Lytix Biopharma AS

OSE:LYTIX

Earnings Call Transcript 2024-Q1

[Oystein Rekdal, executive]

Good afternoon, everyone, and welcome to Lytix Biopharma's Q1 report presentation where we will present the company's latest highlights. My name is Oystein Rekdal, I'm the CEO and Co-Founder of Lytix Biopharma and I'm joined by our CFO, Gjest Breistein.

Today's presentation is being recorded and will be available at our website later today. At the end, there will be a Q&A session and to ask questions, please follow the instruction via the webcast platform.

Cancer is still one of the deadliest diseases globally and one major reason why it's so difficult to cure cancer is that each solid tumor consists of different cancer cells with unique mutations, making it very difficult to kill all the different cancer cells.

Our unique technology overcomes this challenge by generating broad tumor-specific immune responses in cancer patients. Lytix is a clinical stage company with a unique technology platform derived from world-leading research. Our lead product candidate, LTX-315, is currently tested in 2 Phase II studies in the U.S. and Europe with encouraging interim results. And all drug candidates have the potential to be an integral part of future cancer treatments, either used as monotherapy or combination with existing cancer therapies.

Our technology is commercially validated through our licensing deal with the NASDAQ-listed company, Verrica Pharmaceuticals for treatment of certain types of skin cancer. And to the right is an illustration of our development program and an update on the development of our 2 lead candidates, LTX-315, and LTX-401 will be presented later in today's reporting.

The global market for immunotherapies is predicted to grow significantly through this decade. The growth is currently dominated by immune checkpoint inhibitors, which block certain proteins that hinder the patient's immune system to fight cancer.

Since immune checkpoint inhibitors have certain shortcomings, other types of immunotherapies are highly needed. And during the next years, the market for immunotherapy in general, is expected to grow more than 20% annually going forward with an increased market space for new complementary immunotherapies.

And since all drugs, candidates are addressing some of the main reasons while a large number of cancer patients do not respond to immune checkpoint inhibitors, all drug candidates potentially represent a large commercial potential within the immunotherapy market.

Let's then move on to the highlights for the first quarter of 2024 and some post-quarter events. Our licensing partner, Verrica Pharmaceuticals, is running a Phase II trial in basal cell carcinoma, which is the most common type of skin cancer.

In January 2024, Verrica announced that all patients enrolled in this study have been dosed. And we are very much looking forward to the top line data from this study that are expected to be shared within this half year. In the ATLAS-IT-05 study, our lead candidate, LTX-315, is tested in combination with the immune checkpoint inhibitor pembrolizumab in late-stage melanoma patients that have previously failed to respond to immune checkpoint inhibitors of the same type.

Early interim analysis of all 20 patients showed encouraging results with the stabilization of the disease in approximately half of the patients for up to a year. And in one patient, the total tumor burden was significantly reduced and characterized as a partial response.

In April, we received very good news from regulatory authorities, that investigator-led Phase II study, NeoLIPA, for early-stage melanoma patients was approved. And the study is planned to start mid-2024 at the Oslo University Hospital, Radiumhospitalet.

During the first quarter, Lytix generated a revenue of NOK 10.5 million for sale of LTX-315 to Verrica for use in the clinical trial. And in April, we succeeded to raise NOK 50 million, primarily from existing shareholders, which extends the cash runway into 2025.

In end of April, I was invited to hold a presentation at an immuno-oncology conference in London, exemplifying the real interest for Lytix cutting-edge technology within the international immuno-oncology community.

This takes us to the clinical and operational update for the first quarter. Verrica presented earlier positive early-stage data from part 1 of their ongoing Phase II study in basal cell carcinoma. So far, LTX-315, referred to as VP-315 by Verrica has shown a favorable safety and tolerability profile in basal cell carcinoma patients.

And patients receiving a higher range of dosing with VP-315 experienced a consistent response of clinical tumor necrosis and clearance of tumor cells. Part 2 of the study is focused on gaining more information on safety, tolerability and optimal dosing regimen that will support initiation of a pivotal Phase III study.

We are very much looking forward to see the top line data from this Phase II study that is expected in June. This is a significant milestone in Verrica's commitment to advancing VP-315 for U.S. patients facing this prevalent form of skin cancer, and also as a clinical validation of our own technology platform.

Basal cell carcinoma patients are traditionally treated with surgery, and VP-315 emerges as a potential alternative treatment offering significant advances over surgery, such as reduced pain and reduced scarring.

