Lytix Biopharma AS

OSE:LYTIX

Earnings Call Transcript 2023-Q2

[Oystein Rekdal, executive]

Good afternoon, everyone, and welcome to Lytix Biopharma's Q2 report presentation, where we will present the company's latest highlights and events. My name is Oystein Rekdal, and I'm the CEO and the co-founder Lytix Biopharma Today, I'm joined by Gjest Breistein, our CFO; Graeme Currie, our Chief Development Officer; and Ole Peter Nordby, Head of Investor Relations.

As with previous reports, today's presentation is being recorded and will be available on our website later today. At the end, there will be a Q&A session. [Operator Instructions] Before we go into the event of the fourth quarter -- second quarter, sorry, I will in one slide briefly introduce our technology. Lytix is an immuno-oncology company. And during this fall, we are presenting interim data from 2 ongoing clinical Phase II studies. Our technology has been validated by international experts within the immuno-oncology space, and our technology has also been commercially validated through our licensing deal with Verrica Pharmaceuticals. Our molecules address major challenges in current cancer therapy due to the unique ability to induce activation of a broad repertoire of T cells. That can target the high diversity of different tumor cells in solid tumors and which make these molecules ideal for combination with immune checkpoint inhibitors.

Let's now move on to the highlights for the second quarter of 2023 and post periodic events. Our industry partner, Verrica Pharmaceuticals, is running a 2-part Phase II study, evaluating LTX-315 for the treatment of basal cell carcinoma. They recently reported positive results from the Part 1 of this study where complete clearance of injected cancellations were observed in 4 patients. 95% clearance in one patient and 30% clearance in another patient. We find these results highly encouraging and look forward to see the results from Part 2 of the study.

Based on the stronger-than-expected activity observed in patients receiving LTX-315, Verrica has decided to accelerate the clinical development of LTX-315, and to complete the Phase II study end of first half of 2024. In our Phase II study, ATLAS-IT-05, we recently reported that all 20 patients have now been recruited to the study and interim results from this study will be presented at the European Society of Medical Oncology Congress in October 2023.

We have also decided to support an investigator-led Phase II study at Oslo University Hospital, Radiumhospitalet. This will be a neoadjuvant study in earlier stage melanoma and is expected to start in first half of 2024 and will enroll 27 melanoma patients. We have further decided to refocus our resources and concentrate on generating additional clinical efficacy data with LTX-315 and postponed the start of the planned Phase I safety study with our second-generation molecule LTX-401 for some time. This takes us to the clinical and operational update for the quarter, and I will then hand over to Graeme Currie, our Chief Development Officer, for the clinical update.

[Graeme Currie, executive]

Thank you, Oystein. As Oystein announced, we reached a milestone of recruiting 20 patients in the ATLAS-IT-05 study. This is a significant milestone and will allow us to share some of the initial results of our study at the upcoming European Society for Medical Oncology Congress, which is being held in Spain on the 20th to 24th of October. We are hoping from the interim analysis that the data will provide us encouraging efficacy signs and will really help us focus on which patients are able to achieve benefit from the combination of LTX-315 and an immune checkpoint inhibitor pembrolizumab. As a reminder, these patients are patients who have highly advanced disease and have been refractory to prior treatment, so progressing after multiple lines of therapy.

Next slide. In addition to evaluating looking further at patients in that advanced stage of disease, as Oystein mentioned, we are also proposing to fund a neoadjuvant study. This is treating patients ahead of excision of the tumor in patients with Stage III/IV melanoma. The study is entitled NeoLIPA. It is going to be conducted under the principal investigator, Henrik Jespersen, who's at Radiumhospitalet in Oslo, and he is hoping to commence the study in the first half of next year.

ATLAS-IT-05 is treating patients in the most advanced stages of disease who have failed prior therapies, including checkpoints. This disease setting will be at a much earlier stage, where we believe that patients will have a more intact immune system, less resistance mechanisms will be in place. And that will really allow the power of LTX-315 to show itself, there will be a great opportunity to activate a broad diversity of T cells prior to surgery. And the intent here is not only removing the tumors with surgery, but also being able to treat the micrometastases that may be aren't visible during the surgical process. And this is where we believe LTX-315 can really help this process.

