Lytix Biopharma AS

OSE:LYTIX

Earnings Call Transcript 2023-Q3

[Oystein Rekdal, executive]

Good afternoon, everyone, and welcome to Lytix Biopharma's Q3 Report Presentations where we will present the company's latest highlights and events. My name is Øystein Rekdal, and I'm the CEO and Co-Founder of Lytix Biopharma. I'm joined by Gjest Breistein, our CFO; and Graeme Currie, our Chief Development Officer.

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 Q&A session. And to ask a question, please follow the instruction via the webcast platform.

Before we go into the events of the third quarter, I will give a brief introduction to our technology. Lytix is an immuno-oncology company with a technology platform composed of molecules with a commercial potential within several different cancer indications. Our lead candidate is showing promising preliminary efficacy in 2 ongoing Phase II studies. Our technology has been scientifically validated by international experts within the immuno-oncology space. And our technology has been commercially validated through our licensing deal with Verrica Pharmaceuticals.

Our molecules address major challenges in current cancer therapy due to their 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, indicating and making these molecules ideal for combination with immune checkpoint inhibitors.

Let's then move on to the highlights for the third quarter of 2023 and some post periodic events. We have recently reported promising preliminary results from our ATLAS-IT-05 study at the European Society for Medical Oncology Congress in October 2023. In this study, our lead candidate LTX-315, is tested in combination with the anti-PD-1 immune checkpoint inhibitor, pembrolizumab, in heavily pretreated melanoma patients that had previously failed on PD-1, PD-L1 immune checkpoint inhibitors.

The early efficacy signal is encouraging with a disease control rate of 43% and one patient achieving a partial response and reduction of size in both injected and noninjected tumors.

Our industry partner, Verrica Pharmaceuticals is running a Phase II study with LTX-315 as a monotherapy for the treatment of basal cell carcinoma. Verrica has also reported convincing, preliminary data with complete clearance of tumors treated with the highest dose of LTX-315 tested in the study.

With stronger results than expected, Verrica had decided to accelerate the clinical development of LTX-315, and to complete the entire Phase II study in H1 2024. We are also intrigued by the initiative from the University Hospital of Oslo, Radiumhospitalet, to initiate a neoadjuvant study in earlier stage melanoma patients in collaboration with Lytix Biopharma. This study was presented at the 15th Nordic Melanoma Meeting in October 12 and was very well received within the Nordic Melanoma Expert community. This takes us to the clinical and operational update for the quarter.

I then hand over to Graeme Currie, our Chief Development Officer, for the clinical update.

[Graeme Currie, executive]

Thank you, Øystein. Just as a reminder, our Phase II study, ATLAS-IT-05 is a study looking at LTX-315 in combination with a checkpoint inhibitor pembrolizumab in advanced melanoma patients who have evidenced of being refractory to a prior course of an immune checkpoint inhibitor. The aim of the study is really to show whether LTX-315 can turn these what appear to be immunologically cold tumors to hot and this patient population has really advanced disease and very limited treatment options.

Recruitment of the first 20 patients was completed in the middle of 2023. And the first report of this data, which was from an early look at this data set was presented at ESMO in late October this year. The positive data that has emerged out of this study to date is encouraging. And if we continue to see further positive data we could expand into other tumor types.

Next slide, please. So as I mentioned, this is a relatively early look at the data. Patients are still remaining on study and the data is evolving. From this dataset, we had 20 patients who were evaluable for safety data, 14 of those met the criteria to be considered evaluable for efficacy. As of the data cut, there was a medium follow-up of 15 weeks, which is very early in the treatment course.

The combination regimen showed signs of tumor shrinkage and prolonged stabilization of disease in these patients who are advancing on their prior therapy had confirmed the evidence of progression and that also in their prior treatment regimens failed a checkpoint inhibitor. These patients really have very poor prognostic factors and a number of these patients have failed double checkpoint inhibitor therapy with an anti-CTLA-4 as well as an anti-PD-1. And patients who are eligible for BRAF/Mek inhibition that progressed on that treatment as well.

