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Transcript : Targovax ASA, Q4 2022 Earnings Call, Feb 16, 2023
02/16/2023 | 04:00am EST
[Presenter Speech
Erik Wiklund (Executives)
Welcome to Targovax and the presentation of our Fourth Quarter Results for 2022. My name is Erik Digman Wiklund and I’m the CEO at Targovax. During 2022, we have made important progress on all of our R&D programs and this sets us up for success in 2023. For the ONCOS-102, our lead clinical asset, we published a promising phase 1 results in prestigious journals and scientific conferences and based on the strong data, we are now preparing to set-up a phase 2 trial to demonstrate and validate these data in the larger setting. This trial is called SOPHOS-213, preparations are going forward according to plan and we’re planning to open up prestigious cancer centers in the USA and Europe later this year for enrollment of patients.
Second, Circular RNA, we’ve established a new cutting-edge Circular RNA program from scratch. We’ve hired the discovery of Circular RNA, Dr. Thomas Hansen and he is running this program for us. In just 12 months, we’ll achieve technical proof-of-concept for our vector delivery system. And in addition, we have filed critical IP applications to carve-out territory for Targovax in this space.
Moreover, TG01, our KRAS cancer vaccine here with enhance the product format and we’re bringing it back into the clinic in a creative way where we use collaborative setups and external sources of funding in order to bring the program forward at low-cost to Targovax. 2 externally sponsored trials are set to open or are open and will soon enroll patients.
In order to execute on these programs, we are relying on having external partners. On the business development side, we have forged a strategic relationship with Agenus, who are supplying checkpoint inhibitors to several of our trials, both on ONCOS-102 and the TG vaccine and in addition, they are supplying us with the next-generation adjuvant QS21 to boost immunogenicity of TG01. In order to run this internally, we’ve retooled organization, we’ve hired key people in finance and in business development and importantly we built a new scientific team at the Karolinska Institute in Stockholm, where we’re running our Circular RNA program.
Now we’re set-up well, we’re going to deliver in 2023 and in order to achieve that, we need the finances in order and let me hand over to Lubor Gaal, CFO to give you an update on this front.
Presenter Speech
Lubor Gaal (Executives)
Thanks, Erik. I have the pleasure to present fourth quarter results, as well as talking about the convertible bond financing with Atlas that were announced earlier this morning. So let me first talk to you about the fourth quarter results. Our spending in the fourth quarter reflects our strategy to support all our research areas, which Erik just explained, to add sufficiently to the next value inflection point. So investment reflects the initiation of the phase 2 study for ONCOS-102, it reflects the 2 clinical studies for TG01 one in Oslo and one in Norway and the USA. And of course, it reflects our investment into Circular RNA platform that will be the engine of growth for Targovax going forward.
Overall, we spent NOK 30 million in the fourth quarter, which brings our cash balance to NOK 66 million at the end of fourth quarter. So on the right-hand side, you can see our cap table, you can see that we spent NOK 30 million in the fourth quarter, bringing the balance to NOK 66 million. Our market cap remains around NOK 200 million and our daily trading volume respect shows a healthy interest in the Targovax shares.
So now let me switch the story and talk about convertible bond financing from Atlas that we announced earlier this morning. But before I talk about the bond, let me explain a little bit the backdrop of the financing. 2022 was a tough year to raise money for public biotech companies, not just in Norway, but globally. 2022 saw a drop about 70% in investments into global biotech companies, in Norway that drop was 80%. As you can see, there were only 2 public biotech transaction in Norway in 2022, this reflects the lowest investment in Norwegian biotech companies for 5 years.
Against this challenging backdrop, we were able to secure NOK 300 million financing from Atlas Capital markets. So let me way to give you a high-level overview of this convertible bond. The total amount, as we said is up to NOK 300 million. We can call it in different tranches and over a period of 36 months. These tranches will be available to us every 3 months, but what is really important that Targovax remains in control when and if we call those tranches. We will call these tranches very carefully only when we actually need to resources to advance our research programs going forward.