The photos to the right show a surgical intervention in a patient with a basal cell carcinoma lesion on the nose, where VP-315 could potentially have less invasive effects on the patient's skin and tissue. And since VP-315, not only kill cancer cells, but also activates the immune system, a treatment with VP-315 should potentially lower the risk of new tumor lesions that often occur in BCC patients.

BCC is the most common form of cancer in the U.S. and the incidences of this cancer type continue to increase globally. And the BCC market is expected to increase to more than USD 11 billion by 2028 in U.S. alone. Under the terms of the license agreement with Verrica, Lytix is entitled to receive up to USD 110 million in regulatory and sales milestone payments plus teen to mid-teen royalties based on Verrica's worldwide annual sales.

Lytix has to date received USD 3.5 million from Verrica, and next payment milestone will be the initiation of a Phase III study. In our ongoing ATLAS-IT-05 study, late-stage melanoma patients that have failed to respond to anti-PD-1, PD-(L)1 inhibitors have been enrolled.

In this study, LTX-315 is tested in combination with immune checkpoint inhibitor pembrolizumab. And as some of you know, immune checkpoint inhibitors block tumor cells' ability to prevent the body's immune response. In addition to not have responded to anti-PD-1, PD-(L)1 treatment, the majority of these patients have previously failed to respond to 2 or more lines of therapies.

So this patient population generally has a poor prognosis with rapid disease progression and few or no additional treatment options to be offered. In August 2023, Lytix announced the completion of recruitment of 20 patients for the study. And so far, the combination of LTX-315 and pembrolizumab have resulted in stabilization of the disease in this challenging patient population, with a disease control rate of approximately half of the patients, including one patient achieving partial response.

As exemplified to the right, complete regression was observed in a number of injected lesions. This patient had several lesions on her forearm and all these lesions were totally eradicated after being treated directly with LTX-315. We also analyzed the effect of the treatment in non-injected lesion in the patients and in a number of patient non-treated lesions were reduced in size.

One example is shown below to the right, where a non-treated tumor reduced in size from almost 3 centimeter to 3 millimeter without being treated. So even though these patients are late-stage melanoma patients that have failed multiple therapies, LTX-315 is able to stop the progression of the cancer and even significantly reduce the total tumor burden at this location in the patients.

Some of the patients have now been followed for a longer time, showing durable stabilization of the disease to more than a year after starting treatment, which highlights the impact of the treatment. As you can see, some of the patients are still at a relatively early phase of the study and further updates will be shared during the fall this year.

Clinical research has demonstrated that the immune system is more robust and responsive to immunotherapy in early stages of cancer. We are differing collaboration with Dr. Henrik Jespersen at Radiumhospitalet, Oslo University Hospital soon ready to initiate the study in patients with early-stage melanoma.

The study will be an investigator-led study where LTX-315, in combination with standard of care pembrolizumab will be given prior to surgery. And the treatment with immunotherapy before surgery is called neoadjuvant therapy.

While checkpoint inhibitors alone in the neoadjuvant setting has demonstrated a significant reduction of the risk of relapse in melanoma patients, many patients still experience limited effects.

So there is an unmet medical need for more effective neoadjuvant treatment regimes. And since LTX-315 has the potential to shrink too much before surgery as well as inducing broad and tumor-specific immune responses. LTX-315 in combination with checkpoint inhibition could potentially reduce in the risk of relapse of melanoma in a higher proportion of the patients.

The NeoLIPA study was approved end of April, and the study is planned to start mid-2024. This study represents a significant step forward by advancing LTX-315 development in early-stage melanoma, which also represent a larger commercial potential compared to a later-stage metastatic setting due to a larger patient population.

LTX-401 is another drug candidate in our pipeline, which has shown superior activity in hard-to-treat cancer model, including liver cancer. Based on preclinical research in collaboration with reputed oncology research institutions in Europe and U.S., LTX-401seems to be ideal for deep-seated tumors and with a large commercial potential.

Clinical validation of our lead drug candidate, LTX-315, should increase the interest for our other pipeline molecules. And we are currently in dialogue with clinical oncology experts to map out the optimal clinical route for LTX-401.

I will now hand it over to our CFO, Gjest, who will provide you with a financial update.

[Gjest Breistein, executive]

Thank you, Oystein. In Q1, the development of LTX-315 progressed steadily. The interim readout from ATLAS-IT-05 in the first quarter showed good clinical results. First, at Lytix it is very encouraging to see that 315 treatment is able to stabilize the disease in very sick patients that have owned a few or no alternatives left.

Also in January, Verrica reported that all patients have been dosed. This is great news for Lytix, as it confirms Verrica's commitment to complete the entire study by the end of first half of 2024. The licensing agreement with Verrica is an important value driver as Lytix is entitled to receive contingent milestone payments and royalties on future sales.

