IRLAB Therapeutics AB (publ) (IRLABA) Earnings Call Transcript

Welcome to this live Q2 presentation by research company, IRLAB, addressing Parkinson and other CNS diseases. Presenting today is CEO, Kristina Torfgard; Vice President of Research and Development, Nicholas Waters; and CFO Viktor Siewertz. After the presentation, there will be a Q&A with equity analysts and viewers can ask their questions in the live chat. I hereby welcome CEO, Kristina Torfgard. Please go ahead with your presentation.

Thank you very much, Mattias. So this is our disclaimer, and we are listed on NASDAQ Stockholm main market, to remind about that. Very pleased to have you all listening in today. Can I have the first slide there, thank you, which is the agenda for today. So I will start with some news during the period, hand over to Nicholas, EVP Head of R&D, to take you through the R&D update; and after that, we will hear Viktor Siewertz, our CFO, to take you through the financials; and then I will come back in the end there and talk and make some concluding words; and this will be then followed by a Q&A session, as you already heard. So we have had a very good period also this time. We are very excited about the progress we are doing with the projects. First here, I have summarized a couple of the key highlights that we think are very important for the company during the period and after. We have a new patent granted for mesdopetam, which is the salt patent, which is used for the drug product for the candidates that we are developing and using in the studies. This patent will be extended until and through mid 2040s, and this is specifically in the U.S., which makes that we have a really good impact in a huge market, and this is already granted in many of the other countries all over the world. So this will also strengthen our value position for the candidate. And we believe that this is also very important to bring in the ongoing discussions that we have regarding a partnership regarding mesdopetam. For 757 that we are developing together with MSRD/Otsuka, we were very pleased to see the data that we received from the repeated dose study that we did in volunteer -- healthy volunteers. And we have already made the decision to continue into a study with individuals with Parkinson's and apathy, and we strengthened this, so we have progressed according to the plan. And we have to remind you that the program is fully financed by MSRD and Otsuka through the proof of concept. Earlier this year, we presented data from our cortical enhancers which is pirepemat, 757 and 942 at an international conference, which is called Alzheimer's Disease and Parkinson's Disease. And there were huge interest about our cortical enhancers. And we really believe that we have groundbreaking data here for the candidates and we will talk more about specifically pirepemat there. And there, we have the potential also for a new class of CNS drugs coming up. And then finally, during summer, we performed the right issue, which we were very pleased with the outcome from that. So in total, SEK 150.5 million (sic) [ SEK 115.7 million ] we received before, issue costs and set-off loans and in total we received around SEK 60 million in the company. This definitely strengthened our financial situation. And also, this is important in our ongoing discussions with potential partners to show that we have financing through, I would say, second half -- until second half of 2026. But also, we secured money for financing also to our key projects, which is for pirepemat to move forward with a couple of activities there, which we'll talk more about and also for 1117 that we are performing additional activities in manufacturing, I would say, substance for coming studies. And so by that, I think it's time to hand over to Nicholas to take you through the R&D session.

