Lytix Biopharma ASA (LYTIX) Earnings Call Transcript & Summary

Good morning, everyone. Thank you for joining us today, and welcome to our fourth quarterly results presentation for 2024. Today, we are excited to share with you significant progress we have made in our mission to develop the future of cancer treatment. Our innovative approach, which combines the killing of cancer cells with the activation of the immune system continues to show promising results. And looking ahead to 2025, we remain committed to driving forward our strategy to generate clinical results and commercialization through partnership. I'm Oystein Rekdal, CEO of Lytix Biopharma, and I'm joined by our CFO, Gjest Breistein. So before presenting the highlights, I will give a short introduction to our company and our technology. Our innovative technology approach combines the benefits of direct killing of cancer cells and immunotherapy, leveraging molecules derived from a part of nature’s own defense system. Our licensing partner, Verrica Pharmaceuticals has achieved compelling results in the Phase II study for basal cell carcinoma, potentially positioning it as a first-line treatment. We are also excited about the 2 clinical studies we are running in late and early-stage melanoma patients with our lead drug candidate. And our next-generation molecule opens new avenues into deep-seated cancer types. The robust clinical results obtained with our lead drug candidate and a commercial agreement already in place significantly reduces risks and position us to capitalize on the growing market potential for intratumoral immunotherapy. Lytix is addressing major shortcomings in current cancer immunotherapy. Since 2010, modern cancer treatment has been revolutionized by checkpoint immunotherapy with particular good response in melanoma. However, the majority of cancer patients in most cancer types do not respond to immune checkpoint therapy due to a lack of immune cells within the tumor. Our technology addresses this challenge by enhancing the number of immune cells in the patient's tumor. In other words, we complement the shortcomings of today's checkpoint inhibitors, providing a solution to challenges faced in current cancer treatment. Our solution works through 2 phases: killing tumors locally and activating a systemic broad immune response. This dual approach ensures a comprehensive attack on cancer cells throughout the body. Let's take a look at the highlights from the fourth quarter of 2024. So we achieved solid results in the Phase II basal cell carcinoma study with our licensing partner, Verrica Pharmaceuticals. The impressive 97% calculated objective response rate and overall reduction in tumor size of 86% indicates that LTX-315 has the potential to be a first-line therapy in basal cell carcinoma. The positive results were presented in 3 different posters at the 2025 Winter Clinical Dermatology Conference in Miami, Florida. Verrica plans an end of Phase II meeting with the U.S. FDA in the first half of 2025 to determine the next steps. In the newly started NeoLIPA study, patient recruitment is ongoing and where the impact of LTX-315 in early-stage melanoma are investigated. Encouraging interim data from the ATLAS-IT-05 study show a 40% disease control rate up to 22 months in these heavily pretreated patients with a progressive disease when they enter into the study. The new superior formulation of LTX-401 represents a significant advancement for our second lead candidate. These new formulations has demonstrated substantially improved anticancer effects and will potentially extend patent life. And clinical trial preparations are underway, targeting a launch in 2026. We have successfully secured a U.S. patent for the combination of LTX-315 with PD-1 immune checkpoint inhibitors. This U.S. patent not only fortifies Lytix Biopharma's intellectual property portfolio by protecting the use of LTX-315 in combination with anti-PD-1 antibodies, but also enhances our competitive edge in the rapidly growing pharmaceutical market in U.S. We are excited to strengthen our management team with the appointment of Mette Husbyn as our new CTO. She brings extensive experience in all aspects of developing new pharmaceutical products. We successfully raised NOK 111 million from both existing and new shareholders, providing operational stability for the coming period. And we are strengthening our focus on late-stage development and commercialization through partnership. An interim results from the NeoLIPA study will be an important milestone for these activities. Now let's move on to the clinical and operational updates. Here is an overview of our clinical progress across various studies and product candidates. We have 3 Phase II studies, one led by Verrica Pharmaceuticals, showing strong results in basal cell carcinoma and 2 ongoing studies in melanoma with the ATLAS-IT-05 study in late-stage melanoma and the NeoLIPA study where LTX-315 is evaluated in combination with PD-1 immune checkpoint inhibitors, pembrolizumab in early-stage melanoma and pre-surgery. Our second lead candidate, LTX-401, with a new formulation is being prepared to enter into clinical Phase I study. When it comes to the Phase II study in basal cell carcinoma that was run by Verrica Pharmaceuticals, LTX-315 with its impressive results in basal cell carcinoma offers a potential paradigm shift in the treatment of this type of cancer. Today, about 95% of the patients are treated by surgery, which can cause pain, discomfort, bleeding, infection and scars as exemplified with this person that had to remove a part of his nose due to a basal cell carcinoma lesion on his nose. LTX-315 provided less invasive treatment and with the potential to protect against the formation of new lesions. Our partnership with Verrica Pharmaceuticals is a commercial validation of our technology. Verrica has a worldwide license to develop and commercialize LTX-315 for certain dermatological oncology indications. Under their license agreement, Lytix may receive aggregate payments up to USD 110 million upon achievement of certain development and sales milestones, along with the tied royalty payments in the double-digit teens. In November 2024, Verrica raised about USD 42 million in new capital. We are fully committed to supporting Verrica in driving efficient development and future commercialization efforts for LTX-315 for BCC and are looking forward to their end of Phase II meeting with FDA within this half year. When it comes to the ongoing ATLAS-IT-05 study, LTX-315 is tested in combination with a PD-1 immune checkpoint inhibitor in late-stage melanoma patients that have previously failed to respond to a number of cancer therapies and had progressive cancer disease when they enter into the ATLAS-IT-05 study. These patients had also failed to respond to same type of immune checkpoint inhibitors that has been combined with LTX-315 in this study. In this heavily pretreated patient population with a progressive melanoma, LTX-315 is showing promising interim results from 20 patients with this disease control in 40% of the patients and now up to 22 months, including 2 patients with a durable partial response. The impressive effects in both injected and non-injected lesions highlight the potential of LTX-315 in patients with a metastatic disease. In the NeoLIPA study in earlier-stage melanoma, we are expanding the potential of LTX-315. This study evaluates LTX-315 in combination with pembrolizumab PD-1 inhibitor administered prior to surgery in early-stage patients, which are expected to have a more responsive immune system. The study is ongoing and are led by Dr. Henrik Jespersens at Oslo University Hospital, where the aim is to shrink tumors before surgery while boosting tumor-specific immune response, potentially lowering relapse after surgery. The patient population for this study is larger, translating into significant commercial potential. Interim data are expected Q3 this year and top line results end of first half year of 2026. Regarding our second lead candidate, LTX-401, which is a small molecule to have -- seem to have a large commercial potential in solid tumor, including deep-seated cancer. With increased commercial interest and good feedback from preliminary meetings with regulatory authorities, preparations are underway to advance LTX-3401 in this new formulation towards human clinical trials. The new superior formulation of LTX-401 has demonstrated improved anticancer effects and a potential to extend the patent life of LTX-401. Additionally, LTX-401 shows strong synergy with checkpoint inhibitors, make it a promising candidate alone and in combination with immune checkpoint inhibitors in various solid tumors, including deep-seated lesions like primary liver cancer and other cancer types with liver mets. Then I will hand it over to Gjest, who will provide you with the financial update.

