Nykode Therapeutics ASA

OSE:NYKD

Earnings Call Transcript 2024-Q3

[Operator]

Greetings, and welcome to the Nykode Therapeutics Third Quarter 2024 Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to your host, CEO, Michael Engsig. Please go ahead.

[Michael Engsig, executive]

Thank you very much, Kevin, and a warm welcome to everybody this early hours of Scandinavia to dial in from there.

Go to the next slide. Here, I just want to remind everybody of our forward-looking statements. So we are familiar with the wording on that and on that note we will move forward. I'm very pleased to have with me today here in the room, Agnete Fredriksen, Chief Scientific Officer and Business Development; Harald Gurvin, Chief Financial Officer; and today, we also are pleased to have Martin Nicklasson, the Chairman of the Board.

And Martin, I'm going to hand over to you to kick us off for this quarterly update for third quarter 2024.

[Alf Gunnar Nicklasson, executive]

Thank you, Michael, and welcome from my side as well. It's a pleasure to join you this morning. As announced this morning, Nykode is launching a new focused operating model which the Board of Directors fully stands behind. Basically, it will mean that Nykode will transform into a leaner research and technology-driven organization. With our current strong cash position, Nykode aims to operate with a substantially reduced annual cost base of approximately USD 20 million which will extend our cash runway into 2030.

Put into context, Nykode will focus on advancing its unique Vaccibody technology platform into innovative therapeutic modalities for which we intend to seek early-stage partnerships. For the existing clinical assets, VB10.16 and now recently, VB10.NEO, Nykode will explore possibilities for partnerships. Hence, new pivotal clinical trials for these assets will only be conducted under potential partnership agreements. In summary, the Board believes this operating model is a balanced cost-conscious way forward, built on financial stability, extending our business into 2030. The time frame sufficient enough to explore many commercially exciting therapeutic opportunities with our unique platform, which hopefully will attract external parties to enter partnerships with Nykode.

With that, I hand over back to Michael, who will give you more details on this. And of course, to go through with his teammates the financial report for the third quarter. Over to you, Michael.

[Michael Engsig, executive]

Thank you very much, Martin. And I'll begin by recapping a few of the details of our announced strategy this morning here for taking you through our plan, how we see the plans for both our clinical data assets and our early stage research. I'm going to hand over to Agnete for a brief update on the R&D side. And finally, Harald will take you through the financial information for this quarter here. So we are announcing this strategic refocus to bring balance between our financial resources and the cash runway and the organizational priorities that will drive shareholder value for Nykode in the coming years. And the strategic objective is to bring the annualized cost base down to around USD 20 million, which will mean an extension of the cash runway, into 2030. That will mean amongst other things that Nykode will transition into a leaner, meaning smaller, predominantly research and technology-focused organization.

That will -- as I alluded to, I mean a significantly smaller organization where we, unfortunately, will have to say goodbye to a significant number of good colleagues. We are still looking into the exact details in terms of numbers, but we are roughly looking at a reduction of staff in the area of 50%. The implementation of this restructuring will begin immediately. New Nykode will have 2 main focus points, we'll be working dedicated on behalf on our asset generation, both advancing our leadership in the field of inverse vaccines; developing drugs can be used in autoimmune diseases, allergies and organ transplantation rejection. We will also be continuing our innovative research to develop best-in-class cancer vaccines, an activity we have been successful with over the last couple of years.

We continue to see significant value in our clinical assets, VB10.16 and VB10.NEO and we'll be continuing to explore potential partnerships for those assets. We will not be engaging into large clinical trials with these assets before we have some partnerships. And for our future assets that comes out of our research engine, we will have an operating model that involves early-stage partnerships. The updated strategy is intended to basically make sure we have full control of our own destiny by bringing financial stability, significantly extend cash runway while continuing to create opportunities for targeted investments in high-value future initiatives, whether this is through strategic partnerships or small cost-efficient clinical activities.

In the following slides, I'll just take you through our thinking around our clinical assets. As mentioned, we still see significant value and potential to drive medicines that makes a difference for patients with both VB10.16 and VB10.NEO. For VB10.16, we are now looking at determining the best next step for the program, which does include exploring potential targeted cost-efficient clinical activities. We will continue to explore partnership opportunities. We will conclude the Part 1 of the ongoing C-03 clinical trial, which explores VB10.16 in combination with pembrolizumab in patients with first-line head and neck cancer. As a consequence of our strategy, we will not be progressing into starting the C-05 trial and to the Part 2 of the C-03 trial or we have secured a suitable partnership that will ensure an offloading of the costs.

