Medigene AG (MDGEF) Management on H1 2022 Results – Earnings Call Transcript

Medigene AG (OTCPK:MDGEF) H1 2022 Earnings Conference Call August 3, 2022 9:00 AM ET

Company Participants

Anna Niedl – Investor Relations

Dolores Schendel – Chief Scientific Officer

Birger Kohlert – Chief Financial Officer

Conference Call Participants

Xian Deng – Berenberg

Victoria English – Evernow Publisher, MedNous

Operator

Good afternoon and good morning to the guest. My name is Anna Niedl, I’m responsible for the Investor Relations at Medigene. I would like to welcome everyone to today’s conference call in which we will describe managing financial and operational results in the First Half Year of 2022. Today’s presentation, as always, is available for download on our website, and this call will be recorded and will be accessible later on our website as well in the same section. With me today here on this conference call are Professor Dolores Schendel, our Scientific – Chief Scientific Officer; and Dr. Birger Kohlert, our Chief Financial Officer.

I would now like to draw your attention to Slide 2 of the presentation, and I would like to remind you, as usual, that during this conference call, we will present and discuss the forward-looking statements.

And with this that, I hand over to Dolores Schendel on Slide 3 of the presentation.

Dolores Schendel

Thank you, Anna. So let us first turn our interest to our investment highlights. Our business model is to leverage our cutting-edge scientific research to develop innovative immunotherapies against cancer. The excellence of our technology confirmed by our past and present partnership and we employ approximately 70 people and Medigene currently have a market capitalization of about $60 million RO [ph].

Let’s look at the next slide. This illustrates how we develop our projects around 2 pillars. On the left, we deal with generation of T cell receptors to meet needs for multiple types of cancer by targeting distinct target antigens. At the bottom, you can see we started with two cancer-testis-antigens for blood cancer, one for our own TCR-T trial and the second TCR without license.

We use the same in further cancer-testis-antigens for solid cancers in the middle block. We are in the hands of partners for further clinical development. Additional undisclosed T-cell receptors are retained for our owning health projects or for DD purposes.

Third, at the top, we have in-house discovery projects on tumor-specific neo-antigens, from dark matter antigens to shared tumor mutations that are in earlier stages of finding TCRs and understanding the safety profile of these antigens.

The second pillar is built around cutting-edge technologies on the right. I will shortly discuss two of these. Important is that these add-on tools can be combined with different T-cell receptor, as listed on the left to create the appropriate combination drug products to meet the needs of individual cancer indication.

Let me use this slide to briefly elaborate on our partnerships. Hongsheng Sciences, as the first example. Medigene was informed that Roivant sold its holding in Cytovant Sciences in July. After this sale, Cytovant became Hongsheng Sciences, thus, Roivant is no longer involved in this company.

Hongsheng Sciences has temporarily suspended its development activity within the Medigene partnership until new funding is available. We are currently monitoring events closely, and we’ll announce as soon as their change is relevant Medigene.

2seventy bio, which is formerly Bluebird Bio. At the end of June, the research term for the partnership was successfully concluded in accordance with the contract. This conclusion of the court does not affect Medigene’s entitlement to future milestone payments and royalties from 2seventy bio regarding product candidates that arise from the collaboration. Simultaneously to these changes, Medigene has started the extensive work under the new bigger and more complex partnership with BioNTech.

Let’s go to the next slide and discuss how Medigene developed drug products for personalized TCR-T against cancer. So as the first top TCR-T technology company, we have also successfully established a robust process for manufactured TCR-T that are made individually for each patient. This starts without acquisition of a larger number of white cells through leukapheresis in step 1, clarification of the T cell fraction, introduction of the T cell receptor selected for a given trial for used in all trial versus participants. This receptor is transferred into activating this patient T cells.

And step 2. These TCR-Ts are then expanded to the required numbers and frozen as drug products. In the frozen aliquots undergo quality control assessments and shipment of the final drug product to the center for treatment. This is being bought at the bedside for a single infusion into the patient.

