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

Dear ladies and gentlemen, welcome to the Earnings Call, Half Year Results 2021 of Vivoryon Therapeutics N.V. At our customer's 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.

Thank you, Angela. Good afternoon, and thank you for joining us today for Vivoryon's conference call to discuss the company's first half 2021 results and operational progress. This morning, Vivoryon issued a press release, which is posted on the company's website at www.vivoryon.com. On the call with me today are Ulrich Dauer, Chief Executive Officer of Vivoryon; and Florian Schmid, our Chief Financial Officer. Also with us on today's call and available for questions is Michael Schaeffer, our Chief Business Officer. We will begin today's call with opening remarks from Ulrich, on our strategic focus and focus during the first half, and then Florian will review the financial results. Following the prepared remarks, we will host a Q&A session. 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 speaks only as the date hereof. With that, I will now turn the call over to Ulrich.

Thanks, Manuela. Good afternoon, everyone, and thank you for being here with us. Today is World's Alzheimer Day, an important day within September's World Alzheimer's month that serves as a reminder of the devastating reality of millions of people around the world suffering from Alzheimer's disease and dementia currently without a chance of being cured. We at Vivoryon support this year's World Alzheimer's campaign, that shines light on the warning signs of dementia, encouraging people to seek out information, advice and support. And more than this, we want to make a real difference to all those affected by this merciless disease. For this, we have developed a completely new approach to treat Alzheimer's disease. At Vivoryon, we've specialized in developing medicines to block the misguided activity of certain enzymes that either cause diseases or allow them to progress. Our most advanced medicine in development, varoglutamstat, is a differentiated small molecule inhibitor, which we're developing to treat Alzheimer's disease. We have already characterized varoglutamstat broadly, and it has shown benefit for patients in the first clinical trial, with improved working memory in patients suffering from Alzheimer's disease. Varoglutamstat is in clinical Phase IIb, and we've designed our development program with a clear regulatory part in mind towards bringing it to patients in need as soon as possible. An important benefit of our approach is that, while many drugs in development in Alzheimer's disease are antibodies that have to be injected or infused. But we focus on small molecule medicines. So varoglutamstat can be very conveniently administered as an oral pill. We've already partnered with large pharmaceutical organizations in the past. Most recently, we entered into a regional partnership in China. My focus today will be Alzheimer's disease, but I wanted to mention that our technology has a broad range of potential applications, and we are also working on earlier-stage programs that address other indications of high medical need, like, for example, oncology, inflammatory and fibrotic diseases. Hence our research and development efforts are protected by a strong IP estate with potential market exclusivity beyond 2035. Another highlight was the strategic regional licensing partnership we entered with Simcere to develop and commercialize N3pE amyloid targeting medicines to treat Alzheimer's disease in Greater China, where we're eligible to receive a combined upfront and milestone payments of up to $565 million plus double-digit royalties on sales. Simcere is a leading Chinese drug developer, and we are excited about this partnership, because we believe that Simcere will be ideal partner for us towards allowing as many Alzheimer's disease patients in China as possible to benefit from our medicines as soon as they are successfully developed. Enrollment is ongoing into our European Phase IIb VIVIAD study in patients with mild cognitive impairment and mild Alzheimer's disease. During the ongoing pandemic, a few COVID-19 related patients and staff protection policies were implemented at German study sites, so we decided to increase the number of sites and have already opened additional study centers to avoid delays in recruitment. Through the remainder of this year, we plan to more than double the overall number of sites. The study is on track for an interim safety readout in mid '22, and we continue to anticipate final data in the second half of 2023. Details on the study background and design were recently published in the journal Alzheimer's Research & Therapy. We significantly expanded our patent portfolio with a total of 14 additional patents granted for Vivoryon small molecule inhibitors and antibody-based medicines in development to treat Alzheimer's disease and other diseases with exceptionally high medical need through 2021 to-date. Additional important developments through the reporting period include Florian Schmid, joining the team as our new Chief Financial Officer; and our shareholders approving all resolution, which -- with large majority in our annual general meeting. There are many, different therapeutic interventions in development to treat Alzheimer's disease. So how do we fit into that landscape and what's unique about our approach? Well, a key differentiator is that we are targeting an enzyme, glutaminyl cyclase, or QPCT for short, which is found in the brains of Alzheimer's disease patients in much higher quantities than in healthy individual, and which have been shown to be linked to Alzheimer's pathology. As you might know, there are 3 classical hallmarks of Alzheimer's disease, Abeta plaques, neuro-inflammation and tau pathology. In addition, synaptic function is also affected. We've shown that QPCT and its active form, QPCTL are important in all of these pathways. Firstly, QPCT is responsible for forming a neurotoxic variant of Abeta peptide called N3pE amyloid or pGlu-Abeta. Importantly, this N3pE amyloid is not there in healthy people. It is only found in Alzheimer's disease patients. You can see this pathway here on the left-hand side of the graphic in light purple. N3pE amyloid in the brain correlates with the QPCT in the brain and moreover, with the cognitive ability of Alzheimer's disease patients. N3pE acts as a seeding element for Abeta aggregation, so you can think of it like the starting point from which plaques form and grow. We'll show you in more detail how we've already validated the QPCT and N3pE amyloid pathway in our own clinical studies on the