Molecular Partners AG (MOLN) 2021 Q2 法說會逐字稿

Good day, and thank you for standing by. Welcome to the Molecular Partners First Half 2021 Results Call. (Operator Instructions) Please be advised that today's conference is being recorded. (Operator Instructions) I would now like to hand the conference over to your speaker today, Seth Lewis, Head of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to the Molecular Partners H1 2021 First Half Results Conference Call. My name is Seth Lewis, Head of Investor Relations at Molecular Partners, and we're joined this morning by senior members of the management team, Patrick Amstutz, Chief Executive Officer; and Andreas Emmenegger, Chief Financial Officer.

We will begin today's call with prepared remarks from management and then move to a Q&A.

Please be aware that the presentation contains certain forward-looking statements, and I would refer you to our website, molecularpartners.com, for our most recent and up-to-date filings and disclosures hereafter. For those of you listening to this on replay, this call was conducted on August 26, 2021.

Thank you all once again for joining us. And at this time, I will turn the call over to our CEO, Patrick Amstutz. You may proceed.

Thanks, Seth, and a warm welcome to everyone on this call. Also from myself, Patrick Amstutz, CEO of Molecular Partners. I'll just add that I have with me also Michael Stumpp for the Q&A Co-Founder, COO and very close with Ensovibep, so the project lead on that.

Before I dive in, just one remark, a bit of housekeeping remark. We just had a fire alarm going on. So if something would happen on the fire alarm side here, I might drop out with Michael, and then Seth would take over the presentation with Andreas, who are at a different location.

So in the next hour, we want to really cover an update from what happened in the first half of this year. The key achievements, obviously, will cover to a deeper dive on Ensovibep have an outlook going to H2 and then open for questions for all of you.

I think the one molecule to really take out is in ensovibep and maybe the slogan is, it's more needed than ever and going stronger than ever. Other than that, obviously, we have many other updates to share, but the focus will be around in Ensovibep, today. I'm now going over to the disclaimer. I will be making forward-looking statements and now reach Slide #3, an overview of the update.

The first part is the R&D here, clearly Ensovibep. And here we have a full cover of Phase I trial, a small inpatient trial that led to the full support of two pivotal trials, EMPATHY and ACTIV-3 and part of this call is really to bring it closer to you how we see that they are different, how both are adding value to our pipeline and to patients.

Next to that, and very important that the basis for this program is that Ensovibep is holding up to all viral variants of concern that we have tested to date. So that gives us hope in this difficult times that we have a drug in hand that will help us.

Next to Ensovibep, we have advanced our immuno-oncology pipeline. We have AMG 506 or MP0310, whatever you prefer, now in weekly dosing in the clinic, and we will, for sure, have data for that and then a discussion with Amgen. We have 317 that should reach the clinic in the coming weeks -- months, and we're very much looking forward to an AML candidate in our pipeline, a Tri-specific Bi-specific, which we will highlight around ASH and at our R&D Day.

Also on the operational side, we had a very strong year. First, we have two new Board members, Agnete Fredriksen, who joins us from Vaccibody. She brings a deep understanding also of the infectious disease space. And Dominik Höchli, former AbbVie employee brings late stage and a commercial mindset to our Board. We were also successfully listing on the NASDAQ, bringing us a bit less than CHF 60 million, and that leads us to a strong balance sheet, and Andreas will cover that in his slides and we are well funded into the second half of '23.

Abicipar, that's our ophthalmology asset that came back -- came just back a few, literally weeks ago. So at this point in time, we're still retrieving data I will call that at this point in time, a neutral position. We first have to understand where we are, then see if there is value and if there is, how we can unlock the value on abicipar or abicipar.

Moving to Slide 4. Slide 4 is the pipeline chart and maybe just quickly highlighting the changes we made: the one is that we are now calling out the two pivotal trials: ACTIV-3 and EMPATHY. And obviously, the other one is that our logo is back on abicipar as we just got back or are getting back the rights as I speak.

Next quick. So now I'm on Slide 5. You see a highlighting of these individual arrows and ACTIV-3 really stand for this hospitalized patient trial. I will have much more time in the next slide to go into that. Here, the trick is that the DARPin has no Fc. We don't expect antibody-dependent enhancement. And in this setting that has been historically difficult for antibodies, many have failed in this early hospitalized setting, we see a real chance for the DARPin.

