Evaxion A/S Q2 FY2023 Earnings Call

Good day, and thank you for standing by. Welcome to the Evaxion Biotech Q2 Results Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Per Norlen. Please go ahead.

Thank you, operator. Good morning and good afternoon, everyone. I'm Per Norlen, Chief Executive Officer at Evaxion. And with me today is Jesper Nyegaard Nissen, Chief Operating Officer and Interim Chief Financial Officer at Evaxion since August 1. First, before we start, a note on forward-looking statements. Let me remind you that the following 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 annual report Form 20-F and the company's current and future reports submitted to the Securities and Exchange Commission, SEC. With that said, I'm pleased to welcome you to today's conference call. During the call, I will provide you with a brief overview of the excellent progress we made across our pipeline and on our core AI technologies over the past six months. I will then turn the call over to Jesper, who will review our financial report for the second quarter of 2023, and then we will open up the line for questions. We have a presentation which you can follow, and this is Slide 1, and we will start by taking a quick look at today's agenda, which is on Slide 2. So, Slide 2. I will start with our recent communication on our staphylococcus aureus vaccine EVX-B1, where we were pleased to present preclinical proof-of-concept data showing that the vaccine candidate can clear staphylococcus infections. We will also show the early-stage clinical data reported on AACR 2023 and ASCO23, indicating that patients treated with our vaccines, EVX-01 or EVX-02, in combination with the checkpoint inhibitor experienced a treatment benefit and with good overall tolerability. Further, I will provide an update on our next-generation personalized cancer vaccine candidate EVX-03, which is approaching the clinic as well as our novel AI technology observed, that's been used to identify a new source of antigens for personalized cancer vaccines. And that's planned for clinical validation through the EVX-03 program. And of course, the financial update with second quarter financial results as presented by Jesper. So, let's start with EVX-B1 on Slide 3. So, move to Slide 3. In late July, we presented novel data on our vaccine candidate for prevention of staphylococcus aureus disease, EVX-B1, at the Gordon Research Conference in New Hampshire, USA. The vaccine candidate has been generated using our AI technology. And apart from the protective effect demonstrated in the sepsis disease model, which we have shown previously and that you can see for reference on the left-hand side, we have now assessed the ability of EVX-B2 to clear bacteria from internal organs. And if you take a brief look at the graph on the right-hand side, the results are quite clear. No bacteria could be detected in any organs four weeks after bacterial challenge. The program is currently in late preclinical development and we are in discussions with a potential partner on its future development and commercialization in accordance with our strategy. So, now let's switch to oncology and our clinical programs for personalized cancer vaccines, that's Slide 4. So if you have the right slide in front of you, you should be able to read EVX-01 on the top, and it should show the readout of our clinical Phase 1/2 clinical trial in metastatic melanoma. EVX-01 is a personalized peptide-based cancer vaccine, where patient-specific tumor mutations, so-called neoantigens, are identified using our AI technology pioneer. These neoantigens are ideal targets for cancer vaccine and that they derive from tumor mutations and therefore, only exist in tumor cells, which means that the treatment can become very specific for the tumor with less risk and negative effects on healthy tissue. In the first human trial, six biweekly doses of EVX-01 were given in combination with PD-1 therapy. The treatment was well tolerated. And of the 12 patients that completed the trial, eight showed an objective response to the treatment. If you look on the graph on the right-hand side, you should see a horizontal black line indicating the tumor size at the start of treatment. You can see 12 bars, which represent the best objective responses for each patient in the trial. If the bar goes up, tumors increase in size, and if the bar goes down, this means that the tumors decrease in size. And to our excitement, most bars do actually go down. And for eight of the patients, the outcome fulfills the criteria of a treatment response. We're obviously really enthusiastic about these results. It's better than you would expect from PD-1 alone, and it speaks to the strength of our AI technology in selecting the right neoantigens for personalized cancer vaccine. This was EVX-01, but we have also reported data from our DNA-based cancer vaccine EVX-02, that's on the next slide, Slide 5. It just says EVX-02 at the top. This is a clinical trial of EVX-02 in combination with nivolumab, a PD-1 blocker as adjuvant therapy to prevent cancer relapse after a complete surgical resection of malignant melanoma over 12 months. It's a DNA-based therapy. The image shows the DNA plasmid carrying the genes for patient-specific neoantigens. So, the vaccine is administered as DNA and then translated to neoantigens in the patients, and the results look very promising. All 10 patients that have completed the vaccination with EVX-02 were relapse free at the end of the trial. The vaccine was well tolerated in all patients and induced a new antigen-specific T cell immune response in all patients, which