next slide, but I want to mention that there's also positive clinical Phase II data Eli Lilly, whose antibody bamlanivimab targets N3pE amyloid. There's a second important pathway shown here on the right side in dark purple. Here, the isoform of variation of glutaminyl cyclase or QPCTL, upregulates or boosts the pro-inflammatory signaling molecule CCL2 by turning it into pECCL2. So by blocking QPCTL, we are able to reduce neuro inflammation. Moreover, CCL2 is also promoter of the tau pathology, meaning that you can also address this pathology. Varoglutamstat can inhibit both QPCT and QPCTL, so we are modulating all important pathological hallmarks of Alzheimer's disease, Abeta pathology, neuro-inflammation, tau pathology and synaptic impairment, leading to the protection of important brain functions. And here you can see that varoglutamstat clearly helps further upstream of other therapeutics, like, for example, the many plaque reducing using antibody such as aducanumab and others. Those work by trying to remove existing Abeta drug, while we prevent the toxic Abeta variant N3pE from forming in the first place. Now let me outline our development strategy and show you where we stand in the development of varoglutamstat and why we believe that it has the potential to really alter the cause of Alzheimer's disease. Alzheimer's disease has been prominently featured in our industry and beyond throughout the last month and recent developments, including the FDA approval of aducanumab, were preceded by the search for new medicines in the field, historically suffering from low success rates and lengthy time lines, delaying new treatments and also discouraging investment into Alzheimer's disease drug development. Studies across drug development programs have identified important strategies for decreasing the risk and increasing the likelihood of success in drug development programs in Alzheimer's disease. And these experiences provide guidance for our approach to Alzheimer's disease drug development. We are following a intelligently designed development strategy without cutting costs. Our goal is to ensure that we have the right target, the right drug, the right biomarkers, the right participants and the right trials to allow us to bring varoglutamstat to patients in need. We've completed preliminary work shown here on the left in pink, building the foundation for our development by showing that our approach works in vivo, as evidenced by the robust effect of QPCT blocking on cognition in well-known Alzheimer's disease mouse models. As the next step, in the completed Phase I clinical trial in 205 healthy volunteers shown here in yellow, we've proven that varoglutamstat is well tolerated, and we also got important information on dose response and target occupancy. And we've also completed the first trial for Alzheimer disease patients, our Phase IIa SAPHIR study, shown here in dark purple, in which we achieved not only the primary objective of obtaining important safety information, but we're also able to show evidence of the disease-modifying activity of our varoglutamstat, namely significant improvements under treatment with varoglutamstat, including improved synaptic function as well as improved neuronal connectivity of brain regions. But most importantly, we were able to measure significant improvement of working memory and meaningful improvement of attention as important cognitive abilities after only 12 weeks of treatment. These results are truly encouraging, since after a very short period of treatment, only 3 months, varoglutamstat not only improves pathological hallmarks, but also cognition and memory in patients. These Phase IIa guided the design of our ongoing VIVIAD study, shown here in light purple on the top, which is the Phase IIb study in 250 patients with 30 Alzheimer's disease in Europe. The primary endpoint is a cognitive core changes in cognition as measured by attention and working memory. Patients are treated for a minimum of 48 weeks on a stable dose of either 300 milligrams or 600 milligrams twice daily. We'll select it as final dose versus placebo, which will be selected based on an interim safety analysis planned for mid of 2022. All patients are treated until the last patient enrolled has completed a total of 48 weeks of treatment at the final dose, and this results in a maximum treatment duration of 96 weeks. We anticipate final data of this trial in the second half of 2023. And we are complementing VIVIAD with our Phase IIa/b VIVA-MIND, which we are starting as planned, with the first site is now approved to initiate screening of its first participant. As the study sponsor, we at Vivoryon are very fortunate to work with an outstanding group of professionals. The study Director is Dr. Howard Feldman, Professor of Neurosciences and Director of the Alzheimer's Disease Cooperative Study or ADCS, at the University of California, San Diego School of Medicine, the world's leading key opinion leader in Alzheimer's disease. The study is coordinated by the ADCS and supported by the National Institute of Aging, part of the National Institute of Health. We plan to enroll 180 patients to the Phase IIa adaptive dose finding portion with an interim utility analysis planned for the first half of 2023. If our predefined criteria are fulfilled, the trial is stage-gated into the Phase IIb portion, enrolling an additional 234 patients who will be treated at the selected dose for at least 72 weeks. The primary endpoint for this study is an established approval to endpoint called CDR sum of boxes, which measures a combination of cognitive ability and activity of daily living. We look forward to updating you on this exciting study and its time line as we move through development. We are not currently guiding to a completion date of this study since this will depend on the overall duration the stage-gate phase and recruitment time lines and patients are being treated for 72 weeks. But those patients enrolled very early into the Phase IIa could potentially be receiving up to 72 weeks of treatment prior to the stage-gate decision. In terms of our regulatory path to approval, by combining these 2 studies, we are looking to assess the cognitive improvements we hope to see in patients in the European VIVIAD trial will also translate into an established clinical endpoint in patients in the U.S. trial. If this is the case, it would allow us to potentially apply for accelerated approval of varoglutamstat based on these Phase II data already rather than the classical path of conducting a large Phase III study. And with that, I'd like to hand over to Florian to review our financial results. Florian?

