Nykode Therapeutics ASA

OSE:NYKD

Earnings Call Analysis

Earnings Call Transcript 2023-Q3

[Operator]

Greetings, and welcome to the Nykode Therapeutics Third Quarter 2023 Financial Results webcast. [Operator Instructions] As a reminder, this conference is being recorded. At this time, I'd like to turn the call over to CEO, Michael Engsig. Thank you. You may begin.

[Michael Engsig, executive]

Thank you very much, Darryl, and thanks, everybody, for dialing in to this webcast for our third quarter results 2023. Starting out with the formal part, our forward-looking statements. We assume you're all familiar with those. So on that note, we'll move forward. I'm happy to have with me here today, as usual, Agnete Fredriksen, our Co-Founder and Chief Business Officer; as well as Harald Gurvin, our Chief Financial Officer.

Just a quick intro, the third quarter has been another eventful and successful quarter for Nykode Therapeutics where we've seen a lot of progress along our strategic pillars, which are all aligned at building the leading immunotherapy company in the space -- focused on space of oncology and autoimmune diseases. So far our lead asset and wholly owned asset VB10.16, we've seen significant progress with all our trials. I'll start by mentioning our C-04, which is our next step towards patient end markets in the recurrent metastatic cervical area, where we've had FDA IND approval for the trial, which means it's basically ready to start. And we are now in the process of finalizing the last preparations with the U.S. sites, so they can start opening up and recruiting patients.

We've also initiated the C-03 trial, which is our first step to expand the therapeutic scope of VB10.16 into head and neck, another large and unmet need for HPV16 driven cancer types. This is a trial we run in partnership with Merck, where we combined VB10.16 with KEYTRUDA or pembrolizumab in recurrent metastatic head and neck patients.

We've shown very exciting data from the VB-C-02 trial that we reported on earlier in this year, which further substantiates the long-lasting immune responses again, supporting the development expansion of this program here also into the earlier cancer stage treatment settings. And on that note, we are now on the back of our successful private placement in October, also starting up the VB-C-05, which is going to be our first step into the locally advanced cervical cancer setting.

On VB10.NEO which is Nykode's fully individualized cancer vaccine that we developed in partnership with Genentech, we've also seen very good progress. We were able to report the clearance of the safety evaluation of the 9-milligram dose, which is -- for the first time ever, we use 9-milligram in patients and no safety concerns reported from that analysis, which gives us further encouragement and enthusiasm for not only with VB10.NEO, but also for other programs. And again, here, we also showed additional analysis at our Capital Market Day in New York back in September, supporting the long-lasting immune response, including immune responses long after we have stopped the vaccination.

On the Regeneron partnership, which is a multi-program partnership centered around 5 different programs. We were able to -- at our Capital Market Day in September in New York to show preclinical data generated by our partners, Regeneron, demonstrating that our APC targeted vaccine technology can induce a potent T-cell responses against targets that are subject to central tolerance, which means we can break the tolerance for patients own antigens and proteins.

That opens up a lot of potential for our vaccines in the space of tumor associated antigens. We've also seen significant progress on our tolerance platform, which will constitute a potential new therapeutic vertical for Nykode. We showed very compelling proof-of-concept data with our autoimmune disease platform at the Capital Market Day in New York, which shows efficacy both in the EAE, which is a preclinical model for multiple sclerosis as well as the NOD model, which is a preclinical model for type 1 diabetes.

We are continuing to explore selected asset-focused partnership opportunities for the tolerance platform. And then we have shown additional exciting data around our technology when we presented at the conference in Boston, a preclinical data that demonstrates superior immune responses elicited by our technology whether we deliver it as a DNA or mRNA. So regardless of the modality, we show that adding our technology to the vaccines induces a broader and faster response. And Agnete will, in a few seconds be taking you through some of these data in detail.