We move to the next slide. So data recently was shared on the effect of pembrolizumab alone in its neoadjuvant setting. It was very encouraging data in terms of 9 of the 142 patients enrolled at 6% who had a complete response. This is a much larger group who showed a partial response, 41% and the main goal of this procedure is to get what we call complete pathological response. That means that when looking under a microscope, there's no evidence of any remaining disease, that occurred in 21% of patients in this study. The potential to further improve on this by adding LTX-315 on top of pembrolizumab is really a very exciting opportunity, an opportunity where we really believe that LTX-315 can continue to show a significant difference.

On that, I'll hand back to Oystein.

[Oystein Rekdal, executive]

Thank you, Graeme. As mentioned, Verrica has recently presented results from the first part of their Phase II study in basal cell carcinoma. The results were presented by Dr. Bhatia at the conference arranged by the American Association of Dermatology earlier this month. The patients were treated once daily with LTX-315, named VP-315 by Verrica for up to 6 treatments over a period of 2 weeks. After complete treatment, the lesions were surgically removed and analyzed by histology.

In 4 of 6 patients that were treated with the highest dose, it was found -- not found any cancer cells in the treated lesion. The other 2 patients showed a partial response with 95% and 30% tumor clearance, as earlier also mentioned. But these early results from Part 1 are very encouraging and document that 315 is able to kill all cancer cells in the most mutated cancer type of all cancer. And we look forward to see the data from Part 2 of the study, which is expected to be completed end of first half year of 2024.

Lytix has a licensing agreement with Verrica where Lytix is entitled to receive up to USD 111 million in potential milestone payments and teen to mid-teen royalties based on Verrica's worldwide annual sales. And this is an attractive deal for Lytix because the commercial potential is large with a $6.7 billion market in U.S. alone in 2021 and a market that is expected to increase significantly the next years.

Basal cell carcinoma is the most common cancer among all cancer types with 3 million to 4 million incidences per year in U.S. And today, the majority of the patients are treated with surgery, which is painful. And since BCC lesions often occur in sun-exposed area of the skin, scarring and hypopigmentation can cause cosmetic challenges for the patient. LTX-315 could potentially represent a better alternative to surgery because it may lower the risk of relapse and will cause less damage in the patient's skin. So as you can see from our pipeline, our lead candidate, LTX-315, is currently being evaluated in two Phase II studies in the U.S. and Europe as a monotherapy in basal cell carcinoma and as a combination therapy in melanoma patients. We have already seen positive interim data from the BCC study, and we will report interim data from ATLAS-IT-05 in October. Today, we are reporting that we will also support an investigator-driven study in neoadjuvant setting at Radiumhospitalet in melanoma patients with an early stage disease, where we expect to see an improvement in responses rates because these early-stage patients have a more healthy immune system. Since we have decided to focus on generating more clinical efficacy data on 315, we have decided to postpone the clinical Phase I safety study with our second-generation molecule, LTX-401. And preparing for further development of the company, we also have additional molecules in the early discovery phase.

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

[Gjest Breistein, executive]

As you can see, this year's second quarter has been a very exciting period for Lytix. We have reached a key R&D milestone by dosing all 20 patients in ATLAS-IT-05. This is a result of a proactive Lytix team who, towards the end of 2022 and early 2023, succeeded in setting up additional sites in both Europe and the U.S., enabling us to speed up recruitment during second quarter. With 20 patients dosed as of earlier this week, we look forward to presenting interim results at the upcoming ESMO meeting in October.

Now to the key financial figures. With increased R&D activity during the second quarter, the total operating expenses for the period was NOK 34.6 million, up from NOK 20.4 million for the same period last year. This slide illustrates the continued high activity level across Lytix this year. As a clinical drug development company, our R&D efforts represent most of our expenses with more patients recruited for ATLAS-IT-05, direct R&D expenses have increased to NOK 24.6 million up from NOK 12.1 million last year.

The operational activity, alongside increased efforts on business development side has resulted in slight increase in other operating expenses to NOK 2.4 million. Net financial items amounted to NOK 2.7 million in second quarter due to a stronger U.S. dollar. Overall, Lytix is a lean organization that strongly focuses on being fiscally responsible while advancing our development program. Our cash position including short-term financial investments amounted to NOK 100 million at the end of the period compared to NOK 145 million as of December 31, 2022.

The current cash runway will see us well into 2024, and we continue to regularly assess our financial position to ensure that we have the necessary funds to support ongoing and future activities. So far in 2023, our development program has matured and reached a point where our drug candidates are being recognized as a new treatment modality with a significant market potential. As we embark on this year's second half, we are excited to deliver interim data and carry on this important work. I will now hand it back over to Oystein.