The disease control rate of 43% on these patients who are rapidly progressing is a positive early sign. And there was a patient who had a partial response in this dataset. At the time when we presented that data, that response was unconfirmed, but the emerging data has shown that, that response is confirmed. We show evidence of direct tumor shrinkage in both the injected and non-injected lesions. The data set also demonstrated that LTX-315 is well tolerated with generally mild-to-moderate adverse events.

Next slide, please. If I look specifically at the response in injected lesions where we had data, which was in 9 out of the 21 patients that were available to look at, 9 of those -- 21 lesions available to look at, 9 of those lesions showed 100% regression or complete regression when looked at by CT scan. Partial responses were not able to be captured in this assessment because CT just recorded whether the lesion was present or absent. We will continue to look at this data. On the right, you can see a lesion at baseline, which started to show signs of necrosis after Day 8 and by Day 43 showed complete resolution.

If we move to the next slide. This is a separate patient at another site who had multiple relatively large lesions on the right forearm that were chosen to be injected. And you can see the extent of the disease at screening. By day 43, which is still relatively early in the treatment course, there was clear signs of necrosis and regression of these injected lesions. Again, encouraging signs that we had a direct effect.

If we move on to the next slide. But not only do we have a direct effect, we do have systemic effects as well. This is the patient who at the time of reporting was unconfirmed partial response. On the right-hand side, you can see the baseline CT scan and this patient was a 75-year-old male who had stage IVm1a melanoma and have BRAF positive disease. They had multiple nets in both the lymph nodes and present on the gluteal muscle. And this is the lesion we're envisaging here that had prior treatment with nivolumab and BRAF/Mek combination. The baseline this lesion on the gluteal muscle was around 28 millimeters in size. By day 43, the lesion has started to regress after initial growth, which is what we would expect with immune therapies, some slight flare of disease before same regression. At days 169, this lesion was measured as 3 millimeters in size. There was complete regression of all injected lesions in this patient.

Next slide. This is another patient. We're looking at clinically systemic result -- response, this patient at baseline had a lesion site, just over 15 millimeters. It was a 77-year-old female with stage IVm1a that had prior treatment with nivo. As you can see again, this patient showed that slight increase at Day 43 but then showed regression of the lesions. This patient would have been classed as a partial responder but unfortunately had one new lesion that appeared in one of the lymph nodes on Day 106. The patient is continuing to be followed, and we'll see what happens with that lesion as the treatment progresses.

Next slide. So Øystein in his early remarks talked about a study we're embarking with Dr. Henrik Jespersen, who's the Head of Melanoma Oncology at Oslo University Hospital. And the plan is to start this in the first half of 2024. The neoadjuvant setting has been -- long been an area of interest for us and is very well suited through an intratumoral treatment where your -- you have access, your goal is to shrink the tumor prior to [indiscernible] surgery.

We will look to administer LTX-315 in combination with pembrolizumab as neoadjuvant and some adjuvant treatment and look for an outcome. Pembrolizumab has shown encouraging data in this setting but we believe that, that response can be further enhanced with LTX-315.

Next slide, please. Okay. I'll hand it back over to Øystein to give you the update on Verrica Pharmaceuticals.

[Oystein Rekdal, executive]

Thank you, Graeme. As mentioned, Verrica has recently presented positive results from the first part of their Phase II study in basal cell carcinoma. The results was -- were presented by Dr. Bhatia at the conference arranged by the American Association of Dermatology in August. 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 lesion was surgically removed and analyzed by histology. In 4 out of 6 patients that were treated with highest dose, was not found any cancer cells in the treated lesion. The other 2 patients show a partial response with 95% and 30% tumor clearance.

And here, you see photographs of the basal cell carcinoma tumors and histology analysis of tumor tissue from the same tumors before and after LTX-315, showing full necrosis and complete clearance of tumor cells following LTX-315 treatment in these 2 patients. These early results from part 1 of the study are very encouraging and document that LTX-315 is able to kill all cancer cells in the most mutated cancer type of all cancer. And we are now looking forward to see the data from Part 2 of the study, which is expected to be completed at the end of first half year of 2024.

