Evaxion A/S Q4 FY2021 Earnings Call

Greetings, and welcome to the Evaxion Biotech's Fourth Quarter and Full Year 2021 Earnings Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Corey Davis. Thank you, sir. Please go ahead.

Thanks, Donna, and hello, everyone. Thanks for joining us. Let me quickly remind you that today's discussion contains certain statements that are considered forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Because forward-looking statements involve risks and uncertainties, they are not guarantees of future performance, and actual results may differ materially from those expressed or implied by these forward-looking statements due to a variety of factors, including those risk factors discussed in the company's prospectus filed on November 5, 2021, and the company's current and future reports filed with or submitted to the Securities and Exchange Commission. At this time, I'd like to turn the call over to Lars Wegner, the company's President and CEO. Go ahead, Lars.

Thank you, Corey. Good morning, everyone. Thank you for joining us for this Evaxion Biotech's Q4 earnings call. I'm Lars Wegner, the Chief Executive Officer of Evaxion. With me today is Evaxion's Co-Founder and Chief Business Officer, Niels Moeller, who is currently the interim Chief Financial Officer. We'll give you a short presentation on our business and results and then open the call up for any questions you may have. Let me begin by saying Evaxion continues to demonstrate exciting clinical momentum in the fourth quarter of 2021 towards our goal of becoming a world leader in AI-driven immunotherapies. As many of you know, Evaxion is specialized in coding the human immune system and using the data to rapidly discover and develop potentially effective drug candidates to improve the lives of patients with cancer and infectious diseases. We believe that our AI models allow us to identify unique drug targets, which may translate into a higher likelihood of clinical success. In October 2021, we announced a clinical trial collaboration and supply agreement with Merck, one of the world's leading immuno-oncology companies, to evaluate the combinations of Evaxion's cancer immune therapy, EVX-01, in combination with Merck's KEYTRUDA in a Phase IIb clinical trial in patients with metastatic melanoma. In January 2022, we received regulatory clearance to initiate this Phase IIb trial of EVX-01 with KEYTRUDA. We plan to have the first patient visit for EVX-01 in the first half of 2022. Also in January 2022, we completed recruitment for our Phase I/IIa clinical trial for EVX-02 and are advancing into a dedicated Phase IIb clinical adjuvant trial in patients with resectable melanoma. We plan to file for regulatory clearance for EVX-01 and EVX-03 in patients with resectable melanoma by the first half of 2022 and have the first patient visit in the second half of 2022. The EVX-01/02/03 products all come from our PIONEER AI platform, which generates patient-specific cancer immune therapies. In other development areas outside cancer, we remain on track on the lead candidate in our EDEN platform, which generates vaccines against bacterial diseases. This program, EVX-B1, is a vaccine for the prevention of Staphylococcus aureus in skin and soft tissue infections. We also plan to select our second bacterial product candidate in the first half of 2022. We plan to select the first viral candidate from our RAVEN platform in the second half of 2022. Outside of the clinic, we closed our follow-on public offering in November 2021, raising net proceeds of USD 24.9 million. Evaxion also received the 2021 Enabling Technology Leadership Award in the artificial intelligence enabling drug discovery industry by a leading global research and consulting firm, Frost & Sullivan. We are honored to receive the award, and I'm very proud of the hard work and commitment of the whole Evaxion team in advancing our vision for better global health. Evaxion also gave a presentation at the Immuno UK conference, which was held in London, where one of our senior scientists, Emma Christine Jappe, introduced Evaxion's AI immunological core technology and detailed how the company is using AI to decode the human immune system. She is focused on PIONEER and demonstrated how Evaxion is continuously working to improve the platform through immunological data generation and the development of optimized AI technologies.

