Altamira Therapeutics Ltd. (NASDAQ:CYTO) Q4 2022 Earnings Call Transcript May 18, 2023

Operator: Good morning, and welcome to the Altamira Therapeutics 2022 Results Conference Call. On today’s call are Thomas Meyer, Altamira’s Founder, Chairman and Chief Executive Officer; and Covadonga Pañeda, Altamira’s Chief Operating Officer. Earlier today, Altamira issued a news release with the full year 2022 financial results as well as a comprehensive business update. The release is available on the company’s website at www.altamiratherapeutics.com and has been filed with the SEC. During today’s call, the company will be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements that address future operating, financial or business performance or its strategies or expectations.

Forward-looking statements are based on management’s current expectations and beliefs and involve significant risks and uncertainties that could cause actual results, developments and business decisions to differ materially from those contemplated by these statements. These risks and uncertainties include, but are not limited to, the timing and conduct of our clinical trials, the clinical utility of our product candidates, the timing or likelihood of regulatory filings and approvals, our intellectual property position and our financial position as well as those described in the Risk Factors section on our Annual Report on Form 20-F and future filings with the Securities and Exchange Commission. In addition, any forward-looking statements represent the company’s views only as of today and should not be relied upon as representing its views as of any subsequent date.

While it may elect to update these forward-looking statements at some point in the future, it specifically disclaims any obligation to do so even if its views change. With that, I will hand the call over to Thomas Meyer.

Thomas Meyer: Thank you, operator. Hello, everyone, and thank you for joining our 2022 earnings and business update call. I will provide an update on our various development projects, an overview of recent corporate developments as well as an update on our strategy. Our Chief Operating Officer, Covadonga Pañeda, will discuss our RNA delivery technology, market position and strategy. Finally, I will discuss our financials and outlook for the rest of 2023. We will then open the call for any questions. All in all, 2022 reflects continued progress on our strategic repositioning to become a leading pure play in RNA delivery technology for targets beyond the liver and with the effective and rapid release of RNA payloads within target cells.

It is an incredibly exciting and dynamic emerging field of medicine. Many of you are already familiar with the nascent therapeutic RNA sector, which we and much of Wall Street believe, has massively disruptive potential to transform the medical landscape. This is validated in part by the increasing sell-side coverage, strong investment capital flows and M&A in the sector over the past couple of years from big pharma. As to our legacy assets, we are fast approaching important clinical and regulatory milestones with our programs in OTC consumer health and in our ear therapeutics, which are key components in our strategy to divest or partner these legacy programs as the second and final step in our transformation to a pure-play RNA delivery technology company.

In addition, through this process, we expect to unlock the intrinsic value of our legacy businesses. While the transformation has taken longer than initially expected, as these are valuable assets, we look forward to its conclusion this year. Unpacking our strategic repositioning further, we have now essentially completed the clinical development program for Bentrio, our FDA-cleared drug free nasal spray for protection against harmful airborne particles such as allergens. We await top line data from our NASAR clinical trial later this month. We have also completed all planned development steps for our main inner ear therapeutic asset, AM-125, our betahistine nasal spray for the treatment of vertigo. Based on the positive outcomes from the Phase 2 TRAVERS clinical study in Europe, I’m delighted to announce today that we have just submitted an investigational new drug or IND application to the FDA for AM-125.

We are actively engaged in divesting or out-licensing both Bentrio and AM-125. I will circle back with more detail on both our legacy assets Bentrio and AM-125 in a few minutes. At this time, I’m pleased to introduce Covadonga Pañeda to discuss our flagship RNA programs. Cova?

Covadonga Pañeda: Thanks, Thomas, and good morning, everyone. Our RNA delivery technology center on our OligoPhore and SemaPhore platforms, the technology is based on a patented peptide for delivery of RNA in nanoparticles to extrahepatic tissues with efficient endosomal release inside target cells. Both the delivery of RNA to tissues and organs beyond the liver and the speed and quantity of RNA payloads getting released into the cells cytoplast have remained major challenges for the application of RNA therapeutics to date. Those features, coupled with good stability, a great tolerability profile as well as a strong versatility for technology extraordinarily powerful cutting-edge, and we believe is quite valuable. The versatility is shown by the large and still growing number of disease models in which delivery technology has already been successfully tested.