We're in a solid financial position at the end of third quarter, we had USD 159 million in cash. And after the period ended, we also executed successfully a private placement that raised USD 45 million and so very importantly and incoming of significant international biotech specialist investors, which was the primary goal of the placement. We received a notification from the tax authorities also in October, confirming their original stance on the tactical payment for our upfront from Genentech. We continue to believe that Nykode has a strong position and our way of treating the tax from this upfront is correct. And we will -- allow me to move back here, sorry. And we will appeal this decision, Harald Gurvin our CFO, will add further details to that during the financial review.

Quick look at the pipeline, which we have expanded to include the C-05 trial model and the pipeline is in general a testament to the diversity and versatility of our platform spanning a long range of tumor types, both with our lead asset VB10.16, and our fully individualized cancer vaccine, as well as making significant steps into the field of autoimmune diseases.

With those words, I'm going to hand over to Agnete, to take us through an R&D update.

[Agnete Fredriksen, executive]

Thank you, Michael. And first, just a quick reminder of the technology that we are developing here at Nykode. We are creating APC targeted vaccines, meaning that the vaccine antigens when we deliver them with our technology will be specifically targeted to antigen presenting cells to binding the surface receptors and T-cells and that is something we can use in order to direct the immune response in different directions. For oncology purposes, we use the targeting unit that specifically binds the subsets of antigen presenting cells, attract this antigen-presenting cells to the ingestion side and ensures internalization inside the antigen presenting cells, also effectively through the cross-presentation pathway, which has shown to give us a stronger and broader CD8 T cell response than with other targeting units or with nontargeted vaccines.

Go to the next, Michael. The VB10.16 is based on this platform. You can see to the right here that we have CCL3L1 in the targeting unit, and we have 2 full length antigens from HPV16 E7 and E6 in the antigenic unit of our vaccine. It is an off-the-shelf therapeutic cancer vaccine built on a plasmid DNA format and targeting the most prevalent oncogenic HPV strain which is HPV16. It's wholly owned by Nykode and we are -- if you go to the next.

We have this year -- earlier this year, finalized the trial the VB C-02 trial where we have seen some compelling data supporting further development with VB10.16 in different HPV16 driven cancers. I think the last quarter here, we have seen some relevant updates from other therapies operating in the space. Importantly, we've seen data coming out from the Skyscraper-04 trials, where we now have some data to benchmark the efficacy of atezolizumab as monotherapy in PD-L1 positive patients.

As you see here, with 15.8% ORR, 1.9 months median progression-free survival and 10.6 months overall survival. And this compares then favorably when we look at the data where we have tested VB10.16 plus atezolizumab in a comparable patient population as possible. We then see an ORR of 29% median progression free survival, 6.3 months and the median overall survival not yet reached at the time of the analysis and also updated back in August with an estimated median of 24 -- 25 months. We also have this quarter seen some interesting updates, some feedback, Pembrolizumab and Tisotumab vedotin where the ORR was reduced to 17%, for instance, compared to earlier data. So we feel that this quarter has further substantiated the data and the relevance for moving VB10.16 forward in additional trials within HPV16 driven cancers.

If we go to do next. One of the additional data we have shown this quarter is more details on the T cell responses and the kind of T cell responses that we observed in the VB-C-02 trial, where we see a very long-lasting durable immune response throughout the immune targeted treatment. And we showed before that this [indiscernible] for efficacy, we believe the durability is important and also substantiate the clinical data that we just went through.

If you go to the next. So our current plan with VB10.16 in order to move this product into all relevant indications that we see that we can add a benefit -- clinical benefit for the patients. As mentioned, we have now the data from C-02 that validates further development. The plan is with C-O4 first to do the fast-to-market strategy than in second line cervical cancer. This is the trial that we are now pursuing and have an IND approved as Michael mentioned. Then, importantly, we see lots of value in expanding into additional indications for head and neck largest indications. And here, we can move into first line, then we will come into the L1 positive patients as well where we have initiated the trial this quarter.

And then we have additional untapped potential that we now have the opportunity to move into within the adjuvant setting, where we have recently then disclosed to you also the recent capital raise that we are now planning to move into adjuvant cervical cancer.