Thank you, Lars. As Lars mentioned, we closed our follow-on public offering in Q4, which was multiple times oversubscribed and included the full exercise of the underwriters' overallotment option, for which we announced the pricing on November 4, 2021, which raised net proceeds of USD 24.9 million, including underwriting discounts, commissions, and other offering expenses. This follows our IPO in February 2021, which raised net proceeds of USD 27.9 million after underwriting discounts, commissions, but before offering expenses. We also completed a drawdown and received our first tranche of approximately EUR 7, approximately USD 7.7 million, from the European Investment Bank loan on February 17, 2022. As of December 31, 2021, cash and cash equivalents were USD 32.2 million compared to USD 5.8 million as of December 31, 2020. We expect that the net proceeds from our IPO and our follow-on offering, the proceeds from drawdowns, and amounts available under the EIB loan, along with our existing cash and cash equivalents, will be sufficient to fund our operating expenses and capital expenditure requirements through at least the next 12 months. Research and Development expenses were USD 19.6 million for the year ended December 31, 2021, compared to USD 10.9 million for the year ended December 31, 2020. The increase was primarily due to the increased spending, net of grant income, for ongoing development on our platforms, preclinical product candidates, and clinical trials. In addition, employee-related costs increased due to the higher headcount. General and Administrative expenses were USD 6.3 million for the year ended December 31, 2021, compared to USD 5.7 million for the year ended December 31, 2020. The increase was primarily due to increased professional fees related to the expansion of our corporate function for our initial public offering, which was partially offset by the decrease in employee-related accounts. Net loss was USD 24.5 million for the year ended December 31, 2021, or USD 1.26 loss per basic and diluted share, compared to USD 15 million or USD 0.97 loss per basic and diluted share for the year ended December 31, 2020.

Thank you, Niels. That concludes our presentation today. Now it's time to open up the call for any questions.

Our first question is coming from Kevin DeGeeter of Oppenheimer.

Can you comment on the recent approval of the first of the LAG-3 antibodies in a fixed combination with PD-1? Do you sort of see that compound serving a similar or different patient population relative to EVX-01? And just any thoughts as to how that approval may or may not impact the potential pace of enrollment for the EVX-01/2B study?

Thanks, Kevin, and good questions. We've all been following the development of the combination of checkpoint inhibitors in this field, and especially the large trial with LAG-3. So it was expected to pan out as we saw. We do see that the landscape in metastatic melanoma is changing. It is an ever-changing landscape that you need to monitor, both for clinical trial and commercial opportunities for your compound. We don't see a big challenge in it. We see that the market space is developing, and we see this data as being a decent potential for patients in this space. It's also still actually showing to be pretty toxic, a bit more than I expected. So good efficacy results, but a lot of toxicity still. It will, of course, play a role. I think we have a very unique value proposition with the combination of PD-1 and EVX-01, due to the fact that EVX-01 is really a precise medicine, which means you are truly only targeting the cancer cells. This allows for a very clear-cut efficacy, but it also allows for having very limited off-target effects. The majority of the side effects you see on PD-1 and also LAG-3 are off-target effects. That means we believe we will have an effective therapy but also a very well-tolerated therapy, almost in line with monotherapy with checkpoint inhibitors. So we definitely believe there is a huge place for therapies that are this precise with this efficacy and safety profile.

Great. And then maybe as our follow-up. I think you called out the first half of the year for the first patient dose in the Phase IIb study of EVX-01. Can you comment on the number of sites either open or expected to be open in the first half? And any thoughts you've had preliminarily on the potential pace of enrollment?

Yes. So we just got clearance in Australia, where we will set up multiple sites, and that's already in the works. So that will be the place where the first patients will start recruiting. Then we will, down the road, receive clearance in the EU and U.S. and start sites there. So it will start with multiple sites in Australia, and that's already in the making. So I believe we are on track for that. And then EMA and FDA will follow that.

Our next question is coming from Thomas Flaten of Lake Street Capital Markets.

Just to follow on to the prior answer, Lars. Can you give us some sense of timing for the submission to EMA and FDA for clearances in the U.S. and Europe?

Yes. I can give an idea; we have not communicated specifically to the market on the timing. We're already in dialogue and have been for some time, both with EMA and FDA. We do not expect a lot of hiccups in that process. So we believe it will follow as we're currently planning. We're not pinpointing exact times, but it will be as fast as possible. We're already in dialogue, and we see no dark clouds on the horizon. So we're quite happy with our regulatory interaction so far.

And just to go back to the PD-1-LAG-3 combination. Given that you're bringing in patients who are on background pembrolizumab, do you see any shift in standard of care where ethical considerations could be raised in terms of treating patients with what some would argue would be the older standard of care as opposed to the new standard of care, especially here in the U.S. where it will be on the market first?

