Lytix Biopharma AS (LYTIX) Earnings Call Transcript

Good morning, and welcome to Lytix Biopharma's third quarter results presentation. We thank you for taking the time to join us today. This quarter has been very active in terms of clinical data readouts, and I'm excited to share the most recent data with you today. We have continued to operate with discipline and purpose as we prepare for a period -- I'm excited to walk you through where we stand today and what lies ahead. My name is Øystein Rekdal, and I'm the CEO and Co-Founder of Lytix Biopharma. With me today is our CFO, Gjest Breistein, who will later take you through the financial results and outlook. So before presenting the highlights, let me introduce you to our company, our technology and the clinical progress we have made. Lytix Biopharma has built an oncolytic molecule platform that overcomes immunosuppression within the tumor microenvironment via a 2-step mode of action. First, the drug -- drugs destroy the membranes of cancer cell, which releases both tumor antigens and potent immunostimulatory molecules. This is followed by activation of immune cells that target cancer cells that have not been killed by the drug directly. So the result is death of cancer cells and a broad and durable antitumor immunity. For patients, this means not only are the tumor cells killed but their immune system, remember how to fight the cancer to also kill metastasis and ultimately prevent tumor recurrence. Our oncolytic approach has been clinically validated across multiple skin cancer, both as monotherapy and in combination with immune checkpoint inhibitors and has the potential to redefine the standard of care for patients prior to surgery. Today, Lytix Biopharma is approaching the commercialization of our first asset, ruxotemitide, and is expanding our pipeline with our second asset, LTX-401. All molecules are highly synergistic and safely combinable with immune checkpoint inhibitors, the current standard of care for many cancers. Our vision is to bring our drugs to patients early in their treatment journey prior to surgery to allow their immune systems to continue to fight the cancer long after it has been removed. Utilizing immunotherapy in early cancer treatments is gaining momentum in the industry, and Lytix is positioned to be first-in-class. As many of you are aware of, the common standard of care for resectable tumors involves surgically removing the tumor together with immune checkpoint inhibitor therapy. There are two reasons why this approach does not work optimally. One, surgical removal of a tumor comes with a high risk of recurrence since the immune system has limited antitumor immunity. And two, the highly immunosuppressive nature of many tumors result in a modest pathological response to immune checkpoint inhibitors. And at Lytix, we can do better. Our approach to treating patients with resectable tumors is to first treat them with our oncolytic molecules to kill cancers within the tumor and to induce a durable antitumor response to prevent recurrence and to fight distant metastasis, either as a monotherapy or in combination with immune checkpoint inhibitors. We firmly believe this is the best option for patients as not only do we reduce the risk of recurrence, but we also have to prime the patient's immune system to respond to the immune checkpoint inhibitors by overcoming the immunosuppression that causes low response rate. Let's now turn to the Q3 highlights. Today, we'll be sharing an update on the ongoing Phase II study in basal cell carcinoma led by our partner, Verrica Pharmaceuticals. For our investigator-initiated NeoLIPA trial, we will describe the recent interim data that was presented at the Nordic Melanoma Meeting. And for ATLAS-IT-05, we are currently proceeding through the closeout process. For our preclinical asset, LTX-401, we are carefully reviewing development strategy options and optimal timing to enter the clinic. On the financial front, we maintained disciplined cost control and a stable burn rate. So let's look into the clinical and operational update. Here, you see an overview of our pipeline and the status of each program. And now I will take you through the Q3 updates for each of these programs. Regarding the completed Phase II study in basal cell carcinoma, Verrica Pharmaceuticals has recently reported additional clinical data from its completed Phase II study with ruxotemitide in basal cell carcinoma, which strengthens our conviction in the commercial potential of ruxotemetide in this indication. It was earlier reported that all patients experienced a reduction in tumor sites with 51% of the patients achieving complete histological clearance. There was a 71% reduction in tumor size for the remaining half of the patients with residual carcinomas, an 86% overall tumor size reduction and a 97% overall calculated objective response rate. And recently, Verrica reported that abscopal effects were observed with histological reduction in the size of all nontreated basal cell carcinoma that were studied, which is consistent with broad systemic immune activation that we have observed in other cancers. Verrica also presented immune data at the Society for Immunotherapy of Cancer's annual meeting in early November. These data demonstrated a strong increase in the density of CD4 and CD8 positive T cells as well as B cells, all of which support activation of an antitumor response within the tumors. Additionally, there was a reduction in immune suppressive cells population within the tumor microenvironment. These findings are compelling evidence that ruxotemitide, a first-in-class oncolytic peptide immunotherapy, reprograms the tumor microenvironment to increase the infiltration of immune cells and transform an immune suppressed tumor into an immune activated one. The mountain of evidence that ruxotemetide is a potent, safe and well-tolerated cancer immunotherapy, continues to grow for superficial tumors such as basal cell carcinoma. As a part of their Q3 financial report, Verrica has indicated alignment from the FDA to conduct two Phase III studies with 100 patients each, both placebo-controlled with the primary endpoint of complete clearance as assessed at week 14. The potential of ruxotemetide as a nonsurgical first-line immunotherapeutic approach for basal cell carcinoma patients is strong, and we remain committed to working alongside Verrica to ensure the -- this breakthrough therapy reaches patients as fast as possible. Moving to our NeoLIPA study, the interim data, the interim update that was presented by Dr. Henrik Jespersen's team at the Nordic Melanoma Meeting reinforced our belief that resectable melanoma patients, who have not received any previous treatment, will benefit from treatment with ruxotemetide prior to surgery, together with immune checkpoint inhibit therapy. And as such, neoadjuvant melanoma remains a clear strategic priority indication for Lytix moving forward. Not only do we have the opportunity to enter a large commercial market with limited competition, but we also have the potential to cure patients and their disease. Whilst the data is limited to the first nine of evaluable patients, the data is consistent with previous findings and importantly, patients have experienced both a high overall pathological response rate of 88% on top of a favorable safety profile and complete pathological responses in 44% of the patient. These promising interim results showing responses in the majority of patients support ruxotemitide's ability to be developed for neoadjuvant therapy in combination with immune checkpoint inhibitors. So let's now turn to LTX-401. We strongly believe in the ability of our preclinical asset, LTX-401, to provide a highly differentiated therapy for deep-seated tumors. We have demonstrated proof of concept in several cancer models, including liver cancer models and are in the final stages of formulation development for LTX-401, which enabled us to move forward into an IND-enabling -- into IND-enabling studies. We have received positive regulatory feedback in Europe that supports our clinical path forward, and we are currently assessing clinical development strategies in order to identify the optimal timing and pathway for advancement into the clinic. I will now hand over to our CFO, Gjest, for the financial updates.

