Philogen S.p.A. (PHIL) Earnings Call Transcript & Summary

I would like to welcome everybody to our latest webinar. Today, we will focus on the latest scientific and financial results as of the first semester of 2023. As always, on the call, we have Professor Dario Neri, our CEO and Chief Scientific Officer; and Dr. Laura Baldi, our CFO; and myself, [indiscernible] as Investor Relator. We will give a presentation of about 30 to 40 minutes, which is being recorded. And this will be followed by a Q&A session, which is not recorded. [Operator Instructions] And with this, I hand over the stage to Dario, who will present the introduction Nidlegy. I will then take over for Fibromun. Dario will take over again for OncoFAP and Laura Baldi will finish off with the financial slides. Having this, please.

Thanks a lot, Emanuele, and it's a pleasure to meet you again for this update. First of all, for those who are new to this webinar series and want to know more about Philogen and Philochem. Philogen is the mother company, listed on the Italian Stock Exchange with 2 industrial headquarters in Sienna. Philochem is a fully owned daughter company located near Zurich in this blue building, where especially discovery activities and certain small molecule therapeutics are developed. Collectively, the Philogen Group works, as you will see on ligand-based pharmacodelivery activity and we have or we have had a number of industrial collaborations over the years. And just in the recent past, we announced collaborations with Bracco, Google, Sun Pharma, Merck, IPSA. And hopefully, there will be more to come. A quick update about GMP production, which is very important. On one hand, we were inspected by authorities for the Montarioso production facility, and this received an extension for the next period of GMP production. We were very pleased but importantly, we have had the MED inspection of our GMP manufacturing facility in Rosia. The second facility, which is designed for commercial activities and the inspection went very well. And a second AIFA inspection is expected in October that should complete the procedure, but you see pictures in operation of our cell expansion. 200-liter fermenter downstream processing, fill and finish really in a facility, which is state-of-the-art in terms of quality, instrumentation and size. Now again, a look at the pipeline. As always, we will focus on Nidlegy and Fibromun, which are our most advanced products. We have a number of programs, typically partner with other companies that we don't cover in these webinars and we will cover also the chemical activities, which are really exploding in a positive sense, as you will see from the slide. So really updates on Nidlegy on melanoma and non-melanoma skin cancers, then Emanuele will follow up on Fibromun, and you see a number of trials, which are either Phase III trials or Phase II trials with registration potential. Now if we focus on Nidlegy, as always, it's a dermato-oncology product. It's the only product that we give in traditionally because we are treating skin conditions. However, we treat locally, we act globally as we have the opportunity to publish and present in the past, we have found that these 2 active ingredients, L19 IL-2 and L19 TNF potently synergized. The green moiety is the L19 antibody moiety that anchors the product in the tumor whereas the interleukin-2 to moiety blue and Tumor Necrosis Factor in orange red are potent immunomodulators that activate the immune system against the tumor. We have an EMA [ combi pack ] authorization for the use of this product and which is an important regulatory milestone, and we focus both on melanoma and non-melanoma skin cancer and to be more specific, I'll show data for both indications. Last webinar, we announced a commercial agreement for the distribution of Nidlegy Europe, Australia and New Zealand, with Sun Pharma. Sun Pharma is a leader in Dermato-Oncology. We are really pleased that we have Sun Pharma as a partner. They are also very present in dermato-oncology as they mark Daromun Basal Cell Carcinoma and the economics of this term were communicated in a previous webinar. Now again, we focus mainly in Stage IIIB/C melanoma, which means melanoma, which is metastatic has reached the skin, the lymph node, but has not yet spread to visceral organs and after seeing activity in Stage IIIB/C melanoma, we have started using Nidlegy basal cell carcinoma at high risk as well as danger of squamous cell carcinomas and other tumors and you will see, as always, an update of what has been accomplished. So this is an important slide because we had previously announced the completion of enrollment for our Phase III trial whose design is depicted in the slide. You see that patients are randomized 1 to 1 there are typically patients relapsing with the disease. One half receives surgery, which is the standard of care sometimes followed by immune checkpoint inhibitors and the treatment arm receives Nidlegy nearly once a week for 4 weeks and then surgery if it's needed to render all patients with no evidence of disease and the primary endpoint is relapse-free survival. The trial has successfully passed 2 interim analysis you see the geographies of trials and centers, which participating this effort in Europe and in the United States, it's really a global effort with 22 sites for the European trial, 33 sites for the U.S. trial. And the news is that the events have been