To date, OligoPhore and SemaPhore have been tested in 17 different studies in vivo with both short interfering RNA and messenger RNA. The two most recent additions evaluated SemaPhore with mRNA into interesting models. At the 2023 Osteoarthritis Research Society International World Congress held in March in Denver, a Washington University Research Group presented data from a mouse model of meniscal injury, referring to the meniscus, which is a cartilage tissue patch that cushions the new joint. Systemic delivery of DNA methyltransferase 3 beta mRNA with SemaPhore nanoparticles, significantly reduced bone sclerosis, cartilage degeneration and synovitis compared to controls. In addition, functional studies showed significantly decreased pain sensitivity and improved weight bearing.

In a March 2023 article preprint, another Washington University Research Group presented data from the mouse model of sarcoma metastatic breast cancer; systemic delivery of zinc finger and BTB domain containing 46 mRNA a transcription factor with SemaPhore nanoparticles promoted antitumor components in the tumor macro environment and resulted in restriction of tumor growth. When the nanoparticle treatment was combined with an anti-PD-1 checkpoint inhibitor, significantly to synergistic effects in the control of tumor growth were observed, generating long-term complete remission of tumor mass in many of the treated animals. Our business model is to make our delivery technology available for use by biopharmaceutical companies with their own RNA sequences under license.

That is we are providing the modern version of picks and shovels rather than . This business model is capital efficient, scalable and therefore offers great potential. Since 2022, we have stepped up our efforts to present and promote our OligoPhore and SemaPhore platforms by presenting at international conferences, submitting our research, studies to medical journals and increasing our business development activities targeted at potential partners in the biopharmaceutical industry. As I often attend or speak at this conferences, I can report we have increasingly succeeded with injecting OligoPhore and SemaPhore into the biotech industry. We continue to step up our business development efforts. As a result of these outreach efforts, we are confident to enter into the first collaboration agreements with biopharmaceutical companies this year.

Concurrent with our development of OligoPhore and SemaPhore platforms, we have continued the development work in our two showcase program with OligoPhore platform for sRNA delivery. AM-401 for the treatment of KRAS-driven tumors, and AM-411 for the treatment of Rheumatoid Arthritis. As a reminder, AM-401 is our program for the treatment of KRAS-driven cancers. KRAS is the most frequently mutated oncogene in human cancer. Currently, only one specific mutation name G12C is addressable through pharmacological treatment, but there are many more oncogenic mutations that occur within this gene and the disease. Our approach seeks to tackle several mutations with one single product, which we call polyKRASmut. That is all one word spell lower case POLY, upper case KRAS, with a superscript MUT tagged on.

We are testing AM-401 in different in vitro and in vivo models with the aim of moving into IND-enabling toxicology studies by Q4 2023. In February of this year, we expanded our intellectual property estate by filing a provisional patent application relating to polyKRASmut. If granted, the patent would extend IP coverage for the AM-401 program out to year 2043. AM-411 targets a component of the NF-kB inflammatory pathway and is under development for the treatment of rheumatoid arthritis. NF-kB is the main inflammation checkpoint in this disease and has for a long time been considered undruggable. The reasons behind these are twofold. On the one side, it is an intracellular protein, and as such, difficult to target using traditional small molecules.

On the other hand, NF-kB has important physiological function in non-disease cells. With the combination of an RNA-based therapy and OligoPhore platform, we can address an intracellular target specifically in sites of inflammation, which in the case of rheumatoid arthritis, are typically the joints. For AM-411, we’re aiming to start IND-enabling toxicology studies in the first half of 2024. The use of RNA therapeutics is start to offer significant advantages for the treatment of diseases who were resistant to develops over time, as is the case for KRAS-driven cancer are Rheumatoid arthritis. RNA silencing, down regulates the target protein rather than inhibiting it. Consequently, reducing the likelihood of resistance because the target protein is simply not present in the tissue or it would induce resistance.

Looking further forward, we aim to advance both AM-401 and AM-411 to an IND-filing with the FDA next year. Until then out-license them either following the IND or after our Phase 1 clinical trial at the latest. Thomas, that’s my report. Back to you.

Thomas Meyer: Thanks, Cova. I will now unpack in greater detail our strategy for Bentrio and AM-125. On Bentrio, we are looking forward to the full top line data readout from the NASAR trial in seasonal allergic rhinitis in Australia, which we expect to announce later this month. That will complete the Bentrio development program in allergic rhinitis and will close out the last remaining clinical study. With this, we have accumulated clinical data from two challenged studies under controlled allergen exposure, one in seasonal and the other in perennial allergic rhinitis as well as data from one outdoor study, NASAR, which has been performed under real-life conditions. The NASAR study enrolled 100 patients suffering from seasonal allergic rhinitis, more commonly known as hay fever, who were treated for two weeks either with Bentrio or a classic saline nasal spray, which is the current standard of care and drug-free treatments.