Can we go to the next. So in totality, you see the programs here, C-02 is finalized, but importantly, there is -- we've continued to follow these patients for survival. So we will come back with updated survival data in the first quarter of next year.

For C-03, we have initiated the trial. So we're starting to enrolling. And we have today also guided that we aim to have a recommended dose for the Phase II for the Part II in the second half of 2024. C-04, we will initiate the trial now within the end of the year. And C-05 trial in the locally advanced cervical cancer, we have now started to develop the protocol.

If you go to the next, when we look at VB10.NEO. VB10.NEO is our fully individualized cancer neoantigen type vaccine. We have shown you before that we have the ability to select neoantigen based on our own proprietary method and create unique broad CD8 dominated T cell responses. We see responses in all patients. And this quarter as well, we were able to show some very intriguing data on the durability of the T-cell responses in this trial where we can see that -- you can see here on the figure to the right, the T cell responses continue to be strong and durable throughout the year on treatment. But importantly, also here, we see that the T cell responses remain strong, also up to at least 1 year after the last dose of the treatment, again supporting the durability of these relevant T cell responses.

So in detail on the VB10.NEO we have 2 clinical trials. The N-01 trial is finalized. That's where we -- the 3 mg dose in combination with the checkpoint inhibitor and that's the data that we have presented. The N-02 trial is an ongoing trial also in recurrent metastatic cancer, is covering more than 10 different indications, and this is where we test higher doses as well. So we have safety cleared the 9 mg dose, which is the first time we tested 9 mg of our vaccines in patients. And this is -- and this trial done in combination with atezolizumab.

Next slide. Then we can move on to the interesting new field. As mentioned, we are currently now focusing on taking advantage of the progress we've seen in oncology, but also recently been seeing some very nice progress on using our platform as inverse vaccine for treatment [indiscernible] intolerant for autoimmune diseases in particular. And you should recognize these figures. So it's really based on the technology that we have previously worked [indiscernible] Michael. We have here changed the targeting unit so that the antigens will be delivered to a different subsets of antigen presenting cells, also trigger different signals within these antigen presenting cells. We can also use our second-generation technology where they transact itself with the DNA plasmid in this context and also secrete additional cytokines that affects the antigen presenting cells and increase the immune response in the right direction. And here, we want a completely different immune response profile. We will get regulatory approvals that are antigen specific which then can inhibit or delete the disease specific effector T cells that have been generated and are unwanted in patients with autoimmunity, allergy and organ transplant.

If you go to the next slide, we have back in September, then been able to show some very intriguing data from the 2 different mouse levels that are proving that we can -- are able to generate an immune response that can treat autoimmunity. We see efficacy in an EAE mouse model, which is an MS-like mouse model, where we can see these inverse vaccine can prevent serious disease using although very low doses of Vaccibody proteins.

Interestingly here as well on a technology focus, we see a reduction in disease-associated cytokines that we can achieve with much lower doses compared to -- if we compare that with non-APC targeted antigen, so showing the unique benefits of our technology.

We have also seen efficiency in the type 1 diabetes model, as you see here to the right, so very nice to see this in 2 different models. This opens the therapeutic market for us and in autoimmune there is a high unmet medical need, but we also can see this in the future moving to allergy and also in transplant rejection.

And then a busy quarter. We have also this last year, been able to demonstrate that we can also formulate APC targeted vaccine technology with mRNA lipid nanoparticle technology. And we have compared them in-house, our vaccine either delivered as a DNA or mRNA and compare that to the more standard mRNA based vaccine and then including the exact same antigen.

And we do see a stronger and broader T cell response when we use our technology targeting these antigen to antigen presenting cells, also importantly as an MRNA-based vaccine. So we are nearly doubling the number of immunogenic antigens, when we target this -- in this context different antigen to antigen presenting cells. We also see that they are primarily driven by CD8 T cell responses, so it's very nice for us to now see that the ATP targeted technology has benefits across different formats and formulation.

So it validates for us a very broad application and also, obviously, partnering potential of our platform in developing cancer vaccine across various vectors and formulations.

Yes, I hand it over to you, Harald.

