Medivir AB (publ) (MVIR) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Medivir AB Q1 Report 2021. [Operator Instructions] Today, I'm pleased to present Yilmaz Mahshid, CEO; Magnus Christensen, CFO; and Fredrik Öberg, CSO. Please begin your meeting.

Thank you, operator, and warm welcome to everyone joining this call. Medivir's first quarter numbers and highlights, Slide #3, please, operator. You will find our presentation on our homepage, and I do recommend everyone to read our cautionary statement, which you find on Slide #3. Let's jump to Slide #5, please. We will briefly present an overview of the company's main projects and partners and highlight a few numbers for the first quarter. To be continued with our CFO, Magnus will present the broader picture of our, what we believe, strong financial position, followed by an update on our recently announced partnerships. Then we'll be touching up on our 818 project for liver cancer and round up the presentation with a Q&A. Slide #6, please. Our proprietary asset, 818, is a liver-directed nucleotide prodrug and has received orphan drug designation, both in EU and the U.S. We did recently announce the safety follow-up of the last patient has been completed and recommended dose for the upcoming combination therapy has been determined. As previously communicated, we will announce next study in more details later in this quarter. Our internal goal is to initiate the next study during second half of this year. We did in the quarter out-license birinapant to IGM Biosciences and have also out-licensed one of our preclinical projects, USP7 to Ubiquigent. In parallel, we have completed a successful financing of the company, specifically to drive the next phase of our 818 molecule. In the rights issue, the specialist investor HealthInvest has become a new major shareholder, and we did receive good support from existing shareholders, Linc AB and Nordea. And we do also have 2 programs partnering that is remetinostat and MIV-711. Slide #7, please. A snapshot of our clinical assets where we have our proprietary project, 818, which is a liver-directed nucleotide prodrug. Currently, as I mentioned, completed the monotherapy Phase Ib, where the recommended dose has been determined, where we can now continue into a combination study phase. Our partnered asset, IGM, where we continue to expect initiation of a Phase I trial later this year. And we do have our 2 other assets, remetinostat and MIV-711. Remetinostat, a topical HDAC inhibitor, where there have been conducted clinical trials in CTCL, basal cell carcinoma and also a smaller trial in squamous cell carcinoma, where data has still -- have not been disclosed. For 711, the company, as in the past, concluded an osteoarthritis Phase II study. With that, I'll hand over to Magnus Christensen, CFO of the company, for financial highlights of the company.

Thank you, Yilmaz. Please go to Slide #9, please. And here, you can see the financial summary for the quarter 1 this year compared quarter 1 last year. And bear in mind, all numbers are in million SEK. And you can see in the Q report in the last year and this Q1 report for this year, Medivir has been very, very cost conscious. And for example, we have reviewed all our external agreement. And as a result, you can see the cost base is much lower now as a result for that. And then if you look at the numbers for Q1, you can see the turnover quarter 1 amount to SEK 9.9 million, which is an increase of SEK 2.6 million compared to last year, and that really relates mainly to the out-license of birinapant to IGM Biosciences, which Yilmaz described earlier. And as we continue to be very cost conscious, for example, we have received this quarter a refund from previous clinical studies, and this is shown as other operating income. Overall, we have lower external expenses, which amounts to SEK 18.8 million compared to SEK 20.7 million. And please note that the revenue share to Tetralogic regarding the out-licensing of IGM of birinapant is included in this figure. Lower personnel cost relates to less number of FTE employed and amounts to SEK 5.8 million compared to SEK 7.3 million. And the loss for the quarter 1 is around SEK 8 million, improvement from SEK 23 million last year. And the cash flow from the operating activities this quarter amounts to minus SEK 1.5 million, which is a nice improvement from last year of SEK 16.6 million (sic) [ minus SEK 16.6 million ]. And if we sum up the cash position at the end of Q1, it's SEK 269 million. And the increase relate mainly to the rights issue and directed issues carried out in this quarter 1 and totaled SEK 223 million before the transactional costs. And according to our current plan, the cash run rate is well into the year 2023. Next slide, please. Financing secured to bring MIV-818 study into the next phase. I think we have informed you earlier about the rights issue. It was completed successfully and oversubscribed with 93.5%. And with the directed issues carried out in Q1, Medivir received a total of SEK 223 million before transaction costs. And with this, Medivir has now a very strong ownership base with 3 strong institutions: Linc AB, especially invested with around 10.5% shareholders; Nordea, one of the largest banks in the Nordics with almost 9% shareholder; and HealthInvest, a specialist investor with around 6.5% shareholder. And thank you all existing shareholders and the new shareholders for participating in the rights issue and directed issue. And with that, I turn back the call to Yilmaz.

