Welcome to Alligator Bioscience's interim report call for the second quarter of 2024. My name is Greta Hög, I am the IR and communications manager at Alligator and I will be introducing today's call.

With me today is our CEO, Søren Bregenholt, and our CFO, Johan Giléus. They will walk you through the latest development at the company, after which they will be happy to answer any questions you may have.

You may either submit these questions in the Q&A function of this chat or you may email them to [email protected]. As Alligator Bioscience is a publicly listed company, and I would like to note that today's presentation may include forward-looking statements.

Please refer to the disclaimer on this slide and to the next slide for the whole presentation. With this, I would like to turn the call over to you, Søren.

Thank you, Greta, and once again, welcome to this Alligator earnings call, Q2 2024. We have some Wi-Fi issues here at Medicon Village in Lund, I will already now apologize if the line is unstable or there are any other sort of technological fallout during during today's meeting.

With that out of the way, let's go to the next slide, Greta. Thank you.

A couple of of key updates from from the company. In April, we saw data from mitazalimab investigator-initiated study presented at the Congress of American Association of Clinical of Cancer Research, and at that meeting, also our our the molecule called HLX22, which is developed by Henlius and and derived from partly derived from HLX22, that we'll talk more about later today.

Data on that was also presented. Then in May, HLX or Henlius reported that HLX22 had, or announced follow-up data beyond the 39 months in in gastric cancer, something that that Alligator also reported.

Later in June, the company also reported that all patients, or that the first patients, had been dosed in all of the phase 3 regions on the ongoing study in with HLX22 in gastric and gastroesophageal junction cancer, two important milestones for HLX22. Whilst that important, a number of significant events reported from Alligator after the quarter.

In July, we reported that we will refocus on our financial interest in HLX22, and that we will discontinue independent development of mitazalimab, and that the remaining operations of the company will be wound down. We'll of course spend some time on that in in today's call, with the aim of giving the explanation why we have taken this decision, and also convey to you the financial upside of the potential financial upside of our interest in HLX22.

Also in July, we announced the rights issue of of units to approximately 250 225 million with an a bridge loan of 19 million to secure the continued operation of the company. I can tell you, as you probably saw earlier today, that today's extraordinary general meeting approved that that rights issue and at the same time, also approved a share capital reduction.

If we take the next slide, we will spend some some time on on on discussing the the pivot in in strategy at Alligator and of course, also answer any questions that you that you may have towards the end of the call. As you are well aware, we have developed mitazalimab in first-line metastatic pancreatic cancer, a disease that currently is being treated with chemotherapies in in first line.

The development rationale for mitazalimab and the OPTIMIZE-1 study that we have been reporting data on and discussed here several times was to combine mitazalimab with chemotherapy in first line. As you all know, we have shown some some pretty encouraging data in in that setting.

Now, in parallel with Alligator developing mitazalimab, a number of of companies have been developing a new drug class of small molecules, orally available molecules, tablet-based molecules, targeting a mutation in pancreatic cancer called KRAS. It's approximately 90% of of the patients with KRAS that has this this mutation to drive their to drive their disease.

We have known that these drugs would come. We have known that they had some level of of efficacy in in second line.

We've also seen glimpse of of data in first line during the year, and the hypothesis has been that even though that these drugs are being developed, there would still be a clinical rationale for combination of mitazalimab and and chemotherapy. If we change to the next slide, I think what has happened, next slide please, Greta.

What has happened actually since the beginning of June and and until now is that we have seen the latest data from these molecules. They have been taking the the clinical community in this indication by surprise, how efficacious they are and how many patients they actually provide benefits for.

If we just focus on on on the left hand side of of the slide here, first, we saw the paradigm changing phase 3 data from the molecule that called daraxonlisib from Revolution Medicine. We saw them presented at at ASCO in the beginning of June, in patients in second line extending their life more than double than what has been seen with chemo alone, therefore, setting a new regime for KRAS inhibitors in second line, a significant medical achievement and significantly significantly good news for patients suffering from pancreatic cancer.

What we have then seen since then, latest at ESMO GI, another medical conference in Munich early July, was then another set of data from this molecule now in first line, again blowing chemotherapy almost out of the water. At this at the same conference, we also saw data from a more specific molecule from Revolution Medicine called zoldaranlisib combined with FOLFIRINOX in first line, and these data showed that that these patients almost 100% of the patients were actually benefiting clinically from this.