These drug products are living cells and want them to expand in the patient, eradicate the cancer cells in the body and build a persistent memory that is retained by the patient for longer periods of time.

If we look at the next slide, one can see the proof of concept of how we implemented this manufacturing, as well as our TCR discovery platform into MDG1011 Medigene performed its first TCR-T trial in patients with refractory or relapsed blood cancers of the types, AML, MDS and multiple myeloma.

The Phase I part of this trial was a dose escalation study in which small groups of patients were dosed with different amounts of TCR-T that are increased at each point of escalation. We achieved satisfactory of study outcomes in this proof-of-concept Phase I. Our TCRTs did not cause any dose-limiting toxicities or neurotoxicity. We were highly successful in manufacturing the drug product from very ill patients who had undergone extensive chemotherapy before entering into the trial and some are very advanced patients with respect to age.

In 4 of the 9 patients, we saw signs of biological or clinical activity of the TCRT. In 2 cases, we observed cytokine release syndrome, which shows that the TCR-Ts were responding immunologically to the cancer cells in the patients. We saw clinical responses in 2 patients, 1 complete response in a patient given the lowest dose of cells, but this response was only transient. We presume that this patient did not receive enough cells to establish long-term persistence, something that one learns through the dose escalation study.

The last patient in the trial who received the highest dose of cells had MDS and cleared all kinds of AML blast in the bone marrow. This disease did not progress to form and AML as predicted to be imminent at the time of trial entry. This patient remained in a progression-free status at his last study visit at 12 months in June. We can still detect TCR-Ts in the blood, showing our desired long-term persistence. Final data are currently being analyzed and will be published as soon as they are fully available.

As announced earlier, we only proceed to Page 2 with a partner because of the need to have large patient numbers that must be recruited as – to the trial and could only be managed in an extensive international study involving multiple countries.

So let’s look at the next slide. What distinguishes Medigene from other TCR-Ts companies in this arena? We have a high tool foot robotics platform that allows us to isolate optimal affinity TCRs for an enormous variety of target antigens. We use starting T cells from healthy donors. So we’re independent of patient materials that are limiting, complex to organize and require screening of many patients to obtain suitable clones.

The use of healthy donors and the screening of many thousands of T cell clones, we can find TCRs that are earmarked by 3 characteristics, we call these the 3F TCRs, exquisite specificity, high sensitivity to the target antigen and clear safety profile. So specificity, sensitivity, safety, representing the 3 of it. These TCRs not need to be mutated to display these characteristics, which contribute to their safety profile and distinguishes us from several of our competitors product.

Finally, our discovery approach allows us to find TCR theraphy peptide from different antigens with different HLA presenting molecules. This is a peculiarity of how T cell function in antigen re-commission. The capacity to find TCRs in peptide with different HLA broadly extend the number of patients that can be treated in the future with TCR-Ts. And this is a specialty of Medigene.

On the next slide, slide number 8, the second differentiating characteristic of Medigene technology for TCR-T is that we use our deep science-driven experience to develop better TCR-T drug process through implementation of innovations that are developed in in-house.

The first tool is the so-called switch receptor that we combine with any of our individual TCRs and which can improve persistence of TCR-Ts in vivo. In the normal situation of solid tumors, TCR-Ts will express a second surface molecule called PD-1. When this molecule interacts with its counter part on tumor cells, the TCRs are rapidly blocked in their function. We purposely placed the variant of the PD-1 on the surface of our TCR-T that upon encounter with PD-L1 positive tumor cells does not lead to inhibition, but rather leads to activation and enhanced proliferation of the TCR-T.

Let’s look at a minute at the business implications of our switch receptor technology. In the upper half of the picture, you see the approach being applied by other TCR-T companies to overcome the PD-1 driven inhibition of T cell function.

They develop combination therapies that include the TCR-Ts with an antibody to either PD-1 or PDL1. The antibody serves to block the PD-1, PD-L1 binding so that negative signals are not transmitted to the T cell.

