Medigene AG

Welcome, everyone, and thank you for joining us. With me today is Dr.

Selwyn Ho, CEO of Medigene. Today, we announced financial results for the year ended December 31, 2023.

You can access the press release on the Investor Relations page of our website at medigene.com. Before we get started, let's quickly run through the forward-looking statements.

Please note that as part of our discussion today, management will be making forward-looking statements. Also, we believe our expectations are based on reasonable assumptions.

By their very nature, forward-looking statements involve risks and uncertainties and may be influenced by factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. Any forward-looking statements made on the call reflect the knowledge and information available at the time of this call.

The company undertakes no obligation to forward-looking statements.

With that, I'll hand the call over to Selwyn.

Thank you, Pamela, everyone, and thank you for joining Medigene's Full Year 2023 Earnings Call. I look forward to reflecting on the past year and its achievements as we continue Medigene's journey and as we look ahead to all that we aim to achieve in 2024.

Cancer remains a leading cause of death worldwide. Over the past decades, cancer research efforts have contributed to major breakthroughs, arguably, most notably in immunotherapy, impacting patients' lives in a profoundly positive manner.

Despite these advancements, significant challenges remain, in particular, regarding treatment options for patients with solid tumors.

Cell therapies such as T cell receptor engineered T cell therapies or TCR-T therapies for short, represent one of the few promising treatments with the potential for a curative therapy for solid cancers. At Medigene, our work starts with the patient in mind.

With our comprehensive expertise in T cell immunology, specifically TCR-based therapies and decades of research and development of our own innovative end-to-end platform. We aim to unlock the immune system's potential to achieve curative therapies for patients' solid tumors.

Medigene's proprietary end-to-end platform provides a differentiated approach to addressing the key challenges in developing effective, safe and durable TCR-T therapies, and thus, ultimately advancing cancer patient outcomes. Starting with ensuring treatments target the cancer optimally.

Our technologies allow for the engineering of optimal affinity, specific, sensitive and safe, so-called 3S T-cell receptors or TCRs for improved safety and efficacy.

Secondly, solid tumors have a highly immunosuppressive tumor microenvironment that significantly inhibit the body's T cells to destroy cancer cells. Our armoring and enhancement technologies, such as our exclusive PD1-41BB, costimulatory switch protein, or CSP, enhances the activity and persistence of the TCR-T cells in the hospital tumor microenvironment, resulting in better efficacy and sustained anticancer immune responses.

Finally, cellular therapies are living treatments and are highly complex to produce the optimal product. Our drug composition has been developed over many decades and is tailored through an accelerated automated manufacturing process, which reduces time to treatment in patients and generates the optimal cell composition of our TCR-T therapy to improve clinical efficacy, safety and durability of the treatment.

Taking a closer look at our End-to-End Platform. This is the basis of our differentiated approach and combines multiple, exclusive and proprietary technologies to create best-in-class differentiated TCR-T therapies in specific development modules.

The platform includes multiple safety-focused technologies here in green, efficacy enhancing technologies in orange and development optimization technologies designed to make development process more efficient, high quality, cheaper and faster in gray.

Examples of such technologies across each of our module include TCR generation and optimization technologies such as the allogeneic HLA or Allo-HLA, TCR Priming as well as Precision Pairing. And TCR-T therapy armoring and enhancement technologies, such as, our PD1-41BB and CD40 ligand CD28 costimulatory switch protein, and our inducible Medigene T cell receptor to address challenges in developing effective, durable and safe TCR-T therapy.

Our platform is dynamic and constantly being expanded with new intellectual property and technologies and our partnerships with multiple companies, including BioNTech and 2seventy bio continue to validate the platform value. Reflecting on our achievements in 2023, I would like to mention, how proud I'm of all my colleagues at Medigene and the execution and delivery of all our commitments.

Over the past year, we have prioritized the programs that we believe will create the most value for patients and shareholders with significant progress in further developing our End-to-End Platform and advancing our product pipeline. In terms of platform innovation, we have significantly advanced our E2E Platform.

We've been able to improve clinical efficacy, safety and durability of our drug product with our accelerated 6-day automated GMP manufacturing. This includes a quick drug product generation with high proportion of CD8-positive cells.

We also acquired the exclusive license for the CD40 ligand, CD28 costimulatory switch protein, which expands our suite of product enhancement technologies within our platform and joins our existing PD1-41BB costimulatory switch protein as a technology that has the potential to further enhance the antitumor activity of our TCR-T cells and improve their ability to overcome the immunosuppressive solid tumor microenvironment.

Additionally, we added the next generation of the [ Expitope ] safety screening tool. Antigen selection and assessment of on and off-target specificity is a major challenge in generation of TCR-T therapies.

To make such selections and reduce off-target toxicity, the identification of [ suitable epitopes ] is the first and most critical step in the creation of our best-in-class TCR-T therapies.

