Altamira Therapeutics Ltd. (NASDAQ:CYTO) Q4 2023 Earnings Call Transcript

Altamira Therapeutics Ltd. (NASDAQ:CYTO) Q4 2023 Earnings Call Transcript April 10, 2024

Altamira Therapeutics Ltd. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good morning, and welcome to the Altamira Therapeutics Business Update and Full Year 2023 Earnings Conference Call. On today’s call are Thomas Meyer, Altamira’s Founder, Chairman and the Chief Executive Officer, and Covadonga Pañeda, Altamira’s Chief Operating Officer. Earlier today, Altamira issued a news release with full year 2023 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, development 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 proposition and our financial position as well as those described in the Risk Factors section in 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 now hand the call over to Altamira Therapeutics’ CEO, Thomas Meyer. Please go ahead.

Thomas Meyer: Thank you, Rossiya. Hello, everyone, and thank you for joining our business update and full year 2023 earnings call. I will kick off the call by providing an overview of recent corporate developments as well as an update on our strategy. Our COO, Covadonga Pañeda, will then discuss the progress in our new core business of RNA delivery. Finally, I will discuss our financials and outlook for 2024 before opening the call for any questions. Reflecting on where Altamira stood one year ago and where we are today, I’m pleased to say that we made great progress and emerged as a stronger and more focused company. We keep progressing with the RNA delivery business, more and more potential applications for our OligoPhore and SemaPhore nanoparticle technology are being identified, and we just recently concluded our second collaboration agreement with another exciting biotech company.

Extrahepatic delivery of RNA and efficient intracellular release are hot topics in the industry. With the recent partial spin-off of our Bentrio legacy business, we took a significant first step on our journey towards becoming a fully focused RNA delivery company. And we expect to complete the strategic repositioning of the company through partnering of our AM-125 legacy asset in 2024. Those legacy assets have substantial intrinsic value and we just started to unlock that potential. We managed to streamline our cost structure and reduce cash burn very significantly. At the same time, we cleaned up our balance sheet by paying off all financial debt earlier than planned and rebuild shareholders’ equity from a deficit to CHF6.5 million or more than US$7.1 million.

This puts us financially in a much stronger position. We are seeing great potential in the RNA space, and are now much better positioned than one year ago to take advantage of these exciting opportunities. With this, I’m handing the call over to Covadonga Pañeda, our Chief Operating Officer, who will provide you with an update on our RNA delivery business. Cova?

Covadonga Pañeda: Thanks, Thomas, and good morning, everyone. Indeed, these are exciting times to work in the RNA space. Tremendous progress has been made over the past decades in science, research and development, with the pace of discoveries and innovation increasing even more. Delivering RNA to target cells beyond the liver and releasing the RNA efficiently inside cells, however, have remained major challenges to date. This is where we come in with our peptide-based OligoPhore and SemaPhore nanoparticle platforms. The technology allows for extrahepatic RNA delivery as the nanoparticles distribute within the body to disease tissues, in particular to inflamed tissues in cancer and inflammatory or autoimmune diseases. Once inside target cells, the nanoparticles disassemble and release their RNA payload at substantially higher rates than lipid nanoparticles, the current industry standard.

OligoPhore and SemaPhore have been validated across more than 15 distinct animal disease models, utilizing both siRNA and mRNA by various research groups worldwide. And we’re excited to see the evidence continue to grow. In 2023, two in vivo studies performed by independent research groups using the SemaPhore platform show promising results for mRNA treatment in cancer and osteoarthritis. Upregulation of ZBTB46 expression resulted in an immunostimulatory tumor microenvironment and restricted tumor growth; the effect was significantly potentiated when combined with anti-PD1 immune checkpoint inhibition. On the other hand, increase of DNMT3B expression resulted in reduced bone sclerosis, cartilage degeneration, synovitis and pain sensitivity following meniscal injury.

Another independent research group recently showed that insertion of our peptide into adeno-associated virus vectors significantly enhanced cell transduction. Recombinant adeno-associated virus vectors are commonly used as carriers to introduce nucleic acid into cells for gene therapy. We are pursuing with the RNA delivery business a ‘pick and shovel’ strategy based on the licensing of our platform technology to partners in the biotech and pharma industry for use in their own RNA drug product development programs. The first of such collaborations have been set up. Heqet Therapeutics, a spin-out from King’s College London, will test nanoparticles based on Altamira’s OligoPhore platform and comprising certain non-coding RNAs in the regeneration of damaged heart tissue following myocardial infarction in animal models.