Thank you, Kristina, and thank you all for listening today. Can I have the next slide, please? We'll start with a few words around mesdopetam and some very important progress in that program. Next, please. As you all remember, mesdopetam is our most advanced project right now, and we have been working quite hard during the first half of this year in a kind of a boring aspect of it is derisking the program, it sounds boring, but it means that we have ticked off a number of very important aspects for bringing this into the next step. Mesdopetam, as we have talked about before, is a drug that has the potential to be an add-on on levodopa and to treat dyskinesia in Parkinson's disease. This is a problem for about 30% of all patients across the globe. It acts through inhibition of dopamine D3 receptors. Today, a recognized mechanism for treating dyskinesia. And we -- as Kristina alluded to, we have developed the patent portfolio around the compound. And now we see that we could probably expect composition of matter-based exclusivity for the product in all the major markets across the globe towards the mid-40s. Next, please. As for the Q1 presentation, we discussed the regulatory alignment that we have reached with the program, and this is, of course, one of the most important aspects of the program and that is that the regulatory agencies, both in the U.S. and in EU and across European local agencies agree on the design of the program, the endpoint structure of the program the additional studies that we should do in parallel with the Phase III efficacy trials. So that's a very important derisking aspect of the program. And then there are a couple of other aspects of a program which are necessary for the value proposition. And as the foundation for any project of this kind, the protection, the exclusivity based on patents is an important -- is perhaps the most important aspect. It defines the potential value of the program. And we have been very, very successful in developing a patent portfolio around mesdopetam. And the last pieces of this puzzle came in during Q2 this year with the granting of the salt patent for or actually a composition of matter patent for mesdopetam. It's salt form but also aspects of its production. This patent has been granted in all major markets across the globe including China, Europe, South American countries, U.S., Canada, et cetera. And this means that we have exclusivity based on composition of matter, which is the strongest type of exclusivity and protection on the market for this product. And depending on how we decide to use the granted patent term extensions, PTEs, we can see exclusivity to 43, 44 roughly with the program. And this is an important aspect for the calculation of the, let's call it, net present value of the program. Next, please. Another aspect, which we have spent a lot of effort exploring and that is the payer research that we've done on the -- for the product, both in the U.S. and in EU. And this work has led to the conclusion that payers see mesdopetam as something that could be used in the phase between adjustments of levodopa dosing, which is the first thing you do when you see the occurrence of dyskinesia, you usually start lowering the doses of levodopa or dividing the doses into more fractions during the day to keep a steady plasma concentration of levodopa. That works to some extent for a while, but eventually 30% in some cases, or even 40% of all patients actually get into dyskinesias, which are uncontrollable. And in those cases, you have to lower the dose of levodopa quite dramatically, which hampers the therapeutic effect. So what we see here is adding mesdopetam will still allow for high doses or relatively high doses of levodopa without the complications, without the dyskinesias. And the positioning will be after these manipulations with levodopa and before going into the more expensive invasive treatments that are available for the late-stage patients. And these late-stage treatments are quite expensive, which means that we could actually get a premium pricing for mesdopetam both in the U.S. and Europe according to the payer research we have done so far and this is really interesting. And that also adds to the value proposition for the product. Next please. Pirepemat, a very interesting story around this program. We are the first company in the world as far as we see -- can see to actually address one of the biggest problems with -- seriously address one of the biggest problems in Parkinson and that is the mid- to late-stage occurrence of falling in these patients. So pirepemat is intended to treat falls, reduce the risk of falling and we have taken this program from preclinical discovery all the way through a Phase II program, including a Phase IIb study, which we published earlier this year. Next, please. This is the first-in-class compound exactly like mesdopetam, a first-in-class defining a new CNS class, acts through inhibition of alpha-2 receptors and serotonin 7 receptors. And also here, we have built a very strong patent portfolio with exclusivity reaching into the mid-2040s from where we stand today. Next, please. Falling is the -- as I said, one of the biggest problems. There is no treatment for it. There's lots of patients, about 45% of all patients fall recurrently. In the trials that we have conducted -- if you go to the next slide, in the trials that we have explored pirepemat, these are high fallers, patients that fall more than 2x to 4x a month actually. The cost of falling is huge. In general, if one looks at the cost of falling across the globe and with a focus on the U.S., for instance, they spend roughly $80 billion a year for treating fall -- pain injuries related to falls. So this is the biggest problem also, if not only in Parkinson but in elderly in general. What we saw in the Phase IIb study was -- we've been through this before, we talked about it in the Q1 report. We see a clear efficacy with the drug. We reduced the falls in these high fallers with around 50%, which is highly clinically meaningful and really, really an interesting therapeutic effect of the drug. What we noticed in the trial is that this occurs in a specific plasma concentration range and that is what we are now looking forward to. Next please, the next step for this program is to build the development strategy or development plan so that we can build in this finding into the development plan, and I'll come back to that issue a little bit later. So the plan is in place. We are now preparing for the decision, the internal decision to move forward to the next step. And what we need to do is to produce some more pirepemat, of course, but also to set the scene for this specific trial intending to prove the finding we got in the exploratory Phase II studies. And that is to titrate patients into this perfect plasma concentration range and see the effect there. And that will be used then for the strategy for the dosing strategy in the Phase III program. The results that we generated in the Phase II studies, Phase IIa, Phase IIb studies has been extremely informative in terms of how we want to move forward. And that's the key with Phase II studies. Another aspect of the program, just as for mesdopetam, we are, of course, working hard with the patents and exclusivity for the program. And the last puzzle basically in this game came in during the period. We have been -- we have received a notice of allowance, which in principle means 100% likelihood of getting a granted patent also in Canada, which means that we now have exclusivity into the mid-40s for pirepemat as well. So that's 20 years from now. And this, of course, creates a huge value for the program. Another aspect of the program is that during discussions with the physicians that participated in the trial after the trial. There has been a huge interest in being part of the Writing Committee for the publication. So we have now put together a pan-European expert group of Parkinson physicians, Parkinson's doctors to prepare the publication based on the Phase IIb study. And this is also an important puzzle in the business development activities that we are initiating now with this program. Next, please. 