[Harald Gurvin, executive]

Thank you, Agnete. Nykode is financially well positioned to execute the company's strategy over the next years with a cash position of $159 million at the quarter end. This is before the post quarter events, which we will come back to on the next slide. As previously stated, we continue to explore and prepare for a potential listing on the Nasdaq Global Market in the U.S. We can unfortunately not give any guidance on timing, which will depend amongst others, on market conditions and our plans.

Next slide, please. Moving on to the post quarter end events, we successfully raised $45 million through a private placement in end October. The main objective of the private placement was to broaden the shareholder base with international investors, which are important ahead of an envisaged future U.S. listing.

The transaction was multiple times oversubscribed, and we are also very pleased that there was significant participation from international life science specialist investors. As previously communicated, we also received a decision from the Norwegian tax authorities where they reiterated their position that upfront payment received under the Genentech agreement entered into in 2020 should be recognized as taxable income in full in 2020 rather than the use of taxable gain loss account, whereby part of the taxable income will be deferred to subsequent years based on a 20% decline in value.

Nykode continues to believe that the use of taxable gain lost account is the correct treatment of the upfront payments, a view which has also been confirmed by a third-party tax experts. The transition will generate a payable of approximately $30 million. And Nykode will appeal the decision, but we'll settle the payable to the Norwegian Tax Authorities in the fourth quarter while we await the outcome of such appeal.

Next slide, please. Looking at the income statement. We reported revenues of $2.8 million in the third quarter and $10.9 million for the first 9 months of 2023 relating to the R&D activities under the agreements with Genentech and Regeneron, which is up from $700,000 and 4.5 million for the same period in 2022.

Our other income represents government grants from SkatteFUNN and the Research Council of Norway, where we had 2 projects running at quarter end. Looking at employee benefit expenses and other operating expenses, we have been ramping up both the organization and our research and development activities over the last years, resulting in increased expenses.

Please note that the year-to-date employee benefit expenses for 2022 included a noncash reduction of $7 million relating to social security cost accrual on share-based payment and as operating expenses both for the third quarter and year-to-date 2022, including nonrecurring cost of $6.3 million. In line with increased interest rate levels, finance income has increased, mainly due to increased interest income. So overall, we recorded a net loss of $10.2 million for the third quarter and $29.8 million for the first 9 months of 2023.

Then moving on to the balance sheet. We had a strong cash position of $159 million at quarter end, which is, again, is pre the post quarter events referred to earlier. Trade receivables are down to year-end due to receipt of a $2.5 million milestone under the Genentech agreement in the first quarter.

Next, please. Moving on to the equity and liabilities. We had total equity of $130 million, which represents a strong equity ratio of 75%.

And with that, I will give the word back to Michael.

[Michael Engsig, executive]

Thank you very much. Just finishing off with the last slide before we open up for questions. Looking at the focus areas for the next 12 months, we are looking at a busy time period starting out with our efforts to get the C-04 trial, our next step into recurrent metastatic cervical cancer setting up an enrolling, as we mentioned, we have received the IND approval. So we are in the process of finalizing the last agreements with the sites and getting the patients into the trial. We've also said that we will be putting a name to the next oncology program from our internal discovery engine and we'll be doing that in 2023, so imminently.

We are also looking forward to update you from the C-02 trial, where we have indicated we'll be able to give an updated analysis of survival data for the patients that are in the trial. That's planned for the first quarter 2024. We -- as we said, have initiated the C-03 trial and if everything goes along the planning, we should be able to -- in the end of 2024, we're recommending a Phase II dose for the Part 2 of that trial, which we will then enter discussions with the authorities on -- so planned for the end of 2024. And then we -- again, if everything continues according to our plan, should see the C-04 trial Part 1, finalizing enrollment also towards the later part of 2024. Then we, of course, also look forward to update you on the development and the progress in our autoimmune disease program, which, as we mentioned, does constitute potential new therapeutic vertical for Nykode.

And with those words, I'm going to hand over to the operator to take us through the questions.