Basis cell carcinoma is the most common cancer among all cancer types with 3 million to 4 million incidences per year in the U.S. And today, the majority of the patients are treated with surgery, which is painful. And since this lesion often occurred in sun exposed area of the skin, scaring and hyperpigmentation can cause cosmetic challenges for patients. 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.

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

So as you can see from the pipeline, our lead candidate, LTX-315, is currently being evaluated in 2 Phase II studies as a monotherapy in basal cell carcinoma and as a combination therapy in melanoma patients. We have already seen positive interim data from both studies. An investigator-driven study with LTX-315 in a neoadjuvant setting in melanoma patients with early-stage disease is planned to start early next year at Radiumhospitalet in Oslo.

Since we decided to focus on generating more clinical efficacy data on LTX-315, we have decided to postpone the clinical Phase I safety study with our second-generation molecule LTX-401. We also have additional molecules in the pipeline that opens for additional commercial opportunities.

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

[Gjest Breistein, executive]

Thank you, Øystein. As Øystein and Graeme has always -- already been explaining, Q3 has been a very exciting period for Lytix where both Verrica and ourselves have published clinical results from our 2 ongoing Phase II studies. And following the complete recruitment of 20 melanoma patients in August, we reported promising results at ESMO. As already mentioned, we achieved 43% disease control with one partial response and in patient with partial response, all injected tumors disappeared while the noninjected tumors shrunk.

Verrica reported convincing preliminary data with complete tumor clearance. Verrica has now decided to accelerate the development of LTX-315 and with an aim to complete their study in first half of 2024. And this is big news for Lytix since we have the licensing agreement with them.

Now over to the key financial figures. Total operating income for the third quarter includes NOK 3.9 million in revenue from our industry partner Verrica Pharmaceuticals. This revenue is from sale of LTX-315, for the use in Verrica's clinical development program. The remaining revenue is from government grants.

Total operating expenses increased by NOK 2 million compared to the same quarter last year but decreased compared to the second quarter of 2023. The reason for the decrease is lower activity in July and August.

With all sites open in the beginning of the year, we managed to complete recruitment by mid-2023. The recruitment peaked in Q2 before slowing down during July and August. The slowdown was a result of less activity at the hospitals during the summer vacation period. Our clinical trial represent most of our expenses with fewer patients recruited during the summer.

For ATLAS-IT-05, direct R&D expenses decreased to NOK 13 million, down from NOK 24 million in Q2 2023. The operational activity alongside increased efforts on business development, we saw an increase to NOK 3.4 million, up from NOK 2.5 million for the same period last year. The net financial results amounted to NOK 0.4 million and is a result -- mainly result of the U.S. [ lead ] NOK exchange rate fluctuations.

Overall, Lytix is lean organization with a strong focus on being fiscally responsible while advancing our clinical development program. Our cash position, including short-term financial investments were NOK 78.8 at the end of the quarter compared to NOK 145 million at the end of 2022 and NOK 172 million at the end of September 2022. The cash runway will see us into 2024, and we continue to regularly assess our financial position to ensure that we have the necessary funds to support existing and future activities.

So far, in 2023, our development program has matured in reach to point where our drug candidates are being recognized as a new treatment modality with a significant market potential.

I would like to highlight that the interim readouts from both Lytix and Verrica's clinical trials has shown that 315 is able to completely eradicate injected tumors resulting in full skin healing. These results indicate why we have such a strong belief in 315 that it can have a huge potential and play a significant role for BCC patients. As we embark on the year's last quarter, we are excited to carry on this important work.

I will now hand it back over to Øystein.

[Oystein Rekdal, executive]

Thank you, Gjest. Looking forward, there are a few key messages we wanted to take with you from this presentation.