Back in January, we announced the results from an interim analysis of 53 patients, which showed a statistically significant improvement for Bentrio treated patients versus controls as well as good safety and tolerability. That improvement was well above the minimal clinically important difference and even approach the magnitude achieved with certain medicated nasal sprays. and saline nasal spray aims to rinse out allergen particles. Bentrio forms a thin protective layer, which prevents contact of those particles with the nasal mucosa and helps to remove them through natural mucociliary clearance. As demonstrated in yet another study, which was published recently in a peer-reviewed scientific journal, Bentrio stays for about 3.5 hours within the nasal cavity, where it can exert its protective effects.

In contrast, saline spray was present for only about one hour and showed narrow distribution and less coverage within the nasal cavity. Overall, we have a strong set of data for Bentrio in the management of allergic rhinitis, which we have considered as the principal application for this product right from the start. We are addressing here a very sizable market. It is estimated to reach close to $4 billion in U.S. sales in 2023 alone. In our view, there are particularly great market opportunities in the segment of non-medicated preservative-free treatments. As for the development of Bentrio for use in viral infections, we very much remain convinced of the product’s utility based on how it works and based on the wealth of supportive data. The thin protective film formed by Bentrio on top of the nasal mucosa helps to defend not only against airborne allergen particles, but also against airborne virus particles.

Unfortunately, the design and setup of clinical studies in viral infection are much more challenging than for allergic rhinitis, which was very much evident during the COVID-19 pandemic as case numbers were waxing and waning. In addition, the time course of an infection is also challenging and that symptoms typically start to appear only once the viral load in the nasal cavity has already started to decline, which means that one may only start treatment late. And then one has to beat the natural recovery. That is the fact that typically infections tends to recover on their own over time. With our COVAMID trial with Bentrio in 160 patients suffering from acute COVID-19, we face these types of challenges. As reported back in January, the results from the study were inconclusive under the specific test conditions.

Also a trend for faster, more pronounced reduction in nasal viral load and symptoms was observed as Bentrio compared to untreated controls. The differences were not deemed statistically significant. Altamira considers that the more benign outcomes from the Omicron variant resulted in more pronounced spontaneous recovery and treatment may have started too late in the trial, about 4.5 days after infection. As previous studies with Bentrio on cultured human nasal epithelial cells exposed to various types of viruses, have shown best results from prophylactic treatment application. We concluded that Bentrio is best used right before or while being exposed to virus particles. No further studies in viral infection are ongoing or planned at this point.

As part of our strategic pivot to become a pure play RNA delivery technology company, we initiated last year discussions with several well-established OTC consumer health companies for the partnering of Bentrio for North America, Europe and other key international markets. These discussions and related due diligence have extended into 2023 and are still ongoing at this point. In the context of these partnering discussions, the company suspended preparations for launching the product in the U.S. on its own and minimized marketing and sales activities in Europe. Meanwhile, the company’s existing distribution partners launched Bentrio in several Asian geographies, including Singapore, Malaysia, Indonesia, the Philippines and Hong Kong. Through partnering with well-established players in OTC consumer health, we expect to unlock and realize the significant value of Bentrio and look forward to moving these discussions to the finish line.

After Bentrio, let me turn now to AM-125. In June of 2022, we announced positive top line data from our Phase 2 TRAVERS trial with AM-125. This is a patented nasal spray formulation of betahistine for the treatment of surgery-induced acute vestibular syndrome abbreviated as AVS. Detailed results were published last month in a peer-reviewed article. AVS is characterized by the sudden onset of continuous vertigo lasting days to weeks and may be associated with nausea, head motion intolerance and unstable balance. The randomized double-blind placebo-controlled TRAVERS trial enrolled a total of 124 patients at more than 10 study sites across Europe who suffered from AVS following surgery for the removal of the tumor growing behind the inner ear.

The trial demonstrated good tolerability of 125. Further, administration of 125 resulted in a dose and time-dependent improvement in balance and signs and symptoms of vestibular dysfunction. Based on the positive outcomes from our TRAVERS study, we have just submitted the IND to the FDA, which, if cleared, will allow conducting clinical trials also in the U.S. The submission includes the protocol for a Phase 2 trial or the treatment of Posterior Canal Benign Paroxysmal Positional Vertigo, or BPPV, which is the most common type of AVS and is characterized by repeated episodes of vertigo produce by changes in the head position relative to gravity. We are confident that the IND will increase both AM-125’s attractiveness and value. At a minimum, the FDA review will take 30 days in case of questions that we will need to answer, clearance could take longer.