What this means for Alligator, what it means for for patients with with pancreatic cancer, is that this new class of drug will drive a paradigm change in the standard of care both in first line, but initially in second line we expect daraxonlisib to be approved already this year in the US at least. Then, in in three to four years, probably a similar change in first line, either through Revolution Medicine's drugs or via those drugs or via some of the other players that are now starting phase 3 studies in first line with KRAS inhibitors.

A significant change expected in in the standard of care in the treatment of metastatic pancreatic cancer, both in first and second line. That of course have a number of implications for a company like Alligator or anybody else developing drugs in in the indication.

The industry itself refocuses towards this new drug class. Those companies that are partnering in in the disease, their focus is of course also changing towards agents that are either KRAS inhibitors or complementary to KRAS inhibitors, and away from from drugs that primarily have data in in the chemo setting.

If we then talk specifically what this means for Alligator, it's very clear from our dialogues with our key opinion leaders, leading physicians treating patients with with with metastatic pancreatic cancer, both in Europe, in US, and also in Asia, there is a clear indication or a clear conclusion that standard of care also in first line will change away from the current chemotherapy backbone towards a KRAS-based a KRAS inhibitor-based backbone, of course a significant change there. That also means that the commercial rationale for developing mitazalimab in combination with FOLFIRINOX, as we were preparing to start a phase 3 for, that commercial rationale do not do not no longer exist.

Hence, the rationale for the registrational study in this population is no longer relevant. We don't want to spend, it's not prudent or rational to spend money on developing a drug in a population that will not exist once the drug is is ready to get approved.

Here the the prudent business decision is of course to discontinue registrational development for mitazalimab in combination with chemo. We still believe that a combination of mitazalimab and a KRAS inhibitor remains both scientifically and also most likely clinically relevant.

We believe that some of the some of the longer-term effects we see with mitazalimab will be highly relevant in combination with that with a KRAS inhibitor whether in combination with with chemotherapy or alone. The fact is that the next step in that development will be potentially a phase 1 study followed by a randomized phase 2b study, i.e., a clinical undertaking on par with what we have done with mitazalimab in OPTIMIZE-1.

Unfortunately, with our available cash, with our current market cap, we do not see this as a an undertaking that that Alligator can do without a partner. As we do not have a partner, and I do believe that that that it will take some time before the the the industry has refocused itself toward combination strategies with KRAS inhibitors, we took the decision to discontinue all further independent development of mitazalimab, i.e., discontinue the the preparation for the phase 3 study.

We had a number of of IITs, investigator-initiated trials. Remember, these trials that bear no cost for Alligator.

We have a couple of those ongoing plus a a a randomized phase 2 study in in in in the in the planning. We are reviewing those opportunities and and the cost benefit of these these these these programs.

Our primary focus, as you can see, the next bullet point here is to preserve the royalty potential of HLX22 within the company and only invest in in these all those free opportunities if we have secured a financial cushion allowing us to do that. We will start winding down remaining operations.

We will reduce the organization and and and the the the cost base. We have started that already, and will continue working on that in in the coming period.

Then we will, of course, continue to seek to divest mitazalimab as a broader immuno-oncology asset within within the coming months. The the press release of of a couple of weeks ago have already created some incoming interest from from from companies seeking assets outside of of metastatic pancreatic cancer.

That is of course discussions that we will that we will engage in as we go as we go along. External factors has eroded the commercial rationale for continuing to develop mitazalimab in combination with FOLFIRINOX.

We have decided that we are not able financially to pursue what needs to be done for develop mitazalimab in combination with a RAS inhibitor. Therefore, we have continued all further independent development.

We are reviewing ongoing IITs, refocusing on preserving the royalty potential of HLX22 in the company, and then wind down remaining operations and organizations to reduce the cost base in the company. Can I have the next slide, please?

Just to reiterate these points, the principal value driver in Alligator now is our financial interest in HLX22, and we'll talk more about what that entails in just a second. It's a molecule that is being developed, owned, and funded, controlled by Shanghai Henlius Biotech.

Alligator has a royalty stake in in in the molecule that when you do all the all the calculation sums up to up to 1.75% of the net sales of HLX22. That is without any development cost or other cost to Alligator.

We are reducing the cost base. I already told you that we are discontinuing in develop- independent development of mitazalimab, including the phase 3 preparation.

