PeptiDream Inc. (4587.T) Q2 FY2025 Earnings Call Transcript & Summary

Good evening, and welcome to PeptiDream's Second Quarter 2025 Earnings Call. This is Yen Ting Chen, Head of Business Development. And with me today on this call is Patrick Reid, Chief Executive Officer of PeptiDream. For today's call, Patrick will provide some recent updates and perspectives. [Operator Instructions] I would like to remind you that this call will contain remarks concerning PeptiDream's future expectations, plans and prospects. Actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors. In addition, any forward-looking statements represent our views only as of the date of this call and should not be relied upon as representing our views as of any subsequent date. We specifically disclaim any obligations to update such statements. Today's call is recorded and will be disclosed on the PeptiDream website. And with that, I'd like to turn the call over to Patrick.

Good evening. Good morning and good afternoon, everyone. Welcome to our second quarter fiscal year 2025 financial results presentation. In today's call, we will -- on Slide 2, we'll go an outline of Q2 fiscal year 2025, consolidated financial results. We'll go over a few of the key topics that have happened in the first half of this year and outlook for the rest of the remaining half of the year. Also, we'll touch on briefly the results of the Special Investigation Committee report that was issued today. And then finally, we'll move into a Q&A session, where we'll happily take any questions and/or comments from any of the attendees. Initially, on Slide 4 is our performance overview for the first half of fiscal year 2025 as of note to date, we've had revenue of JPY 8.543 billion between the drug discount rate business, the [indiscernible] business and the Radiopharmaceutical business [indiscernible]. At current core operating profit is minus JPY 2.6 -- roughly minus JPY 2.6 billion. Net income is minus roughly JPY 2.1 billion. Our forecast for the full fiscal year remain unchanged from those provided in February, and we are still anticipating reaching our revenue target forecast of JPY 49 billion in addition to the core operating profit, operating profit and net income values listed on Slide 4. On Slide 5, is just a little bit further information around the patterning side of the business for this year, this fiscal year. We have had a relatively from a financial perspective, a relatively low first half of the year with revenues coming in at around JPY 0.8 billion and we're expecting the second half of this year to be quite significant in helping us reach our intended forecast numbers largely in the second half. Again, I think the highlight is the out-licensing of our myostatin program, which I will touch on subsequently. We also have a number of other opportunities we're currently pursuing in addition to roughly JPY 3.7 or so billion worth of expected milestones and/or other R&D funding considerations were expecting to receive. 2025 actually looks very similar to 2022 for us. For those who remember, in 2022. Also, we had closed 2 large deals in December, allowing us to hit our significant or exceed our forecast for that year. Unfortunately, 2025 is shaping up to be something similar to that, where we are looking to having a number of these closed later at the end of the year instead of early in the like we did in 2024. On the subsequent slide, Slide 6 is in relation to the PDR Radiopharma business. The company continues to operate very solidly with largely quarter-on-quarter earnings coming in close to roughly JPY 4 billion on average. We are seeing increasing sales of mode the Alzheimer's diagnostic agent, basically week-over-week and quarter-over-quarter. So this has been a continuing trend from the end of last year and is extremely positive. So we're very happy to see that. We're also expecting to see our therapeutic and the [indiscernible] MIBG to further see use expansion, which also should allow for further sales of that product. And I think we're seeing this overall good sales across the other pet imaging products that we have and also our related kind of hardware and software related services that are being -- that the company has been providing and focusing on are also seeing increasing growth. So that's very positive. And these are, of course, offset a little bit by an overall global general market decline and simply just the use of spec imaging. So as many of you may be aware, spec imaging is in essence of older type of technology, certainly, at least in comparison to PET/CT and MRI in those type of immune technologies have seen continued refinement improvements technology innovations that are making them significantly improve the diagnostic capabilities in efficiency. So I think this is quite -- this is a global thing that's actually happening in the market and nothing specific, of course, to PD Radiopharma at all, but we believe we're well positioned to see increasing in pet products as we see slow decrease in stack box. Nicely though, the spec products have largely stabilized over the last couple of quarters. So this slow market decline. At this stage, it's very slow. So I think that is an overall positive. It is not declining rapidly or something that we need to be conservative. So we think we're in the optimal position Also, as everyone is very much aware for PD radiopharma, but the end goal, of course, is to get the therapeutics moving towards the market, bringing those to market and securing the related product sales will be a key driver for future Paratopharma growth, which we'll be touching on in subsequent slides. On Slide 7 is just the current consolidated balance sheet through the first half of the year. Of note, of course, is that we remain negative overall, which we have announced happened at the end of -- in 2024. And of course, we've maintained that. Additional, as we are continuing to trend in the right direction as far as the ratio of equity attributable to owners of the parent total assets, right? And so this, we had dropped down to about 50% on the acquisition of PDR Radiopharma. And since that time, it has, of course, slowly grown as of this moment is around 68%. And again, we're aiming in the short term to past 60%, which we've now done. We had pension previously in 2024. That was the short-term goal. So we've actually achieved that already. and that the next level