Evaxion Biotech - Q3 2024

Transcript

Operator (participant)

Good day, and thank you for standing by. Welcome to the Evaxion Business Update Conference Call Q3 2024. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star, one, and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star, one, one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Christian Kanstrup, CEO. Please go ahead.

Christian Kanstrup (CEO)

Thank you so much, and good morning and good afternoon to all of you, and a very warm welcome to this Evaxion Business Update Conference Call on the back of our Q3 earnings release, which has been out earlier on today. I'm Christian Kanstrup, CEO of Evaxion. With me today, I have Birgitte Rønø, my Chief Science Officer. I have Mads Kronborg, our Head of Investor Relations. Also with me today for the first time, I have our new CFO, Thomas Schmidt, who just joined us. And I would actually like to start out by just handing over to Thomas for a very brief introduction of who you are. Thomas?

Thomas Schmidt (CFO)

Thank you, Christian, and also from my side, good morning and good afternoon to everyone on the call. As mentioned and as written here, my name is Thomas Schmidt, and officially will be joining here 1st of November as the CFO of Evaxion, having spent the last few days with handover from Jesper. I'm an accountant auditor by training and education, and I've spent the past more than 25 years within the life science industry, many different roles within the company of Roche, amongst others, also financial officer in Germany, and I've been Group CFO also in Hamburg earlier, so I'm really, really looking forward to now joining Evaxion, this being my first business update conference call, and excited to be working together with the team and also with the shareholders.

Christian Kanstrup (CEO)

Great to have you on board, Thomas. Let's jump to the agenda, which is very similar to what we normally do. I will start out with a brief introduction. Birgitte will take an R&D business update. We will have Thomas go through the financial results. I will conclude before we jump into the Q&A. But before we get going, let's also just direct your attention to this slide, the forward-looking statement slide. As normal, we will be talking about the future. Of course, when you talk about the future, that does entail uncertainty. Hence, I carefully direct your attention to the forward-looking statement slide, which speaks to the uncertainty about talking about the future. With that, let's get into the introduction and look at the key achievements since last business update.

I think it's fair to say that I am super proud of the team and proud of what we have achieved during the last quarter. It has been a very busy quarter, and it has been a quarter with a lot of significant achievements, and we have seen a continued strong strategy execution. Several milestones have been achieved across the company. If we start out with our multi-partnering strategy here, of course, in September, we signed the transformative deal with MSD, the European name for Merck, around EVX-B2 and EVX-B3. This is providing a significant financial and strategic value to Evaxion. Also, I'm proud to see that we see a continuously increasing external interest in both our pipeline and our platform, and we have a number of ongoing partnership discussions. We've also seen a very solid pipeline progress, which Birgitte also will get back to.

We did release a very convincing one-year clinical data from the phase 2 trial with EVX-01. We did present the proof of concept for mRNA-based B2 vaccine. We are also spending a lot of effort in continuously strengthening the platform and the organization. We launched an upgraded version of EDEN. Birgitte will get back to that as well, and then, as we just talked about, Thomas has been appointed as CFO, so an exciting quarter, a busy quarter, but an important quarter with a lot of significant achievements, and let me just start out or go a little bit, spend a few minutes on the MSD agreement, which is truly transformative for us. Just to remind everyone, it's an optional licensing agreement. It's covering EVX-B2 and EVX-B3, and it is ensuring a fast and effective development of these two vaccines to address a serious unmet need.

Let's also remind all of you that no approved vaccines are available for the infectious diseases those two vaccines are targeting. This does mean a significant financial and strategic value to us, not only for the short term, but also, very importantly, for the long term. We have received the $3.2 million upfront payment in October. We are expecting up to $10 million in 2025, contingent upon MSD exercising the options to license either one or both candidates. In terms of total financials, milestone payments of up to $592 million per product, plus royalties on sales. Needless to say, this is providing a potential very important source of income and funding for the years ahead.