reached. So 95 out of 95 events. This is what we are told by the centralized independent central review procedure, which in a blinded portion is actually organizing and documenting the results. And within the next couple of weeks, probably 1 to 2 weeks, we will receive an important binary communication, whether the primary end point of the study has been met or not. So these are very important pieces of information, which should become available in the next 1 to 2 weeks. So please stay tuned. Now while I cannot show the results of the Phase III trials and they will be communicated in a dedicated press release once the Central Review Board has finished its activity I can communicate results of the Phase II trials, which are running in basal cell carcinoma but also in other tumors. Let me start basal cell carcinoma is the most common tumor on earth is actually a disease which affects, for example, alone in the United States, 4 million new cases per year with an incidence which is growing because the tumor is sand-driven and about 1% of such patients are high-risk BCC patients. And the disease is highly disfiguring, as you will see and the -- 3 approved drugs for high-risk BCC, which are Libtayo, Odomzo and Erivedge have a low complete response rate and this is clearly what we are trying to improve. But let me mention and you will see a couple of examples that we have activity now also in other conditions. And while BCC is a disfiguring disease, squamous cell carcinoma is actually a tumor that kills. It actually kills more than melanoma. So really, the expectations for Nidlegy are not only in melanoma, but also in other skin cancer conditions. The trials, which are ongoing are called Duncan and Intrinsic. You see the European countries in which the trials are working, and you see also the centers. And we are also about to start a clinical trial in the United States because we see really the development of this product on a global basis. Again, a simple program, which means we inject up to 4x our Nidlegy in the lesion and you will see the benefit for the patients. All other products in this indication have been approved after noncontrolled Phase II clinical trials based on overall response rate. So we see this as an opportunity also for the development of Nidlegy. Now this is a picture which has been presented before. And still, it's very impressive. You see a patient in St. Gallen with our colleagues, Professor [ Copland Dr. Wagner]. This patient was candidate to disfiguring surgery with amputation of the nose and you see how the treatment is very effective, not only in removing the tumors, but actually favoring a complete formation of the skin from the biopsy, you see the tumor in red before treatment and the complete disappearance. So a pathological complete response at 2 months. And of course, encouraged by these results, we want to show a few more younger lady with a tumor at tip of the nose, which was again candidate to disfiguring surgery and you see how the nose looks like after basically 2 months just perfect. And again, the biopsy confirms a complete pathological response. One more patient, again, in St. Gallen with heavy mass in the cheek, which would have required a disruptive surgery, and again, a good healing of the tumor documented by biopsies and again in brown, you see the presence of the tumor before treatment and disappears at 2 months and half. One more patient, 85 years old, again, to document that the treatment is well tolerated. The patient was candidate for surgical removal of this portion of the year. And if you follow the disease over time, you have a complete formation of normal year really with no detectable disease and again, a pathological complete response at day 72. And these responses are durable. Patient 78 years old with a large tumor in the scalp and at day 36 actually, the tumor is gone, pathological complete response, the blood that you see comes from the biopsies. And one more example of really diffuse basal cell carcinoma that again would have required a disruptive and disfiguring surgery in the face again, complete response confirmed by 4 punch biopsies. This is an example of patients with multi lesions of BCC, so lesions of basal cell carcinoma in multiple parts of the body, again with pathological complete response again, showing that I think we have a good opportunity to treat these patients. This is an ugly picture of a patient with a really nasty locally advanced basal cell carcinoma next to the ear. And the improvement of the lesion is clear even though the response is still ongoing. And so we will show you more pictures at the next webinar. And I want to finish this series showing again, examples but patient with cutaneous squamous cell carcinoma as mentioned, this is a disease that actually kills and it kills more than melanoma. And you see really a very nice response which is at present a partial response, clinical advice and typically the responses, the complete responses come at the later time points. So this is 1 of examples of patients with other skin lesions that make us believe that Nidlegy has the potential to be a broadly applicable dermato-oncology drug in melanoma and beyond. And with this, I hand over to Emanuele for the description of Fibromun. He has really accompanied the development of Fibromun in Glioblastoma you will see an update on the clinical activities in soft tissue sarcoma and Glioblastoma. Emanuele?

