Evaxion A/S Q2 FY2024 Earnings Call

Good day and thank you for standing by. Welcome to the Evaxion Biotech Business Update Conference call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Christian Kanstrup, CEO. Please go ahead.

Good morning and good afternoon, everyone. And a very warm welcome to this Evaxion business update conference call on the back of our Q2 results. I'm Christian Kanstrup, CEO of Evaxion. With me today, I have Birgitte Rono, our CSO. I have Jesper Nyegaard Nissen, our COO and CFO. And I also have a new joiner with me today, which is Mads Kronborg, VP Investor Relations and Communication. I would actually like just to start out by handing briefly over to Mads for a brief introduction to who he is. This is the first time you are attending the call here.

Thank you, Christian. And thank you for the opportunity. Just for a brief introduction, I have around 15 years of experience in Corporate Communication and Investor Relations from the pharmaceutical and biotech industries, having previously held positions such as Head of Corporate Communication at Lundbeck and Head of IR and Communication at Zealand Pharma. I'm glad to join Evaxion at this very interesting time for the company with a number of milestones lying ahead, and I'm looking forward to helping communicate our progress and facilitate the dialogue with you as investors, analysts, and journalists. You will find my contact information on the Investors section of our website and are, of course, always welcome to get in touch.

I am pleased to have Mads on board so we can provide even better service and support to all of you. So great to have you on board, Mads. Then let's jump to the next slide and look at the agenda for today. I'm going to do a brief introduction, then I will hand over to Birgitte for an R&D business update, and Jesper will cover our financial results. I will conclude before we head into the Q&A part. But before we get going for real, let's just direct our attention to Slide 3, which is forward-looking statements. As you know, we will be talking about the future, and that does entail uncertainty. Hence, please read this one carefully. So with that, let's look at some of the key achievements since our last business update. One of the key elements in our strategy is to create value via a multi-partner approach, and I am super pleased to see that we have been advancing our partnering discussions since our last update. We are seeing solid interest from external parties, both in our AI immunology platform and pipeline candidates. We do have several partnership discussions ongoing. This is, of course, key to executing our multi-partner strategy that we see these discussions advancing. What I'm also pleased about is the progress on the EVX-01 program. We presented positive and validating Phase 2 immune data at ASCO this year. We also published our Phase 1 results in a leading medical journal, including the 67% objective response rate from the Phase 1 trial, which I'm very proud of. Importantly, we are on track for a key milestone for Evaxion, our 1-year clinical data readout, which will be presented at the ESMO Congress in September. So we are seeing great progress on the EVX-01 program. In addition to this, strengthening our AI immunology platform and capabilities has progressed over the past quarter. We received positive feedback on a patent application for an AI-based novel target identification method, which is based on the endogenous retroviruses, and creating a strong IP portfolio around our platform and pipeline assets is crucial for us. This positive feedback is a major milestone for the continued strengthening of our platform. Lastly, I want to mention that we presented at the Computational Biology conference not too long ago, showcasing improved performance on one of the building blocks of AI immunology. AI immunology has a unique modular structure, and improving the performance of one of these modules enhances the performance of all AI models utilizing it. Overall, we have been quite busy with several key elements of our strategy advancing since our last update. Before handing over to Birgitte, I want to ensure we look forward, as we have a number of important milestones to report shortly. In September at the ECCB conference, we will be launching the upgraded version of the EDEN model 5.0, which we are looking forward to. Also in September, at the 18th Vaccine Congress, we will report on the milestone for EVX-B2 in an mRNA version, where we aim to present the preclinical proof-of-concept. I already mentioned that in September, we will have the 1-year readout on EVX-01 at ESMO. So we have several significant milestones to report on shortly. For the latter part of the year, we remain on track with our collaboration with MSD around EVX-B3, where the first phase will conclude in the second half. We are also on track with our ERV-based precision cancer vaccine, where we are pursuing preclinical proof-of-concept for which we will also report later this year. Finally, we aim to generate business development income equal to our 2024 cash burn, excluding financing activities. The only update here is the wording has been changed to reflect the current context. If we get to the $14 million, it is uncertain how the accounting impact of upfront milestones will be recognized, leading to possible income in 2024 or 2025. However, we maintain our ambition of generating business development income of $14 million this year. As you know, business development activity is uncertain, but we are experiencing strong traction with new potential partners approaching us regularly.

