IRLAB Therapeutics AB

STO:IRLAB A

Earnings Call Analysis

Earnings Call Transcript 2024-Q1

[Mattias Vahlne]

Welcome. It's the 8th of May, and that is also the report date of IRLAB Therapeutics for the first quarter of 2024. We will get a presentation by the company, followed by a Q&A with equity analysts and viewers can ask their questions in the live chat.

To present today, we have IRLAB's CEO, Gunnar Olsson; Executive Vice President, R&D, Nicholas Waters; and CFO, Viktor Siewertz. Hello. It's great to see you again.

[Gunnar Olsson, executive]

Thank you. Thank you, and good morning, and welcome to the IRLAB Quarterly Update. Could we have the slides? Next slide, please. Next.

The agenda for today that is that I will give you an update of the news in the period and this will be followed by Nicholas Waters, who will give an R&D update. Viktor Siewertz would then give an update on the financials. And I will come back with some concluding words before we enter the Q&A session.

Last year, the fourth quarter was a great quarter. But even so, I think that the start of this year has been exceptionally positive.

Next slide. We've had some very great key achievements, and I have the key highlights on this slide. Yesterday, we signed the collaboration with MSRD and Otsuka, which funds the 757 projects through clinical proof-of-concept. And that means that now we have this particular project fully financed through proof-of-concept. Earlier this year, we had a successful End-of-Phase II meeting with the FDA for mesdopetam, and that means that we now have the Phase III study program confirmed. We've had and generated new insights from the Phase IIB study with pirepemat, and that has led to regulatory approvals to reduce sample size with retained statistical power to detect treatment effect. And the fourth, we just have the regulatory approval to start Phase I with 757 and we anticipate that the study will start during this month.

Next, please. So going from this high-level highlights to some more details. Starting with 757, that is now fully financed through a proof-of-concept. We'll run the initial Phase I study based on the grant that we received from The Michael J. Fox Foundation. And then the MSRD agreement will fund all the rest up to and including a clinical proof-of-concept. For the initial Phase I study, we have the CRO contracted and we have now the regulatory approval, and we anticipate that this study will start before end of the month.

Next, please. So the development collaboration with MSRD/Otsuka, what is it about? Well the scope, that is really to take 757 through clinical proof-of-concept and this in 2 populations. It is both in Parkinson's and Alzheimer's disease, 2 populations where apathy is very frequent and a very large unmet medical need and we have now secured the financing to do all this.

Next. So what will the different parties do? On IRLAB, we will receive upfront payment and activity-based milestone payments. We will execute the development activities. We will also retain the full ownership of the product and all the IP.

And on next slide, next. And on the MSRD side, they will, in addition to paying the upfront milestone payments, they will fund all the development activities under the terms of the contract. MSRD may extend the collaboration beyond proof-of-concept, but that is subject to new negotiations and new deals. And in the event that MSRD would not extend the collaboration, well then, they will receive single -- low single-digit royalty on future sales.

Next. So what does this mean for IRLAB? It is very important. And there are very multiple positive aspects of this. The first one is, of course, that this brings near-term cash flow to us upfront and milestones, USD 8.5 million, USD 3 million upfront and the rest in activity-based milestones. It secures the full financing of the development activities, as I said, in 2 populations with apathy, Parkinson's and Alzheimer's disease.

And this also gives us the opportunity that when we have generated this -- this data, I would really stress this clinical data, that's when we can then go out and seek licensing for commercialization of the product. And of course, it could be Otsuka or I should say, MSRD/Otsuka, but it could also be another party. But the value of the project is, of course, much larger when we have generated the clinical data.

This also provides additional external validation of the R&D innovativity as well as the quality. It's also a validation of our partnering and business development activities. With this signed deal, our assessment is that this deal provides conditions to run business without additional capital injection, past a potential licensing deal with mesdopetam and past the topline data in the Phase IIb study with pirepemat. We have not communicated the total value of this deal. But just to give you a benchmark, the industry average, you estimate the cost to take a compound from Phase I initiation up to proof-of-concept to be in the range of about USD 25 million.

Next, please. If we then continue with mesdopetam, we're continuing driving this forward. In our lead indication, levodopa-induced dyskinesia, we had a successful End-of-Phase II meeting with the FDA. So we have now an alignment on Phase III program. And also importantly, we have an alignment on the path forward to NDA filing for market approval. Parallel to all these regulatory activities, we have continued with very high intensity of our business development activities.