Thank you, Oystein. Let me now take you through our key financial updates for the fourth quarter and the strong financial foundation we have built heading into 2025. First and foremost, our most significant achievement in Q4 was the capital raise of NOK 111 million. Given the current challenges in the capital markets, this is a major accomplishment and a strong testament to the confidence investors have in Lytix. We received strong support from both existing and new investors, and we were pleased to see over 200 retail investors participate through the primary bid platform. This broad investor interest reinforces our strategic direction and potential of our clinical platform. With this capital in place, Lytix is now in a strong financial position to reach value inflection points in 2025, ensuring we continue to advance our clinical programs while maintaining strategic flexibility. Moving on to costs. We saw an increase in expenses during Q4. However, it is important to highlight that these costs were largely onetime in nature, and we expect our expense profile to decline in 2025. The biggest driver of increased expenses was higher R&D expenses, particularly related to ATLAS-IT-05. As we near the completion of this study, we conducted a thorough financial review and accrued NOK 11 million in expenses due to delayed invoicing from clinical sites. This means that most costs for ATLAS-IT-05 are now fully recognized. What does this mean for 2025? First, we expect a lower cost base as these accrued expenses won't recur. Second, with ATLAS-IT-05 wrapping up, our spending will shift to areas with the highest potential return, such as the NeoLIPA study and the next steps for LTX-401. Finally, we remain disciplined in capital allocation, ensuring that every corona spend is driving us closer to commercialization and long-term value creation. With this capital raise completed and our cost structure stabilized, let's take a closer look at our liquidity position. At the end of Q4, our cash balance stood at NOK 131 million, a significant increase from the NOK 27 million at the end of 2023. This gives us a solid runway well into 2026, allowing us to execute on our clinical and strategic objectives without short-term financing concerns. In addition to our own cash position, our licensing partner, Verrica Pharmaceuticals, raised USD 42 million in Q4. Together, this financial strength, both for Verrica and Lytix significantly derisk the development and commercialization of LTX-315. Total liabilities increased to NOK 39 million, up from NOK 13 million at the end of last year, primarily due to accrued expenses related to the ATLAS-IT-05 study. With our strengthened financial position, we remain focused on delivering long-term value through strategic commercialization efforts. Our molecules have a huge commercial potential. In previous studies, we have demonstrated efficacy in several different indications, and we are now focusing on the areas where we believe we have the best chances of success. At this stage, Lytix has the opportunity to make significant progress relatively quickly on multiple fronts. Verrica has already presented highly promising Phase II data, indicating great potential for 315 in BCC, which will generate revenue for Lytix the fastest. Strong results from NeoLIPA will demonstrate the value of our technology in metastatic cancer and position us to engage discussions with larger companies. 401 is a highly attractive drug candidate, validated by LTX-315 results, yet representing entirely new opportunities. With that, I will hand it back to Oystein for closing remarks.

