Alligator Bioscience (Stockholm:ATORX) Q2 2026 Earnings Call

0:00 Welcome to Alligator Bioscience's interim report call for the second quarter of twenty twenty six. My name is Kjeetha Hague. I am the IR and communications manager at Alligator, and I will be introducing today's call. With me today is our CEO, Weinhold, and our CFO, Johan Gilius. 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 and a function of this chat or you may email them to iralligatorbioscience dot com. As you know, Alligator Bioscience is a publicly listed company, and I would like to note that today's presentation may include forward looking statements.

0:50 Please refer to the disclaimer on this slide and to the next slide for the whole presentation. And with this, I would like to turn the call over to you, Sara. Thank you, Perja. And once again, welcome to this Alligator earnings call Q2 twenty twenty six. We have some Wi Fi issues here at the Medical Village in Lund. So I will already now apologize if the line is unstable or there any other sort of technological fallout during during today's meeting. With that out of the way, let's go to the next slide, Geita. Thank you.

1:39 So a couple of of key updates from from the company. In April, we saw data from mitzalumab investigate initiated study presented at the Congress of American Association of Clinical Re of Cancer Research. And at that meeting, also, our the the molecule called HLX22, which is developed by HLX-twenty two and from partly derived from HLX-twenty two that we'll talk more about later today. Data on that was also presented.

2:25 Then in May, HLX, or HLX reported that HLX-twenty two announced follow-up data beyond the thirty nine month in gastric cancer, something that Alligator also reported. And later in June, the company also reported that all patients or that the first patients had been dosed in all of the phase three regions on the ongoing study with HLX22 in gastric and gastrointestinal junction cancer, two important milestones for HLX22. Why is that important? I've got a significant event, reported from Alligator after the quarter. In, July, we reported that we will refocus, on our financial interest in h a HLX twenty two and that we will discontinue independent development of metazolumab, and that the remaining, operations of the company will be wound down. And 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.

3:57 Also in July, we announced the rights issue of units to approximately 250 $225,000,000, with an average loan of 19,000,000 to secure the continued operation of the company. And I can tell you, as you probably saw earlier today, that today's extraordinary general meeting approved that rights issue and at the same time also approved a share capital reduction. So 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 may have, towards the end of the call.

5:00 As you are well aware, we have developed, metazolumab in first line metastatic pancreatic cancer, a disease that currently is being treated with chemotherapies in first line. The development rationale for metazolumab and OPTIMIZE one study that we have been reporting data on and discussed here several times was to combine metazolumab with chemotherapy in first line. And as you all know, we have shown some pretty encouraging data in that setting. Now in parallel with Alligator developing metazolumab, a number of companies have been developing a new broad class of small molecules, orally available molecules, tablet based molecules, targeting a mutation in pancreatic cancer called KRAS.

6:05 It's approximately ninety percent of the patients with KRAS that has 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, and 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 a combination of miso celimab and chemotherapy. If we change to the next slide, I think what has happened next slide, please, 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.

7:21 If we just focus on the left hand side of the slide here, first we saw the paradigm changing phase three data from the molecule that called diraxonezib 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 had been seen with chemo alone. Therefore, setting a new regime, for KRAS inhibitors in second line. A significant medical achievement and significantly good news for patients suffering from pancreatic cancer. What we have then seen since then, latest at ESMO GI, so 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.

8:29 And at this at the same conference, we also saw data from a more specific molecule from Revolution Medicine called saldoranosib combined with FOLFIRANOX in first line, and these data showed that that these patients, almost, a hundred percent of the patients were actually, benefiting clinically, from this. So what this means for Alligator, what it means for patients 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 dirazantinib to be approved already this year in The US at least. And then in in three to four years, probably a similar change in first line either to revolution medicines drugs or via those drugs or via some of the other players that are now starting phase three studies in first line with KRAS inhibitors.

9:34 So a significant change, expected 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. First of all, the industry, itself refocuses towards this new drug class. And 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.

10:33 If we then talk specifically what this means for Alligator, it's very clear from our dialogues with our key opinion leaders, so leading physicians treating patients with metastatic pancreatic cancer both in Europe, in U. S, 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 inhibitor based backbone. So of course, a significant change there. That also means that the commercial rationale for developing metazolumab in combination with FOLFIRINOX as we were preparing to start a phase three for, that commercial rationale do not do no longer exist.