Thank you, Øystein. I'll now take you through the financial performance for the third quarter. Q3 was a stable and predictable quarter from an operational cost perspective with only a major deviation coming from the new option program implemented in September. Overall, our financial position remains solid, and we're well capitalized going through into 2026. The headline item for this quarter was the noncash share option expense of NOK 11.9 million related to the new option program launched in September. This accounting charge temporarily increases the reported net loss. If we exclude this one-off option cost, the underlying net loss for Q3 was NOK 11.5 million, which is consistent with recent quarters. This reflects our continued cost discipline and a leaner operating base now that ATLAS-IT-05 is in its closeout phase. Total operating costs remain consistent with previous quarters when adjusted for the one-off option expense, direct R&D expenses of NOK 4.8 million were in line with Q1 and Q2. This reflects a natural shift from the late stage clinical activity of ATLAS-IT-05 towards the start-up and enrollment of the NeoLIPA study, which continues to progress steadily. Overall, we continue to maintain tight control of operating costs and continue to strategically invest in the most value accretive assets in the pipeline. At the end of the quarter, cash and short-term financial investments stood at NOK 90 million. Cash flow for the period was primarily driven by ordinary operating activity with no extraordinary cash items affecting the quarter. With this, position, we remain well funded to deliver in the upcoming clinical milestones, including the NeoLIPA topline readout in 2026 and continued preparations for LTX-401 to enter the clinic. On the balance sheet, you will see that we have maintained a continued decline in top liabilities, which now stands at NOK 17 million, down from NOK 38.6 million at year-end. This reflects the adjustment to ATLAS-IT-05 accruals made in Q2 and the closeout of that study. The balance sheet is now normalized and reflects a company focused on strategic growth as we approach commercialization. Our path to value creation is both strategic and derisked. Ruxotemitide is progressing towards commercialization via two paths. First, our internal efforts in neoadjuvant melanoma and NeoLIPA study. And second, working closely with our partner, Verrica on bringing ruxotemitide to the market as a nonsurgical first-line immunotherapy treatment for basal cell carcinoma. Together, this represents near and midterm opportunities to establish both clinical and commercial value. Ruxotemitide squarely focused on superficial tumors. We continue to expand into deep-seated tumors with LTX-401. With strong support of regulatory feedback and very strong preclinical data package, we are continuing to assess strategic development pathways for this asset. Our pipeline is focused, our finance, our discipline, and we have positioned Lytix to create significant value for our shareholders. Thank you. And with that, I'll hand it back to Øystein for closing remarks.