EMPATHY is our rapid test, rapid treat that the outpatient ambulatory setting, single shop solution ideally subcu. And also there, I will give a short update, as we have now those first not patients but healthy volunteers in our safety trial subcu. 423 is IND-ready, but we have passed the molecule as we see in Ensovibep as the stronger one, and we have added activities to add also a next-generation COVID molecule if need then be -- if mutants would overcome the existing antibodies, vaccines and in Ensovibep.

310, 317, I touched that 310 on weekly dosing, 317 first in human, literally weeks away. AML candidate, very exciting work being done there, candidate selection this year, first in human next year and abicipar, I did explain before.

So let's take a few slides and dive a bit deeper into the Ensovibep story. I guess you might actually know the feeling that you see something coming, and you hope you are wrong. And I think that was the feeling we had earlier this year when we just were, let's say, the data we were seeing from the vaccines was looking too good to be true.

And we thought we cannot stop developing this drug, it's needed. And unfortunately, in this case, our view was right. And as you now know, actually, while vaccines are absolutely needed, they are not a single solution, and we need more than ever a therapeutic approach to COVID and one that is available on the whole globe.

I'm turning to Slide 7, and that's really highlighting that. First of all, let me point out, I'm a big (inaudible) vaccine. I'm vaccinated myself. I would advise everyone to get vaccinated. And still, there is a plateau in vaccination in also the developed countries. Less developed countries, it's difficult to get the vaccine. And that we now see the variant coming and the vaccine protection going down, the numbers of infection are going up dramatically and also the hospitalizations are going up. So at this point in time, it means full force on go, on Ensovibep as the vaccines are integral part as our masks and social distancing but also therapeutics are needed in this situation. So let me first frame where we are aiming to develop Ensovibep.

I'm on Slide #8. To the left-hand side, you have the Prophylaxis, and I count vaccines there, I count masks there, distancing and also a few antibodies are being developed for -- in the prophylactic setting.

On the right-hand side, you have the Intensive Care Unit, where likely the virus is not driving the disease anymore. It's maybe more autoimmune, overreaction that is then really the problem. So targeting the virus there might not be ideal.

In the middle, you have the two settings, that what we call Outpatient or Ambulatory or the early hospitalized setting. The outpatient setting is where the antibodies have shown good results and are being used. And I think here, we want to be definitely, one of the pack holding up against the variant as some antibodies has lost activity and with the option for a subcu small volume injection being able to do the rapid test and rapid treat paradigm, making us the treatment of choice.

In the hospitalized setting, that's where most antibodies have actually failed to go through futility in the ACTIV-3 trial and very likely because, yes, they are helping the patient, but at the same time, they were also causing inflammation leading to a net 0, maybe even slightly negative result for the patient.

As DARPins have no Fc, we expect not to have the ADE effect and with that, we hope to see net positive in early hospitalized patients.

I'm now moving to Slide #9. That's an overview of Ensovibep for those who don't know the molecule. What's shown here is a cartoon from a video that will be going live in the coming weeks that we have made with Novartis explaining the mode of action and the application. Here in black is the surface of the virus. In orange, you have the viral spike protein. And then in blue and purple that's the DARPin. You see three bluish DARPins binding the RBD, the top of the spike protein. These are all different. And with that, they reach very high potency and with the team work they are doing, they protect from viral mutations. And as such, we still see full activity on all variants tested.

The two more purple DARPins bind the human serum albumin for the half life. And this we could show in a Phase I and also in the phase -- small Phase II trial. So we have now half-life established in healthy volunteers, but also patients. It matches up to around two weeks, and that's all we need to have a single shop solution in the applications that we're going for.

Also, our manufacturing team did obviously a lot of work, and we have now a formulation of 100 milligrams per ml that is stable at 2 to 8 degrees, and that is the basis for a really global product that we can also ship to less developed countries.

I'm moving now to Slide #10. Here, that's an overview of the Phase I. We started with the I.V. did, we did then I.V. push or bolus injection, so the same amount is given in a much shorter time in five minutes. Those two parts are completed, Ensovibep is well-tolerated, safe and can move forward.

The subcu patients that have actual patients, healthy volunteers have actually been started to dose that literally happened this week. and we are on track to really then finish that safety trial to then enroll also a large pivotal trial with a subcu formulation. The half-life that we have matured so far, as I said before, is two to three weeks, very much in line with our approach and what we need.