What's also important when we look beyond the mere financials is that this is an important validation of both our AI-Immunology platform, but also our pipeline from a world leader in vaccine development and commercialization. And I think it's fair to say that that validation, we see that with an increasing interest in discussing potential partnerships with us from other companies. So a very important element in our multi-partner strategy is that we have a strong validation from a world leader in vaccine development and commercialization. Then let's jump to the next slide and take a look at our milestone overview. As already said, a busy quarter. We have achieved a number of important 24 milestones. Launched the upgraded EDEN, got the pre-clinical proof of concept on EVX-B2 for mRNA, presented the one-year readout from the phase 2 with EVX-01.

We also had the milestone on EVX-B3 and conclusion of the partner or the target discovery and validation work with MSD. You can say that is now superseded by the option and licensing agreement because the next step here will be the expected, hopefully, exercise of the option from MSD in 2025. We are on track for the pre-clinical proof of concept with our ERV-based persistent vaccine concept, also expected in 2024. Then for the BD ambition of generating BD income or cash equal to our annual cash fund, I'll have an update on that on the next slide. For the business development ambition, we have, as already mentioned, secured $3.2 million this year, up to $10 million in 2025, contingent upon option exercise, of course. We are seeing a solid and increasing interest in both pipeline and platform.

What can be said is that certain discussions are moving into 2025. Business development timing of that is uncertain, and we are seeing, despite the strong interest, that certain discussions are taking longer time than anticipated. Others are being initiated later, meaning that certain things are moving into 2025, which does mean that we will not be meeting our $14 million business development income or cash in 2024 ambition. What is important, however. This, of course, creates a solid basis for business development income in 2025. It is fair to say we are still having a number of discussions or we're having discussions which could potentially conclude in 2024 with additional business development income, but timing is, of course, uncertain given that we only have two months left of the year.

One final update I will give before handing over to Birgitte, as also addressed in our release we had out earlier on today, is the situation around our Nasdaq deficiency letter. We did in May receive notification from Nasdaq that we do not meet our minimum equity requirement, actually, even though we did, in fact, meet it by the end of the first quarter, but we ended up not meeting it by the second quarter. That resulted in a notification from Nasdaq based upon which we submitted a plan and got an exemption until November 4th. Our aim is to ensure compliance via a combination of business development income and capital markets activities, and we remain very committed to our Nasdaq listing.

But it's also clear that this will not be achieved by November 4th as a number of factors have impacted timing, and we had to have certain things aligned. We are, however, in constructive discussions with Nasdaq on this matter, and of course, we have a plan for how to ensure compliance. The way it works is when we're not meeting the November 4th deadline for the extension, we will be receiving a notification or delisting notification from Nasdaq, which we will be appealing and requesting a hearing. At this hearing, we will be pursuing an additional 180-day exemption in order for us to be able to secure compliance in a balanced way.

Of course, no guarantee of an additional 180-day extension can be given, but as mentioned, we are in a constructive dialogue with Nasdaq around this matter and do have a plan in place for how to pursue compliance. As I said, we remain very committed to our Nasdaq listing and will pursue this very diligently. So with that, I will hand over to Birgitte for an R&D update. Birgitte?

Birgitte Rønø (Chief Science Officer)

Thank you, Christian. It hasn't been a very busy and exciting Q3. So besides the transformative MSD agreement, we have made significant progress across our R&D pipeline. So next slide, please. Today, I will be focusing on the milestones achieved in our EVX-01 program, and then I will present the pre-clinical proof of concept data we achieved in our gonorrhea vaccine program with the messenger RNA version of our EVX-B2 vaccine candidate. And finally, I'll present the outcome of our efforts in improving the EDEN model. So next slide, please. So at the ESMO Congress in September, we presented the encouraging one-year clinical data from our ongoing phase two study investigating the effect of our personalized cancer vaccine, EVX-01, in combination with anti-PD-1 therapy in patients with advanced melanoma.