is to get us into the 70% to 80% range. And so I think everyone here feels we're very much on target to also achieve that goal in the future. So the business overall is doing fantastic. On Slide 8 highlights the current consolidated cash flow position. We closed fiscal year 2024 with 40 -- roughly JPY 48 billion in cash and cash equivalents on hand. As of now the end of June here of the close of Q2, we have roughly JPY 33.3 billion of cash and cash equivalents. The decrease in that cash position, of course, has -- was -- a big part of that was associated with income taxes that were paid for and adjustments that were paid for in the early part of the year. And then, of course, impacts the cash flow on the acquisition of both [indiscernible] that was done. And then, of course, we have outstanding loan payments that have been made over the first half of the year, all contributing to a reduction in that current cash position. Again, as we're very much slated to see significant revenue in the second half of the year, we believe we're well positioned to get us back to where we want it to be. So still, again, very, very well excellent cash position to continue to off-trade on our overall strategy. On Slide 10, is getting into the -- some of the topics we wanted to touch on to the call today. This slide outlines what has begun really our 5 core areas of focus as we separate this into 2 general categories with the radiopharmaceutical business. Of course, on one side, and then the nonradio pharmaceutical business on the other, which compose is largely composed of 4 main core areas: peptide therapeutics, both oral and injectable [indiscernible] as well as programs within the peptide drug contact space, but calling these [indiscernible] PDCs, cytotoxic PDCs and then to the right is [indiscernible] and so these 4 core areas sit in our non-radio pharmaceutical business. And then the fifth area, of course, is the radio pharmaceutical business. And these are really what the company is very much focused on delivering new agent in new programs in. On the next slide, on Slide 11. This just highlights a few of the achievements that happened occurred in the first half of 2025. So as everyone is aware, our CA 9 program, which is a wholly owned in-house [indiscernible] program. The results of the Phase I study, which was performed in 2024 were presented at the ASCO GU conference in February with excellent feedback. We also presented at the Nuclear Medicine Annual Meeting in June, the in vivo study results of the ACGN-225 agent in a colorectal cancer model. And this program is nicely progressing forward. We are -- have just started to have pre-IND meetings with the FDA actually already starting to get feedback in preparation for a future IND filing of course. We've also now selected our clinical CRO that we will be using to run this study in the United States was recently done. And so this program is moving exceptionally well as our first wholly owned program to take in the clinic sometime in early '26. I think once we have definitive of course, dates, we will make that information public. Right now, it's slated to happen sometime in early '26, we believe. The second program that we had announced at the end of last year was our 18.2 -- this is being developed for both gastric cancer and pancreatic cancer. We presented some of these results also at the MI meeting in June and also at the AACR meeting in April. At current, we're planning to follow a similar scheme to the CD program anticipating running a Phase 0 study here in Japan in certain cancer patients utilizing the diagnostic. The goal of those course of those Phase 0 studies, very similar to the CAI is really confirmed that this molecule in humans, of course, locates to tumors and get some early kind of PK, PD on the program, which is very confidence inspiring. We have high hopes for this program. We do intend to the 18.2 similar to the CAI to take this into a Phase I study ourselves. And we are actually investigating whether this study will be run in the U.S. similar to C9 or whether -- we're also investigating -- potentially taking this into a Phase I in Australia or China as potential other options. I would say, at this stage, all of those options are on the table and being investigated for the various pros and cons that they may entail. So again, with something around 18.2, we'll announce more once we have any definitive decisions made on that program. But working extremely well. IND package is going very, very well. So we like where that program sits. The third topic is around the [indiscernible] and also the copper-based PSMA IC, so the therapeutic lutetium, the diagnostic copper that we announced in October of 2024. We have been working with Curium very closely. The PDR folks have been working with caring very closely to get together the clinical development and commercialization plan in Japan. We've already had numerous interactions and discussions with the PMDA about the design of this study, and that culminated in the IND application being filed for a clinical study of both of these announced just recently here in July of 2025. And so as of note, these are actually registrational studies. So these will be conducted as bridging studies into Japan, utilizing the Phase III data that have been generated overseas by [indiscernible] to run these studies and then seek approval for both compounds subs. The fourth topic here excitingly is also our Glypican 3 project that had came from our collaboration from -- with [indiscernible] so this is a [indiscernible] course identified peptide conjugated to a [indiscernible] contains either the therapeutic CTM-225 or the diagnostic Gallium-68. That Phase Ia/Ib study commenced in late 2024, early 2025, and we announced that in January 2025. As many of you would be aware, for the raised file for this [indiscernible] retains Japan rights or the option to own Japan rights development commercialization rights to this program for both programs, in which we intend, of course, to exercise that option. And once the Phase I study is completed in United States, that we would then work with raise bio to hopefully join a registrational study subsequent to that. Again, as we get closer to those definitive decisions on those, we'll make those public, but we're very excited about the -- this program moving forward. It was the first one to come from that raise vial, which is now raised