The advancing of our E2E Platform allowed us to extend and strengthen our patent portfolio with new technologies to expand existing patents into additional jurisdictions, such as our costimulatory switch proteins for use in multiple cell types as well as their geographical expansion. As of December 31, 2023, our IP portfolio consisted of 112 issued and 131 pending patents.

In 2023, we also made progress on expanding our platform into new TCR-based modalities and more on that later in the presentation.

In terms of our pipeline expansion and advancements, for our lead program, MDG1015 –is our third-generation NY-ESO TCR combined with PD1-41BB. Here, we made substantial progress in advancing this towards a first-in-human clinical trial.

We have selected the CDMO or contract development and manufacturing organization, [ AGT ] Therapeutics and CRO or Clinical Research Organization, and that we will work with as we look to bring our lead program into the clinic.

Additionally, we have positive interactions with regulatory authorities in both the U.S. and Europe.

We remain on track for submitting an Investigational New Drug application to the FDA and a Clinical Trial Application, or CTA, to the European Medicines Agency, EMA, for this program, with the plan to enter the clinic at the end of 2024, subject to financing.

Importantly, we recently announced that we aim to recruit patients with synovial sarcoma, myxoid round cell liposarcoma, ovarian cancer and gastric cancer as part of our first Phase I clinical trial, thus targeting both rare tumors as well as those which are more commonly seen.

In addition, we successfully broadened our pipeline into neoantigens, which are oncogenic driver mutations that alone are sufficient to initiate and maintain cancer, with KRAS as one of the most frequent neoantigens in solid cancers.

As part of our lead program, MDG2011, which is a KRAS G12V-specific T cell receptor targeting HLA-A*11. This is combined with our PD1-41BB costimulatory switch protein of which -- and we generated 3 outstanding T cell receptors, all of them exceeding the company's selection criteria for highly specific, sensitive and safe TCR.

We were then able to select one of these TCRs as a lead to advance the preclinical stage. Our follow-on KRAS programs, MDG2021, MDG2012 and MDG20XX enables us to offer multiple TCR candidates and potentially provide products for a much larger patient population with a variety of KRAS neoantigens and human leukocyte antigens in diverse solid cancers.

This is our library approach.

In partnering to support the development of our research projects, we have established a partnership network of both biotechs and renowned academic bodies. In 2023, we entered into a joint collaboration with the U.S.

National Cancer Institute to assess the potential of Medigene's proprietary T cell receptors for use in new cell constructs in the treatment of solid tumors.

Our existing partnerships with BioNTech and 2seventy bio are progressing well with a number of undisclosed targets on the go with BioNTech currently. We received a milestone payment from 2seventy bio related to the MAGE-A4 target licensed to them.

We extended licensing for our costimulatory switch proteins, PD1-41BB and CD40-ligand CD28 for use in additional cell types and in Chimeric Antigen Receptor T cells or CAR-T therapies, broadening the application scope of our innovative technologies in immuno-oncology as well as expanding our IP portfolio.

Finally, on a corporate basis, we extended our cash runway through efficiencies in our cash spend and portfolio prioritization and expanded our research coverage from investment banks. We also continued to strengthen the executive leadership team to support the execution of our corporate strategy.

Coming to our pipeline. MDG1015 is our lead program.

Following recent positive EU and U.S. preliminary regulatory interactions, we remain on track for an IND/CTA approval in the second half of 2024.

Subject to financing, we expect to initiate a first-in-human trial for MDG1015 by the end of 2024, targeting patients with multiple solid tumors, including gastric and ovarian cancer and synovial sarcoma, myxoid round cell liposarcoma.

Our second TCR-T therapy program is MDG2011, a best-in-class third-generation TCR-T therapy, targeting KRAS G12V HLA-A*11 again armored and enhanced by the PD1-41BB costimulatory protein. Encouraging first preclinical data on MDG2011 was presented at the ESMO Congress in 2023 as well as the SITC Annual Meeting in 2023.

Lead selection for MDG2011 was announced in the third quarter of last year. We will progress the remainder of our announced KRAS program, namely MDG2021 and MDG2012 towards IND/CTA-enabling work and lead selection, respectively, over the next 18 to 24 months.

Consistent with our previously announced strategic pivot in November 2022, away from hematologic cancers to focus on solid tumors, the company has evaluated the possibility for partnering MDG1011 with interested parties. A lack of interest from potential partners to drive the program forward indicates that the competitive landscape has changed.

We have, therefore, decided to discontinue the active partnering of MDG1011.

As mentioned previously, our partnerships with BioNTech and 2seventy bio for the MAGE-A4 and PRAME TCRs we have licensed, respectively, continue to progress well and provide crucial scientific validation of Medigene's technology and assets. As these partner programs move into clinical development, they will further provide clinical proof of concept alongside Medigene's owned program.