We continue to follow up the patients in the ATLAS-IT-05 study and are planning to present the top line clinical data for 20 patients in Q1 2024. We are in the process to submit an amendment for initiating the expansion cohort with additional conditions. And we continue to support Verrica Pharmaceuticals Phase II study, which is expected to be completed June next year.

In collaboration with Radiumhospitalet, we plan to start neoadjuvant in the first part of 2024. We will also continue to strengthen our position in the immuno-oncology space by continue to keep a strong footprint in the U.S., continue to build strong networks and relationships within the industry, and considering additional commercial opportunities for our unique molecules.

We are -- as mentioned by both Graeme, myself and Gjest, we are encouraged by the latest result we see with our lead candidate, LTX-315, in the 2 ongoing Phase II studies. Exemplified to the right with a clinical response in a late-stage melanoma patients that had failed several lines of treatment, including immune checkpoint inhibitors where nearly 3-centimeter large nontreated lesions is almost cleared completely by the combination of LTX-315 and pembrolizumab without being injected by LTX-315.

Therefore, we have become even more confident that our molecules have the potential to make a difference for many cancer patients who still face few or ineffective treatment options.

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

[Gjest Breistein, executive]

Thank you, Øystein. We have received a few questions. So let's just jump into it.

The first one, expenses, especially R&D are a lot lower in Q3 than previous quarters. Why is this?

I guess I'm the best to answer that question. And as I was saying in the presentation, we saw a reduction in costs during July and August, which was somewhat expected since we peaked recruitment in July -- June and saw a decrease in activity at the hospitals during the summer months, both patients were not [indiscernible] going to the hospital during the summer and therefore, lower activity.

Second question, how many patients out of the 20 will be evaluable for an efficacy readout?

[Graeme Currie, executive]

I can answer that one, Gjest.

[Gjest Breistein, executive]

Yes.

[Graeme Currie, executive]

That ultimately, at the moment, is a moving target. We have just over 20 patients -- 23 patients who have been screened and received treatment. There are a number of patients who -- for varying reasons, either didn't make it through the treatment course or didn't have a follow-up baseline scan, but we expect to have approaching 20 patients to evaluable. That number will be determined when we have the full data set.

[Gjest Breistein, executive]

Thank you, Graeme. Third question here. How important is it to shrink superficial lesions where LTX-315 seems to have superior efficacy in the Phase II study.

[Graeme Currie, executive]

There's a general view in the community that shrinking the superficial lesions increases the chance of getting a complete response, including both superficial and deep-seated lesions in the patient. We don't have a large enough data set really to determine that at the moment. But our goal of treatment is certainly to shrink any of the lesions that we have access to and are injecting with LTX-315.

[Gjest Breistein, executive]

Thank you. I'll continue to answer the questions regarding ATLAS-IT-05. And there, we have a new one. When do you expect to recruit a first patient in the planned ATLAS-IT-05 expansion cohort? Will the expansion add new centers.

[Graeme Currie, executive]

Yes. Again, I can take that one, Gjest. So the process of pursuing expansion will require a protocol amendment that needs to go through both regulatory review and review by the IRB or Ethics Committee that can vary, that can be relatively quick in the U.S. There is a set period of 60 days following submission in the EU for the amendment to be reviewed by regulators. And ethics committees or IRB vary. So it will be in early 2024 that we expect to see the global -- for enrollment of patients into the study. It will vary by center and by location.

[Gjest Breistein, executive]

Thank you. Now we have a couple of questions regarding the NeoLIPA study. What is the market potential for 315 in adjuvant melanoma versus late-stage melanoma. Graeme?

[Graeme Currie, executive]

Øystein, do you want to take that?

[Oystein Rekdal, executive]

Well, neo -- as a neoadjuvant setting is -- in immunotherapy is a quite early stage at the moment, and we are learning. I think everybody see the positive to move immunotherapy in early-stage patient population because you are dependent on a healthy immune system. But to talk about the market is a bit premature. I guess we all expect better efficacy and with better diagnosis of early-stage melanoma, this market will increase significantly as expected. So early to say, more has to be done in both neoadjuvant and adjuvant setting, but this market will open up for immunotherapy as we are moving forward with this type of study.

