Evaxion A/S Q1 FY2025 Earnings Call

Thank you so much, and good morning, and good afternoon, everyone. And a very warm welcome to this Evaxion business update call on the back of our Q1 2025 results. I'm Christian Kanstrup, CEO of Evaxion. With me today, I have, as usual, Birgitte Rono, our Chief Science Officer; Thomas Schmidt, Chief Financial Officer; and Mads Kronborg, our VP of Investor Relations and Communications. And for the agenda today, I will do the introduction, Birgitte will be doing the R&D update. Thomas will take you through the numbers, and I will conclude before we again, as usual, jump into the Q&A. And before we get going, I will direct your attention to this slide. We will be talking about forward-looking statements. And as always, when you talk about the future, that is uncertain. Hence, I direct your attention to the slide here. But with that, let's go, and let's look at the introduction. I think it's fair to say that we have had a super busy couple of months since the last business update. We have seen strong progress across all parts of the business and are continuing to execute well. If we first look at business development, I'm very pleased to say that the partnership with Merck is on track towards potential option exercise in the second half of the year. Needless to say, this is a key milestone for us. If Merck exercises the options to both compounds in the option and licensing agreement, we will be in line to receive $10 million. Hence, a very important milestone, and I am pleased to see that we are tracking towards the decision point in the second half of the year. Also super pleased to see that our business development pipeline remains solid, and it supports our full year target of at least two new business development deals. However, in that context, I also have to direct attention to the fact that the current turmoil in the financial markets and, I would say, an increased regulatory uncertainty is impacting deal execution. We have seen a potential partner, with whom we had been in discussions, deciding to pause discussions and focus on internal later-stage assets in development. I think it's only natural that you would see decisions like that when there is turmoil in the financial markets and some uncertainty surrounding where we are. That being said, we are, of course, mitigating the risk of that by directing our focus towards potential partners less impacted by the current macro environment. As I said, we remain confident about our full year target of completing at least two new business development deals, but it's clear that risk is increasing due to the macro environment. From an R&D point of view, I am very pleased to see that EVX-01 is continuing to yield positive data. We just presented at the AACR in April another set of strong data, and Birgitte will get back to those later on in the presentation here. On top of that, we are on track for the two-year readout in the second half of the year, and we have seen the first patient being dosed in the one-year trial extension. Also important from an R&D point of view is to deploy our AI immunity platform to develop new pipeline candidates. Having a pipeline of novel candidates is crucial for our ability to continue our multi-partner approach and generate future business development income. Again, I am pleased to say that we are on track for selecting the new infectious disease pipeline candidate, which we will add to the pipeline here in the first half. From a platform point of view, it's about the continued optimization and improvement of the platform. That is how we ensure that we have a leading AI platform for novel target discovery and development. We have been spending the past time curating a lot of data, aiming at optimizing the platform to select the best possible lead candidate for our precision vaccine concept, which is set to take place in the second half. From a financing perspective, finally, we have cash at hand until mid-2026. The EIB loan conversion we have talked about earlier is still expected to be completed in Q2. So all in all, these are busy couple of months, but also a couple of months where we continue to see solid traction across all parts of the business. What we also have been doing during the past couple of months is being quite active at various scientific conferences. AACR EVX-01 Phase 2 data, here, we actually presented that 80% of the new antigens elicit an immune response, as you will see in Birgitte's presentation, with very strong data presented at that conference. We were at the World Vaccine Congress and had two presentations, as well as at the next-gen Biomet conference also with two presentations. These participations at scientific conferences are crucial, both from our interaction with the scientific community in general, but also very much for the continued solid execution upon our multi-partner strategy because this allows us the opportunity to engage with possible partners at the various conferences. We will continue to have a very active presence at conferences throughout the year. Before handing over to Birgitte, just a quick look at our 2025 milestones. Here, I am pleased to say that we have delivered on the first two milestones for the year. We are on track with the first infectious disease pipeline candidate. And even though it has been a busy first half, it's very clear that the second half is going to be even busier. We have, as I already alluded to, a key milestone in the Merck decision on option exercise coming up in the second half, an EVX-01 Phase 2, two-year readout, as well as the selection of the lead candidate for the precision ERV cancer vaccine concept, and a continued strong focus on generating new partnerships. We have our target of at least two new agreements in 2025, in addition to yet another infectious disease candidate in the second half of the year being entered into the pipeline. So while it was a busy first half, it's going to be an even busier time ahead. We are looking very much forward to that. And with that, I will hand over to you, Birgitte, for an update on all the exciting things that have happened from an R&D perspective.

