Lytix Biopharma AS

OSE:LYTIX

Earnings Call Transcript 2024-Q3

[Oystein Rekdal, executive]

Good morning, everyone, and welcome to Lytix Biopharma Presentation of our third quarter results. We are proud to share that during the last quarter, we achieved compelling clinical results with our lead candidate. Our innovative technology sets us apart from other cancer therapies as our drug candidates do not only kill cancer cells, but also activate the immune system.

Additionally, we are focusing on cancer indication that represents large and growing markets. My name is Oystein Rekdal, and I'm the CEO and Co-Founder of Lytix Biopharma, and I'm joined by Gjest Breistein, our CFO.

Before presenting the highlights, I will give a short introduction to our company and technology. Lytix Biopharma is a clinical stage immune-oncology company dedicated to develop a new class of cancer therapies.

Recently, we have achieved significant positive Phase II results in late-stage melanoma patient, who had previously failed to not respond -- not responding to several other cancer therapies.

Additionally, our licensing partner, Verrica Pharmaceuticals, has reported encouraging results in their Phase II study in basal cell carcinoma, positioning LTX-315 as a promising first-in-line therapy for this indication.

Our innovative technology has achieved validation from internationally recognized cancer experts, including a Nobel Prize winner who serves on our advisory board.

Current cancer immunotherapies face two major challenges. One is that solid tumors contain many different cancer cell variants. A second challenge is that the majority of cancer patients do not respond to immunotherapy, because their tumors have no or few immune cells. Tumors with no or few immune cells are called cold tumors.

Lytix technology overcomes these two challenges by killing all cancer cell variants within the treated tumor and converting cold tumors into hot tumors by increasing the number of immune cells in the patients' tumors.

The photos to the right show almost no immune cells in a patient's tumor before treatment, whereas after treatment with our drug candidate, many immune cells were presented in the tumor, shown as brown dots. With such an activated immune system, the patient is expected to respond better to existing immunotherapy.

When our drugs are directly injected into tumors, they effectively kill both resistant and non-resistant cancer cells. This unique method of cancer destruction activates the patient's immune system, providing the immune cells with the informations needed to locate and eliminate cancer cells throughout the body. And we have now confirmed that this dual mode of action is working in cancer patients when treated with our lead drug candidate.

And we have seen promising results in several Phase II studies with significant effects in both treated tumors with LTX-315 and non-treated tumors located elsewhere in the body. This is an overview of our current program and based on positive clinical results so far, and we are highly motivated to develop and commercialize our assets further based on the current results.

So now let's look into the key highlights for the third quarter and some post-quarter events. In the Phase II study in basal cell carcinoma, run by our licensing partner, Verrica Pharmaceuticals, an impressive 86% overall tumor size reduction was observed. In 51% of the patient, the treated tumors were completely eliminated. These very positive results position LTX-315 as a potential first-line treatment for basal cell carcinoma.

In our Phase II study in late-stage and heavily pretreated melanoma patients with a progressive disease, 40% of the patients experienced stabilization of the cancer up to 20 months so far. In two of the patients, the overall cancer disease was significantly reduced, demonstrating that LTX-315 work in cancer patients that have failed on several other cancer treatments.

We are also very excited that the first patient has been treated in the NeoLIPA study, a study that is recruiting patients with an early-stage melanoma. Beyond LTX-315, our second drug candidate, LTX-401, shows immense promise. A new superior formulation of LTX-401 demonstrates substantially improved anticancer efficacy and can potentially give the drug an extended patent life. We are actively engaging with European regulatory authorities to expedite its clinical development.

Finally, with NOK 43.5 million in cash at the end of the period, the cash runway will take Lytix into 2025.

We will now give a more detailed overview of our ongoing clinical trials. I'll start with an overview of Verrica's Phase II study in basal cell carcinoma. Basal cell carcinoma represents a significant market opportunity and occur in sun exposed areas such as head and face and with a high risk of new tumors after being diagnosed for basal cell carcinoma.

Today, 95% of the patients with basal cell carcinoma are treated by surgery. Since LTX-315 demonstrated substantial or complete clearance of the treated tumors, LTX-315 could potentially reduce the need for extensive surgery. Our licensing agreement with Verrica Pharmaceuticals enabled us to receive more than USD 110 million in milestone payment in addition to teen to mid-teen percent royalty of Verrica's net sale.