757, our successful Phase I program that has now -- we have now decided to move this into patient studies, but we'll come back to that. Next, please. Next slide. So this is also a novel first-in-class compound. We are focusing this towards neuropsychiatric aspects of Parkinson's disease, and we are looking initially at apathy, and we have designed a large study, which will address that problem. This is an issue which is current in basically all neuropsychiatric disorders with Parkinson's and Alzheimer's and other neurodegenerative disorders, of course. Between 20% and 90% of all patients in these populations experience apathy from time to time or persistently. With 757, we are addressing the -- one of the hypothesis around the occurrence of apathy and that is the lack of connectivity between cortical and subcortical regions and the drug actually increases that activity in the brain. So next, please. During Q1, we have completed the Phase I program, which was, to a large extent, funded by Michael J. Fox Foundation, and we are extremely grateful for that. That was -- is a very, very fruitful collaboration, helping us to get this drug through Phase I. On top of that, we also have this collaboration with MSRD or -- which is a branch of Otsuka, which will fund all the other activities. And the funding from Otsuka amounts to around $25 million roughly during the course of the development of the program through the next trial. So the decisions that has been made during the quarter is that we have successfully completed all the preclinical safety toxicology and Phase 1 activities needed to make a decision to go to the next step. So we have put together during the summer when you were out swimming and bathing in the warm summer here in Sweden, we put together the file for application and that file is finalized. And we expect it to be submitted any day today or tomorrow actually at EMA. And this is going to be a quite large study for the indication. We are planning for a 90-patient study, placebo, 2 different doses of 757. And this is an exploratory study, where we are collecting a lot of information on various aspects, neuropsychiatric aspects, motor function aspects in this trial. With the data coming out from that trial will be the foundation for decisions to move this to the next step. But also during that period, Otsuka has the right to license the program. So there will be a license discussions after the Phase Ib/IIa study that we are conducting. Next, please. Preclinical programs. We have 2 of those, 942 and 1117. Next please. 942 is intended for cognitive deficits in the disorder -- in Parkinson's disease and other neurological disorders. This is a huge problem. There are very few alternatives to treat cognitive deficits today in this population. And we think that 942 has a profile, which is ideal for Parkinson patients, Alzheimer patients and other patients with neurodegenerative disorders. There's a quite large population available on the market, about 6 million people have this complication. For 1117, this is a really interesting program where we are looking at next-generation treatment for the basic symptoms of Parkinson. But the next slide, please, to talk a few more words about 942. So this is a huge cognitive deficit. It's a huge unmet need basically in this population. About 12% of all adults over 65 have this problem. And 942 has a very broad efficacy profile across different modalities of cognitive deficits. And with this program, we see potential for both symptomatic and actually disease modification. Next, please. During the course of the first half this year, we have finalized the methodology for large-scale synthesis of the product. We have also produced API drug substance for the further studies. The studies that we are planning now are the IND-enabling or the preclinical studies necessary for getting into Phase I. And we expect to hopefully start those studies next fall, and that is due to priorities in our pipeline. And I'll come to that priority. Next slide, please. And we are -- between these 2, we are prioritizing the development of 1117 right now. This is a totally new strategy to treat the basic symptoms of Parkinson's disease. The symptoms today treated with levodopa. So about 85% to 95% of all diagnosed patients in the world get treatments with levodopa today. And 1117 acts on the same type of mechanisms like levodopa, but does not induce the complications seen by levodopa and is going to be a once-daily treatment instead of up to 6x, 8x daily treatment. So what we've done during the course of the second half or the first half of this year, and we'll continue with that the second half of this year that is to develop the large-scale synthesis. This is, I wouldn't say, complicated, but a very specific method to synthesize the compound and this is a highly potent compound. So it needs specific sites to do that. And we are developing the API right now. And we are doing the preparations now for the regulatory studies to start Phase I, which could be done during the course of next year getting to Phase I. Next, please. So sorry, go back one. One very important development during the course of the period, I should have mentioned that. We have done a series of preclinical long-term studies with 1117, addressing different aspects. And one specific aspect is the early discovery that we could treat in the preclinical models. We can treat animals, and we can see that you have a sustainable long-term effect on multifunction improvements without the complications. If we do a parallel studies with -- when we do parallel studies with levodopa, I should say, we see some efficacy, but we also see the complications. So the question we have try to ask right now in the most recent study was why does 1117 not induce the complications? Why is it free of the complications? And that is, to some extent, revealed by the study that we are now going to publish during the course of the coming year, where we see that levodopa has a therapeutic effect, but that is concomitant with complications and activation of certain genes in the basal ganglia specifically 2 genes that are activated and they are linked to the complications, the fluctuations and dyskinesias. 1117 does not induce these genes. And that is really, really a key finding explaining the profile of 1117, the benefits of 1117. So that was a fantastic study for us, and we will publish this data in detail. Next, please, will be the finance report and handing over to Viktor to actually finalize his work here at IRLAB with the last presentation of our finances.