by BMS collaboration. The last one, the topic #5 is also very exciting from our Novartis collaboration is the first program also to originate there. This moved into a Phase IIb in December of 2024. It has against the target fat, which is a tube micro environment target. So it is fab is not expressed directly on the tumors themselves, but in fact, expressed on fibroblast that are part of the cancer microenvironment. The therapeutic is using lutesium and the diagnostic is using gallium and we were very excited that Novartis actually presented or only presents these preclinical results of both of these programs at AACR this year in April and they were selected as one of the leading oral presentations to do. And so it's really that to see. And they positioned this as a best-in-class compound against the fab target. And I think that's saying something. So as many of you are largely aware, [indiscernible] was kind of one of the first, I would say, the first major, I guess, targeted RI therapeutic against SSTR2 target. And then we have, of course, [indiscernible] and the PSMA IT example that are against the PSMA target as kind of the second big target in targeted radio therapeutics. And now [indiscernible] is largely believed to be the third next large one. And because of the fact that SAP is in fact expressed in the tumor microenvironment, there's potentially 30 different types of tumors that could be utilized. So this actually has a very, very large potential market in comparison larger than both Lutathera and PSMA targeting [indiscernible]. So significant upside in the fat market. So very excited to actually have this announced and moving forward. So those are kind of the 5, I'd say, highest or highest and cheapest, highest highlights that we saw happen in the first half of 2025. On Slide 12 is the current updated pipeline we've made a couple of tweaks to this to try to make it a little bit easier to understand the type of molecule we're talking about. So as everyone is aware, the ATSM agent is a small molecule. So we have listed the such now SM and then linked to an RI payload. The same for the PSMA I&T program, right? That is a small molecule that was discovered, of course, by originally [indiscernible] and then the [indiscernible] on down or all [indiscernible] PeptiDream, discover and optimize peptide RI conjugates. So again, very excited to start seeing these progress, both across our collaboration products, our programs and also our in-house programs. And I think everyone should accept significantly more advances to come here. If you go to Slide 13, as kind of a general outlook as we look forward into -- across the second half of 2025, of course, and then into 2026. ATSM, that program is in a Phase III registrational trial here in Japan, and that continues to progress well. As I just described, the PSMA I&T agent, we expect that to both agents, both the diagnostic and therapeutic to initiate clinical trials in the near future. I'm very much looking forward those moving forward. [indiscernible] is underway. CA9, we expect, again, the Phase I in the U.S. to commence sometime in early 2026. Of course, we'll update accordingly and 18.2 is being prepared, as I mentioned, for the Phase 0 study. Raiatt MIBG also, as I mentioned, we're expecting additional indication of the expansion around this product that should further increase sales of that product. Lastly, I think our new clinical programs. So again, we have Pat already announced -- we expect actually additional programs to be announced here in the second half of 2025, which I think will be exciting coming out of our partnerships and so we will give as much color to those announcements as we can, but we will see additional clinical starts, other collaboration programs this year. We additionally will see also new announcements on new development candidates to come. So very much looking forward to those announcements in the second half of the year. And also, we're actually in the session, of course, and potential new partnerships in this rating pharmaceutical space, of course, in both the licensing potential new compounds and new programs into the Japan market and also potential discovery collaborations and/or partnering collaborations on patron assets with foreign companies. So there's active discussion across a number of these avenues, which is exciting for us. So I think the Radiopharmaceutical business is going exceptionally well for us overall. And we can continue to focus on advancing the pipeline, but also expanding with new clinical candidates and new development candidates and continue the hard work there. On Slide 14 is a bit highlighting a little bit how we envision the growth drivers around the radiopharmaceutical business, the business that we -- until now, is largely being driven, of course, by diagnostic sales. And the real goal, of course, is to bring on the targeted therapeutics in the near future. This kind of first wave of assets being around the PSMA and the ATSM that will both, of course, be a late-stage registrational studies. We're hoping to bring those to the market in the 2027, 2028 kind of time frames and seeing those start to contribute to therapeutics start to contribute to revenue from '27, '28 onwards kind of time frames. So additionally, again, we're going to continue our pace of announcing, hopefully, 1 to 2 new clinical programs per year and continue to fill out our pipeline to drive future revenue growth. On the diagnostics side, we'll continue to be looking to add additional diagnostic agents, continue to focus on driving the growth of the AMYViD sales, which is being helped in part by the, of course, Alzheimer's therapeutic sales that are slowly showing traction in demand. And so we think there's an exciting future for this innovative product, of course, and we also think there's a strong possibility it will take some time. But for the Tauvid, which we actually gained approval on, of course, last year. It will take time to kind of solidify the market there. But we do see a good future for both of these Alzheimer's imaging agents. Additionally, again, the existing diagnostics that are being sold or the additional noncorporate therapeutics that are being sold to continue to focus on indication expansion -- formulation expansion. And I think there's a strong focus on the PDR radiopharmacy on digital solutions also, right? Kind of the therapeutic diagnostic