We are starting to reduce the organization to the minimum that is required to oversee the HLX22 program, and abide to to the legal obligations we have as a listed company. Then, we are, of course, immediately starting to, have started to review the cost base to save as much cost as possible as soon as possible.

We had a number of of other assets: mitazalimab, 4066, a bispecific antibody, we have 527, a co-development with with America or Seattle-based Aptevo. We will of course review the strategic opportunities of of those assets, and are pursuing opportunities to divest these as soon as as possible to further minimize any cost, even though the cost we associated with these assets is minimal, more to secure any potential long-term upside for Alligator and its investors.

Next slide, please. If we look at HLX22, again, just to re-emphasize the point that this is now the main value driver of Alligator, and and and sort of the main part of of the investment hypothesis in Alligator, it's a novel HER2-specific monoclonal antibody.

It's differentiated from other HER2 antibodies that it increases the so-called internalization of of HER2, significantly over what what drugs are already there. The current treatment regime together with trastuzumab and chemotherapy is being first and foremost explored in in gastric cancer, and I'll come back to that.

The molecule originates from a discovery collaboration between Alligator's subsidiary, Anthem Therapeutics, and Korean AbClon. The molecule is now out-licensed to, developed, and controlled by Chinese Henlius.

If you really want to dig into the details, you can see that it actually got an INN name recently, the molecule is HLX22, but also dupat- Jesus, dupatitug. Yeah.

Let's let's stay with the HLX22. How are Alligator's commercial interest in this?

We own We are own 35% of AbClon's revenue from Henlius, and without disclosing the specifics of of that deal, that amounts to up to 1.75% royalty on the net sales that is is going to be funded to to Alligator. We estimate that this will give or amount to a a royalty income on an annual basis to Alligator between 150 and 450 million SEK a year, or between 15 and $45 million.

As I've said before in these meetings, there's a lot of numbers floating around in out there. This is Alligator's estimate.

This is based on on our estimates of of of a drug like HLX22. Other companies might have other estimates that we are not commenting on.

If we take the next slide, when do we see this come in? What timelines do we do we see for gastric cancer and and and gastrointestinal or gastroesophageal junction cancer?

We we see that based on on on available data in in public databases and and industry industry standards, that we expect the first phase 3 data to come out the second half of next year. It might be earlier.

Based on that, we see a launch of the molecule sometimes in 2029. It may be earlier.

It may be later. Based on a 2029 launch, we expect to see the first royalty revenue in Alligator in in 2030.

What what we have seen with the molecule or what Henlius have seen with the molecule and announced for the molecule is that the phase 2 study showed a 80% reduction in the risk of progression or death versus standard treatment in in this gastric cancer indication. That data was announced now announced at at ASCO last year.

As I said, in in May this year, Henlius reported follow-on data beyond 39 months from that study, indicating continued extension of the progression-free survival of these patients. We really expect this drug to be potentially practice-changing in this indication.

Moreover, Henlius is developing the drug in HER2-positive breast cancer in two phase 2/3 studies: one in recurrent breast cancer, and one in in in so-called neoadjuvant in the neoadjuvant setting is also expected to start shortly. A long-progressed phase 3 study in gastric cancer and gastrointestinal junction cancer, and breast cancer coming up as as a second indication.

If we take the next slide, Greta. Yeah.

I I think for now, we will we will hold here and and and hand it over to to Johan.

Thank you, Søren. A couple of slides regarding the financials for the Q2.

We have general operating expenses as expected, and they are also then mainly around the the the the the operations that we have in in the in the in in the Lund office. We also have had some costs for the CMC cost, the clinical cost, for the now discontinued phase 3 study during the first and now, in particular, the second quarter then that we now have discontinued, then.

What we also then you need to need to note is that we have not made any provisions for for the costs that will come when as a part of the wind-down of mitazalimab, etc. Then that will be made in the Q3 or maybe Q4 depending on on the different requirements, and the cash flow for those provisions will then be primarily during Q Q3 and Q4 2024, but can also then flow over to '25.

Let's move over to the next slide please, Greta. As we then have expected, we we did quite a lot of you know wind-downs when we did the the the the restructuring in '24, well that had an impact on '25 numbers.

We were then expecting that we will come into general operating space expenses between 15 and 20 million. I guess we're now trending below that that that estimate.