In the context of our strategic pivot to RNA delivery technology, we intend to divest or partner the AM-125 program for further development and commercialization. To this end, we have entered discussions with a number of potential partners, and we expect to broaden and intensify those activities now that the IND has been filed. On one hand, we see an attractive market potential for 125 in all those markets where all betahistine is currently being marketed, and that is more than 115 countries worldwide with the U.S. being a notable exception. In most of these countries, all betahistine is the standard of care treatment for vertigo and is actually the only vestibular stimulant available. The global market for oral betahistine is about $450 million per year in revenues to the manufacturers.

Importantly, AM-125 has a 5 to 29 fold higher bioavailability than oral betahistine. On the other hand, we see in the U.S. what could be the largest potential market for AM-125 as there is no approved vestibular stimulant drug product at all. AM-125 benefits from patent protection until 2038. Apart from AVS, AM-125 could have utility also in other CNS therapeutic areas. Clinical studies with betahistine, which were conducted independently from us suggests potential therapeutics benefits also in attention deficit hyperactivity disorder, ADHD, atypical depression, Prader-Willi syndrome or dementia. Turning next to our financial highlights for the full financial year ending on December 31, 2022. Unless indicated otherwise, all numbers will be in Swiss francs.

As of today, CHF 1 approximately buys US$1.1. In 2022, revenue from Bentrio sales was CHF 0.3 million compared to CHF 0.1 million for 2021. As mentioned before, we decided not to push marketing and sales activities to build the Bentrio brand and grow sales as we intend to partner the product. Further, the waning of the COVID-19 pandemic reduced the demand for protection against viral infection. Please note that the 2022 revenues exclude a non-refundable upfront cash license fee of US$1 million from Nuance Pharma related to the marketing and distribution of Bentrio in Mainland China, Hong Kong, Macau and South Korea, which was deferred for revenue recognition. Total operating expenses in 2022 were CHF 25.1 million or CHF 13.7 million before a one-time non-cash write-off all capitalized development expenditures for the AM-125 project based on the impairment testing performed under IFRS, International Financial Reporting Standards.

This compares with CHF 16.8 million for 2021. R&D expenses were CHF 19.7 million or CHF 7.3 million before the aforementioned impairment compared with CHF 8.4 million for 2021. General and admin expenses were CHF 3.6 million compared with CHF 4.9 million for 2021. The net loss was CHF 26.5 million or CHF 14.1 million before the aforementioned one-time impairment compared with a net loss of CHF 17.1 million for 2021. Cash and cash equivalents on December 31, 2022 totaled CHF 15,000 compared with CHF 1 million on December 31, 2021. Over the last quarters, we have decreased our cash burn significantly as studies for our legacy assets have been completed or winding down. We have been adjusting our staffing levels accordingly. Cash burn is expected to increase again later in the year as we will ramp up several projects in RNA delivery.

Overall, we expect for 2023 operating expenses of CHF 12 million to CHF 13 million and our cash requirement to be in the range of CHF 15 million to CHF 17 million, which we intend to fund through proceeds from the planned divestiture of partnering of our legacy assets, issuances of equity, debt financings as well as grants. During the first four months of 2023, we already raised US$5.1 million from share issuances under the at-the-market program with A.G.P and the equity line with Lincoln Capital Partners. Further, in early May 2023, we raised CHF 2.5 million through a convertible loan provided by FiveT Investment Management. That loan bears interest at the rate of 10% per annum and matures 22 months from May 4, 2023. Last but not least, in April, the CHF 5 million convertible loan issued to Altamira 14 months earlier by FiveT was converted, including accrued interest by the lender into common shares, reducing financial liabilities by CHF 5.6 million.

Before we open for questions, I’d like to quickly summarize our report and outlook. With Bentrio, we expect to announce top line data from the complete NASAR trial for hay fever in Australia in the current month. In January, we had already reported positive interim data from that trial, and we are therefore confident about the further outcomes. It will be the last open remaining Bentrio study data readout. We are in advanced discussions with well-established OTC consumer healthcare companies to whom we seek to divest or out-license Bentrio. With AM-125, our clinical data has been positive. Accordingly, we submitted an IND with the FDA for a Phase 2 clinical study for BPPV, the most common type of vertigo. If granted, the opening of the IND will be another key milestone in the program.

Clinical data confirmed that AM-125 increases betahistine levels in the blood circulation, 5 to 29 fold compared to a standard oral dose of betahistine. We are actively engaged in discussions to divest or out-license AM-125. Now that we have filed the IND, we will step up our efforts here as in the case of Bentrio with outside specialist support. With our patented RNA delivery platforms, OligoPhore and SemaPhore, and our AM-401 and AM-411 showcase programs, we are continuing preclinical research and stepping up business development activities further. We are seeing growing interest in our RNA delivery technology and expect to enter into our first research collaborations with biopharmaceutical companies as we progress through 2023. Financially, we have essentially cleaned up our balance sheet, reduced financial liabilities and raised cash.