Thank you, Christian. So we have a very broad R&D pipeline of AI immunology defined vaccines, spanning two key disease areas, cancer and infectious diseases. So today, I'll walk you through some of the latest progress in these key R&D programs. I'll start with EVX-01, our personalized peptide-based cancer vaccine currently in Phase 2. I will also touch on our advancement in our precision cancer vaccine program targeting this novel class of tumor antigens that are shared across patients. Lastly, I will present our progress in expanding our infectious disease vaccine pipeline. So EVX-01, as mentioned, is currently in Phase 2, being developed as a first-line treatment for advanced melanoma. The EVX-01 vaccine includes multiple patient-specific vaccine targets, so-called new antigens that we have identified using our AI immunology platform, by examining the patient's tumor mutational profile and also feeding the immune response or the immune system of the patients. It is being administered in combination with immune checkpoint inhibitors with the goal of enhancing clinical efficacy. As Christian mentioned, we presented biomarker and T cell immune data at the annual meeting in the American Association of Cancer Research. At this meeting, we reported that EVX-01 induced a specific immune response in other patients examined thus far, and that 80% of the vaccine targets triggered a specific immune response, which is a frequency substantially higher than what has been reported for other similar vaccine candidates. Furthermore, immunizations increased and maintained the breadth of the vaccine-induced T cell responses. With these data, we are tracking towards the two-year clinical data that we will report in the second half of this year. Building on these positive data and to further explore the durability of both the immune response and the clinical responses, we have, as Christian mentioned, extended this trial with one additional year, and we now have dosed the first patient with this extra EVX-01. Notably, during this extension phase, EVX-01 will be administered as a monotherapy, allowing us to better understand the vaccine's stand-alone effect. The extension involves minimal additional costs as clinical sites remain active, and the vaccine production is already complete. We are looking very much forward to sharing updates from this program in the second half of '25. Now let's turn our focus to our promising persistent vaccine concept. In this program, we are using AI immunology to design a precision cancer vaccine targeting this novel and non-conventional class of antigens, known as ERV tumor antigens, that are shared across patients in select indications. This approach could allow for broader use of cancer vaccines also for patients that are less likely to respond to conventional cancer immunotherapies. We have obtained proof of concept, demonstrating that mice that are humanized with an ERV-based vaccine are protected from tumors and that we induce a specific T cell response in these lines. Additionally, we have curated transcriptomics and proteomics tumor data from more than 3,000 cancer patients. To identify these ERV epitopes presented to the immune system, we have analyzed more than 1,000 immunopeptidomic datasets. With this data at hand, we have optimized AI immunology to allow for an improved version of the human lead vaccine candidate, containing multiple ERV epitopes that also have broad HLA coverage. We are on track for the final lead selection in the second half of this year. In parallel with designing an optimal lead candidate, we are preparing for clinical interest and have initiated IND and CTA-enabling activities, including CMC and clinical trial planning. Lastly, we are making strong progress in expanding our infectious disease vaccine pipeline, and we have the first of two brand new vaccine candidates contracted for launch in the first half of this year. For this initial program, we have conducted a comprehensive assessment of several bacterial pathogen targets. This evaluation included an analysis of medical leads, commercial potential, competitive landscape, platform applicability, and both clinical and preclinical feasibility. Based on this analysis, we now have shortlisted the most promising bacterial targets. These have been reviewed and discussed with an expert advisory panel to guide the final selection. More to come on this in the near future. In summary, we have seen significant progress across our pipeline in both oncology and infectious diseases, and with the two major milestones completed in ’25 and significant progress made across the program, we are well on track for our next milestones in the second half of this year. We are, of course, looking forward to updating you as our programs continue to advance.

Thank you so much, Birgitte. I think it's fair to say that AI immunology really holds the potential for developing truly novel precision medicines, and it's great to see the progress in the pipeline. Let's turn to some progress in numbers and hand over to Thomas to take us through the Q1 results, please.