Thank you very much, Dario. Glad to provide an update on the ongoing activities with Fibromun You may remember, we're tackling 2 notoriously deadly conditions like Glioblastoma metastatic soft tissue sarcoma. So Glioblastoma the most common and aggressive primary brain tumor. And unfortunately, 50% of the patients die from diagnosis within 4.6 months. Those patients are typically treated with radio chemotherapy as frontline therapy, and they all recur. And that recurrence typically receive auristatin or lomustine second line. Soft tissue sarcoma when they become metastatic, they become very difficult to treat. Patients received doxorubicin at the beginning, they progress typically in 4.6 months. And then they receive different treatments in second line and in third line, they get dacarbazine. And here, the objective as said also during the previous webinars is to add Fibromun on top of the standard of care and try to do better than the standard of care alone. You may -- you remember this picture from the slides presented by Dario. So we basically deliver TNF payload selectively at the site of disease by means of the L19TNF antibody, depicted in green. The product here is given by intravenous infusion. So it's for systemic application and we have published in several peer-reviewed scientific journals that L19TNF localizes selecting the decides bearing health issues. A quick update on the Glioblastoma programs. The Glioblastoma program started in 2017 in collaboration with Prof. Wellerand and Dr. Tobias University Hospital in Zurich currently running 2 pivotal programs. One in first line and one second line in combination with lomustine. See this is a Phase I/II study. We completed the Phase I dose escalation part with 15 patients. And I will give you an update on the next slide on MRI scans. And now since June 2023, we started the Phase II randomized part with 158 patients and see the randomization is 1:1, meaning that 50% of the patients get lomustine and the other 50% get the treatment arm and get the combination. And we look at the difference in terms of overall survival between the 2 arms. You see we are now opening up to 15 centers in different European geographies. And you see we already have 7 patients within a few months, with the only 2 centers and now we are opening up to 15 centers. So you see here the expected prediction of the enrollment rate over the next few years. An update of the year of the Phase I part of this study, you may remember the treatment in last 9 months, then patients are followed up. If you keep Lomustine alone, you may expect an overall survival of 8 months. So patients die within this time line. Patient 2 was one of these cases. It was an unfortunate patient that basically had Covid infection could not receive the combo treatment. And you see that at 6 weeks, the lesion indicated by the red hour increased by 350% in terms of tumor volume. Whereas patient #1 that received the combination treatment and 9 months, see the primary lesion was gone in minus 98% of tumor shrinkage, long lasting for, let's say, at least 18 months at month 21, there was a new lesion at the different geographies of the brain compared to where the first lesion was. And now this patient resume treatment under compassionate use, the so-called individual treatment of [ temp ] and the lesion shrunk again by more than 60%. So it's quite impressive, considering that typically these patients, unfortunately, die within 8 months. Also patient #3, see there is long-lasting meter objective response is now minus 98% of 27 months. Also patient 4, 5 and 6 are benefiting in this data have been published, science, translational medicine last May 2023. In soft tissue sarcoma, we have 3 ongoing studies Phase IIb start in the U.S. in first-line patients, a Phase II study in combination with dacarbazine in last-line patients, and the most advanced one is this one involved a Phase III European study in combination with doxorubicin in first-line patients. We need to treat 118 patients which are randomized to receive doxorubicin alone or the combination. And here, we look at progression-free survival as a primary endpoint. You see here that we are almost in line with the -- basically in line with the predicted enrollment rates, which is in blue and actual enrolled rate is in green. We opened 20 centers in 5 different countries. We had 78 patients out of 118 patients to be treated. So to summarize, I think we're pretty excited about the progress of the programs. As if you think, back at the time of the IPO, we didn't have the BCC data. We weren't so close to the melanoma readout in Europe. We didn't have the Glioblastoma data and also didn't have 20 centers in soft tissue sarcoma, and we didn't have the OncoFAP that is going to be presented by Dario to reach and come over the stage again.