Univercells Group will evaluate the use of the SemaPhore platform for the delivery of mRNA vaccines, increasing the effective amount of mRNA delivered to target cells with Altamira’s technology may allow for using lower mRNA doses and thus result in potentially more effective and efficient vaccines. We expect to enlarge — to engage in additional collaborations as we further develop the platform, generate additional data and advance through IND enabling studies. While working on our platforms, we are also pursuing two proprietary drug developmental programs. They are our flagship programs, which shall demonstrate the potential of the technology. At the same time, we believe that they represent attractive growth opportunities. We are developing AM-401 for the treatment of KRAS-driven cancers and AM-411 for the treatment of rheumatoid arthritis.

We aim to advance both programs into an investigational new drug filing with FDA in 2025 and to out license them either following the IND or after a Phase 1 clinical trial at the latest. The current focus is on the optimization of the formulation and process development for scaling up nanoparticle production. For the AM-401 program, Altamira filed a patent application with the United States Patent and Trade Office to provide broad coverage of different KRAS mutations in cancer treatment with nanoparticles comprising the OligoPhore platform and a single siRNA sequence that we call polyKRASmut. In vitro data confirmed the ability of polyKRASmut siRNA to knock down G12C, G12V, G12D, G12R, G12A and [A46T] (ph), which account for the majority of KRAS mutations in pancreatic, colorectal and non-small cell lung cancer.

I will now turn the call back to Thomas.

Thomas Meyer: Thanks, Cova. Let me discuss now our two main legacy assets, the Bentrio drug free nasal spray for allergy and our AM-125 betahistine nasal spray for vertigo and other disorders of the central nervous system. In November of last year, we announced the partial spin-off of our Bentrio business as an important first step in our strategic pivot towards RNA delivery. As a reminder, we sold a 51% stake in our subsidiary Altamira Medica AG to a Swiss private equity investor for a cash consideration of CHF2.04 million or approximately US$2.3 million. Apart from the raise of non-dilutive cash, the transaction generated a financial gain of CHF5.2 million or close to US$6 million, and will result in a lowering of operating expenses.

Altamira will be entitled to receive 25% of any future licensing income of Medica and also of Medica’s value appreciation in case of a sale, which captures an additional share of the business upside potential. We consider this upside potential to be substantial. In clinical trials, Bentrio showed great efficacy in alleviating the main symptoms of allergic rhinitis, hay fever, and improving health-related quality of life; all of this without containing any active pharmaceutical ingredient. This allows for a unique positioning of the product as an alternative to medicated nasal sprays or in combination with oral treatments such as antihistamines. We expect sales to grow significantly from 2024 onwards, primarily driven by the launch of Bentrio through distributors in additional countries.

For China, one of the largest markets worldwide, we already have a collaboration. It is with Nuance Pharma, which began in 2022. Nuance is currently distributing the product successfully in Hong Kong, and is aiming for market approval in Mainland China and South Korea later this year. Altamira Medica will initially supply Bentrio to Nuance and may receive development and commercial milestones of up to US$3 million and up to US$19.5 million, respectively. Once Nuance assumes local production of Bentrio, it will pay to Altamira a staggered royalty on net sales at a high-single to low-double digit percentage. In Scandinavia, our partner Pharma Nordic just launched the product in Q1 2024, and we look forward to successful development there as well.

For other key markets, notably the U.S., the world’s largest OTC consumer health market, in Europe and elsewhere, discussions and negotiations with interested parties are ongoing. Bentrio was cleared by the FDA for marketing; however, it’s not being marketed in the U.S. yet, ending the partnering of the product. We do expect major news flow here in 2024. Overall, we’re confident to see our stake in Altamira Medica generate a growing revenue stream and result in significant value appreciation. Following this first step in the strategic repositioning of our company, we expect to take the next one in 2024 by partnering our inner ear assets. Partnering discussions are most advanced regarding AM-125, a patented nasal spray for the treatment of acute vestibular syndrome, or briefly AVS, a very frequent type of dizziness.

This product has been developed to help acutely dizzy patients to get back on their feet more quickly. The drug product is a reformulation of betahistine, a histamine analog, which in the traditional oral formulation is standard of care treatment for vertigo in many countries around the world. A Phase 2 trial in Europe demonstrated that a four-week treatment course with AM-125 in AVS patients was well tolerated and helped to accelerate vestibular compensation, enabling patients to regain balance and recover faster. In the U.S., where oral betahistine exceptionally has not been marketed for decades and no comparable product exists, Altamira received in summer 2023 IND clearance from the FDA. To date, we have invested about US$18 million in the program.

There is one important aspect to AM-125. Since betahistine is a histamine analog, AM-125 may have clinical utility in other central nervous system disorders known for the involvement of histamine. It is known that histamine plays an important role in the regulation of a wide range of behavioral and physiological functions such as appetite, drinking, sleep, wakefulness, learning, attention and memory. Studies by independent research groups have shown clinical benefits of betahistine in the treatment of ADHD, cognitive function in dementia, memory loss and antipsychotic-induced weight gain, among others. And histamine is a target in narcolepsy, Prader-Willi syndrome, for which we have an orphan drug designation, or Tourette syndrome. Therefore, we believe that our AM-125 offers quite some potential in partnering for vertigo, but also beyond and especially in the U.S. market where there is no oral betahistine available.