However, combination therapies are difficult to develop clinically when both components distribute differently in the body and have different toxicity profiles. One is dependent upon another company to provide the antibodies and the combination therapy will be very expensive since it combines two expensive drugs.

We use an alternative innovation and build our inhibitor of the PD-1, PD-L1 pathway directly into the TCR-T by introducing our switch receptor into the TCR-T using the same gene vector that we use to transfer the TCR. Not only do we avoid the need for combination with an external antibody, our switch not only blocks inhibition, but also enhances the activities of the TCR-Ts and foster their long-term persistence in the hospital environment at solid cancers.

So both components are present in the same T cells. Their distribution is identical and one can assess the toxicity profile of the single drug product. This reduces complexity, eliminates dependence on the product of another company and will cause less for patient treatment. Thus, this intrinsic combination therapy remains fully in control by Medigene with our selected TCR.

Let us then turn to slide NINE. The second tool allows us to alter the constant region of the two chains of the T cell receptors so that they can only pair with each other. When we make TCRTs with our tumor-specific – specific TCR, each recipient T cell of the patient has its own natural TCR. And we are adding a tumor-specific TCR alongside this natural TCR.

With precision pairing of our added TCR, we can keep these two TCRs, the natural one in each individual T cell and/or added T cell receptor for mixing up with each other. This gives us better surface expression of our tumor-specific TCR and inhibits building of unlocked mixed TCRs, about which we know nothing in advance and thereby, that presents a potential safety issue.

So then now let’s turn to slide 10. So if you look at our two pillars, you can see that we build a compelling pipeline of TCRs in one pillar and we generate innovative tools in the second pillar. These can then be mixed and matched as best needed for particular unmet clinical needs in each intrinsic combination of TCR and tools. Thereby, we have created a unique role product, increasing the value creations that would come from any single component.

And with that, I hand over to Birger.

Birger Kohlert

Thank you very much, Dolores.

The financials for the first 6 months of 2020 contains revenues of €25.3 million; R&D expenses of €3.7 million and as a bottom line EBITDA of €15.4 million. However, R&D expenses as of now are below the expected range for the whole year of 2020. And as a consequence, the EBITDA is too high either.

However, we still hold published guidelines as the current picture is highly influenced by the Biotech deal that was concluded in February and continued R&D expenses are included in expectations.

Cash and cash equivalents as of June 30, 2020, amounting to €39.4 million. No milestone payments or cash inflows included from existing or future partnerships or any other transactions are included in our planning, means our sufficient financial resources to fund business operations is quarter 4, 2024. Thank you.

Dolores Schendel

Thank you, Birger. Now let’s try to sum this all up on slide number 13 and illustrate how Medigene tries to maximize value creation for our shareholders. We have different levels of TCR discovery starting from our existing TCRs, discovery of new T cell receptors in our alliances, exploratory studies for exotic antigens with potential broad application in the future. And from the diversity, we position ourselves to be able to select the best clinical development programs that we can afford to develop in-house.

But by choosing wisely, we create new business development options as reflected in our BioNTech. Our TCRs are envisioned to be combined with tools from the second pillar creating a multiplicity and drug products. And of course, our goal is achieve clinical validation of the best TCR-T through our own in-house programs and through our alliance partners. Of course, in the end, this should all drive to the successful development of treatment for patients with solid cancer.

As you all know, Dr. Selwyn Ho became our new CEO on the 25th of July. I very much enjoyed the opportunity to guide you through today’s earnings presentation covering our achievements until now in 2022 and look forward to many more events in the future under the lead of Selwyn.

Please allow me to make one further closing remarks. With Selwyn just arriving last week, we did not yet define and publish our financial calendar for 2023, as we would usually do in our half year report. This will come in our Q3 2022 quarterly statement.

So thank you to all of you for joining today. And we all look forward to passing the baton to Selwyn as our new CEO. And with that, I turn back to Anna.