[Graeme Currie, executive]

Yes. Just to add on to that, Øystein, there's data published with a checkpoint inhibitor in The New England Journal of Medicine that really showed that treating earlier disease in the neoadjuvant setting is really the -- where do you see the best rates of response and that was even better than the adjuvant setting. So I think there is a lot of interest in the community in treating patients earlier and having a better chance of success, the specific market size, probably is still emerging. But certainly, The data with pembrolizumab was viewed as very encouraging. And I think more and more physicians will be moving to treat earlier in the stage of disease.

[Gjest Breistein, executive]

Thank you. Another question regarding the NeoLIPA study. Are there any costs expected related to the investigator-led trial in neoadjuvant melanoma?

[Oystein Rekdal, executive]

So I can take that. So since this is an initiative from Radiumhospitalet, they recovered the expenses with the standard of care, pembrolizumab, the immune checkpoint inhibitor. They will also take care of the patients. So Lytix is providing the drug and some smaller cost to initiate this study. But this is really very different from a sponsor-driven study where we are -- where all the costs are covered by the Lytix, by the company, whereas here the Radiumhospitalet, will take most of the costs, which is also very positive for entering into the study for Lytix Biopharma.

[Gjest Breistein, executive]

Thank you. And now there is a couple of financial questions. There's one, what's the expected cash runway in light of the light R&D expenses in Q3. And also, could you -- or can we expect the current cost level to continue into H1 2024?

I ask those questions with the same answer. We saw, as explained earlier, lower activity in 2 of the 3 months of Q3. So we would expect somewhat higher costs in Q4 and going forward. But I am not -- or we're not estimating as high cost as we had in Q2, i.e., the Q2 figures was inflated by starting up several sites in the first half of 2023. And another financial question.

And another financial question. What was the income in this quarter?

Due to -- I answered that question earlier but I will repeat it. We have revenue from Verrica from sale of 315 for use in their Phase II study and also some government grants.

There is a question, in Norwegian, which I will translate. When will you raise capital the next time? And do you have any other plans?

And I can start on that. With regards to plans for a potential share issue, we cannot go into details on such matters. The Board will continue to consider when and if the company needs additional funding that -- and that will be communicated accordingly.

And the second part of this question, do you have other plans for financing? Maybe you can answer that, Øystein.

[Oystein Rekdal, executive]

So with a promising data we have presented both at ESMO and Verrica to American Association of Dermatology and our press releases and webinars, we see more attention from the pharma industry. And with Stephen Worsley, our Chief Business Officer, located in U.S. is very actively and reaching out also to other partners. So of course, we are in a process now that there are more opportunities along the way, and we start to see interest. We have dialogues, but nothing to share at the moment. But of course, the more stronger data we generate now along the way, the more -- the better chance is to get into serious dialogues with partners.

[Gjest Breistein, executive]

Thank you. And then we have a last question regarding Verrica and it goes like this. If Verrica starts Phase III following its ongoing Phase II, could give a ballpark figure as to what kind of milestone payment you would expect?

I can answer that. So far, Lytix has received $2.3 million in milestone payments from Verrica. And we haven't communicated the size of the next milestone payment. It is related to the phase -- the startup of the Phase III study, and it will be more than what we have received so far.

Just now it came in another question. Any update on the cooperation with Iovance ?

[Oystein Rekdal, executive]

So I know there was a meeting in -- at ESMO. So there is still dialogue with Iovance. I think they have been very busy with their own technology platform adoptive T cell transfer to get that approved and get that up and going. So as many other companies, very busy with their internal programs but we are still in dialogue with Iovance.

[Gjest Breistein, executive]

Thank you. That was all the questions. So I believe that ends the session. Thank you for sending in all the questions.

[Oystein Rekdal, executive]

Thank you.