SoftOx Solutions AS (6FV.F) Earnings Call Transcript & Summary

Welcome to today's events featuring SoftOx Solutions. We are pleased to have upcoming Chairman, Ulrik Spork; upcoming CEO, Thomas Bjarnsholt; and upcoming CFO, Ingrid Juven, with us. They will provide a market update in connection with the ongoing rights issue. This session will begin with a slide presentation by the upcoming management team. And following the presentation, we will open the floor for a live Q&A session. So if you have any questions during the event, please feel free to submit them on the SoftOx Solutions profile at investor.no. So you can go to investor.no, search for SoftOx Solutions profile and submit questions there. If you submit your questions through Facebook or any Facebook Group or Facebook Pages, you have to submit them on investorlive.no for us in order to answer them. And by that, I give the word to Chairman, Ulrik Spork.

Hello, everyone. Thanks for listening in. As you just heard, my name is Ulrik Spork. I'm Danish National. I actually understand Norwegian very well, but we agreed that I will address you in English. I hope everyone can follow that. Later on, when we come to questions, I'm happy to answer them even if you post them in Norwegian. But anyway, I'm pleased to be presenting this. I have been asked to get involved in this discussion. And ahead of me, entering in as a Chairman, by the end of the month, when the issue is concluded, the plan is, on the request of the current shareholders, that I will step into the Chairman role of the company. And what we prepared today is the slide that gives you a highlight of what is the focus that we would take, a bit about our background, and a chance for you to say what will our focus be? How will we conduct our business once we step formally into position? So if we advance one slide, there was 2, but there's disclaimer in the first, which I will not go through, and I'm sure you're all happy about that. So this slide gives you a picture of what will be the new management team in SoftOx. Going forward, we will be a much smaller organization, much more focused organization. And I've been asked to speak a little bit about my own background and why I'm here and why I think this is a really fascinating and interesting story. So by education, I have engineering background. I have a Master's degree from the Technical University in Copenhagen. And I also have a business degree also from Copenhagen. I spent my entire professional career in the life sciences industry. I ended up being more than 25 years in the Novo Group of companies, and I was involved in corporate business development, venture capital and private equity investments. So I have been doing deals and raising capital and deploying venture capital and private equity into emerging life science companies almost throughout my career. The last 10 years, I have acted as a professional Board member, chairing Boards and rising companies and sitting on Boards. And in total, I think I've been in more than 30 sort of emerging companies in the U.S. and Canada, France, U.K., Sweden, Denmark. This will be my first Norwegian company, and I look forward to be part of that. So what I bring with me is sort of an understanding of how you advance especially pre-revenue companies, which is, as shown in the current funding climate, challenging to raise capital. So it's really important that you have a focus on the next value inflection point sort of where you have created value to allow you to either raise additional capital or seek partners to help you advance your technology. So that's a bit of my background. I'm new to SoftOx. I didn't know of the technology before, but a colleague, Thomas, actually reached out to me a couple of months ago and introduced me to the technology. And I find that the platform technology really has interesting potential. Eventually, it can be deployed in many different aspects. But I think the current focus that we will talk more about I think is particularly relevant. And I think the company has come to a point where we need to focus very narrowly on that, and I'll come back to a bit about that. So I talked about Thomas. We have a common acquaintance that introduced to me. And Thomas will be the incoming CEO in the company and, Thomas, perhaps a few words about yourself before we advance.

Yes. Thank you, Ulrik. My name is Thomas Bjarnsholt. And in Denmark, I'm a professor at University of Copenhagen and also at Copenhagen University Hospital. I have an engineering background as Ulrik and I'm also a Doctor of Medicine from University of Copenhagen. I spent the last 15 to 20 years on understanding, especially, difficult to treat bacterial infections in airways, but also in wounds. And due to the wounds, I was involved with SoftOx as a consultant around 7 years ago, but 2 years ago, I became Chief Scientific Officer of SoftOx. I have primarily driven the inhalation arm of SoftOx; how to inhale the solution and what to do about it. Conducting all the preclinical trials leading up to the Phase II trial that we are raising money for in the next financing round. I initiated the project in the beginning of the COVID pandemic and know very well how the product behaves and the pitfalls of it, but also I have a great confidence that if we can show proof of concept in this model that we present, we also can have great future of the company.