And again, as we've stated before, let me remind you of the commercial opportunity and the number of addressable patients. We are looking at a product with a significant addressable patient population, addressing a significant unmet clinical need here with 2 main indications and more than 14,000 new incidents in the cervical cancer area for the U.S. alone and more than 68,000 new incidences in the field of head and neck cancer also in the U.S. alone. We have generated extremely strong data with the C-02 trial in recurrent metastatic cervical cancer, which we -- forms the foundation for a strong conviction in both this asset and our technology platform as a whole going forward.

We've also seen a significantly reduced competitive fields in the area of therapeutic HPV cancer vaccines with a number of competitive programs going out of development or struggling to secure a path forward recently. So we do feel that this area is a high-value focus area for the company. Our other clinical asset, VB10.NEO, we are in the final stages of negotiating the separation with Genentech, which means we are getting back the full control program, including the right to license program. We will internally together with external experts, consider the next part, which obviously will include exploring new partnerships.

Also with this program, we are looking at a significant and large addressable patient population with the potential to address every form of solid cancer. We will today give you a glimpse at the preliminary immunogenicity data from the N-02 trial, which aligns and confirms the final positive immunogenicity data from the N-01 trial. We have a very strong patent protection, which is of key importance in the field of personalized cancer vaccines. And we continue to believe that our modality with the DNA formulated Vaccibody vaccine does provide us some competitive advantages, both in terms of the turnaround manufacturing time and the cost of goods compared to, in particular, the mRNA alternatives.

If we look at our research engine, we will be focusing on developing new best-in-class oncology cancer vaccines. The field of cancer vaccines is in a flux these days, there's a trend to focus on the adjuvant treatment with a number of important Phase II/III trials ongoing with important readouts in the not-too-distant future. This, of course, will drive the sentiment around the segment. We have, over the years, built up a competitive advantage in the field of antigen selections driven by our artificial intelligence algorithm and the way we design our vaccines and as I mentioned before, the way we produce them.

We will be focusing on discovering new best-in-class cancer vaccines, and we will continue to seek early partnerships to ensure cost-effective and a broad clinical pipeline. In the immune tolerance field, we see an increasing traction from the pharma side with increased interest in hearing more about our technology. We will continue to deploy our unique approach, leveraging the antigen clinic cell targeted technology, which we think holds the potential to really drive a best-in-class solution for this field. We will be focusing on bringing the first inverse vaccines towards the clinic. And also for this area, we will continue to seek early partnerships to ensure cost-effective and a broad clinical pipeline.

With those words, I'll hand over to Agnete to take us through an update on the R&D side. Agnete, please?

[Agnete Fredriksen, executive]

Sure. And I'll first go to VB10.NEO, where we have now regained control after being in collaboration agreement with Genentech. We have VB10.NEO over the years, gained extensive experience with the product. It has been tested in 2 clinical trials, N-01 and N-02. Both are importantly in recurrent metastatic patients, late-stage cancer patients and both are basket studies, meaning we have treated now patients with more than 10 different solid tumor types. N-02 was designed and conducted with Genentech, operationalized by Nykode. So all the experience from the trial still lies with Nykode. The treatment and follow-up phase of N-02 has been completed. The trial population, as I mentioned, includes heavily pretreated patients with multiple metastatic solid tumors. All doses tested are deemed safe and well tolerated, which includes our first experience with the 9 mg dose of our DNA vaccines.

Individualized and neoantigen vaccines have been also then successfully manufactured for all patients enrolled in N-01 and N-02 trial. That also means the experience lies in Nykode for individualized manufacturing as well as the biomarkers. Today, we will, for the first time, show preliminary immunogenicity data also from N-02 and reiterate that we do remain confident in VB10.NEO's potential to generate these broad patient and tumor-specific immune responses.

If you go to the next slide. So here, we show preliminary immunogenicity data from the VB-N-02 trial. It is for us very comforting to see the consistency across the different trials. Bear in mind that these are including patients with a long range of different solid tumor types and also patients that have been heavily pretreated with other cancer treatment modalities. You can see here that in N-01 and N-02, the number of percentage of immunogenic neoantigens lies in the range of 60%. We see that the percentage of patients that have a response to at least one epitope that were not identified before starting treatment lies consistently at 85%. And then we see the percentage of patients that do have a response to at least one vaccine-induced response is in the range of 88% to 100% across those trials.