Yes. Thank you, Christian. So moving into the financials from Q1 2025. Let me start with the key highlights that we had and have seen in Q1. First and foremost, our cash position has significantly improved in the first quarter due to our capital market activities in Q1, mainly even in January. We now have a cash position of $17.8 million, up from $6 million by the end of the year 2024. With our operational cash burn, which we estimate at $14 million for the year, this also means that we have a cash runway until mid-2026. This also means it's past the potential exercise of options from MSD and also the EVX-01 two-year clinical data readout. In Q1, we've seen less spending compared to Q1 2024, as most of our projects have higher spending planned in the upcoming quarters. Our equity has certainly benefited from our capital market activities as well. By the end of Q1, we have total equity of $10.3 million, representing a significant strengthening versus the end of 2024. If I dig a little bit further into the profit and loss statement of Q1, we recorded an operating loss of $3.9 million, which should be compared to $4.4 million last year. The overall lower operating expenses in Q1 reflect these factors. However, we expect that project costs will increase in the coming quarters, fully aligned with our planning. We anticipate a similar cash burn this year as we had last year, approximately $14 million, and it is important to point out that this does not include any potential income from business development deals, which will come in addition. In Q1, we also had financial income of $2.4 million, which mainly derived from a reassessment of our derivative liability. I will expand on our derivative liability on the following slide, but the derivative liability has risen from the capital market activity in Q1 and has impacted our financial income. We expect to see further impacts due to reassessment of our derivative liability in the upcoming quarter, as we still have approximately 50% of the derivative remaining. This means we recorded a net loss of $1.6 million in Q1, which compares to an income of $1.2 million last year, due to significant financial income last year from a derivative liability reassessment amounting to $5.6 million. From an operating loss perspective, we are in a better position this year. Moving to balance sheet items, as mentioned, the strengthening equity is a significant step forward. With the $10.3 million in net equity by the end of Q1, we are well above the NASDAQ listing requirements. The NASDAQ listing requirements determination issue has been completely withdrawn. Investor warrants in our public offering have an exercise price denominated in U.S. dollars. Our functional currency is in Danish krone, which, according to international accounting and financial standards, means that we have recorded these investor warrants as a derivative liability. However, due to developments in both the U.S. dollar exchange rate and also the share price, the net impact of this derivative liability on equity is only $20,000 in the first quarter. It is important to note that as we still have approximately 50% of our warrants built denominated in U.S. dollars, we will see reassessments and will need to do reassessments in the upcoming quarters. Again, the net impact is limited, but this is expected in the upcoming quarters. Cash and cash equivalents stand at $17.8 million. It's really nice to see that we have cash until mid-2026 in the current runway setting. With that, I will hand it back to Christian for concluding remarks.

Thank you so much, Thomas, for taking us through the numbers. Let me just conclude before opening up the floor for Q&A. I do hope that you agree with me from the presentation here that we are maintaining a strong execution momentum. Our financial position has significantly increased; cash and equity have clearly moved in the right direction. It's important that we are tracking towards several potential value catalysts coming up in the second half of the year, which is derived from our clear strategy with a strong focus on value realization through our multi-partner approach. Also, when talking about cash, our runway into mid-2026 is beyond both the two-year readout on 90 days of the warrant and the potential option exercise from Merck, which would bring us an additional $10 million if both options are exercised for EVX-B2 and B3, which in turn would give us cash into 2027. With that, I would like to open the floor for Q&A.

Thank you. The next question is from Thomas Flaten at Lake Street Capital Markets. Your line is open. Please go ahead.

Hey, good morning. Good afternoon. Thanks for taking the questions. A few for beginning here. In the two-year EVX-01 data, was there a meaningful bias between CD4 and CD8 positive T cells?

We mainly see CD4 T cells. In all the patients, we have all the samples from the patients we have analyzed so far, we have CD4 T cells. We also see CD8 in approximately half of the patients. I think this might be mainly driven by the fact that EVX-01 is a peptide-based vaccine. We know that the way the immune system is taking up these peptides and presenting them directs a strong T cell response.

Excellent. That's very helpful. Thank you. And then on the lead ERV candidate that you have, is it the intention that that will be an ERV hotspot vaccine only? Or will you combine that with personalized cancer neoantigens?

The idea with this precision concept is to do an off-the-shelf vaccine. We are basically able to design a vaccine that has what we call broad coverage, meaning that patients with different immune systems and also expression profiles of these tumor antigens would benefit from receiving this type of therapy. It is a precision-based vaccine, and we will, at least not in the beginning, combine it with any other types of vaccines, including personalized approaches.

Understood. And then one final question for me. There was news last week out of the UK that they were going to repurpose a meningitis vaccine for gonorrhea. It looks like it provides limited protection. I was just curious if you had any thoughts on that or what your partners at Merck might have said about that rollout?

Before Birgitte discusses the scientific aspects, I want to highlight that this clearly illustrates the urgent need for effective preventive therapy for gonorrhea. The recent figures reported for case increases in the UK are quite alarming. It’s evident that action is required. This reinforces our confidence in the commercial prospects for EVX-B2. Birgitte, please go ahead and elaborate on the scientific rationale, which is certainly sound.

The scientific rationale is there; it's also been known for a while that there is cross-protection to gonorrhea, but it's far from complete, meaning that there is definitely a need for a more precision vaccine that would provide broader protection. We have not discussed it with our collaborators indeed.

Got it. Thanks for taking the questions.

Thank you. Speakers, there are no further questions for today. I would now like to hand the conference over to your speaker, Christian Kanstrup, for any closing remarks.

I would just like to say thank you so much to everyone for listening in to our Q1 business update call. We are looking very much forward to the continued execution upon our strategy and will, of course, keep you all informed when relevant news unfolds and are looking forward to staying in touch with all of you. Thank you so much for taking the time to listen in and wish you all a good day.

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