Coming on to partnerships and from our biopharma partnerships with BioNTech since the commencement of the agreement in February 2022, this has been making great progress with work progressing now on multiple potential targets. The 2seventy bio, as previously communicated, the research term of our partnership was concluded in accordance with the contract in 2022.

Upon achievement of contractually defined targets, we remain eligible for milestone payments and royalties as per the existing agreement. To that end, in December 2022, 2seventy bio announced a strategic partnership with JW Therapeutics, which triggered a $3 million milestone payment from 2seventy bio.

The payment was booked in 2022 and received in January of 2023. In November 2023, 2seventy bio announced the initiation of an investigator initiated study in China of 2seventy bio's MAGE-A4 T-cell receptor program in solid tumors, and this was anticipated by the end of 2023.

The trial is led by 2seventy bio's partner in China, JW Therapeutics.

And Medigene expects to receive further milestone payments based on the successful conduct of this trial. Separately, 2seventy bio recently announced it was focused exclusively on the commercialization and development of Abecma in partnership with Bristol Myers Squibb.

And as a result, it will sell the research and development pipeline, clinical manufacturing and platform technologies in oncology and autoimmune disease, which includes Medigene's MAGE-A4 TCR to Regeneron Pharmaceuticals to form the Regeneron Cell Medicines business. The transaction is expected to close in the first half of 2024, subject to certain closing conditions.

As previously communicated, due to the prolonged funding and development pause by Hongsheng Sciences that included Medigene's NY-ESO-1-targeted TCR, the parties mutually agreed to terminate that partnership agreement as it relates to the NY-ESO-1 asset in the third quarter of 2023. Subsequent to the end of the reporting period, Medigene and Hongsheng Sciences have mutually agreed to terminate the remaining framework agreement of the partnership.

Those assets previously under this agreement have been returned to Medigene for potential expansion into our pipeline.

In April 2023, Medigene entered into a Cooperative Research and Development Agreement, or CRADA, with the United States National Cancer Institute headquartered in Bethesda, Maryland, to evaluate the use of Medigene's proprietary T cell receptors in novel cell constructs. Through this collaboration, the company expects to expand the range of tools and technologies in its E2E platform and expects that this could lead to opportunities to use multiple immune cell types in addition to Medigene's current work with T cells.

The development of our research products is also supported by our long-standing partnerships with academic institutions, notably the Helmholtz Munich and the Technical University Munich. As innovation remains alive by the both big pharmas and biotechs, we remain very active in developing new partnership opportunities, to maximize the value of our current and future assets and technologies, and ultimately deliver novel and differentiated TCR-based therapies to patients.

I hope to provide further updates during the course of 2024.

I will now go over the financial data for 2023. Our [ 2022 ] revenue consists of income from service contracts with partner companies, pro rata revenue recognition from upfront payments received in the past as well as milestone payments.

Revenues amounted to EUR 6 million, a decrease of 81% compared to EUR 31.2 million in 2022. The decrease in 2023 is due to the comprehensive TCR-T and technology partnership with BioNTech concluded in February 2022 as a result of which EUR 20.9 million in product revenues were generated in 2022.

In addition, revenues from the partnerships with 2seventy bio and Hongsheng Sciences were also generated in 2022.

The cost of sales in 2023 amounted to EUR 1.6 million, a 14% decrease compared to approximately EUR 2 million in 2022. The cost of sales included expenses incurred to generate sales revenue, and this mainly relates to research and development activities for our partner company.

General and administrative or G&A expenses were EUR 9.3 million in 2023 compared to EUR 7.7 million in the prior year. This 21% increase is mainly due to higher personnel expenses as we supported our strategic efforts to advance all our scientific and partnering activities.

Research and development or R&D expenses decreased by 59% to EUR 11.5 million compared to EUR 28.5 million in 2022, despite the increased work associated with new preclinical development activities. The significant decrease in 2023 was mainly due to depreciation related to the full impairment of the drug candidate RhuDex, which was out-licensed to Dr.

Falk Pharma in the amount of EUR 20.4 million in 2022. R&D expenses incurred in the collaboration with partner companies were reimbursed by the companies.

These reimbursements are recognized as R&D payments in the immunotherapies revenue.

The company's EBITDA decreased by EUR 28.2 million from EUR 13.1 million in 2022 to negative EUR 14.7 million due to a product sale in the previous year as part of the partnership with BioNTech. The net loss for fiscal 2023 increased to EUR 16.2 million compared to EUR 8.3 million in 2022.

This increase is due to the prescribed partnership with BioNTech in February 2022 and the associated revenues. Cash and cash equivalents amounted to EUR 8.7 million as well as time deposits in the amount of EUR 8 million, totaling EUR 16.7 million as of December 31, 2023.