This slide highlights the significant advantage of LTX-315, less invasive approach compared to surgery. Removal of a tumor with surgery often demands removal of a larger area to ensure that all cancer cells are removed. This patient had a BCC tumor on his nose. And as you can see, a larger part of his nose had to be removed.

LTX-315's ability to achieve complete clearance or substantial reduction of the tumors indicate the commercial potential of LTX-315. Last but not least, Verrica is currently investigating LTX-315's ability to induce cancer-specific immune responses that could potentially inhibit the growth of new tumors in the patient.

Our partnership with Verrica Pharmaceutical represent the commercial validation of LTX-315. And Lytix is fully committed to support Verrica in clinical development and commercialization of LTX-315 for basal cell carcinoma. As Verrica is navigating some near-term sales challenges with their newly marketed drug, YCANTH, they've taken several steps to address this, including securing new leadership and engaging the global leading investment bank, Jefferies, to solidify their financial position, ensuring further development and commercialization of their assets.

When it comes to our own ongoing Phase II study in late-stage melanoma, LTX-315 is tested in combination with an immunotherapeutic drug in late-stage patients that have previously failed to respond to a number of cancer therapies and had progressive cancer disease when they entered into the ATLAS-IT-05 study.

These patients had also failed to respond to same type of immunotherapy that has been combined with LTX-315 in this study. And despite not responding to all previous therapies, 40% of the patients changed from having a progressive cancer to stabilization of the cancer for up to 20 months so far, as a result of the treatment.

In two of the patients, there was even a significant decline of the cancer disease. Direct injection of LTX-315 into tumors resulted in a complete elimination of the tumors in many of the patients. And the photos to the right shows a patient that had several tumors on their forearm. All these tumors were treated with LTX-315, resulting in a complete clearance of the tumors. But even more impressive is the effect of tumors that were not treated by LTX-315 in the patients.

In this patient, four tumors were treated by LTX-315, resulting in complete elimination of all four tumors. The same patient had also an almost 3-centimeter large tumor that was not treated by LTX-315 as shown up to the right. And the lower photo documents that after more than 18 months, the 3 centimeter -- almost 3 centimeter large tumor has been slowly eaten up completely by the patient's own immune cells. This is very impressive effects in late-stage patients that have failed a number of therapy treatments, and it truly underlies the potential of local administration of LTX-315 to activate systemic cancer-specific immune responses that can attack cancer cells that are spread to other locations in the body.

Since late-stage patients often have weakened immune system, we are very excited that the study in early-stage melanoma has started, because early-stage melanoma patients often have a more robust and responsive immune system that can respond better to LTX-315 treatment.

In the NeoLIPA study, LTX-315 is tested together with standard of care before surgery. The study is led by Dr. Henrik Jespersen and will recruit 27 patients. Due to the quick readout on the effect of the treatment, early interim results is expected end of first half year 2025. This patient population is larger than the late-stage melanoma population and with a larger commercial potential.

When it comes to our second lead candidate, LTX-401. LTX-401 is a small molecule with similar mechanism to LTX-315, but demonstrating superior efficacy in experimental deep-seated cancer models, including liver cancer. The new formulation generated by our team offers improved anticancer effects and potentially extended patent life. And we are actively engaging regulatory authorities to bring this promising candidate with a significant commercial potential into clinical development.

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

[Gjest Breistein, executive]

Thank you, Oystein. In Q3, we achieved robust results driven by our targeted R&D efforts and cost efficiency measures. This quarter stands out with positive advancements in key clinical trials and the strategic focus on high-impact initiatives.

In August, we published promising clinical results from Verrica's study, underscoring LTX-315's potential as a first-line treatment for BCC patients. These results highlight the strong therapeutic impact of LTX-315.

Despite this success, Verrica has faced challenges due to financial pressures linked to the launch of the new drug YCANTH. However, as a partner, Verrica has consistently been reliable and efficient. They received the IND approval for 315 swiftly and recruited 90 patients in their Phase II study in record time.