Okay. And part of the team as well is Ingrid. I'm very pleased that Ingrid is joining us. I think it's essential -- with 2 new individuals in the management team, Thomas and myself, we will always have additional new members coming into the Board. So it's essential that we have Ingrid, who's also part of the past in a transition role. So perhaps Ingrid you can speak a little bit to your own background.

My name is Ingrid Juven. I'm acting as the CFO in the company right now. I have a background, educationally, have a Master of Business Administration degree and have over 25 years' experience from management consulting, project management, restructuring, finance processes, and so on. I've been responsible for the finance area since the restructuring of the company started in 2023, February, approximately. So that was a short introduction.

Very good. So let's move on. So in the course of the last few months, the company has prepared a refocusing and basically a restructuring. There's a lot of efforts that went on in the spring of rearranging past debt. And this is sort of the pillars that the future will be built on. So the focused strategy that we would be implementing will be a very narrow focus on a single area in the inhalation space, a technology that I believe has really strong merit, as Thomas just said. And we have found an indication and a way to do that, means we can get to a very meaningful value inflection point with a reasonably reduced budget. We'll come back to that. So financial restructuring and cost reduction sounds boring, but it's totally essential in the current market condition and also where the company is. So we will be having a very tight ship. We have a very strong focus on activities and cost preservation and cash preservation. And basically, of course, we are a company, but we will be more like a project. So we have a project team. We will conduct a clinical trial that really is a proof of concept trial to, hopefully, with good success, prove that we can make a difference for patients with this particular challenge of pneumonia. So that will be the focus for what we would do. And then we are bringing in competencies to supplement what is already installed in the company. So professionalism sounds a little arrogant when you talk about yourself. But I think when some of the shareholders reached out to me, I think it was their assessment that I could bring some experience and some network and some past knowledge into this, and we will complement the team that you see today with additional competencies also in the Board. So hopefully, we can, around this project, have a lot of insight and knowledge that we can deploy. So that really is the foundation that we will be working from. So if we go to the next slide. Clearly, what is the investment case? Clearly, at the current valuation level, we are at a level that is not attractive for those investors who have been with the company for long, but we really believe that there is an interesting future ahead. Once we have completed this rights issue, we will be able to pay back some positions of debt that is still valid or active in the company. We have and will continue to bring in competencies around the company. And as I said, we will have a very lean and project-oriented organization. We also have a runway which is not far, but it will be enough, hopefully, for us to successfully raise capital for the VAP Phase II project that we will talk to you a little more about. But the highlights of that is that we're addressing a large unmet medical need. It has very high cost for hospitals. And those patients who are getting exposed to this problem have a very high mortality rate. They're quite sick to begin with. And when they get pneumonia on top of that, it really is a challenging situation. We believe that what Thomas has put together is really a very well-defined clinical development plan that first of all builds on very strong data from what we have learned already. Thomas has been intimately involved in all the activities associated with this indication. And we have a very solid basis for this. We also have a very well-defined mode of action, which I think we can claim gives us hope of having a high probability of success. When you do clinical trial with real patients in real challenging situations, there's no guarantee of what will come out. But I think we certainly have moved ourselves in a position where I think we have a good chance of being successful based on what we've seen and the way that we design this. So I really believe that once we can get these results, we get to a very tangible value inflection point, a point where we clearly have proved that we have a valuable technology. And we can do it in sort of pharmaceutical settings with rather modest funding. We'll come back to that. But it's NOK 60 million to NOK 80 million we need to run this study over the next 2.5 years. Once we have the results, the overall plan is to target industrial partnerships and find partners who can help us take the product further on and on to the market. And those data should be available in early 2027. So that basically is the plan that we intend to pursue. If we go to the next slide, in terms of the corporation today, I think, those of you who've been with the company for long, which I haven't, but I'll try to read off on that. There's been a number of different plans. And what I've committed to do and been asked to do is to focus on what is on the right-hand side of this slide. It really is the inhalation activities. We already have, and I think you're aware of that, there is a defense activity going on, which Thomas will talk a bit more to in a little while. But again, the VAP opportunity, ventilator associated pneumonia opportunity, which will be our main focus and which I just talked to, that will be the focus of our activities. That is where we will deploy our activities in the next 6 months. And once we raise the capital, we will go on and do the clinical trials going forward in a very focused project mindset kind of way. We also have some assets within the company in the skin and wound care area. They also have potential for value generation. But in the short term, we will be focusing on the inhalation side. There will be no current activity in the wound side, but once the opportunity arises, the intent is to spin it out. It needs management, it needs funding to enable that. But I will make sure that our focus will primarily be on the inhalation side, while we keep an open eye on what opportunities may arise for the skin and wound side. If we advance one more, this will be the segue for Thomas to tell us why ventilator associated pneumonia is a relevant area. So Thomas, on to you.