We have treated 16 patients with EVX-01, and the current status is that we have 11 patients active in the trial, with 10 patients having received all 10 EVX-01 doses and 4 patients having received the last dose of pembrolizumab. This means that we are well on our way to the two-year data readout planned for Q3 next year. Let's dive into the data we presented at ESMO. Next slide, please. For the primary analysis, we are looking at the clinical response improvement of patients that do have stable disease or partial response before dosing with EVX-01, so after this 12-week run-in phase of pembrolizumab treatment. Currently, we do have 4 patients out of the 14 patients included in this primary analysis that have had an improved clinical response upon administration of EVX-01 therapy at week 12.

We saw that EVX-01 in combination with pembrolizumab resulted in an overall response rate of 69%, which we believe compares favorably to historical data from pembrolizumab monotherapy trials. We are very encouraged with this early data. We also saw that three out of 16 patients achieved a complete remission of their tumor target lesions. Next slide, please. If we look at the changes in the target lesions over time at the plot at the top, it is evident that the target lesions are reduced in the first 12 weeks, so in this pembrolizumab run-in phase, and then further reduced upon introduction of EVX-01 at week 12. Also, from the spider plot, it is clear the abnormal reduction of the lesions in 15 out of 16 patients.

If we look at the lower plot, we have zoomed in on the reduction of the tumor target lesions from week 12, so where we introduced EVX-01, and here we see that there is a clear further decline of the lesions upon this time point. We have not reached OS and PFS yet, indicating a durable clinical response, so overall, we are very pleased with this interim data, and we find it very promising, and we are definitely looking forward to following up with you in the future. Next slide, please. The second of these three milestones achieved in September was our EVX-B2 mRNA program. In September last year, we entered into an agreement with Afrigen Biologics to develop a messenger RNA EVX-02 vaccine or EVX-B2 vaccine, and in September, we presented the pre-clinical proof of concept of this messenger RNA vaccine candidate.

We saw that the candidate triggered a targeted immune response in mice, shown in the graph in the middle panel, with the ability to eliminate several clinically relevant Neisseria gonorrhoeae strains. The data provides pre-clinical proof of concept for the messenger RNA-based version of EVX-02, and it also underlines that the targets that are identified by AI-Immunology are delivery modality agnostic, as we have seen similar results with our protein-based version of this vaccine candidate. So next slide, please. So the third major milestone achieved in September was the launch of a new version of our EDEN model. We used EDEN to identify protective B-cell antigens that are included in our infectious disease vaccines. So the upgraded EDEN prediction model can now predict toxin antigens, allowing for the development of improved bacterial vaccines.

As bacterial toxins are often key contributors to disease, their neutralization is essential for developing effective vaccines. We strongly believe that this now adds to more efficacious vaccines against various bacterial and also, to some extent, other infectious diseases. Overall, very promising progress across the entire R&D pipeline in Q3.

Christian Kanstrup (CEO)

Thank you so much, Birgitte. And now I will hand over to Thomas for his first quarterly business update and for Thomas to take you through the numbers. Thomas, will you take it from here?

Thomas Schmidt (CFO)

Yes, certainly will do. And maybe let me jump straight into the Q3 financials, and let me start with the financial highlights. In Q3, we've recorded a revenue of $3 million, which, again, to what Christian mentioned earlier, is primarily stemming from the new MSD agreement announced back in September 26. The agreement, obviously, is well aligned with the financing strategy and the ambition and has also, looking forward, the potential to generate substantial future revenue. We've also been executing well on the earlier and ongoing cost reduction initiatives, and as a result of that, we are seeing lower spend compared to the same period in 2023. Cash and cash equivalents were $4.6 million as of the end of September.

The $3.2 million upfront payment from MSD agreement we have received in October but is therefore not included in the September or Q3 figures, but obviously will be once we get to Q4. We expect that our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditure requirements into March 2025. Turning to the profit and loss statement, a net loss for the quarter was posted of $1.9 million compared to a loss in the same quarter last year of $5.7 million. The improvement is, as just mentioned, primarily driven by the recognized revenue, but also reduced G&A spending. There's a slight reduction in the R&D expenses versus the same quarter last year, as the R&D expenses were $2.6 million this year versus $2.8 million last year. The decrease is primarily related to headcount.