Thank you, Ulrich. In the first 2 quarters of 2021, research and development expenses amounted to EUR 9.5 million versus EUR 6.4 million in 2020. This increase was mainly driven by higher production expenses, expenses for share-based payments and higher costs associated with basic research projects. Our production expenses increased by EUR 2.3 million to EUR 4.2 million for the 6 months of 2021 because of increased production activities. And furthermore, the company incurred expenses for share-based payments of around about EUR 0.5 million, while there was nearly no expense in 2020. The reason for this lies in the share option grant that was made in December 2020. And lastly, we incurred costs associated with our for new basic research projects in connection with meprin and cancer, which also led to a EUR 0.4 million cost increase. When looking to the general and administrative expenses, we have reported a cost increase of EUR 1.2 million. This increase is largely attributable to consulting costs of EUR 0.5 million and again, expenses for share-based payments of also EUR 0.5 million. The expenses for share-based payment results from a share option grant in December 2020, and no expenses were incurred in the year before. The increase in consultant costs resulted from the transformation of the company's legal form, subsequent adoption of administrative structures and preparations for potential future capital measures. The company did not generate any licensing revenues in the reporting period. Revenues deriving from the strategic regional licensing partnership with Simcere will be recognized starting in the third quarter of 2021. And as in previous period, our financial result was predominantly driven by the FX result on the U.S. dollar cash conversion. All this together resulted in a loss of EUR 11.7 million or EUR 0.58 per share for the first 6 months of 2021 compared to EUR 7.6 million or EUR 0.38 per share in the first half of 2020. When we move to the next slide, I would like to highlight only some of the KPIs shown here. The company held EUR 19.8 million in cash and cash equivalents as of June 30, 2021, compared to EUR 26.3 million as of December 31, 2020. The number of shares remained unchanged and the movements in equity result from the half year results. Our cash flow used in operating activities slightly increased by EUR 0.2 million to EUR 6.5 million in the first half year of 2021, while our other cash flow items remained virtually unchanged. The above described resulted in our cash and cash equivalents position of EUR 19.8 million as of June 30, 2021. And with that financial overview, I will now turn the call back to Ulrich, for brief concluding remarks. Ulrich?

