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

So I would like to welcome everybody to our new webinar. Today, the presentation focuses on the full year financial and scientific results obtained in 2023. And so far, and as always, on the call, we have Professor Dr. Dario Neri, our CEO and CSO, Chief Scientific Officer; Dr. Laura Baldi, our Chief Financial Officer; and myself, Emanuele Puca as Investor Relations. We will give, as always, a presentation with the most recent updates, which will last about 30 minutes. This presentation is being recorded and will be followed by a Q&A session, which is not recorded. [Operator Instructions] And without further ado, I hand over the stage to Dario Neri to begin the presentation.

Thanks a lot, Emanuele. It's a pleasure to share with you a lot of data and also an update about what the company has done since our last webinar. Basically, what we have is we're still a Swiss-Italian company, and you see this green and blue colors that will accompany us throughout the presentation. The most advanced part of the pipeline corresponds to Philogen. They are antibody-based therapeutics. The Philogen Group owns a fully owned daughter company called Philochem based in Zurich, that focuses more and more on small molecule therapeutics, which have reached clinical stage with very good results, and we will be glad to share clinical data with you. The next slide summarizes, as always, our approach, which is a simple but very powerful approach. We use payloads of proven pharmaceutical activity. Not only cytokines, which we typically fuse to antibodies, but also cytotoxic drugs and radionuclides. And we simply deliver these payloads to the site of disease with really state-of-the-art ligands, be them antibodies or be them small organic molecules. And these ligands are discovered from proprietary libraries that contain billions and billions of binding molecules. So it's a simple general approach that will guide us throughout the presentation. This slide summarizes the need for ligand-based pharmacodelivery. Similar considerations can be done not only in cancer, but also in other indications. Here, you see 4 patients with different types of tumors. And actually, these patients receive 4 different types of drugs. On the left, you see a patient with mesothelioma, so a tumor around the lung that received docetaxel as a typical chemotherapeutic agent labeled with carbon-11, and the black spots basically tell you where the drug goes. And basically, you see accumulation in the liver, in the spleen, in the feces, in the urine, but at no moment in time you see a preferential accumulation in the tumor. This is bad news. It means giving a poison to a patient, but the poison goes everywhere except where it's needed. IgGs, so immunoglobulins, full immunoglobulins are better, but the in vivo selective is not fantastic. As you can see, with this anti-FAP IgG in a patient with liver mets of colorectal cancer. We get much better with antibody fragments. These are our own clinical data in a patient with liver mets of breast cancer. You see a very clear delineation of the tumor just one day after injection. But the world record of tumor targeting happens with ultra-small, ultra-high affinity ligands, such as our OncoFAP. Here you see a patient with primary tumor in one breast, many bone mets, many liver mets and the rest of the body is clean, we will see more patients like this. So really, it's a quest for selectivity that hopefully delivers a quest for therapeutic index and performance. Now our pipeline is growing in depth and breadth. You see that our most advanced product, Nidlegy, has completed successfully Phase III clinical trials in Stage III B/C melanoma, but you will see how also other products are moving ahead in registration trials. For example, Fibromun, and you will see how the blue part of the pipeline, so the chemistry part of the pipeline is growing and is already producing with clinical results. So let's start with Nidlegy, a dermato-oncology program. Basically, the skin is the location for a number of important tumors, not only melanoma, which is maybe the most famous skin tumor, and you see the incidence and also the mortality rate, just limited to the United States of America. You see that if you look at the structure of the skin, you see the different types of cells have the potential to give rise to tumors. Melanocytes will give rise to melanomas, basal cells will give rise to basal cell carcinoma and squamous cells will give rise to cutaneous squamous cell carcinoma. Now all these indications could respond to unmet medical need, especially when they are at an advanced stage. And you already see that, for example, the incidence of basal cell carcinoma and squamous cell carcinoma is much greater than the incidence of melanoma. So having a product that is effective against all these type of cancers represents a good starting point for really helping patients in need. Nidlegy consists of 2 active ingredients, which are antibody-cytokine fusions. The L19 antibody here depicted in green, serves to anchor cytokine payloads of proven performance, namely interleukin-2 and tumor necrosis factor at the site of disease. These payloads are strongly synergistic. We have a