To keep SoftOx focused, as Ulrik was talking about, and to really, for the first time, generating a real proof of concept to show that our solution, the hypochlorous acid, has an antibacterial, antimicrobial effect in human beings, we need to perform a study which is easy, not too complicated, and cheap. That's why, together with the intensive care units at Copenhagen University Hospital, we has chosen to focus on ventilator associated pneumonia. It's a very severe type of pneumonia affecting patients who are admitted to the intensive care unit. Currently, there's limited effect from treatment. There's high mortality rates. But from our previous animal studies, we know that we can get the solution into the lungs of the patient. We know that we can treat and kill the bacteria associated with these infections, and we have a very well-defined group of patients. So yes, we'll be working with very dedicated staff at the intensive care units in Copenhagen, which all, not ensures, but raises the probability of success of this proof-of-concept study. Hopefully, when we show that SoftOx can eradicate the bacteria in these ventilated patients and hopefully prevent death of the patients and prevent extraordinarily long stays in hospitals, there will be also an economic benefit. One thing is that we can alleviate the patients, but there's also a large market potential. So I think it's a good case for a small company like SoftOx. Advance, please. And those of you who have been following SoftOx, I think you have also see in these slides that the infection happens when patients have difficulties breathing or put in comas. Then they are intubated and artificially ventilated. This tube, which is inserted into their trachea and in the lungs of the patients, are prone to be infected with bacteria. And when that happens, for some reason, antibiotics do not really work anymore. But we know that our solution works on bacteria in what we also term as biofilms in these very, very difficult to treat settings of bacteria. So we have a very focused group of patients who are very prone to die from this. And we do not really have a treatment, but despite of this, we actually think that we will make a difference in these patients. Advance, please. Our project plan so far is -- of course, SoftOx has been developing the technology. For the inhalation part of SoftOx, we have also conducted, performed all the right preclinical investigations and tests. We've conducted, I'll show a slide later, all the necessary toxicology. And also in humans already. So we have shown that it is safe to inhale and there's no immediate side effects. And we've also shown in animals and in vitro that there is preclinical efficacy. What we really need is to show proof of concept and then, of course, take it through Phase III and possible market adoption. Advance, please. And this slide, if you download the slide deck from the web, you can go into depth with this. But this is to show that all the necessary toxicology, all the necessary testing for being able to enter a Phase II human trial has been conducted. Advance, please. And as I said before, we also tested in human beings. Actually before we tested it in the real Phase I trial, I also tried it myself. And I'm still here. So that was pleasant -- it wasn't unpleasant at all. But also our subjects that were exposed to this for 5 mL up to 4 times daily for 5 days showed no serious adverse events. And it showed that there was a great tolerability and also it was easy to use. And that also indicates that we're ready to go into sick patients. Advance, please. And this is to show that we have this pan-antimicrobial effect of SoftOx. It's not an antibiotic. It's not a classical antimicrobial agent. It will target any organic molecule. That is why we can inactivate virus, we can kill bacteria, we can kill fungi. We can basically kill all microorganisms, but it's also something that our body, our white blood cells make themselves. So our body is used to hypochlorous acid, the main component of SoftOx. So we can kill all the microbes, but we do not kill the patients in the concentrations that we're planning to use in the trials. Advance, please. We tested it in several mouse models and we can show that if you infect mice with a mouse strain of influenza, we can lower the amount of virus in the lungs of the mice. And if you take the next slide. Advance, please. We also see that we can also prevent infections. So I think this is a quite cool experiment we conducted, where we infected one mouse, the black mouse, and then put this black mouse together with 7 healthy mice. And then we saw if the virus would spread from the black mouse to the white mice. And if the mice were just treated with salt water saline, then 7 out of that 8 mice actually became infected with the virus. But if we treated with the SoftOx solution, we could prevent 6 out of 8 mice from getting infected. So I think it's a really strong signal. It's preclinical that our solution works in a real biological model. Advance, please. Our developmental plan is that we'll spend the next year or so, first of all, of course, to raise the capital needed for the Phase II trial. But also to prepare the trial, we need to submit the application to the medical authorities and also really carefully plan the trial. We will perform the trial together with a platform unit called incept, incept.dk, you can look it up. And they are extremely experienced in conducting clinical trials in intensive care unit patients. So far, the plan is to have the first patient treated by the end of 2025. And then the Phase II trial will run for 12 to 18 months. It's an adaptive trial to sign. So we also have the readout of data as we go along, which means also we can adapt the trial, but also we can potentially adapt it into also Phase III trial if funding is available. Next slide, please. And this slide is to show that there's a huge unmet need. There's 130,000 patients succumbing to ventilator associated pneumonia in the EU and U.S. per year. If you're admitted to the intensive care unit, there is a 10% to 30% risk of developing VAP, and up to 50% of these will die from infection. As I said in the beginning, antibiotics are gold standard of treatment, it's difficult to get to work. So the hospitals really need a new solution. We think we can give it to them. And that also means that the hospitals, if this works, if we show proof of concept, they will be eager to purchase this and then there's, of course, market potential. Advance, please. You also heard about our European Defence Fund project, which has been funded through the European Defence project. SoftOx received approximately NOK 35 million, but the entire work package of the inhalation part of the discount at project was NOK 90 million, but SoftOx has not received more than NOK 35 million of these. And this, we have been using and will be used until end of '26, approximately, to update the solution, but also to prepare and partner up with CMOs, manufacturers of the drugs to be used in clinical trials. And also within the EDF project, we will do a second Phase I study. It will still be in healthy volunteers, but we aim to go somewhat higher than we did in our first project. The EDF project is not a prerequisite for going into our Phase II trial, but it's an add-on and there's great synergies between the 2 projects. Advance, please. And this is also what we see here that we still have the VAP timeline that we will go forward with. But the GMP production of the drug to be used in patients is being generated and produced and tested within the EDF, and we'll also do more clinical -- preclinical work and optimization of the solution. And then, of course, we'll make this Phase II in VAP and then Phase Ib within EDF. Both, if successful, will open doors much wider than what we see here. Advance, please. Then back to you, Ulrik.