So we're really excited to see the progress of the pipeline and as mentioned, while we see already nice results that we are very proud of in Phase II studies an important milestone will be the readout of the Phase III trial. Now if we focus on chemistry, we want to give you a glimpse of what we believe could be the next area of expansion of our activities. We will focus on fibroblast activation protein, but this is only one of the targets, as you will see on which we are generating results. The big picture and the big question is the following: We come from a situation in which most pharmaceutical companies like to use full IgGs, so full antibodies for pharmacodelivery activities. And we have been the first company, and so far, the only company that has constantly compare the performance of full antibodies with antibody fragments and even with small organic ligands, to ask what is the best agent for pharmacodelivery, and the results clearly show that especially for small payloads, the small ligands are the preferred delivery vehicle. Let me explain what I mean. In a paper that we published already in Jacks 2018, we were looking at the microscopic level about the localization of tumor hoping antibodies and tumor-homing small ligands within the tumor mass. Tumor cells are in blue. The localization of the product is in green. You see that the antibodies can only give you a patchy uptake typically in perivascular structures and similar findings have been published by [ Genentech ] and other companies. Again, highlighting that antibodies, if they are used in IgG format, they are big, they extravasate slowly and they target badly. Now with small organic ligands, the small molecules extravasate [indiscernible], and you see a uniform green staining of the tumor that suggests that the molecules are much faster and better at getting out of blood vessels and reaching the tumor cells. Also, the microscopic level the comparison is clearly in favor of the small ligands. Here, you see 2 patients from published clinical data imaged with ligands to fibroblast activation protein FAP with full IgG, the tumor is visible, but the contrast is not fantastic. Whereas with the small molecule, you get an excellent contrast, tumor to organ ratio of 20 to 1 or better as early as 1 hour while you need several days to get this picture with the antibodies. So at least the good and selective localization in the tumor. You see the primary tumor in the breast, the bone metastasis, the liver mets suggest that if we can deliver payloads to the site of disease, we are doing something good for imaging and for therapy. Now we discover these ligands using our DNA-encoded chemical live, that's an area in which we have performed pioneering work and once we have ligands, small organic ligands to good targets, we can equip them with radionuclides for imaging or therapy with linker drug payloads. If you want, we can think about anti-inflammatory drugs, immunomodulatory drugs CAR T approaches. We are active in all these areas. We have published in these areas. But for the sake of simplicity, I will focus on these 2 programs because they have a clinical relevance, which is immediate. So let's start with radionuclides. We have previously reported the fact that FAP is a very important target for multiple tumor types. In German centers where OncoFAP used routinely 5 to 10 patients per week received OncoFAP as a problem solver for imaging needs. And if you focus, for example, in breast cancer, you can distinguish locally advanced tumors from heavily metastatic tumors, but also other type of malignancies are nicely imaged with FAP ligands. There is work recently published on a molecule that now belongs to Novartis in which ligand called FAP-2286, equipped with a therapeutic radionuclide was mediating a rapid response. You see a patient with lung cancer before and after treatment. And of course, there is the wish to have even better targeting agents than the one described in this slide. To keep a long story short, if we look at long time points, so 1, 2, 3, 4 days after injection, the molecule that looks so good for imaging is worked away from the tumor, but our therapeutic candidate called OncoFAP-23 actually stays on the tumor for a long period of time I'm with an exquisite specificity over normal tissues. In our hands, these are the results obtained with the molecule that was originally developed by [ Clovis ] on, which is now licensed Novartis and in our hands, that molecule goes away from the tumor and has hierarchical levels. So time will tell what is the clinical performance, but this is the molecule that we have chosen for therapies to patients who have a positive FAP's can, they become eligible for radionuclide therapeutic intervention. In mice, the best molecule for targeting is also the best molecule for therapy. Now therapy here was performed at an ultra low dose of radioactivity, 5-megabecquerel which is about 20x lower than what you would normally use in the mouse. We can cure tumor-bearing mice with this medication. And as you will see, a clinical trial is about to start, and let me be more precise. We have completed GMP manufacturing at [ San ] Swiss partner for the production of these small organic molecules. We have completed central labeling procedures with our partner cyber stores in Austria. So we label with Lutetium 177 at a central location that can ship the drug globally. And you see a number of clinical centers in Italy and Germany in the U.K. and probably in other countries who will participate in this Phase I/II clinical developments. Importantly, the trial will select patients based on a positive scan but will treat either patients in monotherapy with Lutetium 177 OncoFAP-23 or in a combination with L19-IL-2-immunocitochine. Now one last slide to touch on the drug conjugates at present antibody drug conjugates are a huge