Combipack authorization from the European Medicinal Agency (sic) [ European Medicines Agency ]. And this is the only product in the presentation that you will see, given in traditionally, everything else is given systemically. It makes sense to give the product in traditionally if we are treating skin tumors because these tumors are so accessible and again, developments in melanoma and also in nonmelanoma skin cancer. The positioning of Nidlegy in a neoadjuvant setting, which means the standard of care for these patients would be surgery, often but not always followed by adjuvant. And by giving Nidlegy in a neoadjuvant setting, not only we either get rid of the lesions or get them much smaller, but we also train the immune system to fight for any residual tumor cell that maybe look into 4 metastasis. There are other products approved in the melanoma landscape. Some of them are listed. And you see that the average treatment cost per patient per year is typically very high. And often, these products are insufficient performance or high toxicity, often driving patients into autoimmunity. And so there is an opportunity to do better, and that's what we are trying to do with Nidlegy. Now we have announced in October the successful completion of our Phase III clinical trial in Europe, 256 patients, recurrence-free survival as primary endpoint and the 1:1 randomization between a control arm that receive surgery within 4 weeks; for the treatment arm that receives Nidlegy once a week for 4 weeks; and then surgery. And the data will be presented at ASCO in an oral presentation scheduled at the end of May. Now this is what we announced, that the product has successfully met the primary objective of the study. We report more than doubling recurrence-free survival, both by investigator assessment and the blinded independent central review, so a concordant analysis. And when we more than double a time-dependent endpoint in oncology, it means that we are doing something good. And to date, this is the only neoadjuvant therapy for melanoma that has demonstrated utility in a controlled Phase III clinical trial. Similar studies ongoing in the United States because the American authority may accept the European data, but usually, they do so only for conditional approval. They request American data for full approval. And the American trial involves 33 clinical active sites and is roughly halfway through recruitment. As mentioned in the past, the product has proved some activity, I will say, some impressive activity also in nonmelanoma skin cancers. I briefly go through 4 cases in locally advanced high-risk basal cell carcinoma. This is a condition just in the United States, 4 million new cases per year, about 1% becomes locally advanced. The reported complete response rate for approved rate is anywhere between 5% and 22%, and the complete response rate that we presented at ESMO appears to be higher. So we are very excited by our data, and you see 4 patients with disease at baseline who enjoyed a histologically confirmed pathological complete response after treatment. And so this benefit is durable, and that's the reason why we think we are offering a clear benefit to patients who otherwise either could not receive surgery or would receive a very disfiguring surgery, such as amputation of the nose. Similar picture for locally advanced squamous cell carcinoma. For BCC, we treated more than 40 patients already. In SCC, we have already treated 22 out of the 22 patients foreseen in the Duncan study. And you see again how lesions disappear over time, giving rise to a pathological complete response. And as for the BCC applications, we have 2 ongoing Phase II clinical trials at European sites, and the good results actually encourage us now to think about registration plan also in squamous cell carcinoma. So if we try to summarize the business and clinical opportunity, locally advanced melanoma patients are about 23,000 new cases per year, Europe and United States. So this would be the population addressed by Nidlegy in the Stage III B/C melanoma setting. But when we look at locally advanced BCC or, for example, squamous cell carcinoma, the numbers are bigger. And while we have a commitment to file for marketing authorization application by the 3rd of June 2024 in Europe, in the United States, we continue our dialogue with authorities and we continue our Phase III study, with data expected in 2026. Whereas for the local advanced BCC program, the Phase II data are expected in 2024. And we also now see, for the first time, the opportunity to go direct in a first-line approval program, which has been discussed with EMA and which will be launched in 2024. Similar story for squamous cell carcinoma readout in 2024 for the Phase II data. In squamous cell carcinoma, it probably makes sense to go in second line after cemiplimab failure because this is a condition in which basically patients have no therapeutical attempt at treatment, we believe that we can do that registration without control arm. Now if we move to Fibromun, you see a very promising product in soft tissues are coming, glioblastoma and you will like, I hope, the updates that will be presented by Emanuele. And I hand over to Emanuele, who will guide us through the data.