We are also excited to see that the NeoLIPA study is progressing and look forward to start treating patients at the Radiumhospitalet here in Oslo. This setting represent an important commercial opportunity for Lytix or LTX-315.

Now over to the key financial figures. Please notice that the annual report for 2023 was prepared in accordance with IFRS. And that going forward, our interim financial statements will be based on the same standards. There are 2 significant changes compared to the Norwegian GAAP figures.

First, government grants were previously presented as operating income, under Norwegian GAAP. Now these grants are presented as a reduction of operating expenses. The second significant difference is the treatment of leasing. Under IFRS, the lease asset is presented as an asset and future lease payments as a liability.

In first quarter, Lytix generated a revenue of NOK 10.5 million from the sale of LTX-315, to Verrica for the use in their clinical trial. Total operating expenses for the quarter amounted to NOK 29.2 million compared to NOK 24.5 million for the same period last year. The increase in total operating expenses is due to the cost of NOK 9.2 million for the production of LTX-315 that has been sold to Verrica.

Adjusting for these costs, the remaining operating expenses amounted to NOK 20 million for the quarter and represents a fairly large decrease. For the 3 figures presenting expenses on this slide, we have excluded the NOK 9.2 million in cost for the production of 315 that was sold to Verrica.

By making this adjustment, the figures for Q1 2024 are more comparable to earlier quarters. With recruitment completed and all patients in follow-up, the direct R&D expenses decreased by NOK 4.2 million to NOK 11 million compared to NOK 15.2 million for the first quarter 2023.

Other operating expenses decreased to NOK 3.1 million compared to NOK 3.9 million for the same period last year. Payroll and related expenses increased slightly to NOK 5.7 million, compared to NOK 5.1 million for the first quarter 2023.

Lytix is R&D company dedicated to developing next-generation immunotherapy to fight cancer. Lytix has a lean organization that strongly focuses on generating clinical data and create shareholder value. Our cash position, including short-term financial investments amounted to NOK 26.2 million at the end of the period compared to NOK 50.5 million at the end of December 2023.

In April, Lytix successfully raised NOK 50 million in gross proceeds from a share issue primarily directed towards existing shareholders, extending the cash runway into 2025. The strong support from shareholders enable us to take the company through important upcoming milestones, working towards realization, both the next steps of current clinical trials, such as the promising Phase II study with Verrica and the initiation of the NeoLIPA Study.

The company continues to explore strategic partnering opportunities as well as other ways to finance our endeavors.

I will now hand it back over to Oystein.

[Oystein Rekdal, executive]

Thank you, Gjest. Looking forward, there are a few key messages we want you to take with you from this presentation. We are very excited for the upcoming milestones in the near future. We are looking forward to sharing a new update from the ATLAS-IT-05 study this fall.

We're also very excited to see top line results from the Verrica Phase II study that are expected before end of H1 2024. Earlier stage melanoma represents a large commercial potential for LTX-315, and we are looking very much forward to see the first interim data from the NeoLIPA Study first half year 2025.

We also see a large commercial potential for our next drug candidate, LTX-401, and are mapping out the optimal way forward for this asset. In parallel, we are actively exploring new industrial research collaboration that can open for additional commercial avenues for our technology platform.

With this, I will now hand over to Gjest, who will take you through the Q&A session.

[Gjest Breistein, executive]

Thank you, Oystein. We have received a few questions today, and I think I'll just going to jump into those.

The first here is regarding fundraising. And Lytix -- the question goes as follows. Lytix recently raised NOK 50 million. Why did you raise capital at the current low price levels? And how far does the new capital take you?

And I can answer that, and we are very glad to see the strong support from existing shareholders and new investors. And it really showcase the support we have for our unique technology and how we are developing this company forward.

Raising capital now is in line with our previously communicated fundraising plan, and it's the first time we raised capital since we went public with IPO in 2021. And we also have several upcoming milestones in the next period, and that starts this half year with the Verrica data expected to before the end of June.

So next question. How can LTX-315 increase the number of patients to respond to checkpoint inhibitors.

[Oystein Rekdal, executive]

I can answer that question. So as many of you know, immune checkpoint inhibitors have really revolutionized cancer treatment during the last decade. And many -- some of the really deadly cancer changed for being, yes, very deadly to be very responsive to immune checkpoint inhibitors.

Still, there are a majority of cancer patients that do not respond to immune checkpoint inhibitors. And one major reason for that is that immune checkpoint inhibitors take away brakes from the immune system. And therefore, they are dependent on an active immune system in this cancer patient.