[Oystein Rekdal, executive]

Thank you, Gjest. Looking forward, there are a few key elements we want you to take with you from this presentation. We are in good progress with the 2 ongoing Phase II studies LTX-315 and one main focus now is to analyze the interim data from ATLAS-IT-05 study for presentation at the Clinical Oncology Conference ESMO in October. And we will continue to support Verrica Pharmaceuticals Phase II study, which is expected to be completed June next year. We will support initiation of the neoadjuvant study at Radiumhospitalet that is planned to start first part of 2024. . We will also continue to strengthen our position in the immuno-oncology space by keeping a strong footprint in the U.S., continue to build strong networks and relationships within the industry and consider additional commercial opportunities for our unique molecules. We are very encouraged by the latest results we have seen with our lead candidate, LTX-315, and its commercial potential. To the right, you see an example of the systemic effect of LTX-315 in a patient with sarcoma, that failed previous treatment.

When the patient received local treatment with LTX-315, in a tumor lesion in the lower back, the patient experienced a 63% shrinkage in a relative large nontreated tumor in the lung. We have observed similar systemic anticancer effect in a substantial number of cancer patients after local treatment with LTX-315, monotherapy, indicating that LTX-315 is able to generate the right immune cells in the patients that are able to fight the cancer disease at other locations in the body. We are, therefore, confident that our molecules have a potential to make a difference for many cancer patients who still face few or ineffective treatment options.

I will now hand it over to Ole Peter, who will take you through the Q&A session.

[Ole Nordby, executive]

Thank you, thank you, Oystein. We have received quite many questions today. But let's start with what we reported first, which was the results from the Verrica study. We have a question regarding that. After these results, they were reported after 49 days follow-up and the question is, will there be further follow-up on the 2 patients that did not have complete tumor clearance, perhaps seeing the patient with 95% clearance reach full clearance or is it assumed that there is no more effect of the treatment after 49 days that can be related to LTX-315.

[Oystein Rekdal, executive]

Honestly, I don't know the answer for this. I'm not -- we don't know the details how these patients are followed-up after treatment. You know the tumor is removed and analyzed. So in one way, the tumor is away. So you don't have the opportunity to consider it. The only thing you have to look at after you have removed the tumor by surgery is any relapse, of course, which I guess, Verrica is going in to look to any immune responses in these patients.

[Ole Nordby, executive]

Okay. And it's a second question regarding that study. It also goes to you, Oystein. Do you know anything more about why Verrica has changed the date for completion of the Phase II study from October 31 to June 30.

[Oystein Rekdal, executive]

So what we know is based on what Verrica report, but how I understand it is that initially, the study was divided into 3 parts, this has changed. They have combined Part 2 and Part 3. And I think the main reason for seeing a shorter period of time for completing the study is based on they were a bit surprised with the results at this early stage. And with these promising results, they can move faster in the Part 2 and therefore, complete in some months before earlier planned.

[Ole Nordby, executive]

So then it's one question regarding the ATLAS-IT-05 study. Do 20 patients provide enough information on the efficacy of LTX-315, in malignant melanoma patients to provide clinical proof of concept. I believe you should be the one to answer this, Graeme.

[Graeme Currie, executive]

Yes, thanks, Ole Peter, thank you for the question. We've now recruited those 20 patients, which will provide us evidence of the drug showing effects both locally and abscopally and that's what we're looking to see. We have previously communicated that we'll consider expanding this study further provided that the interim analysis shows us enough encouragement where we see responses, and we wish to further characterize them. As we look at those, that will give us an idea of which patients are most likely to benefit. Our goal out of this study is to deliver a robust clinical signal and clinical proof of concept in this study.

[Ole Nordby, executive]

Most of the questions we have received are regarding the neoadjuvant study actually. So we could start there now. With this one, can you describe more about the current neoadjuvant melanoma treatment algorithm? Is anything approved or used off label? What is the pipeline competition like? I believe you are the one who knows most about this, Graeme.

[Graeme Currie, executive]

Yes, I can certainly comment on that. So as I shared, the SWOG study that produced very encouraging data reported out recently. I believe that, that data will be used to support a regulatory application in the neoadjuvant space. So that we believe will become the new standard of care. I don't believe that's approved at this point, but I believe that will change to be the new standard of care. And that is why the design of our study will be adding on to a checkpoint in the neoadjuvant treatment space.

[Ole Nordby, executive]

And then there's a question that goes like this. With a second KEYTRUDA combination study starting as a neoadjuvant study, could there be a case to present to Merck for a collaboration where they provide the drug. Should you answer that, Oystein?