They are very consistent. We do potentially see, if anything, an improvement in N-02 versus N-01, which can be due to gaining increased experience and improvement of the neoepitope selection algorithm. In addition, we have looked at TCR sequencing. So we have observed a persistent expansion of T cell clones in the majority of all evaluable patients. This persistently expanded clones emerge as early as after 2 to 4 vaccinations and show very durable frequencies. And this persistent induction of de novo T cell responses has also been confirmed by ELISpot or 2 different methods confirming this.

So based on these data, we do remain confident in the potential of VB10.NEO. It confirms what we've seen in preclinical data that our technology can provide the benefit of inducing a strong T cell response to multiple epitopes.

Next slide, please. So maybe important today with the new strategy, we -- these data have been generated with the DNA format of the Vaccibody platform. We have a broad opportunity also for the partnership opportunities of Nykode in the future to also exploit other modalities, including mRNA.

If you go to the next slide. As you have seen both with preclinical data as well as with clinical data, we can observe that the APC targeted technology has shown the ability to induce broad and strong CD8 positive immune responses, which is better than what we've seen with existing antigen-alone approaches. Preclinical studies that you've seen before have now demonstrated also that we can see the same pattern with an mRNA format. In this last quarter, we have published some new data at SITC, looking at the breadth and strength of the immunogenicity on an individual epitope basis across doses and time points.

If you go to the next slide. If you look here to the left, you can see the Nykode vaccine versus an antigen vaccine inducing a T cell response both at the prime and prime boost that is arising at a lower dose and is consistently outperforming an antigen-alone vaccine. When we look at this in totality on an individual epitope basis, we can clearly see that Nykode vaccine has a dominant response over antigen-alone vaccines across 13 out of the 20 neoepitopes included in this setting. We do see the antigen vaccine have a strong response to 3 of those. So it's an interesting different profile that we observe when we use our technology versus an antigen-alone technology. 4 of the epitopes are basically non-immunogenic across the different vaccine formats.

What we see with mRNA and we don't see currently with DNA is that we do reach a maximum dose. So the strongest response is not always here observed at the highest dose, but sometimes even at the lowest dose tested.

If you go to the next slide, we have also in these last few months provided an update on the progress on the autoimmunity platform. Go to the next. So as Michael mentioned, there is a lot of interest in inverse vaccines these days. What we showed at the PCCS Conference in the last few months was that we were able to see efficacy in a therapeutic setting again. Now comparing the APC targeted vaccine with a very similar format, but non-targeted vaccine where the only difference is the targeting unit, and we see a very clear differentiating factor here. We have observed this before with antigen-alone vaccines, but now we really confirm this is solely due to the targeting unit.

We have also in this period shown that we have been able to set up a new model, which is a relapsing-remitting EAE model, which is an MS-like model, where you can see that this is sort of both in base, also in mice models. We've also done that with a novel antigen, so a novel vaccine with a novel antigen.

So if you go to the next -- just briefly for those that haven't seen it, this is where we still use our Nykode's’ APC targeted technology, which we've now expanded that from cancer into tolerance, where we changed the targeting unit in particular, so that the antigens are delivered to tolerogenic antigen presenting cells, aiming at inducing CD4 positive T regulatory cells that are specific for the antigens included in the vaccine, which is a new way of thinking about treatment for autoimmune diseases.

If you go to the next slide. This is the slide looks very similar to what you've seen before, where we compared antigen-alone vaccine with the Nykode's’ targeted vaccine. If you look at the disease scores for the model, this is a chronic EAE model, you can clearly see that the non-targeted vaccine using the Vaccibody format, but with a non-targeted -- targeting unit, you see that the level of efficacy at different doses is not as strong as what we can observe when we use a relevant targeting unit. So very clean and nice to see the importance of the targeting unit.

If you go to the next slide, this is where we've now set up a relapsing-remitting EAE model. This is, in essence, a model that is more similar to the clinical setting for MS patients. We have, for this purpose, also developed a new vaccine that includes the lipid protein as an antigen. We can see that this vaccine also is able to alleviate disease in an early therapeutic setting. And you can also see that we're able to get the model to work where you can see that the disease score is going in base. So this set us up nicely for future assays to look into multiple different interesting mechanistic actions before we move to the clinic. You also see nicely here that we do see a significant effect on some of the important disease relevant cytokines like IL-17.