Many cancer patients have a suppressed immune system due to the disease and also due to some brakes the cancer put on the immune system. So LTX-315 has shown very strong ability to evoke the immune system and a very broad immune response.

And therefore, these brakes to keep the immune system going and let this immune responses initiated by LTX-315 continue should really be a very strong synergy, which would increase the number of patients responding to immune checkpoint inhibitors.

And we have seen so far very strong synergy in preclinical studies, and we see very clear examples that we can do -- induce responses that are not seen with immune checkpoint inhibitors are low, but with the combination.

[Gjest Breistein, executive]

The next question is related to ATLAS-IT-05 and the NeoLIPA study, and it goes like this. You're shifting focus from late-stage patients to earlier-stage patients. Is this a result of the weaker performance than expected in the ATLAS-IT-05 trial?

[Oystein Rekdal, executive]

Yes, that's a very good question, which I would like to answer. So we have seen effects in patients -- late-stage patients that have failed on a number of therapies. But as you may know that in contrast to chemotherapy, targeted therapy that are attacking the cancer cells, immune therapy are activated immune system.

And the problem is when you are really studying efficacy in late-stage patients, they often have a very weak immune system. So in a way, it's not fair to really you have to go there to show the efficacy of your immunotherapy. Still, we have seen very promising effects in this ATLAS-IT-05 study failing on a number of other therapies and still responding to LTX-315, in a number of patients.

However, moving towards earlier-stage cancer patient is something the whole field in immuno-oncology are discussing and focusing on because you are really dependent on a responsive immune system in a patient to really see the optimal effect of your immunotherapy.

And it can be, in a way, exemplified like if you want to turn off your engine in the car, you need a fully charged battery, not outcharged battery. So we strongly believe that we will now see more responsive -- better immune responses in these patients with a more robust immune system. So we are very much looking forward to test our drug there.

[Gjest Breistein, executive]

We have received a couple of other questions regarding the neoadjuvant NeoLIPA studies. I think I'm just going to continue there. What is neoadjuvant therapy? And why do you believe this is a better setting for LTX-315? And can you also explain in more detail how 315 will work better in this setting?

[Oystein Rekdal, executive]

So neoadjuvant therapy is to use immunotherapy before you do surgery. So this is nothing that is done in patients with a metastatic disease but in patients that have a resectable tumors that can be removed surgically.

So why this is a very ideal setting for LTX-315? This is because this is a local tumor that will be removed by surgery. If you use neoadjuvant, like 315, this is used locally, you inject that directly into the tumor to kill cancer cells, reduce the size and evoke immune responses.

Here, we strongly believe that LTX-315 has several advantages because it's used locally. As you probably know, the immune checkpoint inhibitors are used systemically and are not therefore ideal for a local treatment -- treating a local tumor like NeoLIPA study where they have a tumor and not other metastatic lesions.

LTX-315 work locally. It works quickly. It kills cancer cells and invokes immune system, and we believe the window before needed to do the surgery is ideal for LTX-315. And I think that partly also explain more detail on why LTX-315 will work better in the neoadjuvant setting, because it's a locally treatment -- local treatment, the local effect is important.

You don't have distant metastatic lesions that you need this effect in non-treated lesion. You really want to have effect on the tumor and evoke an immune system that can after surgery, protect about relapse and growth of new tumors.

[Gjest Breistein, executive]

We have a few more questions regarding the Verrica trial. And the first one is when we can expect updates on the progress of the Verrica trial, and the future milestone payments?

[Oystein Rekdal, executive]

So as we have reported -- and Verrica has reported that this top line data from the Phase II study is planned to be announced within H1 2024. We are now in end of May. So we all expect this to happen within June. That's the plan, of course. We cannot say more than that.

Future milestone payment, if these are satisfactory results, it's, of course, up to Verrica to do all their decision regarding development, but the norm is that then you move on to a Phase III study, a pivotal Phase III study. which also then will be the next milestone payments to Lytix from Verrica.

[Gjest Breistein, executive]

And I think you kind of already had answered the last question here, but pending the results from Verrica. What's the next step if the results are positive?

[Oystein Rekdal, executive]

So this is a Phase II study. And I see they have built up this in two parts, finding the optimal dose, further investigating tolerability, safety and efficacy. I expect that these results in this Phase II study will be sufficient to take the next step and discuss with regulatory authorities about starting a Phase III study, the pivotal Phase III study.

[Gjest Breistein, executive]

Thank you, Oystein. I believe that was all the questions we have received today. So thank you for joining the webcast, and thank you for submitting all the questions.

[Oystein Rekdal, executive]

Thank you.