Thank you, Gjest. As we conclude our presentation, I want to emphasize our persistent dedication to advancing our immuno-oncology pipeline throughout 2025. The positive Phase II results for LTX-315 in basal cell carcinoma from our partner, Verrica Pharmaceuticals have set the stage for critical discussion with the FDA in early 2025, guiding towards a Phase III study. Our ATLAS-IT-05 study in late-stage melanoma continues to show promise and the ongoing NeoLIPA study in early-stage melanoma at Oslo University in Oslo marks a significant milestone for Lytix. We anticipate interim results from the NeoLIPA study in Q3 2025, which will further highlight the commercial potential of LTX-315. We are also making progress with LTX-401 in an improved formulation, and we anticipate launching a first human trial in 2026. Our successful capital raise of NOK 111 million has strengthened our financial foundation, allowing us to start focusing on strategic partnerships to maximize stakeholder value. With a clear strategy and a robust financial position, Lytix is well positioned to drive our innovative therapies towards commercialization, benefiting both patients and shareholders. Our differentiated approach based on groundbreaking science set us apart in the biotech landscape, and we look ahead to 2025 with great optimism. Thank you for your attention. I will now hand it over to Petter Tandberg, who will take you through the Q&A session.

Thank you, Oystein, for the presentation. We have received quite a few questions. So let's just kick it off. I'll start with a question on Verrica. What patient population will Verrica target in Phase III with VP-315, for example, locally advanced BCC are located in the phase. What is the size of this population and market potential?

So I think it's important to say that this will very much be decided of the meeting with the FDA. They will have a thorough discussion with the FDA to plan for the Phase III study, sum up based on the results and safety from the Phase II study. So I think that will tell a lot. But we know that 80% of these BCC tumors are very defined tumors or lesions, which represent a large part of this very large cancer population. So I think it's a majority of BCC patients that will be eligible for treatment with LTX-315. But again, FDA will tell that. This is the most prevalent cancer among all cancer types globally. And it's a huge potential. And in U.S. annually, there is 3.6 million cases per year. And it's an increasing market. So there is a large commercial potential for LTX-315 in this largest cancer population. And I think we look very much forward to see the detailed feedback from the FDA. But we expect that the majority of the BCC cancer patients can be treated. When it comes to more advanced BCC patients, I will not comment on that and wait to see what the FDA is coming back with their decisions.

And would such a patient population be more challenging in Phase III than that of Phase II?

So when you do a Phase II study, you have some limited number of sites and limited number of patients. In this case, it was 90 patients, and you have to expand to more sites and more and a higher number of patients, of course. So we have experienced that results can change in the good way and or in the negative way because it's -- and I would say from my perspective, I think it is a very critical factor is that all these sites get a good understanding on how to administer the drug properly, which seem to have worked well in these sites that were involved in the Phase II study. But with a 97% calculated overall response rate, these results are so strong. So I will be very surprised if it is a big change in the Phase III population with regards to results.

And what advantages does LTX-315 provide versus other local therapies such as imiquimod or chemotherapy-based creams?