adjacent products and portfolio of offerings that we can do to really help grow the market and attain additional revenue from. So again, overall, very excited with the current state of the radiopharmaceutical business and looking forward to some additional exciting news happening in the second half of this year. On Slide 15, in regards to the nonradio pharmaceutical side of the business, a couple of key highlights here. Number one being, of course, around our oral myostatin inhibitor program, which I'm sure there might be some questions on. We kind of kicked this off at JPM at the beginning of the year where we tested the waters and discussed with a number of large pharmaceutical companies, their interest in this program. Of course, that interest was significant, as you might expect. We continue to generate additional data around the program, exciting oral viability and large animals was also conducted in the first half of this year. We also showed additional muscle preservation benefits both with daily and weekly administrations and we kind of expanded that data also in the first half of this year, really allowing us to actually open up one generated a very strong data package around the asset. Two, we were able to get our virtual data role up and going roughly in the May time frame and started bringing on discussing with companies, large pharma companies to bring them into the data room and start having the scientific discussions around this asset. And so those discussions have continued over the summer months here, of course, navigating the schedules, the summer schedules of all of these large pharma companies, but we've had, I think, robust interest in the program. We had also recently have engaged the services of a financial adviser to assist us with this partnering process, in part because of the interest that the program has generated and then a financial adviser would do an excellent job to facilitate, of course, getting the maximum value for this program but also making sure that the process was run extremely fairly and handle the various companies that we're actually dealing with all of them large pharma at this stage. This program has also got a very nice boost and support, I think, from the recent findings that were explained in June from [indiscernible], all of which who showed compelling Phase II data really supporting the ability of myostatin pathway inhibitors to dramatically reduce lean muscle mass, the [indiscernible] that is associated with the GLP-1 weight loss drugs. And so that was excellent timing for that data to kind of come out and very much a nice tailwind for the partnering of this program, given that we have the only orally [indiscernible] at the stage. So exciting what the second half will be. I'm sure there might be an additional question to come here. On number two, myostatin, our oral myostatin program is just one of many -- as I mentioned, this is on the nonradio pharmaceutical side, focused on oral path therapeutics is a core area. We have a number of programs in collaboration that are now getting closer and closer to naming development candidates. And so I do think in the next 6 to 12 months, there's going to be news on partner -- potential partner development cans being announced. So I'm very excited about that to be able to do. In addition to our own in-house efforts, one of which is the oral IL-17 program. We've kind of mentioned this a little bit in the past. We've never really shown much data around it, but I think you'll hear more on our R&D Day this year. Hopefully, we'll -- we're going to -- we intend or anticipate making this a program for presentation and discussion. I think we have an excellent compound here, it's showing extent oral bioavailability excoefficacy in the animal models. And we just continue to generate data around that appropriate looking for that probably to partner that in 2026. That's how I'd probably view that at this stage, but there's significant excitement around the program. We have additional -- beyond that, we have additional other oral bioavailable programs also ongoing, and we've added a couple of new programs in the first half of 2025 also. So very much focused on generating as has written robust data packages to really maximize the value of these programs, both in collaboration but also in our licensing. And the third topic is PDCs and MPCs. We're nearing the nominations of the first Peptide-Drug conjugate, peptide cytotoxic conjugate programs. And we're also measuring the first announcement for nominations on the top line oligos development candidate space arising from various discovery collaborations. So this is something -- again, I think this is probably in the next 6 to 18 months. There should be a good amount of news on this specific topic. These are deals that we've had underway now for 3 years and 4 years and are really starting to see kind of the exceptional progress that has been made over this time to actually get development candidates coming out of this. So I'm very, very -- again, I think this is going to be very impactful for the market and for share price for people to see actual that research, that things are actually arising in the development candidates are being produced out of these efforts. So looking forward to that. The other high-value target, we talked about MPCs in the past at a high level. But recently, in the first half of 2025, we've generated some exceptional data showing some of these tumor engagers that we have created in-house, showing really, really powerful tumor killing efficacy. Again, I think the MPC data is something I'm hopeful we have to get our patent strategy in order, but I'm hopeful that maybe that's something we can talk about our R&D Day also potentially. We are using some of that data in discussions with some of our large pharmaceutical companies and partners who are very much interested in potentially progressing an MPC approach to either combine with their other peptide conjugate approach and/or use within other type of combination style strategies. So I do think the FPC field for us is going to be significant, such as in-house, the immune engager field is going to be quite large for us, and it's going to result in a number of very favorable deals for us from 2026 onwards possibly. And lastly is just around the S2-protein inhibitor, our cocoa program that is sit with FDA. This did, in fact, have -- we just announced, I