It is important to note that despite its significant potential, the AM-125 asset currently carries zero value on our balance sheet. Any proceeds derived from partnering would therefore have a direct and positive impact on our bottom-line. Now, turning to our financials. Before reviewing our financials for the full year 2023, I would like to note that the financial statements are presented in Swiss francs. To help you with interpreting the financials, please note that CHF1 is worth approximately US$1.1. Further, I need to highlight that the 2022 income statement has been revised retrospectively due to the partial divestiture of the Bentrio business. The Bentrio activities are reported now as so called discontinued operations. Continuing operations, therefore, comprise the RNA delivery development programs as well as those related to AM-125.

In 2023, we made great progress in aligning our cost structure with a strategic pivot to the RNA delivery business. Total operating loss from continuing operations decreased from CHF18 million in 2022 to CHF5.9 million in 2023. Research and development expenses were CHF3 million in 2023 versus CHF14.6 million in 2022. Excluding a one-time non-cash write-off impairment of capitalized development expenditures for the AM-125 project based on impairment testing under IFRS, as just mentioned, this program has zero value currently on the balance sheet, research and development expenses rose about 33% from 2022. General and administrative expenses decreased from CHF3.4 million to CHF3.1 million. This… [Technical Difficulty]

Operator: Ladies and gentlemen, please continue to stand by. The conference will resume shortly. Thank you. [Operator Instructions] Hello, Thomas, can you hear us?

Thomas Meyer: Yes, I can hear you.

Operator: Please continue. Thank you.

Thomas Meyer: Okay. Where was I interrupted?

Operator: I think you were on Slide 17.

Thomas Meyer: Okay. So, hello, I’m back. So, apologies here for the interruption. We lost connection. So, I start again with Slide 17. So, shareholders [Technical Difficulty] So, can you hear me?

Operator: Yes, we can hear you, sir.

Thomas Meyer: Okay. Seems to be a difficult connection. Apologies. All right. So, shareholders’ equity swung from a deficit of CHF8.3 million at the end of 2022 to a positive CHF6.5 million by the end of 2023, which represents an improvement of CHF14.8 million. This reflects primarily equity raises via the equity line with Lincoln Park, the ATM program with A.G.P., the amortization of the FiveT convertible loan, which was completed ahead of time, as well as warrant exercises. On top of this, we raised non-dilutive capital through the partial venture divestiture. Total liabilities could be reduced from CHF14.6 million at year-end 2022 to CHF1.2 million at year-end ’23. At this point, no more financial debt was outstanding. One year before, financial debt stood at CHF5.9 million.

In terms of cash flow, well, cash used in operations rose from CHF8.7 million in 2022 to CHF11.5 million, primarily due to the normalization of net working capital. Investing activities provided CHF1.4 million, reflecting mainly the cash inflow from Bentrio transaction. This compares to a cash drain of CHF2.1 million in 2022. The aforementioned financing activities provided CHF10.6 million in ’23 versus CHF9.8 million in 2022. Cash and cash equivalents on November 31, 2023, totaled CHF0.62 million compared with CHF15,000 the year before. So, Altamira expects its regular total funding requirements for operations and financial obligations in 2024 to be in the range of CHF6.5 million to CHF7.5 million; that is without any potential proceeds from partnering.

During the first quarter of 2024, the company raised about US$2 million from share issuance under the at-the-market program with H.C. Wainwright and the equity line with Lincoln Capital. Altamira expects to cover its remaining funding needs through the partnering of its legacy assets and/or the sale of equity or convertible debt securities. With this, let me conclude with a brief summary and some perspectives. We emerged from 2023 in much better shape than we entered it, which is good, especially in view of the pretty strong headwinds that the biotech sector has been facing until quite recently. It has been a challenging period for many of our investors, especially those of us who have been around for some time. The partnering of our legacy assets has admittedly taken longer than expected, but now we have locked down the Bentrio deal and we are working towards the completion of the process with the aim of partnering 125 this year.

In addition, with our OligoPhore/SemaPhore platform, we have a very exciting technology for a very exciting field in human medicine. The platform is very versatile and can be scaled across many different uses. The ‘picks and shovels’ model means that cash outflows are smaller and cash inflows come earlier. Over the coming years, we anticipate entering into a growing number of collaborations based on our development programs and business development activities. Last but not least, we have a great, highly motivated team in place to move our RNA delivery projects forward. All of this makes me confident about the future, and I recently added some shares to my holdings. Looking forward, 2024 promises to be an interesting and exciting year with multiple milestone events and news flow.