The key focus will be on generating non-dilutive funding from the planned divestiture or partnering of our legacy assets. We expect this to support us in making further great progress advancing the exciting research and preclinical studies for our RNA platform and early stage product candidates. As always, we aim to be proactive in keeping our shareholders informed as we continue to advance our mission. I would now like to turn the call back to the operator to open the lines for questions.

Operator: Management will now answer questions. Thomas, your line is unmuted.

Q&A Session

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Thomas Meyer: Yes. Okay. So thank you, operator. We are going to answer a couple of questions that we received. Some of them were overlapping. So we tried here to consolidate those questions. So the first question that we want to address here is why was the AM-401 IND postponed from the end of 2023 to 2024? And for this question, I would like to ask Cova to step in.

Covadonga Pañeda: Yes, Thomas. So the plan was to submit by the end of 2023, but this has now shifted towards 2024. And the reason behind it is we have to coordinate your capacities with CROs.

Thomas Meyer: Okay. Thank you. The next question will be also related to RNA. So when do you expect joint sponsor development and FDA approval of mRNA products? Cova, if you could take that one as well, please?

Covadonga Pañeda: Sure. As mentioned, we expect to enter into the first collaboration agreement this year, but our plans are not to take AM-401 or AM-411 beyond IND or Phase 1, the latest.

Thomas Meyer: Right. And as Cova mentioned during the call, well, we expect to have here some active pipeline for collaborations. So we definitely expect here some news flow as we progress further through 2023. The next question relates to Bentrio. There has been no Bentrio distribution deal for an extended period of time. Are you still actively looking for distribution deals or waiting on divestiture? So clearly, the ongoing discussions with potential partners here for North America, Europe and other key markets are shaping here our strategy. Apart from these discussions, we do have, indeed, several programs ongoing for market access with our partners, and we expect to have further news here also for certain markets that are not covered currently.

Let me just highlight the activities of our strategic partner, Nuance Pharma, which launched a Bentrio in late 2022 in Hong Kong. And Nuance is currently preparing for a submission of a request for marketing approval in Mainland China and South Korea. So just as a reminder, here in early 2022, we could enter into that strategic partnering relationship with Nuance Pharma. We have been very pleased with how it has been going so far. And as you can imagine here the potential in Asian countries, in particular, in larger Asian countries like China or Korea, they are quite significant here for Bentrio. Moving on to the next question. So what range of proceeds from transactions does the company reasonably hope to achieve in 2023? Well, of course, we do have an idea.

But for obvious reasons, we are not disclosing our expectations for proceeds. I hope you will understand that. However, we do know and have already disclosed what we invested into the development of our legacy assets. Obviously, these were quite substantial amounts. We are seeking to unlock this intrinsic value through this divestiture or partnering process with partners. So this has taken a bit longer than expected of the 2023 will be the year where we will have execution on these programs. Another question, Mr. Lachance left the company, what has happened to the OTC consumer health business unit? So that’s referring to Bentrio again. Well, Jean Lachance, as the Head of the Business Unit, he indeed left the company last year as its family moved abroad.

What we understood is a decision, but obviously, also regretted very much his departure. Now since then, I have assumed myself, management responsibilities for this business. And then another question that came in. So what news flow can investors expect this year? So just to summarize a few things that we already mentioned, but also to expand a little bit on that. So there will be indeed quite a few things that we expect to report this year. So in the near-term, we expect news flow from the AM-125 IND submission. So we hope that things will run smoothly. We invested over the years quite a lot here into all the preclinical data, generating them and clinical data and well, on the production of the product and so on and also from the NASAR study with Bentrio.

So as mentioned, NASAR is a very important study under realized conditions for two weeks against nasal spray saline spray, which is the key competitor here for drug-free allergic rhinitis management. Now apart from this, we expect news flow from our divestiture partnering process, probably first about Bentrio. Now within the RNA delivery technology area, while stay tuned for further updates on science, on development progress and partnering, as Cova already mentioned. There is really a lot going on currently. We are very busy, but this is all very exciting.

Thomas Meyer: So with this, I’m concluding the Q&A. Thank you very much for your interest. I will simply thank everyone for attending this morning’s call and also for the good questions, and I will wish you a terrific day ahead. Thank you very much, and take care. With this, back to the operator.

Operator: This concludes today’s conference, and you may disconnect your lines at this time. Thank you for your participation.