Vivoryon Therapeutics N.V. (VVY) Earnings Call Transcript & Summary

Dear ladies and gentlemen, welcome to the earnings call for the full year 2020 results of the Vivoryon Therapeutics N.V. At our customers' request, this conference will be recorded. [Operator Instructions] May I now hand you over to Manuela Bader, who will start today's conference. Please go ahead.

Good afternoon, good morning, and welcome to our 2020 full year results conference call and webcast. My name is Manuela Bader, Director, Investor Relations and Communications at Vivoryon Therapeutics. Before we start, I would like to remind you that during this conference call, we will present and discuss certain forward-looking statements concerning the development of Vivoryon Therapeutics' core technologies, the progress of its current research and development programs and the initiation of additional programs. Should actual results differ from the company's assumptions, ensuing actions may differ from those anticipated. You are, therefore, cautioned not to place undue reliance on such forward-looking statements, which speak only as of the date of hereof. With me on the call today are Ulrich Dauer, our Chief Executive Officer; Florian Schmid, our Chief Financial Officer; and Michael Schaeffer, our Chief Business Officer. You can find the agenda for today's call on Page 4. In the presentation, we will start by giving you an R&D update, followed by an operational review, and after that, we will close with the financial results of 2020. The presentation will last about 30 minutes. After the presentation, we will all be available for your questions. You will find a slide deck of this presentation on our corporate website. And with this, I would now like to hand you over to Ulrich Dauer. Go ahead.