[Operator]

[Operator Instructions] So our first questions are going to come from Gonzalo Artiach with ABG an equity analyst.

His first questions are, could you give us some color on how the recruitment in the head and neck study is going? So far you have 2 clinics active out of the 8 that are planned. How is the interest from clinicians on taking part of the study? And how comfortable are you with the guidance provided today on dose decision by H2 '24?

[Michael Engsig, executive]

Thank you very much, Gonzalo. I think you may have misread the information in our report today. We mentioned 2 countries where we're up and running. That's not meant to say that we only have 2 clinics active. We are not providing detailed progress report in between the major milestones of these clinical sites.

So we'll not be providing quarter-by-quarter status reports. So what we said this morning is that the first 2 countries are fully open and active. The rest of the 8 planned countries are in the process in total, if I do not remember incorrectly, we are planning 26 sites spread over those 8 countries. And I can assure you that there is not a lack of interest from either sites or the investigators to participate in this trial year. So everything is still on plan for us.

[Operator]

And a follow-up, you explicitly mentioned a potential U.S. listing in the future. Do you have any guidance here? Or some color on what you would -- on what would be ideal for you to do it?

[Michael Engsig, executive]

Do you want to address that, Harald?

[Harald Gurvin, executive]

Yes. Thank you. We are, of course, in the fortunate position that we are well capitalized. So there is no rush to do a U.S. listing. And it will also depend on amongst other market conditions, as I said, which are not the best at the current time. So we cannot give any specific guidance on the exact timing, but we do continue to prepare for it. And of course, if I can just add also that, of course, it was a good milestone to get those international life science specialist investors on board through the capital raise.

[Operator]

And then another follow-up, given the fact that TIVDAK only achieved an ORR of 17.8% in the confirmatory trial, would it be fair to expect less pressure from the FDA in terms of a potential accelerated approval of VB10.16 in cervical cancer, for example, by a lower expected ORR by the FDA.

[Michael Engsig, executive]

Thank you very much, Gonzalo, for that question. Obviously, we have also noted the data from reported around TIVDAK from the ESMO and I think we have the same sentiments that you're mentioning here, but I don't think it would be fair of us to speculate how FDA will react to these data here. We have to say, from our point of view, we feel these data, as Agnete mentioned during her review confirms the unmet medical need in this patient segment, so second-line recurrent or metastatic cervical cancer patients. And we also feel this speaks to a potential position for VB10.16 in that field. We agree that it's fair to consider the bar to have been lowered slightly. But other than that, I think it will be premature to speculate how the FDA would look at this.

[Operator]

Our next questions come from equity analysts, Geir Holom with DNB Markets. And it says, could you please elaborate around how you envision the time line for your planned C-05 trial in adjuvant setting and how many patients you plan to include in the trial?

[Michael Engsig, executive]

Yes. Thank you very much, Geir and it is on the border of being premature. So you have to take this as our tentative plans. We did reveal some of our thinking around this trial design at the Capital Markets Day in New York back in September. And we are thinking in the same direction to date. So for us, this will be a double blinded randomized Phase II trial. We are so far thinking around a potential 1:1 randomization. Could be designed differently, but let's say that's the basic assumptions right now. You could expect somewhere between 80 to 100 patients entering each arm of that. Exactly how we would have to design the primary endpoint on that trial, which, of course, would then drive the duration of that trial still is subject to internal discussions inside Nykode, but also with potential parties who will be running this trial together with both investigators as well as potential suppliers of the checkpoint inhibitor.

We are starting this trial of as fast as we can. As you all know, the potential use of the proceeds from the direct replacement is centered around getting this trial up and running. So I would advise that you -- for your planning purpose, assume that the trial will be taking off roughly 12 months plus from now. So potentially slightly into the first quarter of 2025 for the kickoff of the trial.

[Operator]

Our next questions come from the line of Arvid Necander with Carnegie. It is -- there's a couple of questions here. So the first one is among the ongoing clinical trials, the open-label C-O3 appears to be the one capable of generating new data in 2024. Specifically, when can we anticipate the first data from this trial? And what type of data will the readout include? And then I'll do the second part.