[Oystein Rekdal, executive]

I can answer that. That's a good question. So first, so everybody know that. We will do this study in neoadjuvant setting at Radiumhospitalet. It will be an investigator-driven study. So that means that in this study, we will add on LTX-315 with the standard of treatment of pembrolizumab. So we don't have to pay for pembrolizumab in this study. But that said, when we are now getting more into detail about this study, we absolutely should discuss internally whether we should have more specifically target, for example, Merck, who has the pembrolizumab to see whether there could be any supply, collaboration at least.

[Ole Nordby, executive]

And then adding to this, what other indications and collaborations have been discussed or been on the table before landing on neoadjuvant study in earlier stage melanoma patients. And did you ever consider to start more studies so that you could explore LTX-315 outside of melanoma.

[Oystein Rekdal, executive]

So I think I can comment on that. I think what is very important now in -- what we see in the immuno-oncology field is that immunotherapy has started in the end where we have almost terminal patients with a very weak immune system and have gone through a lot of treatments and failed, like our study ATLAS-IT-05, which they have failed on anti-PD-1 before. So the whole immuno-oncology community are, in a way, agree that immunotherapy should be at earlier stage where the patient has a strong immune system and better ability to respond to immunotherapy.

Of course, LTX-315 has a potential beyond melanoma. But I think what is very important, especially with a first-in-class technology like Lytix, it's in a validation of the technology and to get that strong signal in one indication before you spread out is important. But when you have shown that, I think that is open for additional indications.

[Ole Nordby, executive]

Yes. And there is a question regarding bridging from the Verrica custody to the neoadjuvant setting. Would you describe the neoadjuvant melanoma setting as similar to Verrica's BCC setting. Can you draw any conclusions from Verrica's BCC trial as to the potential in adjuvant melanoma, I suppose it's neoadjuvant melanoma, which is meant here.

[Oystein Rekdal, executive]

Please, Graeme.

[Graeme Currie, executive]

I can address that, Ole Peter. So certainly, basal cell carcinoma and melanoma are 2 different types of cancers. However, I think the data from the Verrica study shows very clearly, which was what we expected that we can have very direct effects locally on tumors when the drug is administered intratumorally. So I think the data that we see from the Verrica study confirms what we believe that you can see direct necrosis of tumor tissue when injected.

And certainly, that is the goal in the neoadjuvant setting when we're trying to reduce the tumor size to help excision and also promote an immune response locally that can potentially remove some of these lesions that may be or this tissue, that may not be visible to the eye. So whilst it's not a direct comparison, it really does validate what we believed that we have a very strong direct effect when we inject into a tumor lesion.

[Ole Nordby, executive]

Thank you for that answer, Graeme. And then we have a series of short questions on the ATLAS-IT-05 study. And that would be first one, how many lines of previous treatment have patients in ATLAS-IT-05 had?

[Graeme Currie, executive]

Yes. So we limit the number of lines of treatment to 3 prior lines. However, that is after those treatment lines are following the initial surgical approaches that are normally followed in these patients. So these patients have really quite advanced disease and the majority of them have had 2 to 3 prior lines of therapy. And as I mentioned earlier, including some of these patients having double checkpoint therapy.

[Ole Nordby, executive]

And then how many patients are there in the interim analysis of ATLAS-IT-05.

[Graeme Currie, executive]

So we will present all the data that we have at this point as you will understand that some of the patients have just recently enrolled, so they would not have post baseline data. Generally, we scan these patients about the minimum is 6 weeks after the start of treatment but you really need 9 to 12 weeks before you'd see some effect. So we are hoping in the sort of team level, we'll have data where they have baseline and post baseline, we will report all the data we have, but some of the patients will not have had the opportunity to reach that far in the study where they've got the post baseline scan.

[Ole Nordby, executive]

When do you expect to report ORR and PFS data from all 20 patients as response rates and survival data?

[Graeme Currie, executive]

Response rates, as I mentioned, we have a scan at 6 weeks post baseline and the next scan comes up 9 weeks after that, so around about 15 weeks, 3 to 4 months after the last patient. We announced recently that the last patient was enrolled just prior to the end of August. So 3 to 4 months from then and predicting how long these patients will survive is a hard thing to do. We certainly have seen patients on study now for significant amounts of time. And if we see a complete response, they may well be on for a long period. So I can't really predict how long we will follow to get the survival result. We hope a long time. That will be an encouraging thing for these patients who normally progress very rapidly.