So why did we choose Atlas Capital Markets? Atlas Capital Markets, an experienced international investor to provide growth capital to biotech companies like Targovax, they invest globally, but with a focus in Europe. Atlas – you typically invest in companies, which shows high-potential for growth and Atlas was specifically attracted to our strategy of supporting late-stage assets like ONCOS-102, but also investing heavily into novel platforms like Circular RNA, which will – will be the platform for growth for Targovax.
So Atlas is great – growth potential and Targovax and wants to support us and give us this necessary resources to advance our research programs to the next value inflection point. So now let me go back to the convertible bond and explain you a little bit more about how this will work.
So when we decide that we need more resources, we will call a tranche from Atlas Capital Markets. Atlas will then send us the cash and it will be 90% of the nominal value that we call in that tranche. Once we receive the cash, we will issue a convertible bond to Atlas Capital Markets. Atlas will hold this convertible bonds until they decide that they want to convert them into shares that can be at any day-after the convertible bonds up to the 36 months in 2026.
Once they – once they send a request that they want to convert the bond into shares, we will issue a stock market notice to inform all our shareholders, well, how much do you want to convert, what will be the price of the conversion? How many shares will be issued in response of that. So there will be full transparency to you, our shareholders and we’ll keep you informed about the developments of this convertible bond.
Of course this and then we can do this every 3 months, but as I said, we’ll be very careful when to draw these convertible bonds and we will only draw money when we needed to advance our research programs. Of course, this agreement is subject to your approval, our shareholders. So our AGM notice will go out shortly and we expect that the AGM will happen in early March, where this AGM notice of course has much more details about this convertible bonds, but I’m happy to take any questions in our Q&A session to explain convertible bonds in more details.
And with that, I hand back to our CEO, Erik.
Presenter Speech
Erik Wiklund (Executives)
So with this financing, we now have access to the necessary capital to advance all our 3 R&D programs. Starting off ONCOS-102, our lead clinical-stage asset. We are setting up a phase 2 trial in melanoma and this we’re calling SOPHOS-213. To remind you in phase 1, we demonstrated strong response rates. 35% is the best published response rate in this late-stage patient population. It compares favorably to other companies that have published data in the same indication and this gives us confidence to move the program forward.
The plan now is to run a larger phase 2 trial to validate this data and combined with both CTLA-4 and PD-1 checkpoint inhibition, which we believe can boost response rate even further. With this, we have partnered with Agenus, who will supply their next-generation checkpoint inhibitors and the trial is planned to be set up at prestigious cancer centers in the USA and in Europe in second quarter of this year.
Let me explain how the trial works, it’s a 2-part trial. In the first part, we’re going to try and increase dose of ONCOS-102. In the phase 1, we didn’t see any safety signals and we saw an association between level of virus and the response rates. We believe by increasing the dose, we may also enhance the efficacy.
So we tried the higher dose in the first part. Once that is confirmed to be safe, we plan to bring the high dose forward into part 2 and then what we’re doing is, number one, we combine with a PD-1 checkpoint inhibitor. Number 2, we combine with botensilimab, a second generation CTLA-4 from Agenus. And it’s really the third step, this cohort number 4. This is the key. Here, we want to do the triple combination of ONCOS-102, PD-1 and CTLA-4 and this triple we think has the potential to really boost the response rate up and beyond the 35% and establish ONCOS-102 as a class leader in PD-1 resistant melanoma.
This study is designed with several to deal with several important aspects. Number one, we have been in dialog with the regulatory authorities and we’re answering here important regulatory questions to set the program up for subsequent registrational trials. So we’re doing our homework from a regulatory perspective.
Secondly, we want to be able to out-license ONCOS-102 based on data from this trial. So we design the trial with a size and combinations that make it attractive to potential partners in the future. And we are convinced that both strategically and scientifically this triple combination with a unique CTLA-4, second generation CTLA-4 has the potential to really generate class-leading data and make us – make us the leader in PD-1 resistant melanoma. So that’s the plan for ONCOS-102, SOPHOS-213 is a study, it will open later this year.
On Circular RNA, this is an emerging area of strong interest and growing interest in the pharmaceutical industry. First, mRNA product was approved only 2.5 years ago. And here on this graph, we show you the sales for the top-selling drugs in 2022 and you can see 2 of the top 4 drugs actually are mRNA products. They sold for more than $50 billion last year. Now this is a special situation with the COVID vaccines, but industrial, the therapeutic potential and the commercial value of these products and how they can be leveraged as drugs in the future.