On the mentioned G&A expenses, there's a $800,000 lower expenditure in Q3 this year versus Q3 last year, and the decrease is mainly due to lower expenses following changes in the executive management team made in 2023. The balance sheet as of the end of September 30 shows that due to capital increase in February 2024, the equity has now improved by $4.8 million compared to the year-end last year, while we at the same time, obviously, are investing and continuing to invest into pipeline and platforms. Cash and cash equivalents as of September 30 of $4.6 million, as just mentioned again, I just want to stress that does not include the $3.2 million MSD agreement payment, but we expect that this cash will carry us forward from our expense, operating expense, and capital expenditure requirement into, again, March 2025.

Therefore, of course, we will continue to work diligently to improve, as Christian mentioned earlier, cash flow through continued business development income and also capital market activities, and with that, I will hand it back over to you, Christian, for some conclusive remarks and following Q&A.

Christian Kanstrup (CEO)

Excellent. Thank you so much, Thomas. And just to conclude, I think it's clear from the run-through here that we are seeing a solid execution of strategy and plans. We had a strong quarter in terms of milestone achievements with a good mix of milestones across different parts of the strategy. What is also encouraging is the signing of the transformative MSD agreement and, in general, a solid business development pipeline where we have full focus on continuing progressing those discussions and also initiating new discussions with interested parties to continue being able to feed the business development pipeline. Other top priorities are, of course, the continuation of the EVX-01 phase two trial. Birgitte mentioned we are on track for the two-year readout in Q3 2025, which will be an important milestone for next year as well.

And then we have a number of novel preclinical activities ongoing as a basis for expanding our pipeline. So full focus on executing upon the strategy and strong delivery across all the different parts of the strategy. So with that, I would like to open for Q&A and thank you all very much for listening into this first part.

Operator (participant)

Thank you. If you would like to ask a question, you'll need to press star one and one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Thank you. We will now take our first question. This is from the line of Thomas Flaten from Lake Street Capital Markets. Please go ahead.

Christian Kanstrup (CEO)

Hey, Thomas.

Thomas Flaten (Senior Research Analyst)

Hey, good afternoon, guys. I appreciate it. Hi, how are you? I appreciate you taking the questions. Just a couple from me. Can you walk us through the specific triggers that are required to generate the up to $10 million from Merck next year?

Christian Kanstrup (CEO)

Yeah. I mean, you can say the up to 10 is in case they license or exercise the option for both assets. And if we start with the simple one, EVX-B3, that's finalization of the work that we initiated in September last year. You can say there we set out on target discovery and validation of EVX-B3, which is for an undisclosed infectious disease target. So that's finalization of that, which is just execution of the plan that has been laid out. For EVX-B2, MSD is doing some confirmatory preclinical analysis on the assets. So we are, as such, not involved in the B2 work, and we are more or less wrapping up our involvement or participation in the B3. What I can say also is that, I mean, this next part of the collaboration is well on track, and everything is anchored in terms of plans.

Thomas Flaten (Senior Research Analyst)

Got it. And then from an ongoing business development perspective, are you seeing more interest on the oncology side of the business or more on the viral bacterial side, or perhaps it's balanced across the?

Christian Kanstrup (CEO)

I would say over the past couple or past months, a couple of months, we have definitely seen a pickup in the interest around the infectious disease side of the business, which, as also mentioned, partly is related to announcing the Merck agreement, but that pickup in interest actually started also before we announced that. That's where we are seeing the increase also around, say, new target discovery and validation partnerships. It's tilted towards that. Of course, with the EVX-01 phase 2 one-year data out, of course, there's also been discussions around those data.

Thomas Flaten (Senior Research Analyst)

And then one final one, if I may. In what format do you expect to release the ERV proof of principle, proof of concept data?

Christian Kanstrup (CEO)

Birgitte, do you want to answer that?