Thank you very much, Manuela, and good afternoon, and good morning to those of you who are joining from the U.S., and a warm welcome also from my side. Before I'm going to elaborate on the highlights of an outstandingly successful year 2020 for Vivoryon, I want to start with a general remark. Like for other companies and businesses, the global pandemic situation has been posing particular challenges to Vivoryon in 2020 and beyond. We are proud, however, that with the dedication and discipline of our employees as well as our partners, we were able to implement measures that controlled the impact of the pandemic on our operations, especially on the European VIVIAD Phase IIb trial in Alzheimer's disease patients, a target population group, which is particularly vulnerable towards COVID-19. Overall, we were able to achieve our important goals against the background of increasing pandemic challenges. I'll give you more specifics on our measures we put in place to mitigate risk and make sure we can meet our R&D goals with a particular focus on our Alzheimer's development candidate, varoglutamstat, in the course of our report. As to the highlights 2020, in April last year, we took an important step towards the sustainability of our pipeline with the acquisition of a patent portfolio protecting novel inhibitors of meprin, a posttranslational-modifying enzyme, which opens up opportunities to enter into new therapeutic areas, like fibrosis but also cancer and Alzheimer's disease, and thus, lies within the strategic sweet spot of Vivoryon. We acquired this program from our long-term collaboration partner with Fraunhofer IZI in Leipzig, who will continue to support us in the progression of this exciting asset towards clinical development on the basis of a research collaboration. An important achievement in July last year, especially against the background of the pandemic situation, was the enrollment of the first patient in VIVIAD, the European Phase IIb Alzheimer's disease study, with varoglutamstat or PQ912, on which I'll update you in the course of this presentation. Another highlight was the IND approval of varoglutamstat in August 2020 for the Phase II Alzheimer's disease study in the U.S., the second important pillar of our Alzheimer's disease clinical development strategy. This trial will be conducted in partnership with the Alzheimer's Disease Corporate Study initiative, the joint venture between the National Institute on Aging and the University San Diego in California, run by Howard Feldman, a distinguished Alzheimer's disease expert and key opinion leader. The trial called VIVA-MIND will be funded with USD 15 million from the National Institute of Health in its initial Phase IIa part and is designed to be a seamless stage gate into Phase IIb. End of November 2020, we completed the cross-border conversion of Vivoryon Therapeutics AG into Vivoryon Therapeutics N.V. This conversion aligns corporate and capital market legislation in the Dutch jurisdiction and reflects the continued international focus of Vivoryon since it may facilitate access to additional capital markets such as the U.S. I'm very pleased that as a post-period highlight, we were able to extend the executive team with our new Chief Financial Officer, Florian Schmid, effective April 1, who is joining this call and who will walk us through the key financials 2020 in a moment. Florian brings a wealth of experience in finance leadership in public, biopharmaceutical and technology businesses to Vivoryon. Florian joined us from InflaRx, where he served as Director Finance and Controlling, supporting various financing transactions, including a U.S. IPO. He will lead all corporate finance functions as an executive member of the Board at Vivoryon. And I look very much forward to working together in the extended executive team together with Michael and Florian. Now I'm switching gears to the R&D update and outlook. And let me start with the current representation of the pipeline, and I'm going to walk you through the programs in the following, and start with varoglutamstat in Alzheimer's disease. As mentioned in the highlights 2020, it was a particular successful year for Vivoryon, also driven by news flow around our development candidate, varoglutamstat or PQ912, in Alzheimer's disease. Our European VIVIAD Phase IIb trial enrolled patients since July last year. The trial will focus on a total of 250 early-disease patients currently in 10 study centers in Denmark, the Netherlands and Germany. The goal is to complete the trial by 2023 with a full readout, which, if positive, will certainly lead to a substantial value inflection of our company. We are convinced that we put all important ingredients for success into this trial that is being coordinated by Professor Philip Scheltens, Director of the Alzheimer's Center at the VU University Medical Center in Amsterdam. Philip is a pioneer in the diagnosis and treatment of Alzheimer's disease and an internationally recognized key opinion leader. For further details of VIVIAD, I'd like to refer you to our Research Day, which we had on April 15, and which is available as a replay on our web page. Now certainly, the pandemic situation is impacting the recruitment rate in this trial in 2 ways. First, there are selected clinical centers, which currently have to focus resources on COVID-19 patients at an extent that enrollment of Alzheimer's disease patients is substantially slowed down or even impossible. And secondly, which is probably a less tangible factor is reduced preparedness of patients to participate in the clinical trial under the current pandemic situation. However, we are confident that we are able to counterbalance the pandemic impact on our trial by implementing efficient measures, including we are focusing on dedicated day clinics, especially in Denmark, with less individual traffic. We are about to broaden the recruitment base by doubling the number of trial sites to 20. We will mitigate local risks in Europe by adding 2 more countries. And trial protocols include the possibility for remote entry by phone, prescreening by experienced personnel, helping to keep the screen failure rate lower and also reduce unnecessary traveling for patients. In the context of the last point, lessons learned are also transferred into our VIVA-MIND U.S. trial, which is on its way to have the first patient in this summer. In addition, VIVA-MIND also includes a COVID friendly protocol where more telehealth assessments, including cognitive evaluation can interchangeably replace face-to-face visits. The 5 items of the ADNI battery that have been selected and modeled for this trial are suitable for the option of remote administration by phone or telehealth media visits. As mentioned, VIVA-MIND is the second important pillar of our Alzheimer's disease development strategy with varoglutamstat and is meant to complement our European trial, especially with the selection of efficacy endpoints. Also here, I refer to the practice presentation of Howard Feldman, detailing the rationale and the design of the U.S. VIVA-MIND trial available as a replay on our web page. We do believe that our novel approach to Alzheimer's disease treatment based on targeting the enzymes, glutaminyl cyclase, or QPCT, and its isoform, QPCTL, as compared to other advanced Phase II development programs, combines outstanding elements of clinical validation. First, by efficacy data from our Phase IIa trial on various levels, including cognition; and secondly, by recent clinical data presented by Lilly with its antibody, donanemab, which is finding specifically to pyroGlu-Abeta, a toxic molecule, which we are preventing from being formed as an important element of the mode of action. This level of validation underlines Vivoryon's unique position within the competitive landscape of advanced clinical Alzheimer's disease approaches. I'm now getting into the potential of our QPCTL technology in cancer. In April 2020, MorphoSys choose not to exercise this option to license our small molecule, QPCTL inhibitors in the immuno-oncology field. While this is not all we had hoped for at that time, we are now back to having full control of our QPCTL technology in oncology, and we've made significant progress since then by generating additional preclinical proof-of-concept data through combining our QPCTL inhibitors with a series of antitumor antibodies addressing hematopoietic as well as solid tumor indications. We have re-engaged in partnering discussions and believe we are very well positioned with a unique more molecule-based approach to target the CD47-SIRP-alpha checkpoint in the innate immune system as well as labeling the tumorigenic chemokine, CCL2, for faster degradation. I very well understand some of your expectations for a shorter time line to close the new partnership here, while I want to reemphasize our excitement about the potential of this program and perspectives of a partner who will appreciate this potential. Our newest program in our portfolio is based on our small molecule inhibitor of meprin, a posttranslational-modifying enzyme and a potential target for especially fibrotic indications. Again, we acquired this asset from the Fraunhofer IZI in Leipzig, a long-term collaboration partner, who continues to support our efforts to progress this program into clinical stages. We believe this program is another value driver within our technology sweet spot of posttranslational modifications and an opportunity for early partnerships in the field of fibrotic diseases, such as acute kidney injury with yet unmet medical need. Now I'm switching to the corporate updates and outlook. A conforming element in our corporate development has been the cross-border conversion into a Dutch N.V., and let me elaborate on the rationale as well as the importance of this admittedly effort-taking project. At this point, let me also thank our shareholders, without their strong support demonstrated by an overwhelming majority of 97.6% of the votes in our General Assembly 2020 in favor of this conversion, it would not have been successful. Now with this conversion, we believe we increased our competitiveness with respect to decisions regarding the fulfillment of capital market requirements, exercising of strategic options and the exploitation of favorable market conditions without the specific constraints and limitations of public companies under German law. Moreover, the corporate structure of an N.V. is considered more attractive by international investors as they are acquainted with these corporate structures in their respective legal systems as compared to specific features of a German public company. Also, from a shareholder's perspective, the conversion into an N.V. generated advantages by eliminating ambiguities or uncertainties as to the competence of financial regulatory authorities. In the wake of the conversion, the ISIN has changed while still the stock has continued to be traded under the ticker symbol VVY at the Euronext in Amsterdam. The share price development in 2020 outperformed that of important indices like the DAX sub All Biotechnology index, NASDAQ Biotech index, the Euronext Biotech index and others, as mentioned here. Now with that, I hand it over to Florian for the financials 2020.