guess, sorry, in June, the last patient last visit in the U.S. Phase I style clinical trial of PA-001, thus far, of course, [indiscernible] observed and demonstrating a very favorable safety and tolerability profile. We are expecting the before year-end. We do not, at this time, I think at that time, yes, we'll announce what next plan there are for this program. But as most of you can probably imagine, we largely believe that this program will probably be in a pause position and less some kind of real significant interest comes from any partners and/or whether a second-generation pandemic comes back, hopefully not, of course, that warrants it's positioning to commit forward. On Slide 16. This is the current status of our nonradio pharmaceutical pipeline. I think one of the larger segments, of course, for us to see in the second half of '25 will be our GHR program that is partnered with [indiscernible] AstraZeneca moving forward into a Phase II. So we're very much looking forward to that. We probably will not have too much news on the -- the 2 Merck peptide programs that are actually ongoing in Phase I. Again, those are -- any information related to those programs has to be disclosed in concert with Merck, and we will do so as we are allowed -- on the lower part of this stage, as I mentioned, the biggest news will be in the second half of the year around the myostatin program. And then we've also is, of course, the other 4 main categories. Then again, I think over the next 6 to 6 to 18 months, we should see a significant expansion of our non-radio pharmaceutical pipeline. So it looks a little thin at this stage from all the discovery efforts that are going on, but I think this is going to see exceptional progress here coming -- looking forward to. On Slide 17, again, it's kind of highlighting some of what I just mentioned. GHR probably being the highlights in the second half. I do think there will be other additional news and hopefully, that we'll be able to disclose potentially also new clinical programs as they get announced for development candidates coming from our partnerships, as I mentioned, right? So this is still, again, a very robust area for us. And I think things are going extremely well. On Slide 18, it's just in relation to the growth drivers in this non-radiopharmaceuticals sector. We continue to be focused on generating progressing the collaborations and then generating new assets internally to a certain stage for us to then partner and out-license -- so it has been in the prior days, our model was largely focused on the -- on just a collaboration discovery model. And of course, that has now expanded to not only be collaboration based discovery programs, but also, of course, to generate further in-house programs to then generate excitement in our licensing really around the goal of maximizing the value of all of those programs. and our R&D dollars that we use here. And so I think going forward, we expect to see additional new collaborations, new expansions of deals and certain out-licensing upfront fees in relation to outlicensing of certain programs. With the real goal of expanding the pipeline in getting these products to market sometime in the future, to enjoy the sales royalties that those come with. So very much on track across the [indiscernible]. On Slide 19, it's just a consolidated financial forecast. As I mentioned earlier, we have no change from the numbers that we announced in February of this year. We still very much expect to meet these numbers and we're looking forward to doing so. On Slide 20 is a slide that we have used a number of times now to attempts to describe kind of the slight shift in the business over the years. We've been around now for 18 years, 19 years. And of course, Stage 1 of the company was really on -- focused on the PDPS platform, the Discovery platform and establishing a very strong global reputation as the leader of peptide discovery expanding our R&D capabilities once we move to this [indiscernible] our current site in 2017 that allowed us to start expanding those capabilities and expand our early-stage pipeline. And I think we certainly did that very well, and that really allowed us to give us a very strong base of revenue around the JPY 10 billion per year. Then the shift has happened when we acquired the radiopharmaceutical company, really the combination of the radiopharmaceutical or PR business, but also actually now PD, moving into the next phase of stroke of seeing more programs and larger deal economics, of course, allowed us to reach the JPY 30 billion per year. And now our kind of next goal is really around reaching the JPY 50 billion revenue goal, which should happen, fingers cross happens, of course, soon here. Even though we announced JPY 49 billion for 2025 sometime soon. And then after that, the next phase will be reaching JPY 100 billion as in revenue. I think the company is extremely focused on, of course, maximizing the synergy with the Japanese radiopharmaceutical business and then again, focused on these 5 core areas for discovery and the identification of the on candidates that we can partner and see those move forward into clinical case. So -- and we will continue to focus on expanding our robust pipeline and look forward to continue to create high-value assets to yes. On Slide 21, briefly, 2 large capital products projects underway and very excitingly. One is the really the expansion of PeptiDream at our permanent site. So as is listed in this illustration on Slide 21, you can see to the left is our headquarters and research facility. And then we are now on the land next door, which we had bought a number of years ago. We finally have decided exactly what we wanted to use this land for and the exact type of facility we wanted to make and the real goal is to expand our capabilities further to really unlock additional asset creation and speed. This building is currently in the design stage. And so I think once we have more specific information on cost and definitive time lines, we will make that news public, but we are aiming for this to be completed in 2028 is the current anticipated time line. So again, it's in the exciting design stages and very much looking for that project to get underway. Also on Slide 22, on the PDL radiopharma side of the business, as we announced at the end of last year, is seeing this project progress. We have identified the site, as we