Thank you, Magnus. Let's jump forward to describe our latest partnerships. Slide #12, please. As mentioned during the quarter, we did sign a licensing agreement with IGM Biosciences, a California clinical-stage biotechnology company focused on creating and developing engineered IgM antibodies. Birinapant is intentionally -- initially intended to be combined with IGM-8444. This is an IgM antibody targeting Death Receptor 5 being developed by IGM where birinapant has been shown to enhance antitumor activity preclinically. After signing, we did receive an upfront payment of $1 million, which has now been recognized in the numbers, as Magnus mentioned. This will be followed by an additional $1.5 million when birinapant is included by IGM in a clinical Phase I study. Should birinapant be successfully developed and approved, Medivir is entitled to receive development and regulatory sales milestone payments up to approximately $350 million plus tiered royalties from the mid-single digits up to mid-teens on net sales. As mentioned, a portion of the milestones and payments received from IGM will be distributed to Tetralogic, but the majority of the payments will be in the hands of Medivir. Next slide, please, Slide 13. Slide 13 is a picture presented by IGM Biosciences why they do believe in the combination of 8444 together with birinapant. As you can see in this triple-negative breast cancer model, we see that the combination of 8444 with birinapant inhibits the tumor growth almost completely, whilst birinapant itself do not have any impact on the tumor growth and IGM-8444 have had a slight impact on the tumor growth. Slide 14, please. In February this year, we concluded a licensing agreement with Ubiquigent, and that was based on our preclinical research program, USP7. The agreement grants Ubiquigent an exclusive global license to develop and commercialize all of the program's related substances in all therapeutic indications. In exchange, we get an agreed revenue sharing upon successful development or commercialization. Also remember, last year, in the first quarter 2020, Medivir entered into a licensing agreement with the U.S. biotech company, Tango Therapeutics, for the preclinical USP1 research program. Tango recently announced that they will conduct an SPAC IPO and that they expect to file an IND for the USP1 inhibitor in 2022. Next slide, please. Now we'll be jumping over to our proprietary project, 818. I'll hand over next 2 slides to our CSO, Fredrik Öberg.

Thank you, Yilmaz. So moving into the MIV-818 project. During the development of MIV-818, the focus was to achieve an orally administered prodrug, which was stable in the gastrointestinal tract, stable in blood, but rapidly metabolized when entering the liver. So by that, we sought to achieve high exposure of the drug in the liver while minimizing systemic exposure that we don't need to treat the liver cancer. So the prodrug is taken up by the liver, and it's converted in liver cancer cells to troxacitabine triphosphate, which is the active metabolite. This is done by separate series of enzymes, and it does several things: First of all, the generated metabolites, the phosphates are charged and get trapped in the cells. Second, you increased the potency as compared to troxacitabine by doing this -- adding this prodrug more to the molecule. Once the active metabolite is formed, it's incorporated into DNA and replicating cells. Only proliferating cells are damaged by this mechanism. It causes DNA damage. It causes cell death in the cancer cell. So if we move to Slide 17. We have, of course, in the Phase I study as a primary objective to explore safety and tolerability. But we have additional objectives, and those were to establish a proof-of-concept. And what we do see by analyzing the biopsies that we obtained from tumors from patients is that we have a very clear selective effect signal in liver cancer cells. So we measure this by measuring DNA damage response. We observed that in the tumor cells only, normal liver is minimally or not at all affected. And pre-dose biopsies show that this is induced by the drug. This is also across different types of primary liver cancers, so both metastasis from other tumor sites, hepatocellular carcinoma and lung carcinoma. So all indications are affected by the drug specifically in the tumor and not in the normal liver. And then I'll hand over to Yilmaz to describe the markets.