Yes. Thank you, Uli. And dear, ladies and gentlemen, if I may briefly say something about myself. My name is Florian Schmid. I'm 47 years old, and I'm the new CFO of Vivoryon since the April 1 of this year. I have 20 years of finance leadership experience in public, biopharmaceutical and technology business. And as Uli said, I joined the company from InflaRx N.V., where I served as Director Finance and Controlling. In the last years, I participated in various corporate finance transactions, including an IPO at NASDAQ. And prior to that role, I spent nearly 6 years at T-Systems International, where I most recently led the global deal and business support department. I started my career as a certified tax adviser and a certified public accountant at Arthur Andersen and Ernst & Young. But now, back to Vivoryon in the financial year 2020. Let's start with some key figures. Research and development expenses increased by EUR 13.2 million compared to EUR 4.8 million in the year 2019. This increase is primarily attributable to higher CRO and CMO costs incurred for our European Phase IIb clinical study in patients with Alzheimer's disease. Compared to last year, we have spent EUR 7.9 million more than in 2019. When looking at our G&A expenses, we see a different development. Our general and administrative expenses decreased by EUR 2.8 million from EUR 3.1 million in 2019. And this was mainly caused by reduced legal and consulting fees. In 2019, the legal and consulting fees were higher because of the capital increase in 2019. These 2 aforementioned cost categories led to the increase of our operating loss, as shown here. Our finance result was predominantly driven by FX results on our U.S. dollar cash in our balance sheet. And furthermore, realized -- sorry, we realized minor interest income basically from our money market funds. So in total, we realized a net loss for the year 2020 of EUR 16.5 million or EUR 0.83 per common share compared to a loss of EUR 7.8 million or EUR 0.62 per common share in 2019. When we move to the next slide, I would like to highlight only some of the KPIs shown here. As already elaborated, we have disclosed a net loss of EUR 16.5 million for the year 2020 compared to EUR 7.8 million in 2019. Our cash flow used in operating activities increased to EUR 14 million in the year ended December 31, 2020. This increase was mainly due to the increase in research and development expenditures in connection with our European Phase IIb clinical study called VIVIAD. When you look at the cash flow used in investing activities, you can see that we acquired very interesting IP rights relating to composition of matter and assay patents on meprin protease inhibitors from the Fraunhofer Institute, which costed about approximately EUR 0.6 million. The above described activities led to our cash and cash equivalent position of EUR 26.3 million at the end of 2020. So this concludes our analysis on the key financials, and I will give now the floor back to Uli. And thank you very much.