[Michael Engsig, executive]

Very good. So as you've mentioned, Arvid, and thanks for the questions. We are anticipating to be able to have the first readout from this trial from the Part 1, which is the dose-escalating part of it at the end of next year, which would allow us to recommend a dose for the second part, what we call a recommend Phase II dosing here, which will then have to enter negotiations or discussions with the authorities on.

We don't anticipate that to be a difficult discussion. But as always, once you start discussing with the authorities, it gets a little bit out of our control. So right now, our plan is to give the market an insight into what those data shows towards the end of next year. Remind you that will be mainly sent around the safety of the first doses that we have run the patients into. So in short at end of next year for the first interim analysis or the first results from the dose-escalating part of C-03.

[Operator]

And the follow-up is, can we anticipate an interim readout from the C-04 study? And if so, when or what degree of enrollment, for example, at what proportion of the planned total enrollment could this occur?

[Michael Engsig, executive]

Yes. So we do anticipate to do an interim analysis of the C-O4 after Part 1 is conducted. So that's the randomized part where we have enrolled 30 plus -- 30 patients into the trial. And the protocol designed in a way that we can do that earliest 3 months after the last patient gets into the trial with the time line we've given you here. That would mean at the earliest, we would, let's say, across the last patient data points into the first quarter 2025, give us an additional time to clean up and analyze the data. So expect around mid-2025 plus, give and take, as the base case plan for an interim analysis from the C-04 trial.

[Operator]

Our next questions come from the line of Luis Santos with H. C. Wainwright. How should we look at the market opportunity for the tolerance induction platform? Any guidance on the next update for the total APC targeting pipeline?

[Agnete Fredriksen, executive]

Yes. Thanks for the question Luis. So I think we all know that the autoimmunity landscape is a huge market opportunity, and there is also a huge medical need, in particular to finding treatments that are antigen specific. So we do experience a lot of interest in the field with these preclinical data that we've been able to show you now. As a basis, if you -- we know that top 10 autoimmune drugs in 2022 worldwide was USD 65 billion market. So this is a huge opportunity for us in the future.

And any guidance on the next update? So we have guided now that we will come with the next update in 2024. Second half 2024, we will come with more updates. As you may know, we've been working in principally 2 parallel work streams. One, as to identify or the platform that we will use in the future across different product development for autoimmune diseases. And that we'll be able to work on over the next period so that we identify the targeting units and the format and formulations, et cetera, and how we will use that as a platform in the future.

And then obviously, we're also starting to look at our first project and where we will go internally in the company. And importantly, maybe as a third pillar there we experience a lot of interest from potential partners, which we may take advantage of to accelerate development with certain assets within the state of autoimmunity in order to take full advantage of the platform and learn as much as possible, as fast as possible.

[Operator]

And the follow-up, how would a potential partnership on the mRNA-LNP delivery platform look like? Would it involve a licensing deal of delivery platform or licensing of a pipeline asset?

[Agnete Fredriksen, executive]

Yes. Good question, Luis. I think you could look at this in a similar fashion as what you've seen us do before. We do believe that there are companies out there with mRNA specific interest and also specific expertise. We are not primarily pursuing a deal of out licensing the entire mRNA platform. It will be focused on particular assets, one or a few assets that would be carefully selected with the right partner, with the right expertise for a defined scope, obviously, in the first place. That's our strategy.

[Operator]

We have reached the end of our question-and-answer session. I would now like to turn the floor back over to Michael Engsig for any closing remarks.

[Michael Engsig, executive]

Thank you very much, Darryl, and thanks, everybody, for listening in to our quarterly webcast here. We -- of course, as you can feel, very enthusiastic about the progress this quarter and look forward to continue building this company into the lead immunotherapy company, focused on oncology and autoimmune diseases. And with those words, I'd like to wish you all a good day. Thank you.

[Operator]

Thank you. This does conclude today's teleconference. We appreciate your participation. You may disconnect at this time. Enjoy the rest of your day.