So from that, we can move on to Harald to look at the financials.

[Harald Gurvin, executive]

Thank you, Agnete. Looking at the income statement, we reported total revenue of close to $700,000 in the third quarter, of which $540,000 relates to R&D activities delivered under the agreements with Genentech and Regeneron and the remaining related to government grants. Employee benefit expenses were $8.2 million in the third quarter, up from $6.8 million for the same period in 2023, reflecting the growth in the organization. This is expected to reduce significantly once the announced reorganization is concluded.

Other operating expenses were $6.9 million, down from $9.8 million in the same period in 2023, mainly reflecting reduced costs following finalization of enrollment in the N-02 trial. Finance income and costs were net $2.4 million, which mainly relate to interest income and unrealized currency movements on Norwegian kroner. So overall, we recorded a net loss of $9.7 million for the third quarter compared to a net loss of $10.2 million for the same period in 2023.

Then moving on to the balance sheet. We had a strong cash position of $124.6 million at quarter end, which based on the updated strategy will give us a runway into 2030. As previously communicated, we received a decision from the Norwegian tax authorities in October 2023 relating to the tax treatment of upfront payments received under a license agreement entered into in 2020, which generated a payable of approximately $30 million to the tax authorities in the fourth quarter of 2023. Nykode is confident that the upfront payment has been treated correctly, which has also been confirmed by third-party tax experts. Nykode has appealed the decision and the payment has been booked as a receivable while we await the outcome of the deal. We have not included any positive outcome of the deal in our cash runway and a positive outcome would extend the runway even further.

Moving on to equity and liabilities. We had total equity of $142.6 million at quarter end, which represents a strong equity ratio of 85%.

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

[Michael Engsig, executive]

Thank you very much, Harald. Just to summarize what we've been saying today, we are announcing a refocused strategy intended to bring a balance between our financial resources and cash runway and our organizational priorities. That means we will be moving into a leaner means smaller and predominantly research technology-focused organization with a targeted annualized cost base of approximately USD 20 million, which means extending the cash runway into 2030. We will be focusing on advancing our leadership in inverse vaccines to develop cutting-edge therapeutics that can help people with autoimmune diseases, allergies and organ transplantation rejections as well as driving our innovation in the field of cancer vaccines to establish best-in-class oncology vaccines.

For our existing clinical assets, we will be determining the best path forward, which includes seeking potential partnership opportunities and for our future drug candidates, we will be seeking early partnership strategies to offload the costs from the company. This strategy will allow us to create opportunities for targeted investments in high-value future initiatives, whether this be through strategic partnerships or smaller cost-efficient trials.

I think with those words, we will finish off the formal part of the presentation and open up for questions, Kevin?

[Operator]

[Operator Instructions]

Our first question today -- actually, our first few questions are going to come from Lucy Codrington from Jefferies. How advance your partnership discussions for VB10.16?

[Michael Engsig, executive]

So we cannot give you detailed insights into these discussions, except to say they are ongoing. And I think it's no secret that the field of cancer vaccines is, as I said, in a flux these days. We unfortunately see many of our colleagues/competitors struggling these days, and we see pharma companies shifting their positions to the concept of cancer vaccines. So it is a longer process to find the right and appropriate partner for a product like VB10.16. The good thing is we continue to get very good resonance on the technology and the data we have generated. So we remain committed and convinced about the potential of ourselves. But as I said, this is a longer process to enter partnerships on cancer vaccines these days.

Next question?

[Operator]

A follow-up from Lucy Codrington from Jefferies. When can we expect publication of final VB10.16 C-02 trial? And what is the holdup there?

[Michael Engsig, executive]

So it's always difficult for us to say, give explicit time lines. We can tell you that it is going through the review process with the journal. And when that concludes is simply out of our control, always depends on the interest or perspective of the reviewers and the questions they may have and suggestions for improvements they may have. So we can't give you an exact time, but we can say that it's in the review.

[Operator]

And a follow-up from Lucy Codrington from Jefferies. For NEO next steps, you say including exploring potential new partnerships. What could an alternative path, if not with a partner -- what could be?

[Michael Engsig, executive]

So again, it's too early to speculate on the next step with VB10.NEO. We will give ourselves time to discuss the best path forward thoroughly, both internally and with the benefit of input from external experts. And of course, you should see any strategy in the light of our updated company strategy. So we will be coming back when we know more about the way forward for VB10.NEO.