I would now like to turn the call back to the operator to open the lines for questions.

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Q&A Session

Operator: Thank you, sir. [Operator Instructions] We are now going to proceed with our first question. Hello, [Hunter] (ph), can you hear us? Your line is open. Please ask your question.

Unidentified Analyst: Yes, I can hear you. So firstly, congratulations on the results and all the recent progress. So, given the shift towards the ‘pick and shovels’ business model, what criteria is the company using to select and prioritize collaborations or licensing agreements for its RNA delivery platforms? And additionally, how does the company plan to leverage its flagship programs to demonstrate the platform’s versatility and attract potential partners?

Thomas Meyer: Yeah. Good morning, Hunter, and thank you very much. Yeah. So, we see here, let’s say, the partnering evolve in probably two steps. So, the first step currently is a more exploratory approach. So, we have here a platform that has already shown its utility under quite a few settings. And the Univercells’ collaboration is one example here. This is something that we have not been pursuing so far, that is vaccines, mRNA. This came up here during the last year. It’s something we feel is exciting, but of course, it has something still exploratory in nature. We have the Heqet collaboration, which is group that has achieved quite some success with regeneration — cardiac regeneration, but there were a need of finding a — an appropriate and adequate delivery vehicle.

And so, these are things that come up during business development contacts, some of these companies approach us. We are pretty much open-minded here. However, it’s clear we want to do only things where we see, “Okay, this can lead to a product at some point.” And this is how we prioritize here these inquiries. Now, we are ourselves still adding data on the platform, the package keeps growing. And that’s why I’m talking about two steps. So here, first step, is still a little bit on the exploratory side, but as we will have more and more data, we will talk about a more and more comprehensive package of data that we can offer. And that’s when we then expect to see also an increase in size, in magnitude here in scope of these collaborations so that’s the way we see that.

So yes, I mean, we are open, but clearly, focus here is on programs that make sense scientifically and economically, and we will evolve here as also the scope and the content of our package is evolving. In terms of the second question about the flagship programs, so maybe Cova, that’s one for you.

Covadonga Pañeda: So, with the flagship programs, we’re hoping to show what our platform can actually deliver within two of the main areas where we see that the SemaPhore and OligoPhore can be of advantage, and that is oncology and inflammatory diseases. So, the data that we will generate, we hope will enable us not only to move these assets into clinical development, but also to show potential collaborators, what the platform can achieve in these areas.

Unidentified Analyst: Great. Thank you very much for the detail and answer. And then, going back to the legacy programs, do you have any idea of sort of the timeline or milestones for that? And I guess I’m trying to just get more color on how it fits into the RNA program. And maybe difficult to discuss timing or milestones, but whatever you can mention on that.

Thomas Meyer: Yes, indeed, that’s a little bit challenging. I mean we have the two main legacy assets. So, Bentrio here, we did the first step. And what we now expect to happen is through the partnering here for key markets, North America, Europe and a couple of other markets that Medica, so the company that we spun off partially that they will be able here to engage in partnerships, one or several partnerships in 2024. So, timing still a bit open. But I mean, it has been a while that we have been going through these discussions. We have some parties that could actually be a great fit here for the business in terms of distribution, marketing, power and capacity. So, this is something that we expect that will happen here as we progress through 2024.

Now, as a shareholder in Medica, we will benefit from that, but we also have this 25% share of any licensing stream that will flow to Medica, so that’s something that will then actually flow through to Altamira Therapeutics. We have also the Nuance collaboration, I mean, which is already in place, which started in 2022. So, here upon Mainland China giving the approval for Bentrio in China, we will also receive some milestone share of that. So that’s also in the making. Now AM-125, as mentioned here, discussions have been going on for some time. We have here a number of interested parties. At this point, it’s still open whether we will finally go for a more global deal or a set of regional collaborations. We believe that the U.S. is a very attractive market for this.

Here, we have the opportunity actually to do either vertigo, that’s what betahistine has been developed for, or to do some other indication that can be a rare disease, that can be something that is much more frequent. And the nice thing here is that, okay, this is really a white spot in the U.S. betahistine, oral betahistine is not available. So here, there is much more flexibility than in other countries. However, in other countries as well, betahistine is well established in vertigo that’s the focus. And here, we have a $450 million market for oral. As of today, we expect that 125 could take a nice slice out of this. Now, the difference between, let’s say, U.S. and rest of world, that means — or this explains why we have this question whether it’s going to be more a global type of deal or whether we may have more a regional type of transaction, because we have these differences in market.

But overall, I mean, things are progressing, and we also expect that here something significant will happen in 2024. I hope this answers your question even without being fully specific about timelines.

Unidentified Analyst: No, absolutely. That’s very useful, and it was great additional color. So, thank you for taking my questions and appreciate the update.

Thomas Meyer: You’re welcome.