Thank you, Christian. It has been a very active and busy time during the last quarter. Today, I will focus on the data from the Phase 2 study of EVX-01 presented at ASCO in June and the improvements on a central building block in our AI immunology platform that we call EvaxMHC, which is key for designing effective vaccines. The improved performance of this building block was presented at the Computational Biology Conference named Intelligent Systems for Molecular Biology in July. Our EVX-01 lead product candidate is a personalized cancer vaccine designed to engage the patient's own immune system to fight cancer. EVX-01 is currently in a global multicenter Phase 2 trial in first-line advanced melanoma. The patients enrolled in the Phase 2 trial received standard of care, which is the checkpoint inhibitor from MSD called KEYTRUDA, administered according to label, in combination with six initial EVX-01 priming doses followed by four additional booster doses. EVX-01 consists of 10 AI immunology identified new antigens, which are short sequences exclusively found in tumors that, when administered to a patient, induce a specific T-cell response with tumor-killing potential. In June, we presented encouraging immune data from the first 12 patients at ASCO. The data demonstrated that EVX-01 induced T-cell responses in all evaluated patients. The graph to the right displays the EVX-01 induced immune response over time. Week 1 represents the baseline where the patients had not received any therapy; week 12 is where the patients have been dosed with KEYTRUDA; week 18 is during the EVX-01 priming phase, and week 30 is after priming but before the patient received any booster immunization. In all evaluated patients, we observed an increase in the T-cell response upon vaccination with EVX-01. Further analysis demonstrated that the T-cell responses were mediated by both CD4 and CD8 T-cell responses. Although I have not included data here, they were presented at ASCO, and there is currently a lot of debate about the roles of CD4 and CD8 T-cells. We believe it is very important to maintain a balance between these two types. Additionally, we maintained the response in patients upon boosting, which is critical for achieving a feasible clinical response. It is also important to consider the individual new antigens and their ability to induce a specific immune response. The graph to the left depicts the response to the individual new antigens in the vaccine over time. At week 30, we could see that out of 90 administered antigens, 64 induced a specific immune response, giving us a 71% positive hit rate, which we believe compares favorably to what has been previously communicated. Moreover, we correlated the AI immunology prediction scores and new antigen T-cell responses, which are also depicted in the graph, showing a significant positive correlation, highlighting the precision and predictive power of our AI immunology platform. In summary, at ASCO, we demonstrated that EVX-01 induced T-cell responses in all 12 patients, predominantly mediated by CD4 T-cells, with our AI immunology new antigen quality score correlating with these immune responses. We believe that these early immune data are very encouraging and we look forward to presenting the 1-year clinical readout at ESMO in September, as Christian mentioned. We are continuously working to improve our AI immunology platform. A key feature in developing effective vaccines is the ability to actively predict small fragments known as peptides from pathogens and cancer cells. This enables the immune system to recognize and eliminate threats. We have improved the building block EvaxMHC, which predicts which peptides are most likely to be displayed on the surface of cells and are therefore the most relevant vaccine targets. With these improvements, we have implemented a state-of-the-art novel deep learning framework and trained the models using both public and proprietary data, showing an improved performance of this building block compared to publicly available tools. To sum up, we presented encouraging new data from our EVX-01 Phase 2 cancer study at ASCO in June, and we are on track for the exciting upcoming 1-year data presentation at ESMO. Additionally, we have shown improved performance in our key building blocks, which we believe will lead to improved design for cancer and infectious disease vaccines.

Thank you, Birgitte. It's truly exciting to see the EVX-01 data continuing to unfold. Looking forward to September. Now over to you, Jesper, to see how the Q2 numbers have been developing.