can be seen as proof of mechanism for our DNA vaccine technology. But we do not plan to develop this vaccine candidate further for the time being. And why, you may ask? Well, it's because we have already developed a next-generation vaccine based on EVX-02 and the new vaccine candidate is called EVX-03, and which we intend to prioritize. Let's move to Slide 6. So, EVX-03. EVX-03 is the first-ever personalized ERV cancer vaccine. It builds on EVX-02, meaning that it's a DNA-based personalized cancer vaccine, but it has two major upgrades. One upgrade is the addition of a genetic immune adjuvant, which aims to boost the immune response to the vaccine. The other upgrade is the addition of a novel vaccine target, so-called ERVs, which I will come back to in a minute. Let's start with the genetic immune adjuvant. This is a chemoattractant molecule, which is incorporated into the DNA plasmid, as shown for EVX-03 to the right of the picture. EVX-02 is a plasmid on the left-hand side, incorporating DNA coding for neoantigens, whereas EVX-03 on the right-hand side, in addition, incorporates the DNA sequence for the genetic immune adjuvant, which is shown in green. The DNA plasmid is administered to the patient under adjuvant, a chemoattractant molecule called CCL19 is produced inside the cells of the patient at the injection site. And the consequence of this is that the genetic adjuvant attracts immune cells to the vaccination site, which is thought to make the vaccine much more effective. Preclinical data supporting these claims were presented in detail at our R&D Day in May, and you are welcome to visit those presentations on our homepage. The second upgrade of EVX-03 is on the antigen side. Personalized cancer vaccines are usually dependent on neoantigens, which are created by mutations in the tumor. This is how the immune system can identify and attack tumors. But it's not the only way for the immune system to identify tumor. Using artificial intelligence and specifically our novel AI technology observed, we have identified a novel source of tumor-selective antigens that can be used for personalized cancer vaccines, so-called ERVs, which stands for endogenous retroviruses, and which are also included in EVX-03 as shown to the right. Let's switch to Slide 7, and our novel AI platform ObsERV. So, Slide 7, ObsERV, it's our AI technology for identification of ERVs, and ERVs constitute a novel source of cancer vaccine antigens that may allow effective treatment also for patients who are unresponsive to today's cancer immunotherapies. But what are ERVs? Well, ERVs are viral DNA leftovers from historical infections throughout human history. And we all have it. In fact, about 8% of our DNA has a viral origin. But no need to worry, this DNA is resting and does no harm to us, at least not under normal conditions where ERVs are under tight control by our genetic machinery. But in cancer cells, these control mechanisms often break down, leading to selective expression of ERVs on human cancer cells. And these ERVs, of course, ideal targets for the immune system. The cancer cell basically waits with a red flag saying, 'I don't belong here. I'm infected by a virus,' potentially leading to an immune attack. And that seems to happen quite regularly. We have recently shown that patients that produce ERVs in their tumors may survive longer. If you take a look on the left-hand side in this slide, you can see two survival curves in patients with low tumor mutational burden, or TMB, which means that there are a few tumor mutations. The red line shows the survival in patients with few ERVs whereas the blue line shows the longer survival in patients with a lot of ERVs, presumably because such tumors with a lot of ERVs are more likely to be attacked by the immune system, and hence, a better survival. And in preclinical models, we have shown that this can be used to make a personalized cancer vaccine that effectively combats tumors. So, we believe that EVX-03 may be more effective than current vaccines that are based only on neoantigens. And notably, that we can broaden the target population quite significantly. So why is that? Why do we think we can broaden the target population? It's because today's immunotherapies are more or less restricted to patients with hot tumors, which are tumors where there are many tumor mutations called tumors with high tumor mutational burden, or high TMB. But ERVs seem to be equally highly expressed in tumors with few mutations, also called cold tumors. And these actually make up the majority of all patients' tumors. So, potentially a much larger target population, and we should remember that EVX-03 will contain both neoantigens and ERVs, and also our novel genetic adjuvant technology. And that's why we refer to EVX-03 as a next-generation personalized cancer vaccines with potential for superior effect. So, we plan to submit an application for start of Phase 1 clinical trial for EVX-03 in Q4 this year and expect to be first in the world with a personalized ERV vaccine in patients. So, in addition to the operational progress, we have recently signed an agreement with the Global Growth Holding Limited, including financial commitments totaling up to $20 million, available in tranches over the next three years, subject to SEC approval. The financing is intended to cover the company's working capital needs, including the advancement of EVX-03 to Phase 1 readiness, while the actual initiation of clinical activities for EVX-03 are subject to additional funding. This was the updates from the operations. And now I would like to turn the call over to Jesper.