11:27 Hence, the rationale for the registrational study in this population is no longer relevant. We don't want to spend with not prudent or rational to spend money on developing a drug in a population that will not exist once the drug is ready to get approved. So here the prudent business decision is of course to discontinue registrational development for metazolumab in combination with chemo. We still believe that a combination of metazolumab and a KRAS inhibitor remains both scientifically and also most likely clinically relevant. We believe that some of the longer term effects we see with metazolumab will be highly relevant in combination with a KRAS inhibitor, whether in combination with chemotherapy or alone.

12:29 The fact is that the next step in that development will be potentially a phase one study followed by a randomized phase 2b study, I. E. A clinical undertaking on par with what we have done with metazolumab in OPTIMIZE one. And, unfortunately, with our available cash, with our current market cap, we do not see this as an undertaking that that Alligator can do, without a partner. And 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 metasatinib, I. E. Discontinue the preparation for the phase three study.

13:37 We have a number of IITs investigator initiated trials. So remember, these trials that bear no cost for Alligator, we have a couple of those ongoing plus randomized phase two study in in in in the in the planning. We are reviewing those opportunities and and the cost benefit of these these programs. These But our primary focus, as you can see, the next bullet point here, is to preserve the royalty potential of HLX twenty two 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.

14:32 So 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 we'll continue working that in in the coming period. And then we will, of course, continue to seek to divest metasalumab as a broader immune oncology asset within within the coming month. And and the the press release of of a couple of weeks ago have already created some incoming interest from from companies seeking assets outside of of metastatic pancreatic cancer.

15:19 And that is, of course, discussions that we will that we will engage in as we go as we go along. So external factors, has eroded the commercial rationale for continuing to develop metazolumab in combination with Fotiridox. We have decided that we are not able, financially to pursue what needs to be done for developed metazolumab in combination with the RAS inhibitor. Therefore, we have continued all further independent development. We are reviewing ongoing IITs, refocusing on preserving the royalty potential of HLX twenty two in the company, and then wind down remaining operations and organizations to reduce the cost base in the company.

16:14 Can I have the next slide, please? So just to reiterate, these points, the principal value driver in Alligator now is our financial interest in HLX twenty two, 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 Health and Use 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 HLX twenty two, and that is without any development cost or other cost to Alligator.

17:14 We are reducing the cost base. I already told you that we are discontinuing in develop independent development with niselimab, including the phase three preparation. We are starting to reduce organization to the minimum that is required to oversee the HLX 22 program and abide to the legal obligations we have as a listed company. And 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. You know, we have a number of of other assets, metasalumab forty sixty six, a bispecific antibody.

18:01 We have a five two seven, a co development with with Seattle based at. We will, of course, review the strategic opportunities of of those assets and are pursuing our opportunity to divert divest these as soon as as possible to further minimize any cost even though the cost associated with these assets is minimal, so more to secure any potential long term upside for Alligator and its investors. Next slide, please. So if we look at HLX 22, again, just to reemphasize the point that this is now the main value driver of Alligator and and sort of the main part of of the investment hypothesis.

19:06 In Alligator, it's a novel HER two specific monoclonal antibody. It's differentiated from other HER two antibodies that it increases the so called internalization of of HER two significantly over what what drugs are already there. And and the current treatment regime together with tratuzumab and chemotherapy is being first and foremost explored in gastric cancer, and I'll come back to that. The molecule originates from a discovery collaboration between Alligator's subsidiary, ATORX Therapeutics, and Korean Epclone.

19:53 And and the molecule is now out licensed to, developed, controlled by Chinese head use. And if you really wanna dig into the details, you can see that it actually got an I n I INN name recently. So the molecule is HLA 22, but also duped Jesus. Duped. Yeah. So let's let's stay with the HLA 22. How are Alligator's commercial interest in this? We own we are own 35% of Airclone's revenue from 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.

20:55 We estimate that this will give or amount to a royalty income on an annual basis to Alligator between 150 and 400 and and 50,000,000 SEK a year or or between 15 and $45,000,000. 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 HPLX twenty two. Other companies might have other estimates that we are not commenting on.