The licensing agreement with Verrica is a critical value driver for Lytix, entitling us to contingent milestone payments in addition to royalties on future sales. The promising clinical results are significant for two reasons. First, they enhance the likelihood of LTX-315 reaching the market, thereby increasing the value of the licensing agreement. Second, they validate the technology, raising the intrinsic value of both LTX-315 outside the licensing agreement in addition to LTX-401.

This quarter's operating income was primarily derived from stability testing of LTX-315 for Verrica. Our direct R&D expenses rose slightly compared to Q3 last year, mainly due to the ongoing ATLAS-IT-05 study where patient treatments continue across multiple sites in Europe.

Additionally, we are preparing for a Phase I trial with the newly formulated LTX-401, reflecting our continued commitment to pipeline development. Despite this uptick in R&D investment, we are carefully managing overall operating expenses through site closures and efficiency measures to streamline study costs and focus on critical clinical activities.

The recent NOK 50 million share offering has been pivotal in supporting our continued clinical progress and have strengthened our financial position, extending our cash runway into 2025. Our financials this quarter demonstrate the positive impact of our cost savings initiatives, which are designed to enhance operational efficiency and prioritizing funding for our highest value projects.

Our balance sheet remains solid with NOK 43.5 million in available cash, ensuring that Lytix can continue advancing our strategic goals. The recent capital raise has bolstered our financial stability, enabling us to advance 315's clinical development and the promising 401 formulation.

Looking ahead, our financial strategy remains focused on securing milestone payments and royalties through clinical partnership as well as preparing for discussion with mid-sized and larger pharmaceutical partners to accelerate commercialization opportunities.

We will continue to execute on our strategy and do our best to reach important value inflection points in the near future. We're looking forward to receive the results of the immunological analysis of BCC patients treated with 315 in first quarter 2025.

Verrica is preparing for the end of Phase II meeting with the FDA in first half of 2025 to evaluate the Phase II results and further development plans towards a Phase III study. By mid-2025, we expect interim results from the NeoLIPA study. And we are happy to announce that we will have a 401 meeting with regulatory authorities in December this year, which is earlier than previously announced.

The aim of this meeting is to discuss the optimal development path for 401 with a new formulation. And we expect the finalization of the ATLAS-IT-05 study in second half of 2025.

I will now hand it back over to Oystein.

[Oystein Rekdal, executive]

Thank you, Gjest. So this road map highlights our commercial strategies' direction, focusing on non-metastatic skin cancer, metastatic skin cancer and deep-seated cancer. Our strong pipeline and strategic partnership are positioning Lytix Biopharma to create significant shareholder value. And with the positive results in the NeoLIPA study, Lytix Biopharma is on a strong trajectory towards commercialization.

Our innovative approach, compelling clinical data and strategic partnership position us for continued success. We are confident in our ability to deliver groundbreaking cancer therapies and create substantial value for our shareholders.

Thank you for your time, and please be aware that I'm going to present Lytix Biopharma at the DNB's Health Conference in Oslo, 26th of November and at the Redeye Technology and Life Science Day in Stockholm, 3rd of December.

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

[Petter Tandberg]

Thank you, Gjest and Oystein. We received some questions here, both in advance and also live on the webcast. Maybe to start, there are some questions on your partnership with Verrica, their financial situation as well as the time line on a potential Phase III study. It's also here a question on what happens if they choose to postpone or not take LTX-315 towards Phase III. So maybe if you just can start by elaborating a bit on those topics.

[Oystein Rekdal, executive]

Of course, we cannot share more than it officially announced by Verrica Pharmaceuticals. But of course, we have a very good collaboration with Verrica. So first of all, Verrica has had some short-term challenges with sales of their marketed approved drug, YCANTH.

What we have seen lately is that Verrica has done several -- take several steps and actions to get into a better position. They have reorganized the leadership. And as you -- many of you have probably been aware of, Jayson Rieger has become the CEO of Verrica Pharmaceuticals. Jayson Rieger is on our Board, and we know him very well, and he has a strong track record within biotechnology and also showed ability to change and reorganize structures in earlier situation. So we have strong belief in him.

And as also reported, announced by Verrica is that they have engaged Jefferies as a very internationally recognized bank to advise them in the financial. So we believe that Verrica will manage well in the situation there I know, and I hope and expect to see some positive announcements from Verrica later on.