Yes. Thank you, Nicholas. We can go straight to the next slide, please. Thank you. Cash position, SEK 54 million at the end of the quarter. In the leftmost graph, you can also see that we added a gray bar showing the net proceeds from the share issue that we concluded during Q3, but that is just to illustrate how it looks with these -- with that capital added. So about SEK 56 million added after the set-off of loans and cost for the share issue. In the middle graph, we can see that the external costs that we have internally at IRLAB for our own programs has continued to decrease, and it's even more -- so because the -- most of the costs for external studies occurred during April. So that was -- in May and June, there has been very little external clinical costs for IRLAB. However, the light gray bar indicates how much we put into IRL757. And as you can see, that has increased, and that increase is due to the initiation of the coming study that we're doing in 757. So it has begun to draw some costs, and it will continue to cost quite a bit of money in the coming quarters. We still have a focus on cost control. We will continue with the 757. So we still have quite a lot of cost, but that is mostly related to 757. And we also will retain confidence in the organization, but we'll try to keep the external costs as low as possible that is the financial strategy, so to say, to going forward. And we're still above 30 employees, 31 to be correct or exact. Next slide, please. These are the numbers in more detail. I won't go through them in detail. But of course, you have to take into account the cost that we have for the IRL757 study, which affects our cost. But those costs are always mitigated by the same amount in net sales. So here, you can say that we basically have -- since we don't have any other net sales, we can see that we have about SEK 24 million as revenue, which is all from the Otsuka 757 collaboration. Next slide, please. And as Nicholas mentioned, this is my last quarterly presentation. This is actually my last week at IRLAB. So -- and I just want to mention that I will continue to be committed to make a smooth transition first to my successor, my interim successor and then to the more long-term solution that we -- I know that they are working on at the moment. So I will be there and make sure that everything runs as smooth as possible. But I also thought that this might be a good time to just see what happened with the company during the more than 12 years that I've been involved here. So the company started in 2013 with 2 preclinical projects, which are now mesdopetam and pirepemat. They weren't even called mesdopetam and pirepemat at that time. They were 752 and 790. Today, we have 5 projects and 3 of those are in clinical stage and mesdopetam and pirepemat in late clinical stage. So clinically and from a research point of view, development point of view, it has been a great journey. We have also increased and strengthened our organization. In the beginning, we were a handful of people that are part-time employed just committing their own time to make sure that this actually happened. And now we are 30 people with all kinds of competencies and everybody highly skilled. From my point of view, we have been able to do 11 share issues, raising almost exactly SEK 900 million during this time, 5 share issues in the private setting before we took the company public in 2017 and 6 in the public setting afterwards. At the same time, we have raised more or less SEK 700 million from BD activities, which includes Ipsen's mesdopetam for mesdopetam license and all the money they spent to advance that project. And since it's now our project and our data, that is actually money that has come to our benefit. We have the research collaboration with MSRD and the Michael J. Fox Foundation, of course, and also a few brands from Renova and other governmental grants. So to conclude my more than 12 years here, it has been a tremendous journey as not the least proven by the numbers shown on this graph. So thank you very much. It's been an honor working with all of you and having contact with all of your owners, investors and everybody else that we have been working with during these years. Kristina?