So 95% of the patients are treated by surgery. This 5 other percent of patients are treated with different types of systemic and local therapies. Some of the systemic therapies have shown quite high grade of toxicity. With regards to these 2 types of local therapies, immunotherapy like imiquimod and chemotherapy, I would say that LTX-315 in a way cover both. We both kill like chemotherapy, but in a different and more efficient way, but we also stimulate immune system like imiquimod. So by this, I think 315 have some very strong advantages to compare to these other localized used drugs. And I think that's the reason why they have not succeeded to replace surgery.

Moving on, we have a question on LTX-401. What is the reason for delaying the clinical Phase I for LTX-401? And what is the time estimate for conducting the Phase I?

So we were developing 401 alone, but then we had looked into to investigate whether a possibility to make new formulation to extend patent life. And surprisingly, this formulation resulted in a much more effective results with the formulation compared to LTX-401 alone. So we get 2 advantages here, prolonged patent life potentially and superior efficacy. And we had a meeting with regulatory authorities to discuss the way forward to look at this new formulation, which consists then of more than only 401, which make it a bit more complex, of course. So that will take some more time to prepare all the results with a combination of a formulation with LTX-401. So when we say 2026, nothing is carved in stone. This will be a development. But I think based on the feedback from regulatory authorities, we are more or less aligned on what we need to do. And there was no negative feedback from the regulatory choice. So this is moving, and we will keep update on how this is moving and when we can see more concrete inform about the start of Phase I. But we see this as a very promising improvement of this second generation. And I would also like to mention that LTX-315 is now the same class of molecule of therapies. And so 315 in a way validate also 401. And as we mentioned here, we are also looking for commercial opportunities, and it is also an open possibility that some pharma interested in 315 also would like to be interested in 401. So here are several avenues possible for 401.

Turning to you, you may be addressed this a bit earlier on, but if you have anything to add, what is your financial runway now?

With the capital raise in Q4, the estimated runway is well into 2026.

And a question more specific to Verrica. Do you have a backup plan if Verrica fails to meet its financial obligations to you regarding milestone payments? Are you tied to Verrica at any cost when it comes to VP-315?

So Verrica is a very good partner for us. We work very closely with Verrica, and we see how they recruited patients and delivered results with LTX-315. They have shown ability to bring other drugs to the market. Still, as everybody said, there is a bit struggle there with the sales of the market approved drug. But we can clearly see that Verrica is really focusing on developing 401 and has a focus. And I think the 3 poster at this large dermatology conference in Miami shows that they really want to push this forward and expose the results they had to also get attention from the dermatology indication. And also to answer more concrete on that specific question, yes, we have backup plans. We have rights in our contract with Verrica to get rights back if things are not moving according to what is expected in drug development.

We have a question here. Yesterday, you were stating that the patent -- so this is regarding to the patent for LTX-315 in combination. The patent will extend the effective patent life of LTX-315. What do you specifically mean by the effective patent life since it's hard to see any real extension for the LTX-315 patent?

So LTX-315 per se has a certain patent life. What we always try to do is to strengthen patent with new formulation, which we do with 401, composition of matter, combinations, method of use. And here is a potential prolonged patent life with LTX-315 in combination with pembrolizumab. For example, we get a protection for 315 in combination with anti-PD-1 and anti-PD-L1 inhibitors. And as you clearly see, we are working with that strategy, 315 in combination with anti-PD-1 inhibitor. And that means that the patent life moving forward with this combination has an extended patent life compared to LTX-315 alone. And it's correct that it's not extending the patent life of 315 alone, but we have other strategies and combinations, formulation patent protection. So this is a continuous strategy as you see to prolong patent protection of our products.

And then we have a couple of questions on NeoLIPA study. So let me just probably merge these 2. There's one on how many patients have you currently recruited? And then we have one on that you plan to release interim results or present interim results Q3 2025. Will that include all patients in the study or estimated how many are the patients?

So what we are saying and also today is that we will present top line together with Radiumhospitalet at end of first half year of 2026. So that means that not all patients are recruited this summer. The recruitment is going well. We will not, at the moment, at least, say anything about the recruitment or the number of patients. And it's an investigator-driven study done by Radiumhospitalet, it’s not our study per se, but we have a very good combination and collaboration with the team at the Radiumhospitalet. But the recruitment is going smoothly. And therefore, will be able to present interim results Q3 this year based on the proportion of the patient. But as we have clearly said, we will present top line results first half year of 2026.

And that seems to be all the questions we had today. Thanks to both Oystein and Gjest. If you have any additional questions, please feel free to reach out. You'll find the contact information on lytixbiopharma.com. And we will release the annual report 10th of April and Q1 report 15th of May. So see you then, and thanks for watching.