Yes. Thanks. Thanks, everyone, for joining us today. I'd like to conclude by emphasizing that we are laser-focused on progressing varoglutamstat through clinical development in Alzheimer's disease. As an oral agent, with the encouraging result already available to-date, especially the effect on memory and synaptic function, we believe that we are on the right track to deliver a treatment to patients that can change their lives. Looking ahead, in addition to our own efforts, we see great potential in Alzheimer's disease from our partnership with Simcere, who took over responsibility for developing and eventually getting varoglutamstat and our antibody to patients in China. And beyond Alzheimer's disease, we at Vivoryon continue to leverage our strength and technology in other severe diseases, including cancer, inflammation and fibrosis. We look forward to keeping you updated on our progress, and we will now open the call to take some questions. Thank you. Angela?

[Operator Instructions] The first question we've received is from Joseph Hedden of Rx Securities.

Just on the R&D costs, they've jumped up a fair bit, and it seems that the production costs are driving that. Could you give us perhaps a steer on to what you expect the second half of the year and next year?

Joe, this is Ulrich. Thanks for being on our call today. Well, I mean, we are not usually giving more precise guidance than we have been given here. So the only comment I can make is that of course, we have to make sure that we are ready for the supply, also for the Phase IIb part of the VIVA-MIND trial. But currently, we are moving according to our plans, and I'm not in a position to make or further breakdown here.

Okay, sure. And on the upfront payment from the Simcere deal, is there anything more you can say about the accounting treatment, so that I appreciate you saying that you're going to start in Q3 2021, but what kind of a period are you going to recognize that revenue? Is there anything more you can say on the amount?

Well, the revenue recognition of licensing deals is always kind of a complex situation as to what you really can recognize as revenue, and you often see a deferred revenue recognition over a certain period of time. So for us, it's really premature to further quantify on that, but we would expect that these kind of revenues will start to kick in, in our third quarter reporting.

Okay. And on the cancer program, on the immuno-oncology program, appreciate that you've been trying to partner for further development for a while. We saw that another exciting deal in the space, Pfizer taking out Trillium. That's the fourth transaction around the CD47/SIRP-alpha pathway. I'm just wondering if you could give us any kind of an update on progress, whether discussions are still ongoing and how many potential discussions you're having?

Yes. I mean again, so we feel very well positioned again to remind you, according to our knowledge. So we are the only company that's really able to offering an approach here, completely different approach based on small molecule-based principle, so to speak. And these deals, which you have mentioned, are really showing how attractive this kind of field is being perceived by the pharma industry. And again, so we feel very well positioned in that area. And you also know, it's really hard to give more details on really where we completely stand in our negotiation processes here.

The next question is from Aliaksandr Halitsa, Hauck & Aufhaeuser.

Could you briefly comment on the additional patents that you obtained for your small molecule inhibitors? I'm just wondering whether there is anything noteworthy to mention? Or is it just the business as usual for you?

Well, I mean, the kind of -- the business -- it's a usual business because it's a kind of key objective really to protect our ongoing projects. And so these patents are granted patents as a result from mostly nationalization processes. But what I feel is special is really the overall patent estate of Vivoryon, which is mainly based on competition of medical claims, protecting novelty of compounds that are inhibiting the targets which we are working on. And so we feel very, very strong about our patent estate here. And that also applies not only for the QPCT and QPCTL inhibitor family, but also for the Meprin target family.

Okay. And then also, I've noticed that you have reported higher expenses for basic research projects, also in connection with cancer. Can you maybe update us where do you stand in terms of clinical readiness of your CD47 asset? And how much more was actually done since MorphoSys brief involvement in there?

Well, I mean, of course, we are progressing the program towards clinical development. So that's one kind of dimension. And the other one is that we continue to explore what are most ceded suited combination partners, so you know that this is a program that is especially meant to augment the efficacy of existing antibodies. And these are the 2 dimensions we are kind of developing this program.

Okay. And maybe in this context, again, it has been mentioned already, the Trillium has been acquired by Pfizer for a large amount. Can you maybe somehow relate the sort of landscape of the most prominent, so to speak, candidates with your molecule? And how do you think you're positioned currently with regards to being able to actually pull off a partnership at the development stage you're currently in as of today?