So before I continue with the concluding remarks, I would also like to extend my big thank you to Viktor, who has been a key person in the company, as you have seen. You have contributed not only in the finance aspect, but you are also really good experience with your all legal experience and all legal work you have been doing. So that on the financial part and all the contacts you have had both in Sweden and international regarding the market financing that has been very, very important. So it feels a little bit sad to see you moving forward, leaving the company, but we know that you are looking forward to a new, a very important role in another company. So that's good. And I also would like to comment that from Monday, 1st of September, we will have an interim CFO, Roy Jonebrant, who will take on this work until we have a permanent position for the CFO role. So I will continue with the concluding words. Here, we -- if we have the next slide, please. Here, we have our quite impressive portfolio, I would say. And as you heard from Viktor, many of these projects have been moving forward in a great progress during all these 13 years. We have 5 candidates where 3 of them are in clinical phase. As you can see, they are quite broad indications covering many of the symptoms and complications that Parkinson -- individual living with Parkinson's experience. We have also focused on one indication for everyone first, but we have the opportunity then to extend to a second indication for many of them, which is very good from a market perspective. So with that, I think we move on to the next slide, which is a little bit about the future. Of course, interesting to see what we can expect for value creation milestones coming up. For mesdopetam, we are looking to initiate a Phase III study. But as you are aware of, we are looking for a partner here, working very hard on that. For pirepemat, we have the fantastic data that we received during spring, and we are working, as you heard from Nicholas on the development program and planning to initiate another study that will be important for the Phase III program. And we have interest from BD perspective here also. So we continue those discussions. 757 any day, we will submit the application for starting the trial in Parkinson's patients with apathy. And we are -- we see that the first subject will be dosed likely in Q4 this year. And then we have the preclinical programs, 942, where we are moving forward a little bit slower than previously. And then we focus many resources and finance on the 1117, where we are moving ahead to take that to be ready into Phase I. So by that, I think I hand back over to you, Mattias, to take the Q&A session.