21:43 If we take the next slide, when do we see this come in? What timelines do we do we see for gastric cancer and gastrointestinal and gastroesophageal junction cancer. First of all, 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 three 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.

22:33 It may be earlier. It may be later. And based on our 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 the head users seen with the molecule and the analysis of the molecule is that the phase two study showed eighty percent reduction in the risk of progression of death versus standard treatment in in this gastric cancer indication. That data was announced now announced at at ASCO last year. And and as I said, in in May this year, reported follow on data beyond thirty nine months of that study indicating continued extension of the progression free survival of these patients.

23:31 So we really expect this drug to be potentially practice changing in this indication. Moreover, HETLIOZ is developing the drug in HER two positive breast cancer in two phase two, three studies, one in recurrent and one breast cancer and one in in in so called neoadjuvant in the neoadjuvant setting is also expected to start shortly. So long progressed phase three study in gastric cancer and gastrointestinal junction cancer and breast cancer coming up as a as a second indication.

24:21 So if we take the next slide, Claire. Yeah. I I think for now, we will we will, hold here and, and and hand it over to, to your hand. Thank you, Soren. A couple of slides regarding the financials for the q two. We have general operating expenses as expected, and they are also done mainly around the the the the the operations that we have in in the in the in in the learned office. But we also have had some cost as for the CMC cost, the clinical cost for the now discontinued phase threes started during the first and now in particular the second quarter then that we now have discontinued them.

25:12 What we also then you need to need to note is that we have not made any provisions for the cost that will come when as part of the wind down of Mitasalemab, etcetera. And then that will be made in the Q3 or maybe Q4 depending on the different requirements and the cash flow for those provisions will then be primarily during Q3 and Q4 twenty twenty six, but can also then flow over to '27. So let's move over to the next slide, please, Geita. And as we then have expected, we did quite a lot of wind downs when we did the restructuring '24. We would have had an impact on '25 numbers, and we were then expecting that we will come into general operating expenses between 15,000,000 and 20,000,000.

26:05 And I guess we're now trending below that estimate. But on top of that, of course, you need to need to add the CMC in clinical cost for the phase three preparation that I just mentioned. And then end of June, we had 16,600,000 in cash, and then we raised the the bridge financing here in in July then to be able to, you know, cover costs and and and other things for the the quarter that we're currently in, and that will be a part of the repayment. Part of rights issue will be the repayment of the bridge loan then. So with that in mind, then let us move over to the rights issue that will come here in shortly. Next slide, please. So a couple of key key aspects then.

26:52 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 scribe for one unit. And one unit will then include two ordinary shares and one serial one warrant of the series t u 15, another one for the series t t u 16, then both of them are are given to you by free of charge then. So the price for the subscription of the unit will be SEK per unit, but it which which corresponded to two per ordinary share. And if everyone all of the units are subscribed, there will be 3,000,000,000 more units into the company then, equivalent to 6,000,000,000 shares then. And 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 September 2 next week.

27:57 And then there is a subscription period that goes from the fourth to the September 18. Please be aware that, some of the banks have shorter deadlines than the September 18, so you you might need to, you know, subscribe prior to the September 18. You can then either buy or sell, your your unit rights then during the period for September 4 to the September 15. And a little bit less than a week after that, we will have the announcement of the outcome of the of the rights issued on twenty second second of September is tentative date. And the use of process would be like following them. We will, as I mentioned, repay the loans. We will then preserve the future royalty potential of HLX 22 as mentioned by then, and we will have a very lean organization once the wind down is is completed.

28:50 There will be a very, very lean organization to to to maintain the obligations as a listed company primarily. And, of course, there are costs that associate with the wind down primarily than when it comes to CMC and clinical cost, but and also then the organization in general, the people that then unfortunately to leave the company, but also the other costs that we have obligations to to set to to settle them. And with a fully subscribed rights issue, we believe that we can have the the money until the commercialization of the HLX 22 as mentioned by just recently. But of course, the runway will be dependent on the outcome of the rights issue then. And we will then, in the meantime, in the short term perspective, we'll look through some of the short term strategic opportunities for Metalsa and Lab, but we're not prepared to do any major investments to see if we can actually then do this. It has to be at a very low cost spend for us then as it's important to preserve the cash for HLX 22 then.