In the second indication for mesdopetam, the psychosis in Parkinson's disease, we have made progress. We had a scientific article in neurotherapeutics reporting the antipsychotic effect of mesdopetam in a preclinical model. And this, of course, further validation of mesdopetam as a product. I should though state that, of course, our key focus now that is to drive the initial indication levodopa-induced dyskinesia. But it's very good to know that there are also other opportunities when you have taken the first indication all the way through.

Next, please. Pirepemat, I call this a regulatory update because it has had some regulatory implications. As you know, we are running the REACT-PD, our dose finding study, Phase IIb study in patients with Parkinson and frequent falls and the aim is to reduce the risk of fall. We've done blinded analysis of the data, and that shows that we -- following initiation of all recruiting centers, we have a very stabilized patient recruitment rate. We have also observed a high and stable all rates at baseline actually more than what we anticipated. And this has implications.

Next, please. The implications is that we have a high probability to detect treatment effects even with a lower sample size. And we have now reassessed the sample size and that has been approved by the regulatory authorities so that we can run the study with a lower sample size. Secondly, by using now the data-driven estimates, we can get much more accurate study time lines. And based on that, we see that we anticipate completion of patient recruitment during the third quarter this year.

Next. We have also our 2 preclinical projects. And here, we continue with CMC work to develop the API. And we are, as you see here, estimating these projects to be ready for Phase I end of the year or early next year because we need to find time slots for toxicology studies in the CROs.

Next, please. During this period, we've also had participation. We've given presentations at scientific meetings and financial conferences. We attended the AD/PD meeting in Lisbon where we presented 2 posters, one describing the REACT-PD, the pirepemat study in detail. And the second poster that was to give the preclinical in vivo characterization of 1117. And this is the first time that we have revealed data on this compound. We also participated in the Bayes@Lund meeting where we presented different statistical methodologies to improve study designs and also how to use statistical methods to monitor studies as they are ongoing.

At financial conferences, we presented here in Gothenburg at Life-Science Day. We took part in the fireside chat with ABG, and we participated in Redeye Investor Forum. So all in all, a period with lots of very important progress, which we're, of course, very pleased to see.

Now I think it's time to leave over to Nicholas to take us through an R&D update. Please, Nicholas.

[Nicholas Waters, executive]

Thank you, Gunnar. I will try to follow on that smashing news flow that you actually give. Can we have the next slide, please? And I will just continue with stressing some of the very important and quite substantial developments that we've had during the first quarter this year. And Gunnar talked about this, but I would like to continue discussing the clear path to NDA that we have chiseled out together with the FDA. And that's a really important milestone.

Further regulatory validation has been provided also through the approvals of the refinement of the study protocol for pirepemat. Gunnar discussed a little bit around the aspects of why we did this. But the important thing here is that we have been given the nod from all of the regulatory bodies around Europe that actually have seen the strategy that we want to put forward. That means that we can now reduce the size of the study with about 25%, with retained statistical power. And that's really, really important.

And also, as Gunnar mentioned, we have learned a lot about these patients. And their condition of life during the progression of the study.

And then last, but by no means least in this list of regulatory successes. We have now gotten approval for our third program to enter into clinical trials. And I think this causes a little pause here because [ preclinical ] programs in a small company in Sweden is quite unique. And remember that these are drugs that -- where we have developed the hypothesis, we have developed or discovered the molecules themselves. We have created the description, the pharmacological description of the program. So we've taken them through IND-enabling studies and got into phase -- or approvals for Phase I for all of these. And of course, we are in Phase III with mesdopetam, Phase IIb with pirepemat. So at this stage, with IRLAB, we have 0 attrition. And that's quite remarkable.

Next slide, please. And so we go on, this is a slide we've shown a number of times where we look at the symptomatology of Parkinson's where we have looked at different parts of the symptomatology and found openings for novel treatments.

Next, mesdopetam covering dyskinesia, but potentially also psychosis, where we are building a case.

Next, we're looking at the falls, the balance problems, but even swallowing as a potential improvement here.

Next, please. And now also IRL-757 addressing the very important aspect -- or a very complicating aspect of neurological disorder, that's apathy. And there are no treatments out there for apathy today, covering that as well.