Sure. Kristina, Nicholas and Viktor. And it's time to welcome equity analyst, Fredrik Thor at Redeye.

You mentioned this a bit, but regarding IRL757, what are the remaining steps with the MSRD/Otsuka program? And then, for example, if you could specify the time line a bit? And then I was also wondering, is the plan always to out-license this program after this single final study regardless if it's MSRD/Otsuka or someone else?

The timing of the program is that we will now submit or if it hasn't been done today, submit the application, then it takes about 3 months for -- or 60 to 90 days for EMA to make the decision. The file is extremely clean. This is a very, very nice product from a safety, tolerability perspective, so -- and toxicology. So we believe that this would be a smooth ride. That means that we can start the dosing in Q4. And the study is expected to take around 18 months to complete. So that's the time line from -- so a month from the start of dosing basically. And that's normal in the space. And we are looking at, as I said, about 90 patients in the study or subjects in the study. From a practical collaborative perspective, the program is owned by IRLAB. All data that generated is owned by IRLAB. And MSRD/Otsuka are generously offering us their expertise. And we have, let's call it, monthly or biweekly almost meetings discussing the program, going through the data that we generate and work up the plans for the coming studies. And now we have planned that fully. So the only thing now is the execution of the trial. And we are in the driver's seat there together with our CRO who will do the most of the work with the study. And then when we come out of the trial, there will be a decision whether this is worth going forward with or not as for any program. And what Otsuka or MSRB have gained during the period is a lot of knowledge, specific knowledge. And also they have the right of first refusal, which means that a license negotiation will be initiated. However, IRLAB has the right to opt out of any such offers or negotiations and negotiate with others if we want to during the period. But the ROFR still remains for a period after the execution of the trial. Does that respond to your question, Fredrik?

Yes, that was a good answer.

From a BD -- from a practical BD perspective, I think this is a very good setup both for us and for MSRD/Otsuka because we know what we're going to do. We can prepare for those discussions right now. And we have a very clear potential buyer of the program, which is usually for any biotech company, the big issue to find the right partner for a program. And here, we have already established that partnership.

Got it. But a follow-up question, like in terms of potential with the MSRD/Otsuka let's say, [indiscernible] and so on, is that something that has been discussed? Or is that for later on?

That is after the data. It will, of course, depend on the patient population, the specific indications that we will pursued, et cetera. So numbers as such is not discussed at all.

So what I would like to add to this collaboration that might have already been clear through this presentation, but it's very important that already by the timing that we have recruited and starting to dose the subject in this study, we will receive money, milestones payment, and that's related to a number of quarters after. So in total, we will receive the USD 3 million for milestones for this study.

And as mentioned, this is the value of the collaboration for us is around $25 million, which we don't have to raise by other methods.

Yes. And then the second question about the pirepemat program. You mentioned that you had presented a poster about this therapeutic window and maybe interacting with the scientific community a bit. Can you say anything about that? Does it seem reasonable to find this therapeutic window in pirepemat? What's the feedback?

Yes, absolutely. With the data that we have, we know that we need to be somewhere between concentration A and concentration B and that can be reached in a very specific dosing regimen. It's not rocket science. It's quite simple, but it needs to be done and needs to improve. We think that is important -- an important step to move this so that we can use that dosing strategy or titration strategy for the Phase III studies.

And you mentioned also scientific or the study design for the next study with pirepemat. It would be interesting to just what is the ambition of the study like in terms of how big and how long is it to prove this relatively specific thing compared to the previous trial?

The efficacy and the effect size that we see in the Phase IIb study, we do not expect this to be a very large study. So it's going to be a quite small study compared to placebo and the treatment doing the same kind of those increases in both arms, basically. That is what we're looking at. It's a small trial. It's not a very expensive study.

And the duration compared to the previous trial is not the same or shorter?

Since we have fewer patients, much shorter. Recruitment time is always the limiting factor for any trial.

Got it. And yes, business development is, of course, prioritized and it has taken a bit longer than maybe expected from the market. Can you update us a bit more on your discussions? Is there one program in particular that there is more interest? Or is it relatively broader? Or yes, what can you say about ongoing discussions?