Yes. So roughly describing the landscape, which consists of 2 basic approaches, both antibody approaches, which try to block this CD47/SIRP-alpha access either on the CD47 side, so on the tumor side or on the SIRP-alpha side. So these are the approaches you see, which are kind of defining the landscape. And as mentioned before, so we are pursuing a small molecule approach that is inhibiting the isoform of glutaminyl cyclase, which leads to a structural modification, a very precise structural modification on the CD47 side, which prevents the formation of this access. And I think that's different than what is known, for example, as a kind of class side effect for most of the CD47 antibody, for example, is that they are also blocking CD47 on red blood cells, which often leads to anemia. And this is a side effect, class side effect, which we obviously do not have to deal with. And yes, moreover, it's a very precise manipulation in the axis CD47/SIRP-alpha based on a small molecule, which also from a patient convenience has advantages over those antibody approaches.

Okay. And maybe this one is a little bit more provocative question. Do you think -- to the extent you can comment there, do you think you would be able to find a partnership in oncology by now had you not had this sort of impediment on the Alzheimer side, with regards to the fact that the IP, which you use in Alzheimer, is also the one that is applicable in oncology? So what I'm basically asking is, if this is sort of too much of a hurdle, so to speak, or distraction for you to really pull off a partnership there?

Aliaks, I don't know whether I really understood your question, but I don't think that what you mentioned is indeed a kind of hurdle.

[Operator Instructions] We received a follow-up question of Aliaksandr Halitsa.

Yes. Apologies, I will just throw in another one. On Alzheimer front, I believe you've had the more exposure with the U.S. pharma specialist sort of investment community now. Would you be able to talk about how your novel approach and the sort of extent of the data you've been able to generate thus far is being perceived by the U.S. investment public? And whether there are any major sort of push backs with regards to your approach, or the data that would sort of justify substantial valuation discount that we've seen, to the companies like Cassava, for example, who is fighting against -- fighting the controversy surrounding the quality of their preclinical data, any comments on that?

Yes, Aliaks, generally, I cannot identify that there would be differences in the perception of our story when talking to different types of investors. So my impression and those of my colleagues are that our story is principally very well received and therefore, I'm not able to really make a point to a different -- of a different perception between different types of investors.

The next question is from [Indiscernible] Asset Management.

Yes. It's another question on your patents. How do -- how should I understand continuing a patent protection, is this complementary or additive to varoglutamstat? Or is it possibly in a different area, also addressing AD? That's question #1.

Yes. I mean if we talk about our patents relevant for Alzheimer's disease, it's basically 2 types of patents. So it's the kind of patents that are protecting the small molecule inhibitors of glutaminyl cyclase and its isoform. And we are working in the research still on expanding this patent portfolio to expand our protection to avoid the situation where competitors can enter into this chemical space, which is relevant for us. So that's important to understand. And then the other relevant patent relates to the antibody, the N3pE targeting antibodies PB-C06, where we also are creating different layers of patent protection to make sure that we have an exclusive period for this antibody as well. So these are the main activities we are referring to in the context of the expansion of our patent estate.

Okay. And then the next question would be related to that. The varoglutamstat therapy that you use in your VIVIAD Phase IIa study in 2018, is that the same varoglutamstat therapy that you are presently putting to work in the U.S. and in Europe? Or has that changed?

No, absolutely. So varoglutamstat is the so-called international nonproprietary name of a compound, which we formally call PQ912. So this is exactly the same compound we are talking about.

Okay. So the new patents are really just making the protection even more watertight. What's inside the package hasn't changed?

Exactly. So what we want to avoid is that a competitor may come up with a kind of very similar compound that is also inhibiting QPCTL or the isoform, and this is being avoided by a broad patent strategy that is considering various or a series of chemical structures, similar structures as broad as possible just to avoid that competitors can come up with similar compounds. So this is the essence of our patent strategy.

Very clear. Last question is on the preparation costs for potential future capital measures. If you could elaborate a little bit what exactly is going on there?

Yes. I mean we generally do not comment on any specific financing plans. And we certainly expect the conversion into the Dutch N.V. to support us in approaching international health care, especially with investors moving forward. And with the changes made to our corporate structure and personnel, we are setting the company up to meet international corporate standards and we'll be well prepared to leverage a number of different financing options in the future, and I'm afraid I cannot go beyond what I just elaborated on.

There are no further questions, so I would like to hand back to you.

Yes. Once again, thank you very much for participating in our earnings call today. We highly appreciate your attention and questions. Have a nice day, everyone. Bye-bye.

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