Next, please. Now the next challenge for us is now to bring 942.

And next slide, please, next [indiscernible] 1117 also into clinical trials and we are moving along those paths.

Next, please. A few words on mesdopetam.

Next. This is a first-in-class molecule with a novel mechanism. And from a patient, treating physician and from a marketing potential, novel mechanisms are really important. This is a drug which inhibits dopamine D3 receptors and that leads to a reduction of the involuntary movements induced by levodopa. We have a very strong patent portfolio around this asset stretching -- potentially stretching exclusivity based on patent into the [ 40s ].

Next, please. Going back to the same topic again, but I think that it's important to stress is that we have confirmed alignment between the agency, the FDA and IRLAB on the -- how the Phase III program is going to be designed. And this goes both to the efficacy trials, but also to the study that is determining the safety of the study, where we have a 1-year safety follow-up for the patients entering into this trial and also a number of additional aspects relating to CMC, et cetera. We are in alignment with all these aspects of the program. So the road map to NDA is clear to us.

In the wake of the discussions with the FDA, where we also now initiated a process to get into discussions with the European Regulatory Agencies before we press the button -- the start button for the Phase III to see if they have any additional requirements that they want to see for a drug treating dyskinesia. And we should all remember that there is no approved drug for dyskinesia in Europe yet. So in Europe, this program is the most advanced that we know of. And then we have the possibility actually to start this trial -- the trial program later on this year, we're at the very end of the year. That's a clear possibility.

Next, please. I wanted to show you this. This is, of course, very deep scientific data, but it illustrates the potential for mesdopetam as antipsychotic. If one just looks at the graphs there that are introduced into the slide at the very -- well, from my perspective left side, you see a red band of aberrant signaling captured from the brain. This is electrophysiological captures. And then there is a treatment -- the next panel represents treatment, which has been used as an antipsychotic in PD exclusively which reduces that aberration. And then you need the effect of 2 doses of mesdopetam following that, which basically takes away the aberrant signaling, but also restores what is so necessary and that is complexity in the signaling between brain regions. And this is a very good example of a very advanced way of studying psychosis in the model of Parkinson's where mesdopetam excels in terms of efficacy.

Next, please. And this was published recently. I should say. Pirepemat -- next, please. Going back to the falls indication again. And this is one of the biggest problems in Parkinson's disease, the falling. It's introduced at mid-to-late stages in most patients, about half of all patients fall recurrently. The life limiting -- the quality of life limiting aspects of falling is not fully appreciated. There's lots of literature describing the complications, but also the cost of the falls. And for a fall that enters into a hospital in the U.S., the cost estimate is around $30,000 and that was a couple of years back. So it's probably much higher today. If I can reduce the risk of falling just a tiny bit, 25% to 50%, then that would be a very significant improvement.

We have an ongoing study, as you -- most of you know, across Europe. We expect to finalize recruitment in this trial during Q3. That's our prediction right now. And that's based on our discussions with the regulatory authorities, which we've been into before this presentation.

Next, please. Pirepemat, just like mesdopetam represents a totally novel class of CNS active compounds, and this is not us saying that. That's the WHO-INN saying that. And that's also a very important aspect of the commercialization of a product. To have a new class is, of course, a huge advantage. This is a drug which acts through inhibition of at least 2 targets in the brain alpha 2 receptors and 5HT7 receptors. And also here, we have built a very strong patent portfolio or a state around it, stretching exclusivity potentially into the [ 40s ] as well.

Next, please. Updates in Q1 and Gunnar discussed this a little bit, but we have looked at blinded baseline data to understand better how these patients behave. We have higher fall rates. We see stable baseline. That's interesting that the patients tend to fall on a steady pace during at least 1 month trial -- run-in period on our study. And we saw that withdrawal rates were slightly lower than we anticipated, which -- all these things together means that we can actually reduce the sample size. So we've discussed that with the authorities. We also discussed how to handle this type of data statistically, it's not trivial, I should mention. It's not trivial at all. And they have accepted our way of looking at the data. And that's really, really important.