Thank you, Florian. And let me make some closing remarks here. Overall, we believe that also in 2021, we still will have to deal with the impact of the global pandemic and the implementation of risk mitigation measures, which the consequences may continue to add elements of uncertainties to our financial and operational projections. However, with the additions and advancements with our therapeutic pipeline and the corporate conversion, we have continued the transformation of Vivoryon into a global technology leader in posttranslational modifications as well as increased our competitiveness as an innovator in a challenging field of Alzheimer's disease clinical development. Again, our first-in-class approach based on QPCT and QPCTL has shown clinical evidence in our prior Phase IIa SAPHIR study, and recently, enjoyed an important external element of clinical validation by Lilly's antibody, donanemab, which targets the very same pGlu-Abeta species, which our approach prevents from being formed. Vivoryon with PB-C06 (sic) [ PBD-C06 ] has also developed a pGlu-Abeta-specific antibody, which we haven't mentioned in the current pipeline, however, still which we believe has favorable characteristics over donanemab, for example, with respect to immunogenicity. Due to financial and development bandwidth considerations, we made further development of PBD-C06 contingent to a potential partnership, which we believe may become more likely in the light of releasing data. Important success criteria, apart from our outstanding internal team, our distinguished study partners and Alzheimer's disease experts, among them Professor Philip Scheltens as coordinating investigator for Vivoryon in Europe as well as the Alzheimer's Disease Corporate Study under the leadership of Howard Feldman in the U.S. with VIVA-MIND, which we look forward to start soon with financial backing by the NIH. Now I hope we have -- gave you enough reason to continue to follow the developments at Vivoryon. Let me close with a glance at our current financial calendar. We plan to give our interim management statement for Q1 2020 (sic) [ 2021 ] on June 1, 2021; the Annual General Meeting is scheduled for June 28 this year; and the interim report, half year results is planned to be released on September 21 this year; and finally, on November 23, we'll release the interim management statement for Q3 2021. But I will make you aware that there might be changes of which we certainly will -- we will make you aware in due time. And this concludes the presentation part, and I ask the moderator to open the call for your questions.

[Operator Instructions] And the first question is from Joseph Hedden, Rx Securities.

Could you perhaps quantify in any way the extra expenses that COVID is -- that you're due to incur in terms of -- you're quite diligently putting in place these extra measures to ensure the pace of recruitment of the trials and make sure that the data holds up. Is there any way that you could give us a color on how much cost that's adding? And then on -- you mentioned there PBD-C06, which we have heard a lot about for a while. So I was wondering if you could refresh in our memories, what is -- what differentiates that drug from Lilly's? Why you believe it's got better characteristics?

Okay. Joseph, thank you very much for your question, and great to have you on the call. As to your first question, I mean, I'd describe the kind of measures we put into place, and I can't be specific about the details of the contracts we have in place, for example, with our CRO. But for the time being, it's really very premature to be -- to give a number on what that actually means for our budget. Our first priority is now really indeed to put measures in place that will enable us to read out the data as we have planned, end of 2023. And we will update you as soon as we are able to quantify the impact on -- the financial impact on the measures. For the second question as to PBD-C06, I'll ask Mike to answer that one.