Now this work was done in healthy volunteers, and that's why we also added a very small Phase IIa trial that is shown on Slide 11. This now is an outpatient setting. These patients have symptoms. They had a PCR test, and they had a Rapid Antigen Test. And the Rapid Antigen Test, we're also using in the Phase III or II, III because we believe it will give us a higher starting amount of virus that we can also then clear well. Also in patients, and obviously, now these are patients with the virus in Ensovibep is well tolerated. It is safe, and we also could confirm the half-life. And so kind of if the virus is there or not, in this case, does not make a difference and this is confirmed.

Obviously, we have measured the viral clearance and what you see here is the 12 patients, 6 at 225 milligrams and 6 at 600 milligram. And you see a roughly 4 lock clearance over a bit more than a week, which is expected. And I want to point out that this year, we don't declare as activity or proof of concept. It is an uncontrolled trial. This is massive validation.

Obviously, the data look as good as they can but -- and give us a good feeling, but in no ways what we call this activity. This is just method validation and led us to the decision, full steam ahead in EMPATHY and then also in ACTIV-3 and these methods are all used in the EMPATHY trial.

That brings me to Slide 12. I just want to quickly outline once more what EMPATHY is. EMPATHY is the trial we're running with Novartis, rapid test, rapid treat paradigm. We are planning a full interim analysis after 400 patients. We're recruiting very strong, and we feel confident that we had to have all the results and the readout still this year. This will then lead to the full Phase III, while the interim analysis can lead to a possible EUA. At the interim will be also looking at the dose levels. These are 75 to 25 and 600-milligram and then once we know more about the dose, we can also gauge into the subcu trial where the safety is being established as I speak.

ACTIV-3 is a bit different here, we are not in a Phase II setting. We're in a Phase II, III and the analysis after 300 patients is a futility analysis to directly move on to the 1,000 hospitalized patients. Here, the dose is the higher dose, the 600 milligram. This trial is not run by us. We are donating the drug to the NIH, and this is a master protocol actually going on a global level.

The global level is actually shown on Slide 13. What you see here is we're in all hemispheres in all -- in many different countries. And you see EMPATHY in red, you see ACTIV-3 in blue and then especially the U.S. is in both colors as both trials are running there. And you also see a few yellowish colored countries where we are about to start up the trial, and we're also adding more countries to the goal.

What you see here is really we'll try to be as global as we can. We will try to catch as many different variants as we can and also the peaks of the waves, which means that we can recruit even if the wave is down, let's say, in India and you're not recruiting, you might be recruiting in Argentina or in the U.S. or in South Africa, which is now part of our strategy in the whole setup of this trial.

If you do one quick more, that's kind of showing you the daily cases over actually almost the last year, and you also see those peaks. And we had a few weeks ago announced a delay of maybe 6 to 8 weeks on this program. And this delay came from a slow start in May, June. And you see that on this chart that South Africa and U.K., but also the U.S., May, June, there was not many cases. Now the case numbers are going up, and we have the recruitment speed higher than we had prognosed, and we're actually catching up on those time lines. And for us, and maybe our investors, most importantly, the medical need is going up and the pull for the drug is going up. So the market is growing. The recruitment is as fast as it can be. And I think everything, as I said in the beginning, is full for forward and Ensovibep going stronger than ever.

The Slide 15 is a summary of the work of the last half year, which shows you how we are active on the variance. I'll focus first on the table with the green boxes. There you see the reference that's a 1 nanogram per mL inhibition of the wild type. And you see those numbers go maybe up to 6.8 but mostly they're in the -- or maybe 8.1 I see there. So -- but they're always below 10.

The number where you would say you're losing activity for a reference is 100. So we're still a huge way off to losing activity, and this is on all variants tested. Unfortunately, this is not true for all antibodies that's shown on the right-hand side, where Ensovibep is in the classified as in the antivirals, while some of the antibodies as you will have known and followed have already lost quite a bit of activity and they are not helping any more showing how vulnerable we can all be to these treatments and also underlining how important it is that we don't stop and really push forward with the development of Ensovibep.

With this, I will pause, and I will hand over to Andreas to give us a financial update.

Thank you, Patrick. I'm Andreas, the CFO. And with that, I run you through the H1 numbers and also provide you the guidance for the full year. I focus on the key figures only. There are more details available in the appendix of the presentation, which is also available on our website.

I'm now on Slide 17 with some financial highlights, which you also find on the press release. There is nothing surprising in our H1 financials. Overall, our investments and the use of money are in line with our plans and the guidance provided. We completed the strategic listing on the NASDAQ Exchange as Patrick was for saying and combined also with a smaller, I call it, tactical capital raise of around $64 million or around CHF 59 million in gross proceeds, and this represented around 10% of our issued shares.