Thank you, Christian. I will focus my comments on the financial results for the first half of 2024 compared to the same period in 2023. All the numbers I will review will be approximate for easy sharing during the call. For additional information regarding our first half results and period comparisons, please refer to the business update on the second quarter 2024 financial results, press release, and the Form 6-Ks we have filed this morning. Starting with our financial highlights for the first half of 2024, we are seeing the effects of the 2023 cash spend optimization and organizational slimming in the financial results. This is linked to the continued implementation of the focused company strategy with an intensified focus on value realization through partnerships, as we shared at prior calls. As of June 30, 2024, cash and cash equivalents were USD 8 million, and we expect that our existing cash and cash equivalents will be sufficient to fund our operating expenses and capital expenditures into February 2025. If all prefunded warrants included in the public offering in February 2024 are exercised, we expect necessary funding will be in place until March 2025. On May 7, 2024, the company received a NASDAQ equity deficiency letter due to our equity being below $2.5 million. A plan to regain compliance has been shared with and accepted by NASDAQ, allowing the company until November 4, 2024, to evidence compliance. Looking at our expenses for the period, research and development expenses were $5.6 million for the six months ended June 30, 2024. This represents a decrease of $1.2 million versus the same period in 2023, primarily due to a decrease in employee-related costs, faced against a smaller increase in clinical trial costs. General and administrative expenses were $3.6 million for the six months ended June 30, showing a decrease of $1.7 million versus the same period in 2023, which was driven by reduced external professional fees and lower employee costs. Finance income and expenses for the first six months of 2024 are impacted primarily by the remeasurement of the derivative liability related to investor warrants from the public offering in February 2024 and the private placement in December 2023. These effects will be eliminated going forward as the investor warrants have shifted from exercise currency recognition as financial instruments to equity instruments during Q2. With that, I would like to turn back to you, Christian, for a few concluding remarks before the Q&A.

Thank you so much, Jesper, and thanks for the update on the numbers. Let me just quickly provide a few concluding remarks before we jump into the Q&A part. It's fair to say we are seeing solid progress on our 3-pronged business model and very good traction along the various parts. Importantly, we are focused on advancing ongoing business development discussions, which is a key milestone for us this year, focusing on value generation through a multi-partner approach. The data Birgitte presented shows that EVX-01 continues to deliver solid results, and we do have a major milestone coming up here at ESMO in September. Additionally, it's a big time ahead with several other 2024 milestones set to report out, as we are on track to deliver the remaining milestones in the second half of the year. All in all, I would say I am very pleased with the progress we are seeing and the strong focus on execution as we bring our strategy forward. So with that, I would like to open up for the Q&A session. Please join the Q&A session.

Thank you. The first question comes from Li Chen from H.C. Wainwright. Please go ahead. Your line is open.

Hey, Li.

Hello everyone. Yeah, hi Christian. Congratulations on this great quarter. I have a couple of questions. First, do we expect any update between the ESMO data and the final data in 2025 regarding EVX-01?

I can answer that. Hi, Li. We are continuously generating more data also on the biomarker side. Yes, we expect in early '25 to present some more of that work.

Excellent. Thank you very much. Another question I have is regarding the VX-B2 vaccine. Can you give us a sense of what could be the potential scenario for the next steps in the development with the collaboration with Afrigen?

If we take B2 in general, it is at the preclinical stage. Especially, it's one of the assets where we are looking for partnerships to bring it broadly forward. The next steps on B2 will be partnership discussions for the Afrigen collaboration, which is for the mRNA-based version targeting low and middle-income countries. We aim to establish the preclinical proof-of-concept, which will be presented at the 18th Vaccine Congress in September. Next steps beyond that will depend on the data, but primarily this is a research collaboration focusing on establishing proof-of-concept for the use of the two B2 antigens in an mRNA construct.

Got it. If I can squeeze in my last question. Can you give us a sense of the current status of the ERV platform, what kind of preclinical data you are generating? When do we see the data published or being announced? Thank you.

Are you thinking in particular for the precision-based vaccine, where we have our milestone, or I think in more ERVs in general?

I think you stated the updated timeline is the second half of '24.

Yes, that's the one I'm talking about.

The milestone later this year relates to the precision version of the vaccine, meaning that we are currently developing a vaccine that fits a broader subset of patients with a certain indication. Currently, we are conducting design studies and preclinical evaluations of these designs to be ready for presentation at a conference later this year.

I am personally excited about ERV as a novel cancer target, as well as the concept of developing a precision vaccine capable of reaching new patients who may not have been reachable with standard immunotherapy or personalized cancer vaccines due to a lower tumor mutational burden. We look forward to seeing the data later this year.