mentioned, in Kazusa Akademia Park. It's proximal, excellently well placed between [indiscernible] airport, as is shown on the map there. And we're also now in the design, building design stages of this project. Again, similarly, once we have definitive information on costs and time lines, these will also be announced -- but we are also expecting this to hopefully come online in the 2028 -- in the latest early 2029 kind of time frame and be fully operational by that. So exciting these will add expand our manufacturing capacity and bring much needed space for us to continue to deliver on our strategy of bringing exciting diagnostics and targeted therapeutics to the expand market. Lastly, on Slide 24, as we shared today, I believe actually the Special Investigation Committee report was only -- the full report was only released at Japanese, but we did make a TSC of our statements today that had both in English and Japanese version to that. So we invite those to potentially use translation software, I guess, if you wish to look into the full Japanese versions of the reports that were submitted. The Special Investigation Committee as everyone knows, we have created this in May to investigate the possibility that there was inappropriate ordering and removal of research reagents occurring at the company, by a -- our former COO, who was previously in charge of the company's purchasing department. Within the report as anyone can see, we did, in fact, confirm, of course, that research reagents were, in fact, ordered by this individual outside of our normal ordering procedures, unauthorized without any other executive or Board members' knowledge and that these reagents were taken off site for uses that are not clear at this stage. Again, this is -- was completely in violation of company, rules, company procedures and indirect breach of this person's responsibility and role within the company. During this investigation, during the special investigations committee's investigation of this, what we're calling case 1, this inappropriate removal of agents. They also uncovered additional information which showed that this same person, our previous former COO, also was a party to a variety of different service agreements or consulting agreements that now is providing services to companies that had relationships with [indiscernible]. Again, very easily to understand as a conflict of interest against company policy with no approval from the Board or any other executive and completely hidden from PeptiDream. And so we take both of these issues extremely seriously. And PeptiDream, now with the Special Investigation Committee Report, we are looking into all legal options to pursue this case against this individual. Once anything is decided, of course, we will make that public, but this is a significant breach of trust for the company. Lastly, I think it's important to note though, in regards to the inappropriate ordering of reagents, all of those reagents, these are just general research reagents or a specific reagents. We're expense at the time of acquisition. And so there is no additional expense recognition that will be necessary in our financial statements. So we do not expect any significant impact to the financial statements or any need for revising, say, prior financial statements in regards to this case. And for case 2, also these third-party agreements unauthorized and secret third-party agreements that we have. We also do not expect these to have any specific financial impact to our financial statements that were going to require any type of revision or restating. And so I think that is important to note from a financial perspective, of course, our reporting -- financial reporting perspective. That does not, of course, dilute or change the seriousness of this behavior and what happened here at PeptiDream. There will be more to come on both those topics. And of course, I'm happy to answer the best I can, any questions that may arise. And with that, that completes my presentation for today, and I will be happy to take any, of course, questions from any of the attendees.

[Operator Instructions] And our first caller is from [indiscernible].

Congratulations on a fantastic second quarter. Actually, I was wondering about your IL-17. And can you get that a little bit in context of the competitive landscape? There's a couple of companies working on oral IL-17 and it's a very exciting space. And I wonder -- I know you're going to perhaps speak more about it later in the year. But is there anything you can say regarding the competitive landscape? And then also if you can, anything about IL-17s versus IL-23s, which are doing very well with [indiscernible] a couple of others.

Thank you for the question, [indiscernible]. First, specifically in regards to IL-17, as you're well aware, right, protagonist, of course, in the peptide side of the equation has an announced an oral IL-17 program, there has been some information in regards to that program. It's still a preclinical stage has not particularly get into the clinic. And of course, as you're likely aware, there are a number of companies that claim to have or do have, of course, small molecule inhibitors of IL-17 also that have varying profiles. I think one of the interesting aspects of IL-17 at this stage is IL-17 has an AA and an AF and an FF version of these. And that had previously been outstanding clinical questions around whether or not you wanted any inhibitor to block all 3 of those kind of subtypes or whether you wanted to just be AA focused or AF focused. This has been an ongoing to pay in the IL-17 field, I think, for some time. In the last probably 1 or 2 years, it probably has lended itself a little bit more toward wanting something to hit all of the 3 subtypes. We think we're as [indiscernible] as anybody out there, and we're really focused on just maximizing the oral bioavailability. But I do think a peptide inhibitor has certain advantages over the small molecule, certainly in potency, possibility and in this selectivity across these different types of isoforms that might lend it to be a better overall profile. I mean, that will remain to be determined in the clinic, of course, beyond, right? But certainly from in vivo and in vitro data, I think that supports that. We think we're very, very well placed versus the [indiscernible] compound. So again, I think we'll talk about that more in the future.