Next. 757, we talked a lot about that today. So we go to the next slide. Apathy as such is a huge problem in neurological disorders. You can see a panel here with different frequencies but about 20% to 70% of all patients with Parkinson or Alzheimer actually experience apathy. And this is a condition that not only affects the patient, but also the surrounding in terms of the caregivers. There are a lot of hypothesis or some hypothesis around the origins of this and we have focused on one of them, and that is the connectivity between cortical areas and lower brain areas. 757 has a unique profile in this respect, restoring connectivity between cortical and subcortical regions, which could be a way to treat apathy.

Next. So the main progress in this period has been the, of course, the completion of the preclinical package, the IND-enabling studies. We have received funding from Michael J. Fox Foundation. We are now initiating the Phase I program together with CRO in [ Uppsala ], our colleagues at CTC. And we are now also since yesterday in collaboration with the MSRD/Otsuka, which actually is really, really important. This supports the program all the way through proof-of-concept. Not only in Parkinson, which is our main goal, but also in Alzheimer's disease.

So we get readouts from at least 2 indications through this collaboration. And the collaboration will be a true collaboration where we are working together with developing the product. We're developing the protocols for these studies together, and we will execute the studies and -- we will be the sponsor for these studies. But of course, MSRD/Otsuka will have an important role in the program. Just as MJFF has a very important role in the Phase I SAD, MAD studies that we're conducting now.

Next, the preclinical programs. Since we now have moved 757 into clinical phase, we have 2 preclinical programs, 942 and 1117.

Next, please. 942 is focused on cognitive dysfunction in neurological disorders. This is a huge market. There are still unmet needs in this space. The current treatments, they work, but they could work better. And we think that 942 is that solution. 1117 is a totally new strategy to treat Parkinson's symptoms -- the hallmark symptoms of Parkinson's. Also a huge population, around 6 million people around the world could be addressed.

Next. So if I look at some statistics on the occurrence of cognitive dysfunction, the 12% in old people actually, over 65 experience cognitive decline. And this is, of course, much, much higher in neurodegenerative disorders, such as Alzheimer's and Parkinson's disease. Today, there are a couple of possibilities to treat this condition. But we think there is room for better and novel treatments working through different mechanisms or new mechanisms.

Next, please. Progress in this program has been ongoing. We are developing the synthesis of the API necessary for the tox studies. We are developing a drug product for coming Phase I studies right now. And we expect to be able to start if we get the time slot at the CRO Phase I tox study -- 1 month tox studies during this year which means that we are -- could be Phase I ready at the end of the year or early next year.

Next, please. Going over to 1117, which is the last in the presentation, but by no means the least. This is a really, really interesting program, at least from our perspective, who have been involved in PD research for so many years where we now have discovered a way to actually activate motor function over long periods of time without complications. So this is also -- has the potential to be the first drug in a new class which could actually compete with levodopa as a mainstay treatment for -- potentially to compete with levodopa as a mainstay treatment for Parkinson's.

Next, please. We are right now building a very comprehensive preclinical efficacy, tolerability and the DMPK package before we go into tox studies. And what we've seen so far is that we have after single doses, long exposure of drug, but also long effect of drug over 24 hours after 1 single dose improving motor function. This without giving any of the complications that one see European parallel groups treated with levodopa and in animals already treated with levodopa, if you switch to 1117, the complications goes away and you still retain the motor function activation. So this is going to be a really, really comprehensive package.

We are right now working on the development of the API, the synthesis of the product and IPR, of course, filed a couple of years back and stretches into the 40s with exclusivity.

Next, please. And this is now Viktor's arena. I will hand over to Viktor.

[Viktor Siewertz, executive]

Thank you, Nicholas, finance report. You can go to the next slide, please.

This is picture Gunnar showed earlier, and it shows the financial implications of the agreement with MSRD, where we will get about -- or we will get $3 million in an upfront payment and then another $5.5 million in different milestones.

And next slide, please. So this is a slide that I've shown a few times before. And the line in the graph shows the likelihood of a compound to go all the way to the market. And as such, it also represents the value of a project, of course, since -- as the risk becomes smaller and smaller for the compound. And we can all see that the big action is in Phase II. So if you get through Phase II, that is where you actually build value and you decrease the risk in the compounds. So we marked our compounds here, and we can see that mesdopetam is basically through Phase II and pirepemtat is getting closer to the end of Phase II there.