In comparison, EUR 33.2 million as of December 31, 2022, with a cash runway extended into April 2025, previously first quarter of 2025.

Based on these results, I'm pleased to report that we have met our financial guidance. As previously communicated, the group's revenue as well as R&D costs are the key performance indicators as Medigene's core activities are related to R&D.

In addition, liquidity of the group and of Medigene AG is used as a key performance and management indicator.

Liquidity is described as cash and cash equivalents and fixed term deposits and is expressed as a cash reach in the planning period. This leads me now to our 2024 financial guidance.

The 2024 financial projections include potential future milestone payments from existing partnerships that are highly likely to materialize in the amount of USD 1 million and EUR 2 million, respectively. They do not include potential milestone payments from our future or new partnerships or transactions as the occurrence of such payments or their timing and size largely depend on third parties and cannot be controlled or influenced by Medigene.

As such, the 2024 financial guidance reflects the company's focus and progress in its core immunotherapies business. Based on the above assumptions, Medigene expects revenue in 2024 to be between EUR 9 million and EUR 11 million.

The company expects R&D costs ranging from EUR 11 million to EUR 13 million. And as already mentioned, based on current planning, the company is funded into April of 2025.

The basis of our nonfinancial outlook, 2024 and beyond, which you might be familiar, involves the expansion of our focus into the potential for new TCR-based treatment modalities. This leads us to our corporate vision.

At the core of our expertise and capabilities is our ability to generate optimal TCRs validated by our numerous partnerships. Underpinning this ability to generate potentially best-in-class TCRs is our decades of experience in immunology, T cell biology and cancer biology, which manifests in our proprietary End-to-End Platform.

As such, as we continue to generate these optimal TCRs, we aim to leverage these and apply these into new modalities beyond TCR T-cell therapies where additional value could be created for patients and our shareholders.

Firstly, based on the significant interest in the role, TCR derived off-the-shelf therapies, we'll be aiming to apply our T cell receptors in the form of antibody-based T cell engagers or TCE, and allogeneic TCR-natural killer cells or TCR NK cells, which both have a key advantage of being available to patients without long manufacturing time. We believe that by integrating optimal best-in-class TCRs within these new modalities, we could create highly differentiated therapies for patients.

This is a short to medium-term aim, and we look forward to being able to update you on progress in these new areas.

In terms of our TCR-T cell therapies, to be clear, we remain fully committed to TCR-T cell therapies as part of the range of potential therapies for patients and focused in advancing our lead program, MDG1015 towards the clinic. As mentioned, MDG1015 will be advanced towards first-in-human clinical trials with IND/CTA approval expected in the second half of 2024.

Subject to successful financing, we expect to be able to initiate a first-in-human trial for MDG1015 by the end of 2024. We are also progressing our announced KRAS programs, which will be supported with further scientific data and presented at upcoming scientific conferences in 2024.

We will continue to extend our collaborative approach to R&D, maximizing our existing partnerships and evaluating new partnerships for our technology and assets. Whether through partnerships, licensing agreements or internal development, we will continue to innovate and expand our End-to-End Platform to generate additional value from new technologies.

Again, we have made significant progress here and hope to be able to announce updates to our proprietary technologies throughout 2024.

Finally, with respect to our financial position, and as mentioned before, I'm pleased to confirm that we have extended our cash runway into April '25. We are confident that our current partnerships will continue to progress and that with our expanded approach to TCR-based therapies, that new partnerships will be forged with the potential to support continued investment in our research and development strategy.

Despite this strong position, biotechnology is a capital-intensive industry, and we wish to be fully prepared to raise additional capital to extend our cash runway into 2026 and beyond. As such, we continue to manage expenses prudently, while exploring financing opportunities.

We aim to be ready to execute a capital raise, allowing us to have sufficient capital to fully achieve our medium- to long-term corporate objective.

So in summary, the fiscal year 2023 has been incredibly successful for Medigene. We remain fully on track in the first few months of 2024 on the successful execution and expansion of our strategy and the delivery against our vision to develop differentiated, best-in-class TCR-T and more broadly speaking, TCR-based therapies for patients with solid tumors.

Thank you, everyone, and this marks the end of today's prepared remarks. At this time, I'd like to open up the call for questions.

This is Sara on for Joe. We were just wondering regarding the end of the MDG1015 trial.

I know it's not slated to start till the end of the year. But do you have any insights into -- I guess, guidelines for any initial data readout we could expect from that study?

Would you be looking for like an interim readout that we could expect maybe early '25?

Thanks for the question, Sara. It's Selwyn here.

Our base assumption is, again, subject to financing and starting the trial as planned by the end of this year that we would have an interim data readout towards the end of 2025.

Thank you so much, operator. Thank you, everyone, for your time today.

And, I guess, I'll send you all off into a happy Easter weekend. Thank you so much.