Thank you very much, Dario. You remember that Fibromun is investigated in 6 pivotal trials, 3 in soft tissue sarcoma and 3 in glioblastoma. This one, a single agent has been completed last year -- 2 years ago. So glioblastoma and soft tissue sarcoma, those are 2 deadly indications. At present, unfortunately, with [ screened ] standard treatments, old patients virtually die at some stage. And when you look at glioblastoma, this is the most malignant primary brain tumor. If you want to get an idea how deadly the disease is, you see that only in the U.S., 2023, we speak about 15,000 new cases every year, and we have more than 10,000 deaths. So it's, of course, now in the number of -- in Europe are even larger. But I mean, this gives you an idea that [ virtually ] unfortunately, the old patients succumb to the disease. The median overall survival especially in patients with recurring disease, where we have our most advanced setting, is around 5.5 and 9.8 months. So it's unfortunately very fast. But the situation is not better for soft tissue sarcoma. Because here, we're speaking about, let's say, 13,600 cases every year only in the U.S. Imagine almost 50% of them are metastatic. And so all these metastatic patients then do not have really treatments that work, and you see it by the number of deaths depicted in the slide. And also here, the median overall survival for these patients over is around 12 months. So what we want to do is to provide the better treatment with NNT and TNF. This is one of the 2 active ingredients of Nidlegy. This time is given by intravenous infusion, and the goal as depicted here is to localize the drug to the tumor spreading in healthy issues. Starting with the glioblastoma results. We told you already that the data published in Science Translational Medicine sparked a big interest in the field, given the journal dedicated a full article to our study, which focus on preclinical and clinical research with an anti-TNF in recurring disease, and this data then launched the pivotal programs that we are -- that are now ongoing. This is a slide that we showed in the past. Those are patients in the Phase I trial in patients with glioblastoma at first recurrence, that typically receive lomustine standard of care. And with lomustine, unfortunately, the patients die within 8 months. And here, by giving the combination, you see it by these MRI scans could keep patients almost disease-free for a very long period of time. You see, for example, with patient 1 and now it's more than 3 years with a very small lesion continuing to shrink. Also patient 3, these are already an old picture, 27 months, but now it's more than 3 years, minus 98% of tumor shrinkage. And I said also that also a patient that had a stable disease, this worst-case scenario, patient 6 for 9 months, 9 months of stable disease is still much better than the 2 months of stable disease that you would expect in [indiscernible] alone. So this data basically triggered the ongoing trials that now we're speaking about. So there are 3 trials. One in newly diagnosed patients are now completing Phase I, the so-called Gliosun. The Gliostar, this is the one I showed the Phase I data in the previous slide, and I will expand on it. And the GLIOSTELLA is now approved by FDA, and we expect to treat the first patient this year. This is a study that will be conducted in the U.S. and also parts in Europe and will focus on patients at the first or later progression. So a more advanced disease compared to the Gliostar study. This is the design of the trial of Gliostar, which I said we completed the Phase I trial part of the study. We now have the Phase II part started last June. For patients received in the control arm, the standard of care lomustine or the combination in the treatment arm. And the goal is to show a significant improvement in terms of overall survival in the treatment arm over the control arm. You see on the right the projections that make us very proud. In blue, the projected enrollment rate -- additional projected enrollment rate; and in green, the actual observed enrollment rate of patients with only 10 centers now. We're already at 58 patients, so we're beating our internal expectations. From this red dash line, you see that we expect the completion of the enrollment anywhere mid next year. In soft tissue sarcoma also, we're making a lot of progress. We have 3 pivotal studies that are ongoing: a Phase III in Europe in first-line setting; a Phase IIb in the U.S.; and a Phase II still in Europe in last-line setting. We opened many centers that you see it on the geographical map on the right of the slide. And to cut a long story short, what you see at the bottom of the slide, these projections. And you see that in the Phase III trial, we only missed 18 patients to complete enrollment. And this completion of