So for 757, you can see that it's just going into Phase I now as we got the approval from the agencies earlier this week. And then we need the funds to take it through these steps. And with the MJFF grant, we will take it through the Phase I clinical studies, so that will take us quite a bit into Phase I or basically through Phase I with the -- when it comes to the clinical studies. And then we have all the other activities that needs to be done parallel to that. And that's where MSRD comes in because they will do everything that's needed to take it further along, including a signal finding study. So that is taking a bit into Phase II.

And you should all remember that this is with the funding from MJFF and MSRD. So from now on, IRLAB does not have to spend money on external cost on 757. We will have internal cost. Our employees will work with the project and so on. But the external cost is all covered by MJFF and MSRD. And as you can see, 757, if everything goes as we hope, we will create a lot of value in 757 under this -- during this time. So I think this picture quite clearly depicts how important the MSRD -- in the collaboration with MSRD and the grant from MJFF is for 757 and also for IRLAB and our shareholders.

Next slide, please. This is the normal picture that we usually show. We can see that the costs have gone up a little bit and that is mainly due to increased costs as planned in the pirepemat study showing that, that study goes on in a good way. And also, we have had some costs to finalize 757 to be able to take it into Phase I, which we start now in May. And we're also doing some extra work on mesdopetam to be able to make it as good as possible in the discussions we have with potential partners that we're having at the moment.

I would say that we are still cost conscious. The head count has increased with 1 person and that is the person that works a lot with the clinical studies. So that is absolutely needed competence that will help us a lot in the future.

Next slide, please. Well, a financial summary for all of those who like to read it.

And the next slide. These are our analysts that will be involved in the Q&A. But maybe some concluding remarks.

[Gunnar Olsson, executive]

Thank you, Viktor. A couple of concluding remarks. As you have seen here, next slide, we have, through our own discovery and our own development created this portfolio of projects. And here is the updated slide for the portfolio. We won't go into the details here. But I want to stress once again, we are a small company. We have now 3 projects in clinical phase and then 2 preclinical projects on the way to get Phase I ready.

Next slide. I come back to my initial slide, and that is to just once again summarize the key highlights because these are extremely important events that we have bought through during this period. It is the collaboration agreement with MSRD/Otsuka. And as I stated, and has been done by Nicholas and Viktor, we now have the full financing to take this through proof-of-concept in 2 different populations. And having the full ownership of the compound, we are getting into a good position when we are through this collaboration, and we are talking about licensing for commercialization. And of course, it could be a continuation of the extension of collaboration with MSRD/Otsuka, but it could also be with others.

But the key thing here that is the we are getting a much, much better position when we initiate such discussions after having generated clinical data. We went through the end of Phase II meeting with the FDA. We have the Phase III program confirmed, and we have confirmed in the past path to NDA filing for market approval. For pirpemat, the new insights of this population and what we've seen in the ongoing study resulted in regulatory agreement to reduce sample size, but still retain the statistical power to detect the treatment effect.

And the last bullet here, we have now our third compound being approved to get into clinical testing. And with everything prepared, we anticipate the start already this month.

Next. Before we end, I just wanted to say something about our development -- business development activities as well. We are at present in very intensive activities here. We are becoming aware that IRLAB is now recognized and people recognize the development pipeline that we have, and that is very good news. We are continuously and frequently interacting with potential partners. We are having questions and discussions on [ partnering ] opportunities across the portfolio. But of course, now when we finalized the deal with MSRD/Otsuka, our key near-term focus that is on mesdopetam.

Next. So IRLAB, a world-leading portfolio in Parkinson's. We have, as you know, pioneering biology and a unique ISP platform to discover novel molecules. We have a focused strategy. We have validated our business model. We generate new CDs. We take the CDs into development up to Phase III readiness and we have the experience of multiple deals. Broad and in Parkinson world-leading portfolio, and we are an organization positioned and committed for success.

I think it's now time to move over to the Q&A session. So please, Viktor and Nicholas and over to our analysts.

[Mattias Vahlne]

Thank you so much. Gunnar, Nicholas and Viktor. I will shortly hand over to Soo Romanoff of Edison Group.

[Soo Romanoff, analyst]

Congratulations on the MSRD collaborations for IRL757 apathy. I'm going to pile on with a 3-part clarifying question. Do you expect MSRD to be actively involved in the clinical development? Or will they be more passive?