Anna Niedl

Thank you, Dolores, and thank you, Birger, for the presentation. We can now switch over to the Q&A session. I have received some questions in writing, which I will read out, and we answer them in the room. And otherwise, I would now hand over to the operator. Thank you.

Question-and-Answer Session

Operator

[Operator Instructions] The first question is from Xian Deng from Berenberg. Please go ahead, sir.

Xian Deng

Hello. Thank you for taking my questions. I have a couple, please, if that’s all right. I guess the first one is that with the ongoing exciting collaboration with BioNTech, I was just wondering if you could share any comments on this collaboration, like how is it going, you know, any comments on the progression of TCR-4 or any other projects you’re working on, that would be great.

And the second question is on 2seventy bio, just wondering that in your comment that the current part of the collaboration has been concluded. I was just wondering if you’re expecting any upcoming milestones? And also just wondering for this collaboration with 2seventy bio, will it be developing new targets for them going forward? Or is it kind of on hold for now?

And lastly, if I may, on Medigene 1011, after the initial clinical result that you reported earlier this year. Just wondering when – do you have a rough time line of when we will be publishing the final analysis, please? Thank you very much.

Dolores Schendel

Okay. Thank you. I’ll pick up on all three of those. So BioNTech. We are in full force. We had that collaboration with BioNTech. We have started all of the projects that they’ve specified up to this point and we have those adequately staffed. And a very strong alliance is developing, very good interactions with the scientific level on those projects are commencing according to plan.

Additional projects will be named by BioNTech through the course of the alliance. And we feel we’ll be able to meet all the expectations that BioNTech places on us for moving different dimensions of this very complex project alliance forward.

2seventy bio, we just completed the formal research TCR discovery part of the alliance, but beyond our 2seventy is responsible then for the development of clinical programs, and they have continued to announce that they’re moving forward with their MAGE-A4 project. And they are reporting on the timing and the constellation of how that moves in clinical development. So one can follow that through BioNTech or through 2seventy announcement on the MAGE-A4 program.

For Medigene 1011, we finished the formal part of the Phase 1 after the last patient had the last clinical visit at the end of June. So that means that, that’s part of the trial is now concluded. And one is working on the preparation of the clinical study report and preparation.

There are still multiple laboratory investigations going on looking at the T cell persistence and the impact on biomarkers in that patient. And as soon as all of that data is available, we will be releasing further information and are already envisioning where information from this trial can be presented to the scientific community and to our – to the interested parties who want to learn more about the MDG1011.

We are just very pleased that after 1 year, this patient is still doing fine, has no signs of the progression to secondary AML, which was judged to be imminent when the patient came into the trial, and we can still detect our TCR-Ts at 12 months and that was one of the very important characteristics that we were looking to establish in this trial. In addition to establishing that we have a very robust manufacturing platform now which can be expanded, extended, modified for use in our upcoming solid tumor, TCR-T trial.

So that was a major step forward for us having that manufacturing approach validated, having the quality control assays that teach us really a lot above our drug products and having sophisticated immune monitoring tools that are allowing us to track long-term persistence of TCR-Ts in blood samples from our patients.

Xian Deng

Thank you.

Operator

As there are no further questions, I will hand over to Anna for the written the questions.

Anna Niedl

Okay. Thank you very much, operator. So some of the written questions were already covered, so well, let’s move through them. So and Dolores Lars a question to you again. Is BioNTech or Medigene funding the ongoing development of TCRs for which BioNTech has already acquired a purchase of?

Dolores Schendel

Yes, for all of the work that we’re doing with BioNTech we received for all experimental work and addition of information and continuation in investigation of candidates of interest to BioNTech, they fund our full R&D expenses.

Anna Niedl

And what is the approximate share of Medigene’s main hour [ph] our capacity in research that is taken up by BioNTech at this point? Will this slightly increase or press differently?

What share of main hour capacity is still available for other potential partners or for Medigene’s own research project?