Thank you, Gjest. So before we move into Q&A, I want to take a moment to reflect upon the last quarter and how it has prepared us for a strong 2026. We have now two independent clinical data sets in two different indications that clearly demonstrate the ability of ruxotemetide to activate tumor-specific immune responses and ultimately deliver clinically meaningful outcome for patients. We have a drug that is potent, safe, well tolerated and positioned to enter two commercial attractive markets. Therefore, the path forward is very clear. While we are advancing ruxotemetide towards market approval, we remain open to value-creating partnerships that can accelerate development and maximize the global potential of the program to ensure that patients can access this drug as quickly as possible. At Lytix, we remain deeply committed to being strategic, being disciplined, remain focused to ensure to maximize potential of this drug. So thank you, with that, we will open up for a Q&A session that will be led by Petter Tandberg.

Thank you, Øystein. We have received quite a few questions today. So let's just go ahead with the first one. What exactly do you mean by your statement that you now are accelerating your development strategy?

So we have delivered solid clinical data over time. And recently, we have been seen both data presented in U.S. and at the Nordic Melanoma Meeting. So that are very positive. So that means that these molecules deserve to be developed forward towards commercialization to help more cancer patients. So we are dedicated to do that, and we are looking at different strategic options, including, of course, partnerships. So -- but by any means, this needs to be moved forward, and that's what we are now planning. We cannot go into any detail on how we are doing that, but that's really now summing up everything we have. We are very convinced that this serves to come to the market has a big potential, and we will come back to more detail on that at a later stage.

Thank you. Then there's a few questions on Verrica's development. Can you say something about how big is the expected milestone payments from Verrica at the start of a Phase III study?

Yes, thank you. This is a question that we have received several times before. And the next milestone payment is very important for us. We have said that it is expected when Verrica is initiating the Phase III study, more accurately around the timing of recruiting the first patient. The size of the milestone payment is confidential. But what we have said before is that we have so far received $3.5 million from Verrica in milestone payments. And the next millstone payment is bigger than what we have received this far. Thank you.

And in the extension of that, can you comment on Verrica's current cash position? And how could Verrica fund two Phase III programs in BCC?

Yes. It's not up us to comment on Verrica's financial position. They released their Q3 report on Friday and had a presentation yesterday and we remain committed to Verrica as our partner and strongly believe that what they sit on is well worth raising the capital for Phase III.

And then finally on Verrica and maybe back to you, Øystein. How important is the immune response demonstrated in BCC in terms of competitive edge or positioning in the space?

So as all of you listeners are aware of, we have shown immune responses in cancer patients. Before ruxotemitide what was demonstrated in this immune analysis was that we had not only increased the infiltration of active immune cells but reducing the cells that deactivate immune system. And this was also seen together with abscopal effect that you see some effects or effects in all non-treated lesion in different patients in this study, indicating that this immune system not only works locally, but systemically and with this abscopal effect, this even further strengthened the potential of ruxotemitide as a first-line treatment in basal cell carcinoma.

Moving on to your own clinical portfolio. What does the NeoLIPA interim result mean in comparison to pembrolizumab as a stand-alone treatment?

Yes. So as mentioned, pembrolizumab standalone has shown some efficacy, pathological complete responses. The interesting findings we show is that we saw pathological responses in 8 of the 9 patients, whereas with immune checkpoint inhibitor has effect in some patients and there is more resistance in other patients. We see now efficacy in most of the patients. Still early, could be the -- we're lucky with the patient population, but there is indication here that we do something in the patient population that are not responsive to immune checkpoint alone due to immune suppression.

And can you say something about how is recruitment going in NeoLIPA and when do you expect top line results from the study?

So last week, at the Nordic Melanoma Meeting, it was reported that 13 patients were enrolled. So that was last week. That's almost half of the patients. So it's still our aim to report top line results mid-2026.

And on the ATLAS-IT-05, when do you expect final results to be published?