Yes. If you ask me that question two years from now, we would potentially have designed it differently. But first of all, it's not a sure thing that it will be the standard of care. There are still other combinations. Right now, people are getting either a checkpoint inhibitor as monotherapy, a checkpoint inhibitor which is quite toxic, and now a new one entering, which is a checkpoint inhibitor plus LAG-3, that still shows a significantly higher rate of necessary discontinuations due to side effects compared to monotherapy. So there are patients in all those groups today, even though there are combos approved. I believe there will be three groups of patients also in the future, also in two or three years, which is checkpoint inhibitors as monotherapy, then checkpoint inhibitors plus LAG-3, and then potential checkpoint inhibitors that may fade out with LAG-3 data. But those patients who cannot tolerate the combinations will always exist. Therefore, we don't see a huge issue as we plan to recruit very rapidly in the patient population on monotherapy. I don't think LAG-3 will enter into other markets. Even when it has entered, we are confident there will still be a large pool of patients. It's still quite a large pool of patients getting monotherapy, and that pool will remain.

And then just one final one, if I may. On EVX-02/03, you said you're going straight to regulatory filing following the completion of enrollment in the study. What data will you be taking to the regulatory agencies? And is there any interim data that you'll be sharing with them that we won't see on any fixed calendar, as you've had in the 02 study so far?

Yes. We have not announced. We have more data as the program has matured, and that will be shared with the regulatory authorities. We also plan, of course, to share that with the community outside the regulatory authorities. The exact timing of that we haven't disclosed, but we expect to share that data later this year as it is needed for our regulatory processes on our Phase IIb as well. Thomas, it will be interim data because it is in the adjuvant melanoma setting, and the full readout will be upon one year of follow-up on the last patient.

Our next question is coming from Ahu Demir of Ladenburg Thalmann.

I would like to ask about the AI-DeeP drug response platform. What are the aspects that you use, and how might it be implemented in the ongoing and future trials? Also, can it be applied to all three of the platform aspects, PIONEER, EDEN, and RAVEN? Could you comment on this, please?

Thank you, Ahu. Great questions. Our AI-DeeP is a drug response platform. Based on our current data, it seems that based on the immunological profiling of the tumor microenvironment, we're able to predict which patients are actually responding to immunotherapy and which are not. Right now, we're working on validating that in a larger data set, not from our own clinical trials but from collaborators. When we have that data, we will be developing the AI team as a drug prediction platform, but it will not be 100% related just to our programs because we believe it can actually predict on all immunologically active drugs such as checkpoint inhibitors, LAG-3, etc. We are also developing a business model for that, which will differ from our normal drug development path. So it's a super exciting platform. Here in 2022, we will validate in a large data set to see if it pans out showing the same results as it did in our Phase I/IIa. We definitely have a drug response platform, and when that is validated, we will also implement it in our on-clinical trial going forward. But right now, we believe it's too early with not enough patients to include it. The only way it's included is by gathering data from our current trials to actually train the AI system to perform even better. The AI-DeeP is uniquely focused on cancer. It is based on biopsies and how the tumor microenvironment is expressing different genes. That means it's primarily relevant for our PIONEER platform and not so much for EDEN and RAVEN. I hope that answered your question, Ahu?

Yes. That's very helpful. So my other question would be on the EDEN platform. What stage of the IND-enabling studies are you currently conducting for the EVX-B1 program as you are preparing for the IND filing in the second half?

So that's our Staphylococcus aureus vaccine program. As many of the callers are aware of, it's a huge medical problem. There are currently no approved vaccines. The path to the clinic, which is a Phase I in healthy volunteers, is, of course, to finalize the investigational new drug (IND) package. That's a larger milestone ahead of us on EVX-B1.

And my last question would be about the clinical sites as well. Does the situation in Ukraine impact you? Do you have a site there? And does that impact the expected enrollment by any means for those companies?

So that's another good question. We're all concerned about what's happening in Ukraine. Largely, it does not impact any of our business. We don't have collaborators, we don't have sites, and we don't plan to have sites there. So we don't expect that its current state will influence our programs. Just as we successfully managed our clinical trials during the COVID situation, we're confident that we can also continue to do so, all depending on whether the situation develops into another crisis. But currently, we don't expect any direct impact on the company's performance. Perfect. And then back to you, Donna.

Thank you. Ladies and gentlemen, this concludes today's question-and-answer session and today's event. You may disconnect your lines at this time. I'll log off the webcast. We thank you for your participation and enjoy the rest of your day.