On top of that, of course, you need to need to to add the CMC and clinical costs for the phase 3 preparation that I just mentioned then. Then end of June, we had 16.60 million in cash.

Then we raised the the bridge financing here in in July then to be able to, cover costs and and and other things then for the the quarter that we're currently in. That will be a part of the repayment part of the rights issue will be the repayment of the bridge loan, then.

With that in mind, then let us move over to the rights issue that will come here in shortly, then. Next slide, please.

A couple of key key aspects then. We we have announced the terms.

The terms will be that you will have five unit rights for each share that you own, and you need one unit right then to to subscribe for one unit. One unit will then include two ordinary shares and one series one warrant of the series TO 15 and another one for the series TO 16, then.

Both of them are are given to you by free of charge, then. The price for the subscription of the unit will be SEK 4 öre per unit, then.

It which corresponded to 2 öre per ordinary share. If everyone all of the units are subscribed, there will be 3 billion more units into the company, then, equivalent to 6 billion shares, then.

Some of the key dates then that you need to be aware of. We will find the prospectus next Monday, and the the record date for for owning the shares is 2nd of September next week.

Then there is a subscription period that goes from the 4th to the 18th of September. Please be aware that some of the banks have shorter deadlines than the 18th of September, you you might need to, subscribe prior to the 18th of the September.

You can then either buy or sell your your your unit rights then during a the period 4 4th of September to the 13th of September. A bit less than a week after that, we will have the announcement of the outcome of the of the rights issue, then.

22nd of September is tentative date. The use of proceeds would be like following, then.

We will, as I mentioned then, repay the loans. We will then preserve the future royalty potential of HLX22, as mentioned by Søren, then.

We will have a very lean organization. Once the wind-down is is completed, there will be a very, very lean organization to to to maintain the obligations as a listed company, primarily.

Of course, there are costs that associated with the wind-down, primarily then when it comes to CMC and clinical costs, but and also then the organization in general, the people that that that unfortunately need to leave the company, but also the other costs that we have obligations to to to to settle, then. With a fully subscribed rights issue, we believe that we can have the the money until the commercialization of the HLX22, as mentioned by Søren just recently.

Of course, the runway will be dependent on the outcome of the rights issue, then. We will then in the meantime, in the short short-term perspective, will look through some of the short-term strategic opportunities for mitazalimab, but we're not prepared to do any major investments to see if we can actually then do this.

It has to be with at a at a at a very low cost spend for for us, then, as it's important to preserve the the the the cash for for HLX22, then. With that in mind, Søren, I will hand up hand over to you again.

Thank you, Johan. Maybe there is one more slide?

Yeah. Just to summarize what what we have what we have talked about today that HLX22 is now considered the primary value driver for Alligator.

Again, it's a drug that we have a participating interest in. We do not control or develop or fund any activities.

We are only privy to otherwise public information on the drug. I think that's important to note.

Everything we put out here in terms of numbers, whether it's money or whether it's timelines, are our best estimate based on available information and general industry practices and standards. The global phase 3 study in in first-line HER2-positive gastric cancers, all patients have been dosed in all participating regions.

We expect top-line data or estimated top-line data to be available in the second half of next year. The the accumulated financial interest of of Alligator in the asset is up to 1.75% of the net sale, and we believe that that would amount to somewhere between 150 and 450 million SEK per year to into Alligator.

We have announced and today got approved a a rights issue of up to 125 million, and as Johan said, fully subscribed, that rights issue will take us all the way to the launch of HLX22. To also to ensure that, we are reviewing and reducing the cost base to a minimum, allowing us to monitor HLX22 program and of course abide to all our legal obligation as a publicly listed company.

Mitazalimab, here it says that it's offered for out-licensing or divestment. I don't know if that's the right wording, but that's definitely something we are we are working structured on.

We have other assets and technologies that we will we will retain for the time being and otherwise find strategic opportunities for these molecules. We will continue to evaluate the ongoing investigator-initiated studies.

I think the fair thing to say here is that there is both a financial component of that assessment, there is an ethical assessment of of keeping people on drugs that they receive, but also not introducing new patients to drug that may not be developed. There's, of course, also a general clinical interest and rationale that needs to be reviewed when when we are looking at that.

That's all things and processes that are underway. Again, we believe that that the rights issue that that is has to been announced today that if we look at at the price at the pricing of that rights issue versus the potential financial upside in the HLX22 program is a very interesting financial opportunity.