However, mRNA faces several issues, mRNA is unstable, it’s immunogenic. It’s difficult to deliver and it’s difficult to use the therapeutic payload for solid tumors. We believe that Circular RNA consoles many of these issues that are facing mRNA. Circular RNA was actually discovered by Targovax scientist myself and the Head of Research at Targovax, Thomas Hansen and we published the first paper on Circular RNA back in 2011.
This discovery has now led to several companies setting up in the USA based on the discovery, which has now been advanced to a stage where you can use Circular RNA as a novel messenger RNAs that are more stable. This is also evidenced by a recent deal by Merck, who partnered with oRNA Therapeutics in the USA, were very significant financials for an early-stage preclinical program.
Building on the Circular RNA discovery, preclinical stage US biotechs have been able to attract very significant funding. We give you 2 examples here of oRNA and [ Laurent ], these are the 2 most famous Circular RNA companies and you can see, they have raised several $100 million in early-stage around to build this platform into future potential therapeutics.
What they are doing is synthetic Circular RNA, they’re effectively doing mRNA, just using circular RNA as the modality. So it’s a synthetic Circular RNA and it’s geared towards vaccines and gene therapy that’s the approach they are taking. At Targovax, we have a different angle to Circular RNA. We have developed a vector system which we call, circade.
Circade is a DNA-based system that we use to express the Circular RNA. So our product is not the Circular RNA itself, but the recipe for to sell or in the patient to make that Circular RNA and this setup we can use to create multifunctional products that are highly versatile and have excellent stability. We have already established technical proof-of-concept and we filed critical patent applications to protect our technology.
Using vector system offer several advantages over traditional synthetic RNA approaches. So here, we compare versus synthetic circRNA and synthetic mRNA on the table. There are many aspects to discuss here, but I’d like to highlight 2 specific points. One, we have a delivery around the solid tumors. Currently, there are no other effective ways to get RNA carrying therapeutic payloads into tumors. We already have a clinically validated system based on our clinical experience for how to do this and we know we can do it and we know how it performs over time. So we’re building on this to develop a solid tumor approach for Circular RNA, which is unique as far as we know.
Secondly, we’re relying on manufacturing technology, which is commercially available, robustly known and we already have established, we already have clinical manufacturing ongoing. For Circular RNA, manufacturing did not yet exist. This is a new therapeutic concept, so no one is ever produced it at scale. This will take time and resources to achieve and we believe this gives us a head start. So our aim is to be the first company into the clinic with a Circular RNA therapeutic product in solid tumors. And we aim to achieve that already in 2025, which would be a remarkable feat given we only started this program one year ago.
So to sum up, we’re now set up for success in 2023. ONCOS-102 is ready to enter clinical phase 2 trial in combination with the PD-1 and CTLA-4. Second, our Circular RNA program, here we’re starting important vivo work to validate our findings in the model system. We believe with these data in hand and a robust IP portfolio, we should be able to start having business development discussions, which could enable early partnering as soon as last quarter of this year or in 2024.
And on the KRAS program, 2 trials are open. They are ready to recruit patients. We expect this to get going very soon and these are trials that are run with academic collaborators at low cost at Targovax, creating broad optionality for the future for the KRAS program.
So with that, I wrap up the formal part of our presentation and we are happy to take questions from the audience and I welcome Lubor back to join me on stage.
Presenter Speech
Lubor Gaal (Executives)
Thank you, Erik.
Answer
Unknown Executive (Executives)
So we’ve got some questions on – from the web. Congratulations on the financing. Just wondering why did you choose Atlas?
Answer
Lubor Gaal (Executives)
Yes, very good question. We, of course, evaluated many different opportunities and options and through negotiations and we received many offers from interested parties. We compare those offers very carefully and the combination of the features that Atlas offered to us made them the preferred scenario. Of course, we also appreciate the background that Atlas has an experienced investor supporting small biotech companies, who have a large opportunity for growth and taking a long-term view and then, of course, offering us a large amount to advance all our research program. So it was a combination of many different factors and that made Atlas the most attractive option for us.