Thank you, Thomas. And then this is the concluding slide, and we try to list some of the key takeaways. So as you heard, once we get through the restructuring and we get the money from the current issue in place, we can pay back the debt positions and we are a debt-free company. We've very well-defined and very promising and quite cost-effective clinical development plan in place. Obviously, as Thomas just said, we need to spend the rest of the year raising that amount of capital from new and/or existing investors. We also have a new Board and a management team in place, and we have good experience, we think, relevant for being successful in conducting this further on. As you just heard from Thomas, the VAP, which is our target, represents a very significant value potential. Our study costs are unusually low for a Phase II study. And if successful, as Thomas just said, it means that we will be able to develop additional indications based on those results. So until we get there, we will have a very narrow focus. There are very strong synergies with so far the EDF project, which you just heard about. And the approach that we would take as a leadership team will be one to maintain sort of a venture style, very sharp focus on how we spend money, and only do things that are really mission-critical to get us to the next value inflection point. For me, this is what I've been doing for the last 20 years or so in venture capital companies. Being very appreciative of doing things that add value or decreases risks, so you could get on. Obviously, if you have more money, you can do more things in parallel. But what we will have to do is be very focused on how we spend money and being very sure that we are not losing the chance to actually meet our goals in time. That will be the primary focus for us in the new management team. We will not be spending time or efforts on skin and wound care business. It will be spun out at the right point in time. Obviously, if the opportunity arises, the Board will consider that, but that will be our focus. And as I said before, once we are advancing and we get data, we will seek industrial partners to take this product further on towards the market. So those were the words that we planned to share with you today. And again, I'm the incoming, I don't have a formal role, but based on the feedback that I've gotten from shareholders, I'm confident that we will see the new management team take decision in the company. And I look very much forward to be spending more time within the company running the project together with the team that you just see. So I think from here, we will open up for questions. So Obaid, do you have something already we can address?