Second, can you provide more color on the overall dynamics since we have Michael J. Fox Foundation and then also on the guided time lines? And then the last piece, is -- I think they were also evaluating IRL942 for cognitive function. Is that still the case?

[Gunnar Olsson, executive]

If I start with the first part, and that is how will they be involved. We will now have a joint steering committee. And in the joint steering committee, all the plans will, of course, be discussed with full engagement from both sides. Then when we have agreed this is what we're going to do, then IRLAB will do the execution of the activity.

Do you want to... What's the next question?

[Nicholas Waters, executive]

But given the vast experience of MSRD/Otsuka teams in development in these indications, of course, their teams there will support the programs actively during the progression of 757.

[Gunnar Olsson, executive]

The second question that was how do we see the MJFF and MSRD come together? I can state to you that we have full transparency between the [ 3 ] of us on how things hang together. We do not foresee any complications in this trio that we move forward. In the initial study, we have the closest collaboration with the MJFF since they are funding the activity. When we then move over to, the next couple of activities that are funded by MSRD. Of course, then it will be mainly through the MSRD IRLAB joint steering committee.

[Nicholas Waters, executive]

So to use an IT term, this is plug and play. We have first our collaboration with MJFF and then on -- and building on that with -- further with MSRD/Otsuka.

[Gunnar Olsson, executive]

So we do not foresee any specific hiccups in the time schedule. We have now a clear path forward, and that is the one that we will follow.

Then your last question, and that was about 942. You're absolutely right. We communicated a year back that Otsuka -- sorry, MSRD had a -- had the possibility and exclusivity to review both 942 and 757. As we have been discussing and things have progressed in this evaluation period, MSRD came to the conclusion that they wanted to focus on 757. So this collaboration is only about 757.

[Soo Romanoff, analyst]

Okay. So for the -- my second question, I agree with you that IRL1117 is really exciting and it's probably important longer term. Can you give us an overview of your preclinical -- what we should expect as far as milestones and the preclinical study or activity?

[Nicholas Waters, executive]

Yes. I mean as I saw today, we have a very comprehensive package of efficacy data now and long-term efficacy data, but one is actually in animal studies. With that at hand, the next step now is to finalize the CMC activities to be able to start the tox studies -- the 1-month tox studies. And when that is done, we are ready for Phase 1 basically. So toxin safety is the next step. And we will, of course, keep everybody posted on the progress there as well.

[Soo Romanoff, analyst]

And just -- I'll squeeze one last one in since it's pretty timely. The -- I think one of your peers reported some positive news, [ tardive ] dyskinesia, and I was wondering if you saw any like key learnings or read across to the mechanism of action or like...

[Nicholas Waters, executive]

I would assume you're referring to tavapadon, the 5 agonist or partial agonist. Yes. And our assessment of the data and the inclusion criteria in those studies is that they are not actually focusing on -- and the endpoint structure in the studies, they're not looking at dyskinesia as such. They're looking at tavapadon in a mid-stage population with very little dyskinesia. They're looking at add-on to levodopa to improve good on time during the day and the data they've shown so far indicate that it's equivalent to what you see with COMT inhibitors and MAO inhibitors and no efficacy on dyskinesia.

The necessary step to show antidyskinetic effect is to include the Unified Dyskinesia Rating Scale in the trial, and there was no such scales in that trial specifically. So important that they have actually found a drug, which can actually prolong the effect of levodopa or support the patients within their levodopa treatment. But so far, they do not compete with -- but does not compete with mesdopetam.

[Mattias Vahlne]

And it's time to move over to Redeye and equity analyst, Fredrik Thor.

[Fredrik Thor, analyst]

Yes, so this is a follow-up question to Soo's previous questions about the MSRD and regarding the IRL757 deal. Why are -- I mean both Michael J. Fox Foundation and MSRD interested in 757 and apathy. What is the -- yes. Why the big interest?

[Gunnar Olsson, executive]

Of course, you should probably ask them to get the proper answer. But my interpretation of the situation is that apathy in neurological disease is a very large problem. Today, there is no treatment for it. And I think that we have seen the potential in our molecule that this could be really a breakthrough in this area. But then that's our interpretation.

I don't know if you want to...