Sure. Can I just follow up regarding the bioavailability. What level of bioavailability would you consider should be really competitive?

Yes. So given the publicy of the compounds, you're -- we'd expect this to be in the mid-single digits, right? So you're talking about somewhere in the probably the 2%, 3%, 4% range of oral viability it's -- you're starting to get these type of [indiscernible] to be 10% plus, right? That's not a space that you get to and they don't need to. These are [indiscernible] compounds, right? So I think that's a very different logic than a small molecule, right, which is less potent and therefore, you need to onboard more of course, of the compound. So we see excellent distribution once this is in the body in getting to the sites of action also. So again, it's something potentially as we get toward the year-end, we'll hopefully talk about this more in the R&D day and give a little bit more color to it. But we have already had exceptional outreach from a number of our big pharma partners around this program that have said, please let us know when you want to outlicense the program. So right now, it's really for us data package generation, to maximize the value of any deal we do. In regards to other targets, to the extent, while I would say, yes, we have other oral peptide program going against the other fan favorite IL targets, largely to replace the existing antibody, right, products into an oral peptide formulation, right? And these have been going up for some time. And as I mentioned, that is likely to be some of the exciting news we hopefully will be announcing in the next 6 to 12 months or so. So this is very much an active area for us. And I think we've made exceptional progress and success in it and then the exciting things to come.

The next question is from Fumiyoshi Sakai from UBS.

It's about your [indiscernible] story. The Japanese virgin earlier this afternoon. And many others are concerned about if you're having plan A or Plan B. So I'm not going to ask when that's going to happen, but can you just assure us that as confident that you talk about the making a big deal at myostatin last year. So that remains the same. So that at least we're going to -- I'm going to stick with Plan A, but some people start talking about Plan B, which is not healthy argument. That's my first question or even statement, I think.

Yes, I agree with that. So I don't necessarily like a plan B C either, right? But certainly plan A is to license the biostat program, right? That has always been the plan for 2025, right? And we knew that, that was going to have a large impact on our financials. I'm confident we're going to get it the eye. I believe we're going to get a deal in 2025. I believe we're going to get a deal with one of the big pharma companies. Until we have something signed, I could be wrong, right? As you know Sakai said, right? This business is until we have a contract in hand, nothing is fully defined. But I think we're well positioned. There's super excitement around this pathway in an inhibition of this pathway. And I think there's good acceptance of an oral macrocyclic peptide to do this. So yes, I do believe we'll get a deal for this program. Now what will the numbers be? I don't know. As I've been very transparent with in prior discussions, we think there's quite a range in what the financials could be associated with any deal. And that's not something we necessarily get to decide in all by ourselves either, right? This will be a negotiation, of course, with any partner. And there will be trade-offs around upfront versus short-term development milestones, long-term development milestones and royalties, et cetera, right? So it's hard for me to give too much color on. I don't know today exactly what the upfront is going to look like. and how much that will be. But I think we're confident that it will be significant. I think assets in this space continue to show excellent deals coming out of China and other respective preclinical assets are now in the triple-digit hundreds of millions of dollars. So all of the right pieces are here, and we have interest. Now we just have to deliver on getting it. I'm closing the very best deal for shoulders at PeptiDream, right? That's the goal is to give us the very best partner for the [indiscernible] program, right, and do the right thing for how much we have and how exciting [indiscernible]. In regards to [indiscernible] happen, I don't really think that's something I'm considering at this stage. It's going to happen now. We can make the argument that it happened by December 31 or not? Yes, that's a moment in time that I'm not sure but certainly, at this stage, that is the running plan to do. We talked about earlier in the year that we had other possibilities, Plan B, Plan C, Plan D, Plan E. I think everyone can imagine what that means, right? We plan B and see, for example, our CI program has robust interest from pharma companies to partner or license on, both on the diagnostic and therapeutic side, right? But I think what maybe has changed about C&I don't -- we now have that program all the way. We've got the clinical CRO pick. We've got the financing in place. We're ready to take that into a Phase I ourselves. I don't know that partnering with CA9 would make sense anymore at this stage, right? You'd be far smarter to generate the Phase I data before you actually sought any kind of partnership around the CA9 program, right? I think that's what's in the best interest for shareholders is for us to maximize the value of any of our programs. 18.2 is also -- I mean we have exceptional interest from potential partners on 18. 2 but it would be a heck lot extra have the Phase 0 data and have some human proof of concept before we entertain partnering ideas. Same way with [indiscernible], right? So I don't think we have no shortage of assets we could potentially partner on. We're actually in a number of discussions, as I mentioned, around MPCs around new PDC discovery deals, expansions of deals. Those discussions are well going on. So I really don't have that much concern about our ability to generate future revenues. I do think that the simple calendar year does cause some constraints that we'll have to see, what happens for us. I think [indiscernible] said during the call today, right, if miles doesn't happen, could we combine some other deals? Yes, I'm expecting some other things could happen in certainly in 2025. We'll have to decide whether those really make sense and how much we should push on those to get them done. And we shouldn't be doing deals that get say, pennies on the dollars because we need to think we need to close the deal by December 31. I think that's largely my position is we should be looking at this about getting the very best value for every program we're doing, that's in the best interest of shareholders overall. But as stated during the call, I did see some of the [indiscernible] reports that suggested we were lukewarm on getting a [indiscernible] deal that we weren't maybe as confident. I like where we are. I think we have exceptional interest. I think we have the right financial adviser in place to help us get a deal, and I'm very much expecting that we will.