enrollment is expected by mid -- by this summer. On the right, you see that the expected enrollment rate also going well for a third-line setting, and we expect also to complete the enrollment by this year. And what we announced last February is that for the Phase III trial, we passed successfully an interim analysis. This trial is the one in first-line setting. An interim analysis focused on safety and efficacy that were reviewed by -- within a Chinese wall by an independent data safety monitoring board recommended continuing the study as planned by the protocol. Remember, we remind you that the primary endpoint of the Phase III study is progression-free survival. And what makes us also very proud is that here the trial bets on a substantial benefit, going from 4.4 months from the control arm in terms of progression-free survival to at least 8 months in the experimental arm, so in the combination arm. So the fact that we passed the interim analysis means that at this moment in time, we're on a good track. And of course, we now look forward to seeing the results that will happen as expected by around the end of this year. To summarize the potential market for Nidlegy, we see an initial phase for key markets. We have, of course, the first line of soft tissue sarcoma in Europe and in the U.S. In the U.S., the trial also going well. It is like 12 to 18 months behind the European data. We will see where to use the European data depending -- of course, they are positive to use the European data to go and ask for a conditional approval in the U.S. The third-line setting will also be completed by the end of this year or beginning of the next year. The recurring glioblastoma setting will be completed by -- in 2025, and also there is an opportunity to expand in newly diagnosed glioblastoma. And of course, Fibromun has a pan-tumor potential. So our initial focus is on these 4 key markets, but then once the first indication gets approved, we want to expand and do more. If you want to get an idea of what the market potential of Fibromun is, you can get a flavor by looking at the sales of olaratumab, which is a drug that was approved for the treatment of first-line -- only first-line soft tissue sarcoma in 2016. And you've seen in the first 2 years of sales that the product sold more than [ USD 400 million ]. So with the price, which in the U.S. was around USD 160,000 per patient and in Germany was around USD 100,000 per patient. And here, Fibromun does not only tackle first lines of tissue sarcoma, but also the third-line sarcoma, and glioblastoma which is a bigger market than the sarcoma. That's why I think we're very excited to see the prospects of the product, and we look forward to see the final analysis that we [ commented earlier ] this year. And with this, I hand over to Dario again.

Yes. Just for the last part on chemistry before I hand over to Laura for the financial part, I would like to give you a flavor that also targeting tumors with small ligands can be very effective. So the promise is to basically improve, as mentioned before, on the targeting selectivity. Large antibodies is usually these are the conventional formats that many companies use are very slow at extravasating, and you see that the quality of targeting is not as good. These are 2 patients with tumors positive for fibroblast activation protein, but I think it's fair to say that the picture to the right is much better than the picture to the left. So we want to capitalize on this targeting performance and convert it into a diagnostic or therapeutic benefit. Now the approach is very simple. We start from our demand called the chemical lives. We discover targeting agents which are ideally suited for pharmacodelivery, and then depending on the condition, we may deliver radionuclides, drugs or other modalities. And I'll show you clinical experience with this, at least first 2 approaches. FAP is not the only target on which you can actually prove a selective targeting, and we have by now our nuclear medicine data with 5 targets: FAP, carbonic anhydrase-IX, PSMA, somatostatin receptors and ACP-3. And for the sake of time, I'll only focus on FAP and ACP-3. So basically, if we start with FAP and I focus on radionuclides as payloads, we and our collaborators have treated more than 150 patients with OncoFAP. So our small molecule ligand labeled with gallium-68, which is a PET radionuclide, the program is partnered with Bracco. And what you see with these 5 example patients is really an impressive ability to localize to the site of disease with the rest of the body, which is basically completely clean at 1 hour after the injection. And so for these patients, of course, imaging may provide a useful information, but typically, these patients want also to be treated. And one avenue to treat is to replace the radionuclide with