Dolores Schendel

Well, as I outlined, we have reached the conclusion of the TCR discovery projects for 207, that pre capacity experienced scientists to work on projects and with the current cost in the side of us in the – from chain in collab [ph] alliance, we have also capacities available, and we can apply those votes to the BioNTech projects, as we’ve indicated there are multiple projects being done with BioNTech, as well as to our own our own in-house projects so that we have fully adequate capacity to pursue both arms of research and development at Medigene. So we’re well positioned to meet BioNTech’s needs but also keep our own projects moving forward expeditiously.

Anna Niedl

And there are further questions also regarding MDG-1011 and its future partnering. So is managing at this stage in negotiations that could realistically result in a partnering for Phase II clinical products that had Medigene had any exploratory talks partnerships beyond BioNTech’s and MDG-1011 during the last quarter?

And is the focus from partnering more on traditional TCRs or on dark matter TCR targets? How is Medigene actually addressing potential partners to form new partnerships at Medigene primarily offering its own TCRs was not without its tools, perhaps Medigene also offered licenses to tools i.e., with or without its TCRs to third parties other than BioNTech

Dolores Schendel

So that’s a really complex set of questions, so let me just phrase it this way. I would call our ongoing business development activities, business as results since we are in constant discussion with potential partners for future business development activities. But in essence, I can say yes to all of the above options that we have gone through.

So for example, the clinical study report for MDG-1011, its now becomes an important document to complete for MDG-1011 discussion because each month that we could continue to observe the final patients staying in our mission gives us valuable clinical information, but this data is also backed up by our sophisticated immune monitoring tools that are telling us about the persistence of the TCR-T. So that was kind of waking point for many discussions around MDG-1011 to have that 1-year end of trial visit for those last patients in the trial.

We’re constantly in discussion with various potential partners regarding different assets. And as usual, would inform the public as soon as there is something specific to report on. Regarding our tools, we certainly see them as independent of T cell receptors and so we are open to and hold discussions to license or to engage in projects around our specific tools in which we also give licenses to BioNTech for 2 of those 2.

Anna Niedl

We have one last question in writing here. So Dolores, again to you. Allogeneic TCR solutions and solely of those 5 specific TCR currently a main focus with other BioNTech plans, and thus with analysts and investors. Medigene could obviously also contribute TCRs to such solutions. Has Medigene itself investigated the potential of such a product or has Medigene been approached by other players, by players working on bispecific antibodies for potential collaborations or contributions in this direction?

Dolores Schendel

Well, I think one point, just one important point at this point is that the immunocore market authorization of their TCR bispecific has really raised the level of understanding and interest in these bispecifics. And there’s no doubt that Medigene has the capacity to find and develop the TCR binding arm such as bispecifics and we’re open to engage in such collaborative efforts.

Here in health, we continue to concentrate on our TCR expressing cellular drug products. And that is comes to the very special dimension that distinguishes TCR-Ts from bispecific antibodies.

So one needs to consider this bispecific antibodies, both use the T cell and TCR-T both use the T cell receptor to find drug to the target cell. But a bispecific is very much like an antibody. So it’s molecule that will be cleared from the body. And that means for long term tumor control, one will need multiple applications.

We know from the antibody field that not every antibody specificity turned out to be clinically relevant. So this needs to be a lot of research to understand and probably just sort through which binders will be effective in a soluble form.

We see the advantage in the cellular drug product from the dimension of being able to add to include add-ons in the recipient T cells. And some specific time trying to point out the true advantages of, for example, our switch receptor technology because this is a tool that goes beyond what any normal T cell that is attracted to the second arm of a bispecific could ever be expected to do in the – in the body of a patient, thus are really tailored through the combination intrinsic switch receptor with the T cell receptor to provide enhanced functions but longevity persistence, long-term memory. We think those are attributes that will really have the most power in treatment of patients with solid cancer.