Sure. Hello, everybody on the call. That's Michael Schaeffer, CBO, of Vivoryon speaking. Hi, Joseph. If I've gotten you right, you asked on the antibody, what makes it, let's say, different to donanemab, right?

Yes, that's correct. Yes.

Yes. So we have tested this antibody actually in the lab in comparison to donanemab. You have to understand here, obviously, that in the lab, we always use the mouse variants of the antibodies in this case. So what is very different is that this antibody is -- has a special design in a special mutant. And I don't want to go into very much detail here. But this -- the mutant is helping, let's say, that we will expect a much less trouble, which you usually get with antibody therapies in terms of ARIA induction, let's say. So I don't know if everybody knows that. So you have this kind of image artifacts, which are happening in antibody therapies, mainly because, let's say, larger plaques are going out of the brain, and then edemas happen, which then causes headaches, which then, in turn, yes, let's -- many patients, at least in the donanemab trial, we have seen around, I think, 20%, above 20% of the patients experience severe headaches and many of these patients withdraw from study, which then kind of kills or compromises with your statistics. So what we see with PBD-C06 or, I should say, what we expect with PBD-C06 is due to the special mutation, which is helping that we do not get as much ARIA issues with this antibody as opposed to donanemab. And then also what we see it's very -- more specific to the oligomer -- to soluble oligomers of pGlu-Abeta than donanemab is. So we think it's much more right on target than donanemab to be safe here.

And the next question is from Chris Redhead, goetzpartners.

A couple of questions. The -- clearly, you're focused on doing corporate deals. Is it the interest you're getting on the CD47? Or is it much more on the CCL2? Is that -- or is there a sort of -- where is the kind of focus at the moment?

I would say it's basically very much balanced. I mean, obviously, the CD47 story is more prominent, let's say, in the current R&D world. But I mean, there's also a number of companies looking into CCL2 signaling. So yes, it maybe a little bit more of a niche or, let's say, not so modern at this point of time to look at CCL2, but there are -- there's interest from that side as well.

So it's kind of a more -- is this sort of more broader application probably in CCL2, right? In...

Yes, the application is broader -- yes, I'm sorry. It's absolutely a broader application. It also goes in direction more of inflammatory events, let's say. So there's more to it, let's say, than pure cancer maybe in this case.

Yes. Well, that's probably a good fit for a small molecule, right, where -- clearly, what I just going to -- yes.

It's absolutely a good fit for small molecule to be true. And again, what is very interesting here, so I mean, there have been already attempts to attack the -- to target the CCL2-CCR2 axis, let's say. What is very interesting about molecule, again, is that it's, again, upstream, let's say, of the activity of CCL2. And this makes -- the interesting fact here is that we are not only blocking CCL2 pathway, we are also blocking the very similar chemokines, CCL7, 8, 13, which are all the same family and which actually can bind to the same receptor as CCL2. So -- and I think this is one of the issues of former therapies that if you only target CCL2, you still have, for example, CCL7 doing the short job of binding to the same receptor. So it's better here to be, let's say, a little bit less specific and target 3 or 4 of these chemokine family members, and this is exactly what the QPCTL inhibitors do.

Yes. So that kind of leads on to my sort of second question, which was, with the antibody-based approach, clearly, one of the issues that you always get with those approaches, particularly for chronic diseases, inflammatory or not so much clear, not so much of a problem with cancer, but with this antidrug antibodies. Is there enough evidence out there just looking at those, the donanemab, the Lilly product. Is there evidence for antidrug antibodies for that at this point? Or...

Yes. The -- this is quite an issue for donanemab, yes? So they have a high number, and I don't know exactly the number now or the concentration, but they definitely have issues with antidrug antibodies that are strong enough.

Right. So that makes a very good fit for you guys to come and to use an antibody then to follow it with maintenance therapy with a small molecule, right?