Birgitte Rønø (Chief Science Officer)

I can answer. We are planning to present the data at a conference in December.

Thomas Flaten (Senior Research Analyst)

Got it. I appreciate it. Thank you very much.

Christian Kanstrup (CEO)

Thanks, Thomas.

Birgitte Rønø (Chief Science Officer)

Thank you.

Operator (participant)

Thank you. We'll now move to our next question. This is from the line of Swayampakula Ramakanth from HCW. Please go ahead.

Ramakanth Swayampakula (Managing Director)

Thank you. Good afternoon, folks.

Christian Kanstrup (CEO)

Hey, RK.

Ramakanth Swayampakula (Managing Director)

I'm about Thomas Schmidt.

Thomas Schmidt (CFO)

Thank you.

Ramakanth Swayampakula (Managing Director)

I have a few questions, but let's start from the pipeline side of things. Birgitte, you were stating that you would have some biomarker data in the first half of 2025 from the EVX-01 phase 2 study. Can you just highlight for us what additional biomarkers data would we be seeing that we have not yet seen?

Birgitte Rønø (Chief Science Officer)

Yes. Thank you for that, Christian. So currently, we have not analyzed all samples that we have collected from the patients in the EVX-01 phase two study. So it is additional T cell analysis that we will conduct. We will also do a little bit more on a general profiling of the immune cells in the patients, so looking for regulatory T cells, other immune suppressive immune components in the PBMC. We have also collected serum samples for soluble analytes, and we will, of course, look at some of the standard cancer-related and inflammatory-related soluble analytes. So an extensive biomarker package is what we're working on at the moment.

Ramakanth Swayampakula (Managing Director)

Thank you for that. And then one more question on the pipeline. Outside of the ERV data that we are expecting later this year, what additional data set or data from your programs could we be seeing over the, say, let's say, over the next six months?

Birgitte Rønø (Chief Science Officer)

Yeah, really good question. So we are currently looking at prioritizing the pipeline and also defining milestones for the coming year. So I think it might be a little bit too early to disclose exactly what we are thinking within the early part of our pipeline.

Christian Kanstrup (CEO)

But RK, we will, when we are ready, of course, communicate expected, say, key milestones for 2025 and what you can expect both from an R&D but also, of course, from a general corporate point of view. So that is currently being discussed.

Ramakanth Swayampakula (Managing Director)

Thank you. One last question from me, Christian. We understand that the $14 million or so that you are planning to raise through BD activities during 2024 is not going to be done, and some of it will be pushed into 2025. But is there any opportunity for you to close out some sort of a BD transaction over the next two months, or should we just assume all of it should be expected in 2025? No, I have potential for closing an agreement, additional agreement this year. But, of course, two months left, you have Thanksgiving, you have Christmas.

Christian Kanstrup (CEO)

That's why I didn't include specific guidance. I want to conclude another deal, but it could be possible. But, of course, that's a challenge with BD, right? It takes time, and unfortunately, most often it takes more time than you expect. It's very rarely that it goes quicker than expected. That did happen with the MSD deal, but that's also very rare. So there is potential, but we also only have two months left of the year, which is impacted by, yeah, you would say, various vacations and holidays.

Ramakanth Swayampakula (Managing Director)

Got it. Got it. Thank you very much. Thanks for taking all my questions.

Christian Kanstrup (CEO)

You're welcome.

Operator (participant)

Thank you. As a reminder, if you would like to ask a question, you can press star one and one on your keypad. Once again, that's star one and one for any further questions. There are no further questions coming through, so I will now hand back to the speakers for any closing remarks.

Christian Kanstrup (CEO)

Excellent. Thank you so much. And I just want to thank everybody for listening in and for your questions. And we are truly excited about the quarter and are looking very much forward to the time ahead. So thank you so much for your time, and we'll make sure to keep you updated on any developments, of course. Thank you so much again for calling in.

Operator (participant)

Thank you. This concludes the conference for today. Thank you for participating, and you may now disconnect. Speakers, please stand by.