And I understand it was also a question about if they are not able to move forward with LTX-315 due to the financial situation, I can assure you we also have some backup plan for that. We have an agreement with Verrica Pharmaceuticals. And in that agreement, there are mechanism to get the technology, the license back to Lytix Biopharma, both if they go bankrupt, which we don't expect, but as everybody needs to be sure that there are -- we have backup plans.

In addition, there are also some norms in the biotech, how you develop the drug. And according to that, we also have some paragraphs describing whether they are following a normal development or not and have a possibility to get some -- get rights back.

So -- but all in all, we are very confident that Verrica will manage this situation, especially with Jayson Rieger on board and with Jefferies as a bank supporting them.

[Petter Tandberg]

Thank you. Then there's also a question on what's your plans for a future capital raise?

[Gjest Breistein, executive]

Thank you. This is a question that we expected. And I would just start by saying that following the positive share issue we had earlier this year and also the very encouraging clinical II results we achieved with Verrica that we published back in August, we are highly motivated and have high hopes for both Lytix as a company, but also our technology platform.

And in accordance with our strategy, we will continuously assess and try to optimize how we can support the future growth of this company as well as the commercialization of LTX-315.

And -- as of now, we have money into 2025 with a solid cash position. And going forward, we will communicate with the market if and when there's any news on the capitalization of Lytix.

[Petter Tandberg]

Thank you. Then we also received some questions on the NeoLIPA study. So let's maybe start with a few of those. The protocol says the study will run to May 2026. Does this mean that the fully finalized results from the study will be presented in Q3 '26? Or can it be that you will delay revealing the data even further to present at a conference somewhere in '27?

[Oystein Rekdal, executive]

So since we are -- this study, the primary endpoint is to look at the effect on the treated tumor after treatment before surgery. There is a quick -- rather quick readout for this study. So it means that the first primary endpoint can be announced quite -- yes, not within a few months after the last patient has been treated.

We also have a secondary endpoint where we will look into whether the treatment of this early-stage melanoma patient can inhibit the risk of recurrence of the disease, and that takes some more months. So we can report early top line results, but to announce the complete study with also the secondary endpoints, which takes more months, will come later -- a bit later.

[Petter Tandberg]

Thank you. And speaking of endpoints, there's a question here. So let's maybe continue with that. Can you discuss and explain the endpoint complete pathologic response or CPR? As I understand, this does not take the possible but unknown metastatis into account.

[Gjest Breistein, executive]

So these patients that are recruited into the study, they are really scanned for excluding patients with metastasis. So there are no other -- this is early stage, one lesion, one tumor to be treated and with no other metastasis. However, these patients probably had cancer cells throughout the body and most likely in the lymph nodes. And that's really the reason why a lot of patients that undergo surgery will risk to have metastasis later on, because the cancer has already spread but with no metastasis.

So complete pathological response is our first endpoint, and that's really to look on the effect on this tumor that is treated to see whether there are any remaining cancer cells in that area. And that's -- and if there's not, that's a complete pathological response.

The secondary endpoint is to see whether after this treatment and surgery where the tumor has been totally removed or eliminated by the treatment, then the patient -- we will follow the patients to see whether they will get a recurrence of the disease with metastatis, et cetera, which is really the one major goal here to see that 315's ability together with standard of care is able to protect against recurrence due to the strong ability to evoke the immune system in the patients seen in even late-stage patients with a much less robust immune system.

[Petter Tandberg]

Thank you, Gjest. In the extent of that, there's a question here. What expectations do you have from the shrinking of injected tumors in ATLAS-IT-05, with a complete regression rate of rejected tumors above 40%. Should we not take at least the same CPR rate for granted in earlier-stage patients?

[Oystein Rekdal, executive]

That's a reasonable point. We -- so the standard of care today has a complete pathologic response rate of 27%. And we, of course, expect and want to see a much higher CPR in these patients. So 40% can, of course, be reasonable. We hope that this -- so the effect of 315 here is dual. It's both killing, but also a walking of the immune system. And because the immune system is much stronger, we may see a better efficacy due to that as well compared to more sick patients.

In addition, we add this to the standard of care and other immunotherapy that also can work better with LTX-315's ability to kickstart immune system. The other immunotherapy removes break in the immune system. So here, we can see a synergy. So we have strong expectation and hopes for this study in that way.