lutetium-177, which is really a therapeutic radionuclide. We have completed central radiolabeling with cyber [indiscernible], and we have a validated shelf life, which is compatible with the global development of the program, and the first patient should be treated shortly. It's also possible to deliver a nonradioactive payload, and I'll show you an example with small molecule drug conjugates. So the idea is that the [indiscernible] OncoFAP is coupled to a linker, a cleavable linker into a very toxic drug called monomethyl auristatin E. We had published in Clinical Cancer Research that we could cure large tumors in mice, and we have initiated a clinical study in animal patients, which means dogs with spontaneous tumors that have basically failed chemotherapy and have no other therapeutic option. The very first patient that was treated, you see this lesion that was a sarcoma at baseline and at a very low dose of 3 migs per meter square already after 4 injections 1 month, the volume has reduced to more than half. Now second patient had a primary tumor, head and neck tumor in the tonsil. And if you look at these lymph nodes in the neck, basically, one lymph node is almost 1 kilogram and obstructs basically the airways. If you look through the scan, the animal had problems actually eating and had a life expectancy of 1 week according to the vets. You can see the large edema of the tumor before treatment, that was 9th of February. And here you see the neck just 1 week later after one injection of a low dose of OncoFAP drug conjugate. And if you look at the actually movie, you can see that after a single treatment, the dog could start eating again and improved also radiologically in terms of the disease. So we are very excited now to bring this medication, not only forward for animal patients, but also for human patients. And the last example, ACP-3, really brings us to the field of prostate cancer with really, I think, great results and opportunities. Radiopharmaceuticals are well established in prostate cancer, both for the imaging and therapy of the disease. PSMA ligands are approved, for example, Lantheus has a product called PYLARIFY. And if you look at the sales of this recently approved product, you see that the sales are about USD 800 million per year. So it's a substantial market only for imaging. And Novartis has a therapeutic product, Pluvicto, where again the radionuclide is lutetium-177. And this is already a blockbuster 1 year after marketing introduction. And the benefit shown in Phase III clinical trials was really a longer progression-free survival compared to the standard of care. But you also see that by month 20, basically all patients progress. And you cannot give a higher dose because if you look, this targeting agent also goes to salivary glands and to kidneys. And so there is a liability, which is implicit in the PSMA target that I think we can address with better technology. So this is what I just said, a proven benefit in terms of extending progression-free survival for Pluvicto, but all patients basically progress and the liability that we need to resolve. Now our approach has been very simple. Rather than targeting PSMA, we go for an acidic phosphatase called ACP-3, which is really a fantastic target in terms of expression in the tumors and being clean in normal organs. If you look now at serial sections of prostate cancers analyzed for PSMA expression or ACP-3 expression, you see that ACP-3 is always strongly expressed, as you can see from this brown staining. Whereas there are tumors which are basically very weak or negative for PSMA. So this is a first benefit. And in terms of normal tissues, you see that PSMA has liabilities, for example, in kidney, that give rise to that undesired accumulation that we discussed before. But ACP-3 is basically clean everywhere in the body except for prostate, which is not an issue for patients with prostate cancer. And we have discovered and patented the ultra-high affinity-targeting agent called OncoACP-3. You see this spectacular accumulation in the tumor compared to normal organs with clean kidneys, clean salivary glands at different time points. And those in animal models, you can see that we can cure tumor-bearing mice using lutetium-177 as a therapeutic radionuclide. And now this molecule is on its way to reach the clinic, alongside other chemical compounds developed by our subsidiary, Philochem. So in summary, scientifically, we have really invested a lot. We have moved forward products, both antibody products and small molecule products that are showing activity in the clinic. And we will continue to update you every 2 months or so about how these molecules are performing. With this, I hand over to Laura Baldi, our Chief Financial Officer, who will guide us through the important numbers for the financial review.