29:58 So with that in mind, Sauron, I will hand up hand over to you again. Thank you, Johan. Maybe there is one more slide. Yeah. So just to summarize, what what we have, what we have, talked about today that HLX twenty two 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, and we are only privy to otherwise public information on the drug. I think that's important to note.

30:51 And 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. But global phase three study 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 accumulated financial interest of Alligator in the asset is up to 1.75% of the net sale, and we believe that that will amount to somewhere between 150 and 450,000,000 seek per year to into Alligator.

31:57 We have announced and today got approved rights issue of up to 125,000,000. And as Johan said, fully subscribed that rights issue will take us all the way to the launch of HLX 22. And to also to ensure that we are reviewing and reducing the cost base to a minimum, allowing us to monitor HLX 22 program and, of course, abide to all our legal obligation as a public industry company. Mirzazolumab here 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.

32:45 We have other assets and technologies that we will we will retain for the time being and otherwise find strategic opportunities for these molecules. And we will continue to evaluate the ongoing investor 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. And there's, of course, also a general clinical interest and rationale that needs to be reviewed when when we are looking at that. But that's all things and processes that are underway.

33:42 And, and, again, we believe that, that the rights issue that that is has to been announced today that if we look at the at the price the pricing of that rights issue versus the potential financial upside in the h l a 22 program is a very interesting financial opportunity. With that, I will turn to to today's questions. As Katie said, you could 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. So let me see what if there is already a couple of of questions to start out with.

34:34 We have a a couple of 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, so 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 q two report where you where you can look up, up the data. But if if we put the two indications together, gastric cancer and gastric iso fecal junction cancer or GEJ, we see approximately one million, one point one million new cases a year with the vast majority being gastric cancer.

35:27 That's probably, eighty five, ninety percent of the cases. Of those, approximately between forty, forty five, fifty percent reached the metastatic state. So that's the state that is treated here. And of those patients, approximately between twenty and thirty patients are HER two positive, meaning that we have approximately, on a global scale, a 100,000 patients that are eligible for treatment, in the first line metastatic setting in these indications. These the number of HER two positive patients varies a little bit between between various various regions with with East Asia having a higher abundance of of HER two positive HER two positive patients.

36:33 So that gives a relatively robust patient pool. And without going too much into the pricing, we believe that that number of patients and this indication and the treatment timelines that we have seen, from the from the from the phase two study, at least votes for HLX twenty two being a blockbuster, if not a potential double blockbuster in in gastric, cancers alone. And 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.

37:26 I hope that answered that question sufficiently. Otherwise, you can can can see more data in in the q two report. Then a couple of questions from from Red Eye 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. And this question came before the meeting. So if that's fair, bring it up again. Fully subscribed. This this rights issue brings us beyond the expected or estimated launch of ATLX 22, I. E, into positive royalty territory.

38:19 A third question here. Are there no ways forward for mituximab? 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 mituximab will 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. So, yes, we believe that that that would be a potential opportunity for metazolumab.

39:09 We know that metazolumab also synergizes with PD-1s and probably all other immune immune oncology agents. So definitely that there should be a place for metasalumab. 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. And, of course, we are doing our best efforts to ensure that that somebody else will take up metasalumab and and give it the chance that we believe that it deserves.

40:06 A related question also from from Adam from Redeye is what's the progress on the ongoing IRTs? We, have a number of of IRTs ongoing. As you know, we don't incur any cost on on on that. We supply the drug. We are reviewing that whether or not to to continue with that and and some of the the the parts of that. And then this 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?

40:52 What are the ethical implications of enrolling patients in a study, with a drug that may or may not be, be be developed further, so on and so forth? And 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. We have, of course and and months. We have, of course, already been in contact with with these, with these, physicians. But let me here reemphasize that the primary objective and priority for the company and for management is to be able to maintain, the HLX 22 royalty interest within the company, and that is where we are, focusing.

41:42 And if there is financial cushion to explore, for instance, a randomized phase two study in biliary tract as we discussed. If that exists and only then will we consider doing that. I 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 more has to No. Than we think. Last chance, that doesn't seem to be the case. Then I will thank you for your attention and bid and you a a good day. There's more information on the on the rights issue on the on our website, and there's more information on the HLX 22 program, in the quarterly report that is also available on our website.

42:47 Thank you very much. Thank you.