Yes. Exactly. Absolutely on point.

It's sort of obvious if -- I'd kind of -- what -- thinking about at what point do you approach Lilly?

Yes. That's true, but let's wait and see. So we have our plans, obviously, with this antibody. And -- but of course, I mean, they look into that, and they know a bit of the story. I mean we were -- actually, the development of this antibody was even earlier than the donanemab antibody, to be honest. So yes, there's quite some experience on our side to handle this molecule.

Okay. The last and third question was, could you just confirm what your cash runway is right now with the -- I know there are some kind of unknowns a little bit with the COVID and what have you. But just to give a -- where you sit with the cash?

Yes. I mean, again, as I said, that we see that the pandemic situation has added some kind of uncertainty. But what we have to be confident with is guidance of that we are at least fine for the next 18 months with the cash we have on board.

And the next question is from Martin Fahey, Mackenzie Investments Europe.

Can you hear me?

Yes, we do. Martin, good to have you here.

Okay, given the amount of net cash you've left in the balance sheets and what you spent last year, maybe it was an exceptional year. And there's 2 questions. One is the likely cash outflows this year? And the second question is, given that any Alzheimer's assets in the world today, they're really highly valued in the U.S. There's very few Alzheimer's assets that I can find at your stage that are well anywhere near $1 billion. Surely that means that you've got to be looking at NASDAQ listing or something like that to reflect the value of your assets.

I mean I like this question in a way that you are pointing to the peer group, which is in similar advanced stages of development. And let me again confirm what I expect in the presentation. So with the solanezumab data, we really believe we have within the peer of Phase II development companies in Alzheimer's disease, the highest degree of clinical validation for our approach. So we really believe that the likelihood of success is underlined by these elements of internal validation by our Phase IIa trial and the external element of Lilly data. And of course, we do have an interest to especially approach specialist investors with interest -- particular interest in that field, which we have witnessed in being raising with news flow in that field. And yes, it's certainly -- we certainly are taking care of getting access to those investors, which we believe have a particular interest in that field, let's put it that way.

Okay. And then the first part of the question, then the likely cash spend?

Yes. I mean, again, what we said is we feel comfortable for a period for the next 18 months. We haven't been precise on how that will break down for '21 and '22, but you can expect that the expenditures for '21 will be higher than they are in '22, and that is also mainly due to the start of the U.S. trial, but also due to the kind of ramp-up of recruitment for VIVA-MIND. That will be for the European trial.

And there are currently no further questions. [Operator Instructions] And the next question is from Mohamad Vaseghi, FMR.

So you already answered to my question, but should -- I do have really a small question and it's about delivery. Do you think that in future -- close future, there's any kind of the possibility to use the small molecule of the PQ912 with this monoclonal antibody?

Do we understand you right, if you're asking for a potential combination therapy of an antibody and a small molecule?

Exactly.

It's absolutely -- that's absolutely a way we are looking into, and that's absolutely possible. And it makes also very much sense. If you look in the presentation from our Research Day on our website, unfortunately, you have to dig it somewhere, but we can provide also the right link. It's in the Investors section in the Events segment. You see Philip Scheltens and Howard Feldman referring to the way we think in Alzheimer's therapy in the future. It's very similar to oncology, we think, where combination therapy is with a clear trend, let's say. And using the antibody, which is, in the first place, trying to, let's say, get rid of the already existing pGlu-Abeta in the brain in addition to the small molecule, which is hindering the production of new pGlu-Abeta makes it absolutely shining to the eyes of the researchers and KOLs. And this is something we are also addressing from the R&D side at the moment and looking into this combination.

Yes, everything else is understood. It would be really, really amazing.

And there are currently no further questions, so I'll hand back to the speakers for closing remarks.

Yes. Thank you, everybody, for joining on a Friday afternoon, at least here in Europe. And yes, I ask you to stay tuned about the further development, and we look forward to talk to you soon. Thanks a lot, and bye, everybody.

Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect now.