And you can’t incorporate such an add-on that kind of tool to bispecific. Again, you would be into using combination drug therapies with different patterns of bio distribution, different individual toxicities and quite some complexity in using those in clinical development.

So I think that’s the major differentiation currently at this time. We’re open to partnering TCR binders for others developing bispecifics and we’re pushing to have our intrinsic TCR-T that bring the add-on technologies behind our platform for innovative tools.

Anna Niedl

And we received one more question in writing. Dolores, this is again for you. And Medigene promotes the TCR-X tools metrics approach. But could you please shed some light on the availability of precise products in this respect other than the TCF4 at this point in time. What is the serous [ph] that many teams could offer to interested parties?

Dolores Schendel

Okay. Let’s go back to what has happened in the first half of 2022. We put major efforts into initiating and getting the BioNTech alliance running smoothly and at full capacity, while keeping our new in-house projects progressing well.

Up to this point, to add another large deal for a company our size would have been difficult. Now the things run smoothly, we open up broader discussions once again. As before, we continue to generate interesting TCR-T products. We build next-generation drug products with our tools, and we’ll have new TCR receptors, as well as tools coming up in our emerging pipeline according to our matrix concept.

And these then become opportunities for advanced clinical development projects coming through Medigene pipeline, as well as business development opportunities for additional partnerships as we did with BioNTech in the first half of the year.

Operator

[Operator Instructions] The next question is from Victoria English from Evernow Publisher of MedNous. Please go ahead.

Victoria English

Yes. I’m reflecting on your Slide 13 and your item regarding dark matter antigens. And I’m wondering if you could just give us a little background information how your discovery efforts there are going?

Dolores Schendel

Yes. Well, this is a project that we initiated with the University of Montreal out of the interest to understand peptides that are presented on the surface of tumor cells that are not derived from protein coding regions of the genome, but our drive more from regulatory regions of the genome which normally when things are silent. But in some cases, in a variant tumor microenvironment, it can be translated and despite of peptide on the surface of tumor cells. So in our collaboration with the University of Montreal, we gained access to collection of the dark matter, what they’re called dark matter, because they’re coming from regions of the genome that we know very little about.

We acquired access to near to 50 of these peptides. And the next step then is it’s not hard to define which HLA molecules are presenting those peptides. And the big step to determine are any of these of interest T cell. We have lots of peptides on the surface of cells of the immune system will ignore.

So that required our high-throughput robotics platform to look for evidence of T cell responses to these dark matter antigens. And we – so through did the extensive work to look for reactive T cells and came up with a more limited spectrum of those peptides that could be seen by T cells.

Once we could bring the number down to a workable number, and we would have access to five candidates if we see that they are good targets for T cells, but also safe targets for therapy, then we could move on to very extensive biomarker studies, which we are currently working on to determine the true distribution of these peptides with respect to tumor types because one would ideally want broad tumor expression in multiple different cancer types and then high levels of expression in tumors for a given indication in multiple patients, so that they can pull in an adequate patient size, for clinical development.

But in parallel, we need to understand the safety profile of these. And that requires deep scientific expertise to establish that. So that is the final characteristic that we’re working on to be certain that we would understand adequately the nature of these antigens and where they are expressed or not expressed in cancer versus healthy tissues in order to make this determination. If – are those good target molecules for – in our platform? Are there other target molecules that we explore in parallel, that might build better business development cases and be more interesting for us to front line at this time.

Victoria English

If I can just follow up and ask you how far away are you from reaching conclusion about a handful of molecules?

Dolores Schendel

That will certainly happen in the next period of time. And that will be decided certainly in this year.

Victoria English

Okay. Thanks

Operator

[Operator Instructions] As there are no further questions, and I will hand back to Anna Niedl closing comments.

Anna Niedl

Thank you, everyone. Thank you for joining the call, and thank you for asking so many questions. With this, I would like to close the call now, and let’s speak again and meet again, I guess, through our next conference which will be with the annual report 2022 at some point next year in March. See you, and goodbye. Thank you to everyone. Bye-bye.

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