Thanks very much. Looking forward to the data.

Thank you. We will now take the next question. Please stand by. The next question comes from the line of Thomas Flaten from Lake Street Capital Markets. Please go ahead. Your line is now open.

Hey, Thomas.

Hey, thank you for taking the questions. Christian, I was wondering if you could characterize the partnership discussions mentioned in the press release. Are they focused on infectious diseases, cancer, or are they across the board? How advanced are those conversations? A little more color would be helpful.

Thomas, without going into too much detail, I would say it's across the board. We are seeing interest in our AI immunology for new target discovery collaborations, like the one we have with MSD, and also in our pipeline assets from both cancer and infectious disease sides. Some discussions are quite advanced, which is necessary to meet our milestone of generating $14 million in business development income this year because it does take time to finalize deals. Overall, I am pleased with where we are in our deal pipeline.

And regarding your spending, particularly in R&D for the second quarter, can you help us with how to model spending for the second half of the year? Considering your cash situation and runway?

You should look at slightly lower R&D spending in the second half of the year, and the same goes for general and administrative expenses. We will be having a lower spend in the second half than in the first half. Also, cash flow will be skewed toward the first half because we have expenses such as insurance and employee bonuses in Q1, thus further supporting lower cash out this half.

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

Thank you. The next question comes from Chong Liu from Ladenburg. Please go ahead. Your line is now open.

Hey, Chong.

Hello, this is Chong for Ahu Demir. We have a question regarding the upcoming results at ESMO. Could you please provide more color on what we can expect? Besides the immunogenic data, are we anticipating updates on ORR, PFS, or OS?

Yes, thank you for that question. We will present the 1-year clinical readout from the Phase 2 study, including more biomarker analysis and a few additional cases of patients that have been boosted. We cannot specify the exact clinical data yet because we are a little reluctant to conclude on the primary endpoint when considering it's a preliminary readout.

But we will present clinical data.

Clinical data. Of course, this is criteria for response.

My next question is, will this Phase 2 data readout help advance discussions for future partnerships?

The short answer to that is yes, of course, assuming the data is good, which we hope and expect. Clinical data are essential in partnering discussions, especially for personalized cancer vaccines, and this milestone is significant for us in that respect.

Okay. My last question is regarding the EVX-B3. Can you provide some updates on that?

EVX-B3 is a collaboration with MSD on an undisclosed pathogen vaccine, running according to contract. We have signed the antigens, produced them, and are currently testing them in animal models. We are on track with this collaboration.

The first phase of testing is set to conclude in the second half of the year. Following this, we will discuss the next phase with MSD, which would follow a traditional licensing and collaboration structure, assuming the data looks promising.

What is the difference in the new EDEN model version, like 5.1, from the old version?

The overarching objective with the upgrade is to increase the predictive capabilities of EDEN, enabling us to identify the right antigens and potentially discover targets that could not be found through other methods. We've expanded the training dataset by acquiring more public data using retrieval-augmented generation with large language models, followed by manual curation by domain experts. This enhanced dataset includes predictions of bacterial toxins as a new feature in EDEN 5.0. Additionally, we have advanced protein feature prediction by developing a new building block and fine-tuning the protein language model, enhancing our capability to predict various protein characteristics. In short, we are improving the predictive capabilities of EDEN, which is a continuous process that can mutually enhance all our AI models. We look forward to detailing this at the ECCB conference in September.

Are you going to apply this new model to any programs?

That will indeed be applied to potential new target collaboration discussions or collaborations with pharma and biotech, as well as our internal programs we look to advance. We have a list of infectious disease targets we wish to pursue, and this EDEN 5.0 will greatly aid in swiftly moving new candidates into our pipeline, while also offering additional value in external collaborations.

Great. Thank you.

Thank you. As there are no further questions, I would now like to hand back to Christian Kanstrup for any closing remarks.

Thank you so much. I just want to express my gratitude to all of you for either dialing in or joining the webcast. Thank you for the questions, and we always appreciate good dialogue. We are looking forward to reporting on the key milestones ahead while advancing the various discussions we have ongoing. Thank you for listening in.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.