[Petter Tandberg]

And maybe to round off the NeoLIPA part, what is the next step in neoadjuvant melanoma after NeoLIPA?

[Oystein Rekdal, executive]

Yes. Good question. So with positive results in NeoLIPA, one is that we really hope and also expect again that we have generated so much positive results with our LTX-315 drug candidate and would -- should attract larger pharma, big pharma who has complementary therapies to our drug to be interested in our technology.

So we hope that we can start -- our plan is to start communicating with interim data -- positive interim data next summer, approaching big pharma. Of course, regarding the next step would be, of course, to maybe expand the study to really get the strongest statistic significant of this study, but maybe also consider a neoadjuvant setting in other indications, because there are other very interesting cancer indication for LTX-315 in a neoadjuvant setting.

[Petter Tandberg]

Good. Thank you. There's a few questions also on LTX-401. Let's see. What's the status on LTX-401 as of now? Have you noted any interest for licensing?

[Oystein Rekdal, executive]

So our experience and experience among, in the immune-oncology field is that, you need really data to -- strong data to convince or attract big pharma. And we believe with 315's positive result in NeoLIPA study, could also be a partly validation of our second-generation drug, LTX-401.

So we, of course, are interesting also to present LTX-401 even if it's still then in the preclinical stage. But with the same mode of action, improved effects against deep-seated tumors, there is a higher chances that this also could be interesting.

We will, of course, continue to prepare LTX-401 for Phase I study. We are, as mentioned, will be in dialogue with the regulatory authorities to really outline the path forward to an optimal development for a Phase I study.

And that, of course, could -- getting into clinical Phase I and further will create larger value for LTX-401. But this is sort of a dual path for us. We hope and believe that they could attract interest earlier and -- but also continue to create value on LTX-401, which has a strong commercial potential.

[Petter Tandberg]

Thank you, Oystein. You probably covered this one, but just let me see if you want to add anything for how long will a Phase I study be running for 401 and when will we get results from it?

[Oystein Rekdal, executive]

So, I think now, first and foremost, we need this meeting with regulatory authorities to really make the optimal path until Phase I. And I maybe expect also they have some comments to our Phase I study. But normally, a Phase I study should take 1.5 to 2 years, but it's too early to conclude on that. But then everybody can calculate when we expect results.

[Petter Tandberg]

I think, we need to start running off, but let's finish off with a couple of more questions. Can you specify what R&D costs of NOK 16 million consist of?

[Gjest Breistein, executive]

NOK 16 million is mainly directed or it's a consequence of the ATLAS-IT-05 study. So it's a study that has been ongoing for quite some time. There's still patients in the study. And we know that some of the costs that are coming into us, the hospital takes some time to invoice us. We try to be calculating that on an ongoing basis, but that's a really big part of it. And Keytruda, the patients that are still in the study are on Keytruda. So it's mainly ATLAS-IT-05. It's the monitoring of the study, it's Keytruda and treatment of patients. That's the main part.

And also, we have invested some in LTX-401 preparing for this meeting we will have now in December.

[Petter Tandberg]

Thank you. And let's round it off with, do you have any patent applications pending at the moment? And when do you expect an answer of these, if that's the case?

[Oystein Rekdal, executive]

So Lytix has a patent strategy to claim broad patents, follow up by selective inventions. It can be drug patent, product patent, it can be used patents, it can be combination patents. And these are processes starting as a first application and then run into country-by-country looking into the patents. So this is a continuous process with patents. So we have several patents granted in larger regions, and we continue to push forward new patents and new patent -- selective inventions.

[Petter Tandberg]

Thank you. I think, that concludes the Q&A for today. And there's finally a question here on what's the date for your Q4 '24 presentation. I believe the financial calendar will be published in the coming time. So just stay on top of the stock exchange notices.

I'll leave the floor back to Gjest and Oystein for a few concluding remarks. Thank you.

[Oystein Rekdal, executive]

Okay. Thank you for attention today. We have been through a very exciting quarter with very promising results. And I forgot to mention in Verrica situation, they have very, very promising results in basal cell carcinoma, the larger cancer indication. So we are very optimistic with also our own results and with our new drug, LTX-401, as well as the study in NeoLIPA. So we have very exciting times ahead as well.

[Gjest Breistein, executive]

Thank you.