Okay. All right. That's going -- the second question is this special investigation case. I mean we knew -- I mean, we know who he is, what he was. But the question is, you found the case after his resignation from the company. Now the finding that came from internal whistleblower was something different, totally different source. If it's internal whistleblower, you could probably argue that your governance, your internal controls through works. However, from the investors, institutional investors prospect, if this case happens, if this kind of case happened, some of the investors in frame investing in a stock until some legal issues, some of the compliance issues clear. So that might be pretty negative in your share price. I mean, this just happened today. So what's going to happen? That's my concern. So what do you see this case?

Yes. So I guess just a few comments,. We announced his separation from the company in October. That was not a voluntary resignation on his part, right? He was told he wasn't coming back, largely around poor performance over a number of years in his role here. After his separation from the company, in April, this reagent related aspects came to life. And it was reported by a whistleblower. It was reported by people in our purchasing department who came forward instead, this had been going on and they thought it was strange, and maybe we should look into it. That was one aspect to it, Sakai-san. I think what is really important to also tell the market is the team here is doing a really nice -- we have actually completely digitized our procurement system, right? It used to be more of a hybrid. There was still a paper component to it, which he actually have used to get away with to hide what he was doing. But it's been -- it was fully digitalized and that was coming online in this March time frame also, right? So the possibility of this kind of bad actor happening again is now, of course, gone right? And it was in the process of being closed. I think some of the things that he did, right, he was in a position to actually approve his -- he ordered something, put someone else's name on it and then approve his own order, right? And that type of, I guess, criminal behavior is regardless of how great governance you have. If you have someone in that type of powerful position wants to hopefully commit misbehave, it's sometimes hard to stop, right, I think. But again, that came to light in April. And I think we followed all very transparently announced the initiative of a Special Investigation Committee to fact find and get down to the story behind this. And as I mentioned, that uncovered some additional aspects of these consulting agreements that he had on the side, right? But there was no way to a, I guess, in defense of governments, I think we do have good governance. I think what happened is you had a Board member who simply was willing to receive high and not tell the truth, right, actively receive the other members. We had regular managing meetings where none of this stuff ever came up. He was specifically asked in numerous occasions, of course. Is everything okay or things going well to which, again, the answer was always everything is fine. We also have no whistleblower complaints from the purchasing department up until this April time frame, right? So no one raised over those 7 years of this activity happening. And again, the activity was happening a few times per year in each calendar year. So it wasn't something that I think was on a pace that was happening weekly that should be obvious -- more obvious. And I can tell you to what degree maybe he was hiding that activity or masking that activity as it was going on. So I think there is some unknown components to it. But I do believe it, it is -- for this specific role, there are certain aspects of it that he very much was working hard to keep knocks sound. And so I think that's something that going forward is having one person in charge of things sometimes can be difficult. And so we've actually had already been changing organizational structure of the company to have everything has to be approved by 2 different executives, right? In fact, our new entire digital ordering system was already in that we where the person order and the reagent had to be different than the person actually placing the ore who had to be different than the person approving that order and then given a second line of approval behind that. And that system was completely coming online and have been away for 2 years in design implementation stages and what's coming online, again, as I mentioned earlier this year. So I'd like to believe that governance here is good. And that as this looks, and I do think it's a black eye. I think we have to earn back the trust of the public in regards to this. But I think everybody here that PeptiDream actually believe the integrity of all of the people who work at this company. I don't think -- and I hope that we're not really harshly judged by the actions of one person who I find his behavior to be unbelievably unacceptable.

Yes, of course, course. But every time I hear a story like this, I really feel sorry.

I guess that was the last question. So ladies and gentlemen, this concludes today's conference call. You may now disconnect, and have a wonderful rest of the evening.