With that, I will turn to to today's questions. As Greta said, you can either write them directly to our IR mail, and I know there's a few there already, or you can write them in the chat right here.

Let me see what if there is already a couple of of questions to start out with. We have a a couple here.

First, we have a a question. Could you elaborate a little bit more on the What does it say here?

The gastric cancer indication, how many patients, on and so forth? Yes, we can do that.

We can include that in a in a slide going forward. There's probably also a little bit more data in in the Q2 report, where you where you can look up up the data.

If if we put the two indications together, gastric cancer and gastric esophageal junction cancer, or GEJ, we see approximately 1 million, 1.1 million new cases a year, with the vast majority being gastric cancer. That's probably 85%, 90% of the cases.

Of those, approximately between 40%, 45%, 50% reach the metastatic state. That's the state that is treated here.

Of those patients, approximately between 20 and 30 patients are are HER2-positive, meaning that we have approximately on a global scale 100,000 patients that are eligible for treatment in the first-line metastatic setting in these indications. These the number of HER2-positive patients varies a little bit between between various various regions, with with East Asia having a a higher abundance of of HER2-positive HER2-positive patients.

That gives a a relatively robust patient pool and and and without going too much in into the pricing, we believe that that that number of patients and this indication and the treatment timelines that we have seen from the from from the from the phase 2 study, at least bodes for HLX22 being a blockbuster, if not a potential double blockbuster in in gastric cancers alone. I just gave you the I just gave you the the the royalty numbers, and then you can can do the math yourself, but that should land us comfortably in the range that that we have described on gastric cancers alone.

I hope that answered that question sufficiently. Otherwise, you can can can seek more data in in the Q2 report.

Then a couple of questions from from Redeye here. Let's start from the bottom.

How far will the rights issue take you? I think Johan already already answered that and and so did I.

These questions came before the meeting, so that's fair. Bring it up again.

Fully subscribed, this this rights issue brings us beyond the expected or estimated launch of HLX22, i.e., into positive royalty territory. A third question here: are there no ways forward for mitazalimab?

Yes, I I think there will be. As as as I hope I I relayed in my in my first part of of the presentation here is, we still believe that mitazalimab would be a very competent combination partner for for instance, a KRAS inhibitor.

There is ample preclinical data showing that that the two molecule at least have additive effects both on top of of number of patients responding and not the least the durability of response. Yes, we believe that that that would be a a potential opportunity for mitazalimab.

We know that mitazalimab also synergizes with PD-1s, and probably all other immune immuno-oncology agents. Definitely, there there should be a place for mitazalimab.

The current changes in the in the clinical landscape for metastatic pancreatic cancer, and the refocusing of of of of of that part of the industry, and our financial situation simply means that Alligator is not able to make the investment that it would take to to be to prove that hypothesis in the required clinical study. Of course, we are doing our best efforts to ensure that that somebody else will take up mitazalimab and and give it the chance that we believe that it deserves.

A related question also from from Adam from Redeye is, what's the progress on the ongoing IITs? We have a number of of IITs ongoing.

As we don't incur any cost on on on that. We supply the drug.

We are reviewing that, whether whether or not to to continue with that. Some of the the the parts of that analysis is of course to, how many patients are enrolled in a study, what's the timeline until we get any any data to drive any further development decisions, what are, even though the costs are not big, what are the costs, what are the ethical implications of enrolling patients in a study with a drug that may or may not be be be developed further, on and so forth.

That is something that we are going to to to continue evaluating together with the with the principal investigators in in the the the coming weeks, with of course, and and months. We've of course already been in contact with with these with these physicians.

Let me here re-emphasize that the primary objective and priority for the company and for management is to be able to maintain the HLX22 royalty interest within the company, and that is where we are focusing. If there is financial cushion to explore, for instance, a a a randomized phase 2 study in in biliary tract, as we've discussed, if that exists and only then, will we consider doing that.

I hope I hope that is is absolutely clear. I'm not sure if we have any other additional questions.

I don't think we have.

No. No more has been received.

The last chance. That doesn't seem to be the case.

Then I will thank you for your attention, and bid you a a good day. There's more information on on the rights issue on on our website, and there's more information on the HLX22 program in the quarterly report that is also available on our website.

Thank you very much.

Thank you.