Thank you, Per. I will focus my comments on our financial results for Q2 '23 compared to Q2 2022. All of the numbers that I will review in this discussion will be approximate for easy sharing during the call. For additional information regarding our second quarter results and prior-period comparisons, please refer to the business update and second quarter 2023 financial results press release and our Form 6-K, both filed last week. Starting with our expenses. Research and development expenses for Q2 2023 amounted to $2.9 million, and general and administrative expenses to $2.7 million for the period. Research and development decreased by $1.2 million or about 29% compared to the same period last year. The decrease was primarily driven by a decrease in external development costs of $0.7 million related to clinical trial activities. Further, a decrease we've seen in employee-related costs of $0.5 million due to reduced headcount in personnel. General and administrative expenses increased by $0.6 million or 28% compared to the same period last year. The increase was primarily due to an increase of $0.3 million in external costs related to professional fees and overhead and an increase in employee-related costs of $0.2 million. These increases are due to the timing of funding projects and business initiatives compared to 2022 and the expansion of the organization throughout 2022 to meet the requirements as a listed company. The net loss for Q2 2023 amounted to a loss of $5.7 million compared to a loss of $4.8 million for the same period last year. As of June 30, 2023, we have $7.1 million in cash and cash equivalents. We expect our cash balance to be sufficient to fund operations into December 2023. Now, I would like to turn the call back to you, Per, for a few closing remarks before Q&A.

Thank you, Jesper. And now a brief look into the future. So looking into the rest of 2023, we expect to deliver on two important and near-term milestones. We plan to report interim results from the ongoing EVX-01 Phase 2 trial in patients with metastatic melanoma in Q4 this year. And also in Q4 to submit a clinical trial application to start a Phase 1 study for EVX-03. But as mentioned before, this is subject to additional funding in the range of $5 million to $10 million secured before initiation. So, in conclusion, I'm very happy about the progress and believe we have potential to develop vaccines that may truly improve the treatment of cancer as well as the prevention of infectious disease around the world. On behalf of everyone at Evaxion, I invite you to continue to stay in touch with the company and follow our progress in 2023 and beyond. So, operator, over to you for Q&A.

Thank you. We will now take the first question from the line of Thomas Flaten. Please state your company name and ask your question.

Hey, guys. This is Thomas from Lake Street. A couple of quick questions. Per, you mentioned in your prepared remarks that you were discussing the staph aureus program with a partner. Has the deal been struck there? Or is this part of a partnership discussion for a deal that has yet to be announced?

So say that again, what was the question if we already have announced the partner or...

You mentioned that you were discussing with the partner the future for the staph aureus program. I was curious if there was a partnership that had already been struck, or if this was a potential partner.

Thank you for the question, Thomas. I apologize if there was any confusion. I would like to clarify our strategy regarding these infectious disease programs, which is to seek partnerships early on. We are currently in discussions about some of our assets, including this product, but we have not announced any partnership yet. We will share that information in due time once a partnership is established.

Got it. For the EVX-01 readout in the fourth quarter, I remember you mentioned last quarter that you might have up to 20 patients in that readout. Do you have any updates on how many patients you expect to include and whether the release will be in a press release or at a scientific meeting?

We plan to present the interim data at the end of this year at an important cancer conference, with SITC being a potential venue, though this is not yet finalized. We anticipate showing data from the initial group of patients. While we have recruited patients, we have also decreased the trial size, which now appears to be just under 20 patients, although the exact number is still being determined. We will report on this initial group of patients towards the end of the year at the conference.

Excellent. And then just one final one. The cash runway into the fourth quarter, does that depend on additional use of the ATM or the Lincoln Park facility? Or can you get into December using the $7.1 million that you had at the end of June?

Yes, that's correct. So, the runway is currently communicated with that assumption that we get additional funding.

Excellent. I appreciate you taking the questions. Thank you.

Thanks so much.

Thank you. We will now take the next question from the line of Ahu Demir. Please state your company name and ask your question.

Good morning and good afternoon. I am Ahu Demir calling from Ladenburg Thalmann. Two questions from us. One follow-up to Thomas' question about EVX-01 Phase 2 study. How many of the patients are in the timing stage? Are all patients in the timing stage versus boosting stage? And do you plan to follow up these patients and continue with the boosting stage as well?

Yes. Thank you, Ahu, for the question. This trial involves a combination of PD-1 therapy, which is administered to patients for the first three months, followed by the vaccine. We have started vaccine treatments with EVX-01 in just over a dozen patients and expect to treat the last few patients soon. We are nearing the total number of participants for the trial. I hope that answers your question.