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Erik Wiklund (Executives)
Yes, just to reiterate that, this is a specialist investor. This is what they do, these type of financing, they do a lot of them for biotech and we believe these were clearly the best terms we found out there.
Answer
Unknown Executive (Executives)
Do you know if Atlas is going to be a long-term investor in the company? Or are they going to sell converted shares in the market when they are converted?
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Lubor Gaal (Executives)
I would say both. I mean, clearly, they provide this capital resources for us over the next 3 years, so that makes them, of course, a long-term investor that will support our growth on the long-term and they see growth potential. So they wouldn’t have offered us such a long facility if they didn’t believe in us long-term. But clearly, they – once they convert the convertible – and they can hold convertible bonds for the entire 36 months period. But once they will convert the bonds, they will then decide to shed trade those shares in a short period of time.
Answer
Unknown Executive (Executives)
What is the restrictions for Atlas when it comes to selling Targovax shares in the market?
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Lubor Gaal (Executives)
That was a very important point. So I mean, first of all, of course, it was very important for us to stay in control of this convertible bond. So again, it’s only we can call the bond. So it’s – we are in full control. The Atlas cannot force us to take any tranches or any convertible bonds. So we’ll only draw from them when we need it. And then when they have the convertible bond turned into shares, they will trade very carefully not to impact our share price. They agreed to a limitation of 25% of the weekly trading volume, which I thought was a very fair share, very fair amount. Otherwise, there are no other really restrictions.
Answer
Unknown Executive (Executives)
Thank you. And then we have a question on melanoma. What is the progress in melanoma phase 2 trial, the SOFOS trial?
Answer
Erik Wiklund (Executives)
We are currently in discussions with prestigious cancer centers both in the U.S.A. and Europe. We are preparing to open the trial. It will probably be in the second quarter of this year. There are quite long bottlenecks, both regulatory wise and at sites post COVID. So it does take a while to get through the bureaucratic mill to get things set up and ready for enrollment, but we do anticipate that first patient should be dosed in the second quarter of this year.
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Unknown Executive (Executives)
And there are a couple of questions on Circular RNA. What is the potential value of Circular RNA? And what kind of strategic options are you looking for in Circular RNA?
Answer
Erik Wiklund (Executives)
So Circular RNA is emerging as a new RNA therapeutic class of very high interest and it’s difficult at this stage to put the number on what the value is, but you can look at, for instance, a deal done by Merck. They were willing to invest $150 million upfront, plus $100 million of investment in oRNA Therapeutics to partner on the program, which really is very early stage. It’s preclinical with some in vivo data. So if you use that as a benchmark, I think that illustrates the potential of this modality.
Now we are still quite early in our process. We only worked on this for one year, but we’re making important progress. And our aim is to, of course, capitalize on this as we move forward and get partners to enable us to develop more broadly and show the platform potential of what we’re trying to achieve.
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Lubor Gaal (Executives)
Yes, I think I would add that like considering that the advantages that Circular RNA offers over messenger RNA, you can see the big investment into the messenger RNA field, how many programs are in development. And Circular RNA is supposed to be better than plain linear RNA. So the potential is huge, but Erik is right, we can’t put a number at this point in time.
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Erik Wiklund (Executives)
And then to the strategic options question, when we talk to both investors and partners, we get a lot of interest for the Circular RNA program. Now this kind of early-stage platform development attracts a different type of investor who are interested in – don’t necessarily buy into listed shares. So we are trying to structure ourselves and establish opportunities that enables us to tap into that source of capital as well.
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Lubor Gaal (Executives)
But in addition, of course, we are in discussions with pharma companies and other companies who are interested in Circular RNA and we’re exploring, of course, with them how we could collaborate in the future on our platform and then exploring different avenues for collaboration. So there is interest also, of course, from the industry and working with us, but it will take some time to make that work.
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Unknown Executive (Executives)
Thank you. There are no further questions.
Answer
Erik Wiklund (Executives)
So thank you very much. With that, we wrap up our 4Q presentation and don’t hesitate to contact us if you have questions. Thank you.