[Ole Nordby, executive]

How many patients would you expect to recruit in the potential expansion of ATLAS-IT-05?

[Graeme Currie, executive]

We will be looking to recruit approximately further 20 patients into the study. We will be looking at the initial data looking at the profile of the patients who are responding, and we will look to modify the criteria to make sure that we can include patients who are likely to have the potential to see the most benefit from a treatment like LTX-315.

[Ole Nordby, executive]

And if you decide to run that expansion cohort, will it be performed at the same sites?

[Graeme Currie, executive]

Yes. So when we opened the new sites, it was always with the view of recruiting the full cohort of patients. So we have capacity within the current side network to complete the further recruitment.

[Ole Nordby, executive]

Then there are some questions regarding the financial report. First one goes like this, R&D costs have ramped higher than estimates. Would it be reasonable to assume over NOK 100 million now for 2023?

[Gjest Breistein, executive]

I guess I should answer that question. We have seen an uptick in the R&D expenses due to higher increase -- higher speed of recruitment. And we expect to see a high level of R&D costs throughout 2023, exactly how high is difficult to say. But we certainly will see that the patients recruited will stay in the study for a while, and that with cost clinical monitoring and also treatment with pembrolizumab.

[Ole Nordby, executive]

On SG&A costs, costs in H1, first half 2023 have been higher due to more share-based payments. Will this repeat in second half?

[Gjest Breistein, executive]

As far as I'm aware. I don't think it's likely that we will issue more share options in 2023. We issued some share options at the General Meeting this year. So I would not expect that to continue to increase.

[Ole Nordby, executive]

Government grants have been lower in the first 2 quarters of 2023. Do you expect them in second half? Or is it lower amount expected in the future?

[Gjest Breistein, executive]

This is related to SkatteFUNN, our tax refund grant here in Norway. We have the prior grant lapsed at the end of 2022, and we have sent in an admission for a new grant, but it has not yet been approved. We, of course, are positive and believe we will get a grant and thereby have increased governmental grant or governmental funding for the second half.

[Ole Nordby, executive]

And then a couple of final questions here for you, Oystein. There has been a decreased interest in oncolytic viruses among largest pharmaceutical companies. How do you differentiate your products in discussions with them? And do they appreciate the difference?

[Oystein Rekdal, executive]

That's a relevant question. So we are working with developing oncolytic molecules where has been oncolytic viruses out there for a while and some already approved for the market. There have been some disappointments with the virus. So it's very important for us to differentiate from oncolytic virus. And what we tell and focus on is that we are not a living drug, virus is a living drug. It's a lot of complication to handle a living drug, which certificate, it's harder to get approved by hospitals and also because it's a virus, it's a biology happening in the body that is not so easy to control.

So there are some frustration among clinicians because of virus has to enter into cancer cells, replicate and move into new cancer cells, whereas our molecules have a direct target, work and are degraded and released. So we have a much more controlled effect. And when we also present to pharma or a potential partner that we have a dual effect, not only the killing effect, but this effect on the immune system, the cells that take up the tumor antigens and present them to our T-cells, we -- they understand this is really very differentiated from oncolytic viruses and it's very well received.

[Ole Nordby, executive]

Then a couple of final questions regarding 401. This one goes like this. Have you abandoned LTX-401? Is this a sunken ship? Could you answer that, Graeme, please?

[Graeme Currie, executive]

Yes. I'm happy to, Ole Peter. Yes, it's certainly not at all is LTX-401 abandoned. We have completed the preclinical program the LTX-401, we're still aiming to submit our clinical trial application when market conditions allow. The reason for the delay is -- in that program is to just ensure we are fully focused on building a strong Phase II evidence base for the efficacy of LTX-315 and that data actually will be supportive and encouraging for the LTX-401 development program. So we do look to pursue that program when the market conditions support that.

[Ole Nordby, executive]

And then we have a final question actually that entered in here right now. That's for you as well, Graeme. Do 20 patients provide enough information on the efficacy of LTX-315 in malignant melanoma patients to provide clinical proof of concept?

[Graeme Currie, executive]

I think we sort of answered that question a little earlier. We believe 20 patients will be sufficient to show us whether there is a signal present. We will look to expand the study further after we've looked at the data and seen the patients who we believe we can most help with LTX-315, that additional data will really give us a great opportunity to further characterize the response of LTX-315, and which patients are most likely to benefit.

[Ole Nordby, executive]

I believe that ends the Q&A session. Thank you for all your answers.