So, all the patients will actually have the boosting basically. So, it will be, as I understand, between week 12 to 24, you have the timing section. So, these are the patients you have a much longer follow-up?

Yes. Sorry, now I understand. So yes, we do not know that yet, of course. So it's quite a lot of patients that have been entering the trial during the spring. So, we are not yet there where we will know if they will go into the next phase of boosting. But that is the plan for patients if they stay on the trial and if they're not progressing that they will be offered boosting.

I see. So all the patients we see at the end of this year would be at the timing stage basically? Is that...

Yes, that will be the data we'll present at the end of this year, yes.

Okay. Helpful to know. And my second question is about ERVs. This is something relatively new compared to new antigen approach. So I am curious how do you select your ERVs? How specific are they among patients or within an indication? Just curious if you could elaborate on the ERV side.

Yes, I can provide more information. All humans have a significant amount of ERV DNA, which can be expressed randomly in some cancers when the regulatory mechanisms break down. There are approximately 10,000 to 20,000 different ERVs that may be expressed, and they can vary significantly from one patient to another. However, some patients might have overlapping ERVs. In our trial, we are focused on developing a fully personalized vaccine targeting these ERVs, which is what sets us apart. The selection of these ERVs is based on their potential to elicit a strong immune response, as they are relatively long foreign peptides with a considerable number of epitopes present on each ERV. This allows us to identify high-quality antigens when we observe strong expression of these ERVs in patients. The process is similar to selecting neoantigens, where we assess how well they align with the patient's immune system. We need to predict the shape of the patient’s immune receptors and the epitopes on the ERV, and evaluate the likelihood of their interaction. This is one of the critical factors we examine, though there are additional considerations involved.

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

Thanks so much, Ahu.

Thank you. We will now take the next question. It comes from the line of Swayampakula Ramakanth. Please state your company name and ask your question.

Thank you. This is RK from H.C. Wainwright. Good afternoon, Per. So, a quick question on EVX-01. So, on the Phase 1 portion of that study, you had presented some interim data on the nine patients. Is there going to be additional data in the next update that you're going to be presenting at the end of this year? Or is it mostly going to be initial data from the Phase 2 portion of the study?

Thank you for the question. At ASCO this year, we presented the complete data set. Previously, we showed interim data from nine patients, but in June at ASCO, we presented data on 12 patients, which is the full patient set, and we have eight responders. We have already shared this data. We plan to publish more scientific details later, but we don't intend to present additional clinical outcome data on these programs as that is final. At the end of this year, we will focus on the interim data from the Phase 2 trial, which has a slightly different design and is being conducted at sites in Australia and Europe as a multi-center trial.

Really good. And then on the ERVs, I'm just trying to understand a little bit more on the ERV. Are the ERVs expressed uniquely based on the patient or are they expressed uniquely based on the indication?

Yes. That question is primarily based on the individual patient. We believe there may be some overlaps depending on the type of cancer. If there is a signal for expressing certain parts of the genes in a patient, and if that signal is common among patients, there might be an overlap in those ERVs. However, typically, the expression of that is entirely independent. To simplify my answer, we think it is highly specific to the patient, although there is the potential for some overlap. In the first trial, we are not seeking overlap, so it is entirely personalized. Nevertheless, it is possible to identify a subpopulation where some overlap occurs, which could allow for a common drug to be developed for multiple patients.

So, one last question about the ERV. Do you need a specific level of ERV expression in order to create a personalized vaccine against it? Or are you...

That's a very good question. The key challenge with neoantigens is that a lot of mutations are necessary to find enough high-quality neoantigens for a vaccine. This is why personalized cancer vaccines are currently limited mainly to melanoma and a few other cases like lung cancer. In other situations where there are only a few mutations, it's typically just a small percentage of patients who can actually receive a personalized neoantigen vaccine. With ERVs, we see a somewhat different pattern; they are often found in patients with cold tumors, which allows for the creation of a cancer vaccine for these patients even in the absence of neoantigens. In EVX-03, we plan to do both approaches. We will sequence the tumor, and if there are good neoantigens, they will be included in the vaccine along with strong ERVs. This way, we aim to combine the best aspects of both strategies and hopefully broaden the target population significantly.

Thank you. Thanks for taking all my questions.

Thank you so much, RK.

Thank you. There are no further questions at this time. I would like to hand back over to Per for final remarks.

Okay. Thank you, everyone, for joining, and thank you for all the questions, and we look forward to staying in touch. Thank you. Bye.

Bye.

That does conclude our conference for today. Thank you for participating. You may now disconnect.