[Nicholas Waters, executive]

Yes. I mean we share that view. I mean, we think we have a potential for a breakthrough. This is a novel mechanism, a totally novel pharmacology to actually address apathy, which has been tested over years with different types of psychostimulants and other types of anti-depressants. That doesn't work very well and has complications. And in here, we have kind of found a new way to address apathy. And I think they have acknowledged that. Both MJFF and MSRD, they acknowledge this and want to be able to bandwagon together with us.

[Fredrik Thor, analyst]

Interesting. And when it comes to late stages, for example, Phase IIb or something like that, how long would you need to -- how long would the duration have to do to see a clinical effect in for example [indiscernible].

[Nicholas Waters, executive]

In this type of condition about -- between 3 and 6 months is necessary to show an effect. It's, to some extent, similar to efficacy trials in multifunction disorders, 3 to 6 months but also to capture effect with -- let's hope there is a growing effect over time, then you also see that 3 months is the minimum.

[Fredrik Thor, analyst]

And maybe a final question. About this deal structure, I mean you get funding and some cash, but retain the rights, which is not very super common in a Swedish context. Could you maybe -- from MSRD's perspective, can you maybe explain why they would want the structure?

[Gunnar Olsson, executive]

Of course, this is a way for them to -- as Nicholas has expressed it, get on the bandwagon with something that's very new and that could really be a breakthrough. They do it through this construction of the deal so that they will be fully aware of the data as they come in. And of course, that means that they have someone said [ pole ] position when it comes to future licensing of the drug for commercialization.

[Mattias Vahlne]

And we're moving over to Alexander Kramer at ABG Sundal Collier.

[Alexander Krämer, analyst]

Yes. And first of all, lots of congratulations to your MSRD deal yesterday. And actually, some of my questions have been addressed already, but one question regarding the financial runway. I mean in the report today and I saw today in the presentation, you mentioned that your financial runway will last past a potential mesdopetam partnership deal. And the REACT-PD readout. So considering all this and considering also the second tranche of the Formue loan that you consider take now during the summer, can we expect that your financial runway lasts into 2025?

[Gunnar Olsson, executive]

Viktor?

[Viktor Siewertz, executive]

Yes. Thank you. What we've said is that we've now with -- this deal has a potential to stretch the runway that far. As you said, we have a potential to increase the loan with Formue Nord to take another $25 million under certain -- under circumstances. And also as we have the milestone package, we see that if those clicks in, then we will be able to stretch the run rate quite substantially into 2025.

[Alexander Krämer, analyst]

Okay. And I mean, talking about milestones, like when do you expect to receive milestones from MSRD at this specific...

[Nicholas Waters, executive]

That is not disclosed and will not be disclosed until that happens absolutely [indiscernible] has been important.

[Alexander Krämer, analyst]

And then one last question regarding the -- I mean, we -- today, we already talked a lot about IRL757 and like when you talk to MSRD about the efficacy signal finding study that you're planning together now. What kind of apathy endpoints are you looking at? And like what is kind of the focus of MSRD, like what kind of efficacy to prove?

[Nicholas Waters, executive]

That is something that we are unable to share in terms of what and how much and the statistics, et cetera. But you can be assured that we will use the most common scales that are used for measuring or assessing apathy. We are also discussing to include a number of biomarkers in such a study as well to support the readout and understanding of the effect of 757.

And if I can just fill in one thing, and I think it's really, really nice for us to be able to start talking about 757 now. We have -- they've been in the background 757, 942, 1117 for a while. We've always talked about pirepemat and the mesdopetam, but now we have a third player in the game to talk about and which has a huge potential. We should all remember that a huge potential. We're addressing a huge unmet medical need.

[Mattias Vahlne]

And I have one last question regarding the development collaboration for IRL-757 with Otsuka. Will this put them in the [ pole ] position for discussions regarding later stages?

[Nicholas Waters, executive]

Gunnar. Yes. Well, I can answer. Yes, absolutely. And I think that's the whole point for this deal, not from their perspective to actually have a foot in the program when the licensing discussions get into play, licensing and commercialization discussions.

[Gunnar Olsson, executive]

That's what I meant when I said, have the [ pole ] position discussion on licensing for commercialization would start.

[Mattias Vahlne]

Okay. Thank you so much. And that was all the questions for you today. Thank you so much for the presentation, and good luck going forward.

[Gunnar Olsson, executive]

Thank you very much.

[Nicholas Waters, executive]

Thank you very much.

[Mattias Vahlne]

And thanks for watching.