listening to your progress. And if I start off the Q&A with asking you Gunnar, why is Kristina Torfgard the person to take over where you are now?

She has a long experience in large pharma and in small biotech. She has worked from preclinical activities all the way up to with marketed products. She has been part of driving regulatory discussions partnering. I think that she will fit very well into the team here and really the team spirit of the company, that is really what we want to keep because that really was driving the very good progress that we've seen over the last year.

Thank you. And if I understand it correctly, you will stay active in the Board?

I will continue on the Board to supporting the team here as well as Kristina as we move forward because we have a very exciting position now with this portfolio, all highly innovative drugs where we start to see very good clinical data coming out.

Okay. Thank you. And by that, I will hand over to the first equity analyst, and that is Alexander Krämer at ABG Sundal Collier. Please go ahead with your questions, Alexander.

I have 2 questions. To start off with the first question. You said that you do mesdopetam market research. Will you be able to share insights from this market research at some point this year?

We can only give you top line here because always when it comes to marketing strategy information, any company has a strictly confidential bit. But I can tell you that from showing the TPPs for mesdopetam, there is a very positive response from organizations in both Europe and U.S. So our interpretation of the activities is very positive.

Okay. Very nice. And my second question relates to IRL757 and your report today, you mentioned that you have invoiced costs related to the 757 program to MSRD. And my question here would be, like what kind of costs does this cover beyond the costs that are already covered by the Michael J. Fox foundation?

Well, actually, the first ongoing study that is fully funded by Michael J. Fox Foundation. All the costs that we are invoicing to MSRD, that is cost for things that we will have then after the first Phase I study. But it is so that when you drive development, you need always to be 1 or 2 steps ahead the planning of activities. And that means that you are signing up with CROs, you're asking for production of new material, et cetera, et cetera. And that happens months before the activity actually takes place. And of course, in order to get that going, you need to come with upfront payments to the CROs that you're going to work with. And all those type of costs we are invoicing to MSRD and that's why we see that money comes in, even if we haven't started the next step activities following the Phase I study.

And let's move on to Edison Group and equity analyst, Soo Romanoff.

First, for IRL757, I think it's interesting that you're working on apathy in Alzheimer's and I kind of wanted to talk about the synergies or challenges you'd see in evaluating this patient population along with Parkinson's since that's your traditional focus. And obviously, it's a great time to be looking at Alzheimer's in general.

I think that this is something that is extremely positive. We know that apathy affects very many different diseases or individuals with different diseases. Well, the etiology may be different. Based on our preclinical studies, we believe that we will have a good effect in very many different types of diseases where apathy is a key symptom, but you really can't know until you've done the test. And that's why it's so positive that we already in the initial testing in [ MAD ], now can do this in 2 parallel populations. But of course, depending on the data and how the effect of the drug looks, we will need to make potential choices if we have good effects in both indications, we might see a parallel program for the 2 different populations. If it is other one of the population have a much stronger response than the other, maybe that is then the one to focus for the initial registration program. But the key thing that is that it's very positive that we can do this in parallel. So we don't lose time by doing this sequentially. So it's very good for us.

Yes. No, that sounds interesting. So also congratulations on the safety review for the Phase IIb pirepemat. Should the results be supportive? Do you expect to take further the Phase III development work immediately? Or would you need to foster more partnerships?

This is the beauty of the small company with a large portfolio. Things are happening all the time, meaning that we need to be very agile and nimble in our decision-making and we need to be very fast in how we support things. As I stated in my presentation, we will, of course, initiate some building activities. But depending on what's happening with mesdopetam and partnering, we might be in a position where we we'll do things differently from what we foresee today, meaning that if we have a good partnership with mesdopetam, it may be so that we have funding to do more in-house. But since we don't have that partnership here and now, we need to plan very broadly, and that's why we today states that, of course, when we have the data from pirepemat, we will also do so business development, but as a company we are very flexible, and we evaluate our position all the time as we move forward.

No, that's great. One quick question. Sorry to have so many. It was really nice to see the revenues, the SEK 42.8 million and then obviously, the $3 million upfront from MSRD for IRL757. Could we talk a little bit about the makeup and then the cadence going forward?