component of the pharmaceutical market. But we believe that the future is in small molecule drug conjugates rather than antibody drug conjugates. Our first candidate that will go to the clinic is OncoFAP-GlyPro-MMAE. So in blue, you see the OncoFAP moiety comes to the tumor. In green, you see a spectacular opportunity offered by FAP, FAP is not only a target expressed in the tumor. It's also an enzyme that cleavable repro. So immediate after targeting, we can have cleavable of the linker and release of the potent payload called monomethyl are study. This data has been published in many publications, including recent clinical cancer research paper this complicated slide monitors the release of MMA over time in the tumor. You see that at 24 hours, the blue bar shows an excellent selectivity in tumors over normal tissues. And this works both with cellular models of FAP expression, but also with stromal models of scars FAB expression. We have completed Phase I of a program in animal patients, which means dogs with spontaneous tumors and the therapy part is about to start in collaboration with University of Milan in Italy, which means that while the GMP manufacturing for clinical use is progressing, we have the opportunity to learn about the activity of OncoFAP-GlyPro-MMAE, in animal patients with FAP positive tumors. And FAP is only the beginning of what we can do with ligand-based pharmacodelivery. We have previously shown the ability to target carbonic and anhydrase IX at sites of Hypoxia and in renal cell carcinoma, both for imaging and therapy. Prostate-specific membrane antigen is a good target for prostate cancer, somatostatin receptor is a good target for neuroendocrine tumors. And we have recently discovered against a very important and disclosed target new ligands with ultra-high affinity 100 picomolar association constant using or lower -- using our DNA-encoded chemical live. So I think there is a bright future for Philogen and for Philochem, and we actually will invest more in these activities. With this, I hand over to our Chief Financial Officer; Dr. Laura Baldi, who will tell us about 2 last slides on the financial results.

Yes. Thank you, Dario. Just to like to comment on the group's key economic and financial figures as of 30 June 2023. The group reports on the top line, on the income statement, consolidated revenues of EUR 22.5 million, an increase of more than 10% compared to the first half [ 2023 ] revenues. These revenues are almost entirely attributable to revenues from contract with customer approximately [ 19.6 ]% and to a minor spend to other income as operating rents. The first half of 2023 was characterized by substantial payment related to contract -- to new contract and existing contract with third party. At the present, revenues still remain the nature of known cost and revenues linked to the achievement of milestone or upfront payment of new contracts. With the signing of the standpoint that the group restructuring itself to market products once approval are received. At that stage, revenues will become more stable and recurring now. [indiscernible] company is not yet a product company. It has never less demonstrated that it is able to generate value from multiple assets and to carry out its research and development program and clinical trial projects. Before we turn to the cost analysis, it should be noted that the operating cost amounted to EUR 139 million at the end of the first half. And this cost include personnel cost of about EUR 9 million and clinical costs -- sorry, personnel cost of EUR 6 million and clinical cost of approximately the same value, EUR 6 million, and the remaining part are production costs. Operating cost increased by 25% compared to the previous quarter last year, confirming the continued investment in clinical trials that are increase of 30% and the corporate organization, the personnel costs are increased of more than 16%. The group closed the half year with an EBITDA of EUR 8.6 million, in line more or less with the previous year and an EDITDA of EUR 6.9 million. The depreciation and amortization or no monetary cost increased by 36.5% due to the full commissioning of the new GMP side. And finally, the company continues to invest in plant maintenance in the First Quarter, the CapEx is EUR 1.5 million. Before we move to the net financial position, we can see that it's up by more than EUR 8 million compared to the beginning of the year and in the next slide, we will see a bridge composition of the breakdown of increasing and decreasing of this financial position. The cash position confirm while balancing prudent management as well as a good level of capitalization to continuous activities and the program strategy of the company. In the next slide, we summarize in a graphic way the net financial position evolution. We start the here with a net financial position of EUR 70.4 million and liquidity of EUR 86.2 million. We increased in this quarter -- in this half part of the year at EUR 22.6 million of new proceeds. The Operating Expense secure has been EUR 13.2 million as I said before, EUR 1.5 million is CapEx and EUR 12.2 million is the liquidity absorption for the buyback program. And then we had EUR 1.4 million of the other financial items. So at the end of the first half, the group has liquidity of EUR 94.3 million plus EUR 6 million of tax credit, so more or less a liquidity of EUR 100 million. And then a net financial position of EUR 79.1. we remember that the group -- the financial liability of the group is largely linked to the accounting treatment of lease liabilities and the amount is EUR 15.2 million. So from my side, that is the key figures of the first half. And I thank you and hand over again to Emanuele.

So thank you very much, Laura. And with this, we hand over the formal presentation, and we open the floor to potential questions and