Thank you, Fredrik. Slide 18, please. We have and continue to believe that the HCC market is an attractive segment of the cancer market at the moment. We believe it will grow rapidly in the coming years. Factors that we believe will drive the market is the entry of new combination therapies, which will drive increased usage of drugs, improved survival rates and treatments of patients earlier in their disease. We believe this is just the beginning. And with 818, we intend to become part of these future combination therapies. As mentioned by Fredrik in the mechanism of action, we believe 818 can be combined with multiple other drugs, both approved and in clinical development. As mentioned, we will update you on the next study for 818 during this quarter. It is also gratifying to see that global data and other sources of data that compile the future growth of this market has updated their numbers to become more aligned with our and others' view of the coming development in this space. Currently, the market is expected to grow fivefold in the coming years. Next slide, please, Slide 19. During the quarter, in April 19, it was announced that the last patient had undergone the safety follow-up, and the results were positive with a good safety and tolerability profile. Starting dose was determined for the second part of the Phase Ib study, where 818 will be given in combination with other therapies. The combination therapy is planned to be initiated in the second half of 2021. The results from the Phase Ib monotherapy will be presented at an upcoming conference. We should mention that there are still 3 patients on treatment in the Phase Ib monotherapy study. Next slide, please, Slide 21. We have 2 clinical-stage assets for partnering. Remetinostat is a topical HDAC inhibitor, where we do have positive Phase II data in CTCL. In the CTCL study, we saw an overall response rate of 40% at the highest dose treated and a decrease in pruritus of 80%. In basal cell carcinoma, the study conducted by the Stanford investigators, the top line data has been disclosed. The overall response rate was approximately 70% in this study. However, detailed data still need to be published, and we expect that to be published in the future. And we are still awaiting top line data from the squamous cell carcinoma study, also conducted by the Stanford group to be published. We hope to keep you updated when that data is available. Next slide, please, Slide 22. Finally, I think the company has made great advances in the last 6 months. We do have strong finances to aggressively bring 818 into the next stages of clinical development. We have created a strong shareholder base, and we have licensed out birinapant to attractive terms. If all goes according to the plan, we should have initiated our next study with 818 in the second half of this year, and our partner IGM should have initiated the combination therapy with birinapant also in the second half of this year. And in connection with the Annual General Meeting, I will leave the operational role as the CEO of Medivir. I'm pleased to be proposed as a Board member of Medivir and look forward to continue to contribute to the company's development in that role. The Board's work to recruit my replacement as CEO is in full swing but not yet fully completed. During this interim time, our CFO, Magnus Christensen, will head the company. I would like to thank my competent and dedicated colleagues at the company for this exciting and inspiring period and assure my successor that Medivir has good prerequisites and a very strong potential to create value for health care and patients as well as for our shareholders. We do stand on strong grounds. With that, operator, I would like to open up for a Q&A session.

[Operator Instructions] Our first question comes from Joe Pantginis from H.C. Wainwright & Co.

I have just 2 logistical questions at this point. So first, definitely looking forward to the expansion studies for 818 in combination and was just curious if you could just remind us about the supply chain for 818 and manufacturing capabilities and readiness.

Absolutely. I think I will hand that question over to Fredrik. He is much more closer into the supply chain.

Yes. We have available drug for the combination study, so it's a question of labeling and distribution. So that has already been produced.

Got it. Got it. And then the other thing is on the management front. So Yilmaz, thank you for your tenure, and I'm glad you're staying on the Board with the successful turnaround that's been going on at the company and you really have a new strategy in place. So thank you for that. So I guess the question that I have for you being now on the Board as well as like for Uli, who is the Chairman, is what are the leadership characteristics or qualities that you're looking for in a new CEO candidate?

Thank you for the question, Joe. I think there are a couple of aspects. I think the first aspect, given that we are -- we do have strong financial grants in place right now. It's all about keeping the speed up in the clinical development. So operationally, it's one of the focus. But also, in corporate development, we still have 2 assets that need to be out-licensed, for example, find partners for. So I think that's one of the characteristics that we are also looking for, to have these 2 experiences in the upcoming leader of the company.

Our next question comes from Niklas Elmhammer, Redeye.

I was -- I apologize. I thought I missed something you said about the income sharing with Tetralogic. How is that booked?

Thank you for the question, Niklas. I will hand over that to Magnus, our CFO.

Niklas, thank you for your question. No, it's -- according to the revenue share agreement that we have with Tetralogic, part of the revenue that we receive from IGM regarding birinapant will be shared to Tetralogic, and that is booked as other external expenses.

Okay. Okay. And just another financial detail, the refund for clinical costs, could you remind us what that is about?

You mean the refund?

Yes.

No. It's that like -- we are reviewing all agreements that we have today and passed and really reviewing the terms and condition. And so it's really a renegotiation that we -- and the summary of that is that we will receive a refund -- where we have received a refund from the trial that we've done, the clinical study.

[Operator Instructions] There appear to be no further questions. I'll return the conference back to you.

Thank you, operator. Thank you, everyone, for the questions and for listening to our first quarter financial highlights and also operational highlights. I think we are standing on 2 strong fundamentals, and we believe we can create some good value for patients and shareholders going forward. Thank you.

Thank you. This does conclude today's conference call. Thank you all for attending. You may now disconnect your lines.