Thank you Dario. Just 2 slides to comment on the group's key economic and financial figures as of 31st of December 2023. The group reports on the top line of the income statement. Consolidated revenues of EUR 25.1 million, slightly below the previous year. These revenues are almost entirely attributable to revenues from contract with customers, EUR 23.1 million, substantially aligned to the previous year. Revenues from contract are characterized by substantial payment related to new contract and/or existing contracts. And the persons who follow the group knows that the revenues still maintain the nature of no constant revenues linked to the achievement of milestone or upfront payment of new contracts. With the signing of some contract, the group is structuring itself to market the product once approval are received. At that stage, revenues will become more stable and recurring, and we hope to be very soon at that point. Target to the cost analysis is to be noted that operating cost amount at EUR 30 million approximately increased by 25% compared to the previous year, confirming the continued investment in clinical trial plus 35% in personnel costs to keep a high level on internal confidence plus 16% and setting up the manufacturing activities to prepare our facility to the market, plus 22%. This year closed with a very limited loss of EUR 6 million, approximately, considering the full expansion of our activities. Also the CapEx so the investment in expansion and plus management is in place. Approximately EUR 6 million has been invested in the previous -- in the last year, considering about EUR 4 million to new building, one close to the facility we have in Montarioso and another new building is under construction soon as office and management center. The net financial position at the end of the year stood at EUR 60.4 million. Cash and cash equivalent was EUR 75.3 million, with a cash burn of EUR 10 million in the year. It is testified that the company is well balance sheet, cash management well capitalized and able to turn needs, industrial activities set sufficiently. If we move to the next slide, there is a graphic representation of the cash burn in 2023. As I said, the cash and cash equivalents at the beginning of the year amounted of EUR 86.2 million, the increase by proceeds of contract of EUR 23.5 million. And then the expenses, operating expenses, a little bit less than EUR 30 million, EUR 6.12 million CapEx. The group is going on with the program of buyback, that's EUR 2.4 million was the amount of treasury shares by both in 2003 and EUR 3.5 million was the positive net results of our financial items, the amount of cash that exceeds the ordinary management of the company's investment invested in a security of portfolio. And this is a gain. And we closed the end of the year with cash and cash management of EUR 75.3 million. The liabilities and the in-depth financial for the company was that it is linked mainly to the notional treatment of lease liability, approximately EUR 12 million. It's only a minor part, the EUR 2.7 million in the fourth page that is going to expire at the beginning of 2027. So from my side, I close the financial overview, and I hand over to Dario again.

Thanks a lot, Laura. And really a last slide on again to summarize topics that we have already mentioned. The next big thing for us is the submission of the marketing authorization application June 3 in collaboration and close collaboration with our distribution partners for Europe, New Zealand and Australia, which is Sun Pharma. And of course, further acceleration of our pivotal developments in nonmelanoma skin cancer that we believe to potentially represent an even bigger market than the already interesting opportunity in melanoma. For Fibromun, this is an exciting time. We expect readout of the registration trial in first-line soft tissue sarcoma around the end of 2024. And similarly, we expect a readout in glioblastoma second line around the end 2025. So if successful, these trials will be game changers for this very difficult-to-treat malignancies. In chemistry, I hope you agree with me that the images spoke by themself. OncoFAP is a good targeting agent for imaging, and we are working very hard to translate this promising imaging data into clinical benefit in therapy. And we have a number of molecules entering the clinic as selective targeting agents. Certainly, OncoACP-3 has the potential to outperform the PSMA market in the field of metastatic prostate cancer. With this, we thank you for your attendance. We are open for the discussion session. And those of you who don't want to speak now can always ask us for a one-to-one meeting and we appreciate, and we are glad to discuss with you.

Thank you very much.