Yes. Thank you very much, Ulrik, and Thomas, for the slide presentation. What I forgot to mention during the introduction was that if you are watching this webcast as a recording, you can still submit questions at SoftOx Solutions' profile on Investorweb and the management will give a written answer there in the next few days. Please take the chance to ask your questions if you have any kind of follow-up questions. I have some pre-submitted questions already, so I can start with them, maybe. So the questions, they are in the Norwegian. So I will read out loud in Norwegians and you can answer that. [Foreign Language]

Okay. I can take that. So as you just heard from Thomas, we currently have some funding for this project until Phase Ib, which will be in about 1.5 years from now. We hope that these results will be so good, so it yields a continued interest in advancing this together with the authorities and the military organization and thereby providing additional soft of funding. If so, it would be very synergistic with our other development plans. And over time, if we are continuing to be successful, obviously, it could lead to revenue to us. At this point in time, it's not possible to quantify it further. But we will be very interested in continuing very good collaborations that we have had in the past years.

The next question is [Foreign Language].

Yes. I talked about advancing to a value inflection point. Value inflection points have been a buzzword in the venture capsule. But it means you get to a point where you have demonstrated success or reduced risk and therefore, you should be more valuable. When you conduct a trial, it's essential that you have the funds available to go through. So the intent is that we raise the capital needed and, as you saw in Thomas' slides, it's in the NOK 60 million to NOK 80 million to run the project. It's both the cost to run the project externally and to keep the organization going. We have a very small and narrow organization, probably only [indiscernible] company. So our intent is to raise that amount of money over the next 6 months, so we can, without delay, initiate the Phase II trial and run it all the way forward without having management being concerned about do we have enough money to go through this. So that is the intent. And of course, subject to the results of the Phase II, we will have a strategic discussion, should we continue to do it in our own right or should we seek partners. And as we said before, we think that time will be relevant, because Phase II are really critical pivotal information, and in the indication we are in, if we are successful in Phase II, I think we have a very good chance of convincing potential partners that we have something that could be a real product in the marketplace.

The next question [Foreign Language].

Yes, that's a very relevant question. But perhaps I should back up and say how do I see partnerships in the pharmaceutical industry. As we said, we intend to take those discussions based on the study results that we think we will have in early 2027. And we intend to engage with partners at the time. The fact is that in the pharmaceutical industry, certainly over the last 20 years, a very large proportion, far more than 50% of all innovation comes from small companies like SoftOx. Now that's why there's a biotech industry in the U.S. and many other places of the world. So the pharma industry is used to looking for interesting technology and innovations from small companies. And we hope to be in a position that we can open those discussions with hopefully a number of potential pharmaceutical companies, who can be impressed by the clinical results we have generated and be convinced of the commercial value of this. If we are lucky to have a choice, we will be looking at how committed is the partner to the space already; what are the assets and capabilities they have that can help increase the chance that we get a successful launch of the product; and obviously, the financial terms. At that time, we will have a discussion with a partner, how much of the value should be allocated to the current owners of SoftOx and what should the partner get? So of course, the financial terms will be relevant as well. At the current time, there's no point in guessing what it will be. My view is, if we have strong data, I think we will be an interactive partner. And hopefully, we will have a chance to have module discussions. It's not something that we just start once we have the data, but we need to have good data to have those kind of interesting dialogues with potential partners. And you also asked what happens if we can't find a partner. Obviously, we also have the option to do a stand-alone, maybe not on a global basis, but in a selected region. So I think we and the Board will be considering the options we have at the time. Obviously, we could take it to the market ourselves. But to me, it's quite obvious, for a small company to try to build a commercial organization is a challenge, both from a cash deployment and a capability point of view. And there are very strong synergies at that point with organizations who already have a commercial organization. And there's a whole industry who is waiting, for this point, interesting technology, that will buy small company to get in the hands of a larger organization. So I think we have a good chance of having very interesting dialogues at the time. It was a very long-winded answer. I hope it answers your question.

Thank you very much. That was the presubmitted questions. We haven't got any question during the webcast, so we can give another 30 seconds to see if we get any questions. And as I mentioned earlier, if you're watching this presentation as a recording, you can still submit questions at SoftOx Solutions' profile at investorweb.no. Is there anything else, Ulrik, Thomas, or Ingrid, you want to add before we turn off?

I don't think so. But I look forward to come back in due time and talk more about what we have been up to.

Yes. Perfect. Thank you very much to the viewers. Thank you very much to the SoftOx's upcoming management team, and we look forward to follow the journey, and see you next time.

Thank you.

Thank you very much.