[Operator]

Our next question is coming from Geir Holom from DNB Markets. Some preliminary immunogenicity data from the N-02 was provided in the report, but no clinical effect data secondary endpoints such as ORR, DOR, PFS/OS. Why is no such data disclosed today? And when can we expect such clinical effect data from the N-02 trial?

[Agnete Fredriksen, executive]

Yes. Geir, so if you look at this clinical trial protocol for N-02 and as I also alluded to, this has been designed in collaboration with Genentech. It includes more than 10 different cancer indications. That means that the patient population as such is very diverse, which we all knew from the beginning, and we can see also from the clinical trial protocol. So doing PFS and DOR and ORR across the patient population that is so diverse is not the intention and in principle, not meaningful. We wanted to look at clinical efficacy data here, it would really just be the sign of patient in this. So the study is set up to look at immunogenicity across doses.

[Operator]

Our next question is coming from Arvid Necander from Carnegie. What development milestones can we expect from the inverse vaccine program in the coming 12 months? There are some follow-ups, and there's a follow-up. When can we expect initial efficacy data from VB C-03? And what will this read about entail?

[Agnete Fredriksen, executive]

Yes. So for the autoimmunity platform, we are performing a lot of different preclinical experiments every day to get as much experience with the power of the platform as possible. As we have alluded to today, it's important for us to also focus on how our platform differentiates from other platforms that are in the field, also with the purpose of getting enough data for comforting and potentially moving into partnership discussions. So we are doing these things in parallel. We have updated this every quarter for the last period, and that is our intention as well. We're moving closer to deciding how our first clinical indeed moving into starting a program with the intention to move into the clinic in parallel to working on the platform and getting all the data that would be relevant for an early partnership in parallel.

[Michael Engsig, executive]

Can you remind me, Kevin, what was the second question? I believe it was when are the C-03 data are coming up?

Yes. So thank you, Arvid. So what we previously announced was that we would provide the conclusion from Part 1 in terms of the recommended dose for the Part 2 of C-03 imminently. This no longer makes sense since we are not continuing into Phase II with this program here. So the next step we will get out of the Part 1 of C-03 is the immunogenicity data -- final immunogenicity data from the advanced trial, which with the current planning is scheduled somewhere in first half next year. And I'm saying that with some caution because the protocol actually allows mechanisms that will trigger additional patients coming in. So I'm emphasizing with the current planning, this is scheduled for the first half next year.

[Operator]

Next question today is coming from [ Henning Streubel ] from Manhattan Consulting Group. Can you explain to new shareholders the cooperation and partnership with Regeneron and the status in oncology and infectious disease programs?

[Michael Engsig, executive]

Yes, Henning, I'll do this a little bit short since this is an older program. So we entered a collaboration on 5 different programs with Regeneron back in 2021, all in the preclinical stage. And 3 of these programs are in the oncology field and 2 of them are in what we call the infectious disease fields focused on viral targets. Our role in these collaborations have been to design the vaccines upon our partners' requests and then it is our partners' responsibility to do everything from there, including immunogenicity and animal experiments. We are not in control of either the programs or the communications, so we can't really comment any more on the progress of the status, but that was the basic mechanisms in the agreement.

[Operator]

And our next question is coming from [ Ole Lesteberg ]. Do you know more about why Roche terminated the agreement?

[Michael Engsig, executive]

No, we don't know more than what we've said. And what we said is that it was a very non-script letter we got. And that means that our assessment, nothing has changed that is that this was in reality a -- you could call it a portfolio prioritization or political decision from the very high top of Roche. And most importantly, for us, we do not sense that it was related to the interpretation of the data coming out of the N-02.

[Operator]

Thank you. We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

[Michael Engsig, executive]

No. Thank you very much, Kevin, and thanks for everybody dialing in this morning, and thanks for the questions. It obviously is a hard day for Nykode with the decision to transform the organization into a smaller organization, which means we'll be saying goodbye to a lot of very good colleagues, significant amount of colleagues. We do believe that this is the right step to take for the company to reestablish a healthy balance between our financial resources and our planned organizational priorities. And we do believe that as we get through this period, we are emerging as a stronger company with a healthy pipeline, a very exciting technology. And as I said earlier, full control of our own destiny when it comes to deployment of financial resources.

So with those words, I wish everybody a continued good day and look forward to keep you updated on our progress.

[Operator]

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.