With that listing, we broadened our access to the capital from the global, I call it, now more and more global investment community to support our programs and the growing pipeline. With this more raise, we further strengthened our balance sheet. As by the end of June of this year, we had CHF 174 million on the accounts which provides us funding over -- for over two years at least in to H2 '23.

In H1 of this year, we had an operating cash outflow of CHF 52.5 million. And further, I will elaborate on this later. I maintain the financial guidance for the full year '21.

I now go on to next slide 18, with the key figures. They are all given in Swiss francs, not in dollars. There is Swiss francs for dollars, you have to add about say, 10%. In H1, we recognized CHF 4.4 million in revenue, of which CHF 4 million stem from our collaboration with Amgen for the collaboration on our lead IO asset, MP0310 and the other CHF 400,000 stem from our cooperation with Novartis.

Our total operating expense was CHF 39.2 million, which is CHF 8.6 million more than in H1 of last year. The CHF 39.2 million include CHF 3.7 million noncash effective costs. In increased investments are a natural consequence of the progress of the pipeline, both in oncology and in biology. This bottom line resulted in an operating loss of CHF 34.8 million compared to CHF 23.1 million in the year before.

We had a smaller financial profit of CHF 1.2 million, which mainly stems from unrealized translation differences on our cash positions in dollars and euros and bottom line net loss was CHF 33.6 million. And as mentioned earlier, net cash outflow for operations was CHF 52.5 million compared to CHF 27.9 million in the same period of last year.

Compared to a year ago, our cash balance went up from CHF 64 million to over CHF 174 million and this was driven by CHF 80 million equity round in July of last year, CHF 60 million proceeds from the Novartis collaboration and the mid- to high single-digit amount received from the Swiss Government. And just recently, the CHF 58 million gross proceeds from the smaller capital ratio in combination with the U.S. listing.

And to the end of June, we employed 158 full-time equivalents, which is about 10% more than a year ago.

With that I move to Slide #19 with the guidance, as I was saying earlier. So I didn't make any change in the guidance. I reiterate what I -- what we said with the Q1 release. So we continue to expect the total expense in the P&L of between CHF 65 million to CHF 75 million, which includes about CHF 7 million non-cash effective costs.

In terms of cash outflow is this range is about CHF 20 million higher, CHF 85 million to EUR 95 million, which includes CHF 20 million payable to Novartis for the manufacturing of commercial supply, around 50% or to be precise CHF 10.5 million out of the CHF 20 million were already invested in H1 of this year. With CHF 174 million in cash and no debt by the end of June of this year, we are funded into H2 '23 as said earlier, and just to conclude this guidance does not include any potential receipts from R&D partners, which is important to add because we could possibly get CHF 150 billion for the exercise of the option for an Ensovibep rather nearer term, so to say. Again, more details can be found in the appendix.

And with that, I hand back to Patrick to give an outlook for this year and beyond.

Thanks, Andreas, for this concise summary in capturing all those numbers.

Let me now go to Slide #21 and just reemphasize the one message for this call, Ensovibep is going strong and please pointing out that we have two large trials going on that hospitalized and the ambulatory one. I also want to take this slide and with one quick on kind of really use it to show how we are mastering the platform and how we are building differentiation mainly built on the multi-specificity of the DARPin approach.

And now we have not one or two, but we have several different approaches where we found applications that are very difficult to copy with other therapeutic modalities and where we believe we can add unique patient value going forward.

First foremost, Ensovibep cooperative binding, reaching super high affinity and preventing mutational escape. I think it's still correct that there is no multispecific antibody in development, and we're already in pivotal trials, showing how fast robust and also well tolerated, our approach is.

Then we have the localized action, conditional activation of 310, 317, unique approach there, multispecificity on both sides, five, six DARPin domains acting together to not activate immune cells globally, but only locally. Then we have AML where we have a fine-tuned triplet of DARPin binding CD33, 123 and 70 with that targeting the leukemic stem cells opening a therapeutic window and linked to a CD3 DARPin and then HSA DARPin for the half-life. So a massive construct, a lot of engineering and tuning again, very difficult to copy with other modalities.

And just to put out some buzzwords, conditional activation, switch mechanisms programming the next generation of biologics, not just having and but if, when, then. So adding new programming language to our toolbox, we really see a bright future for our pipeline, and we're excited to add more programs also, and that's a little shot out here in virology, where we will give an update at the R&D Day of programs moving forward.

The other point I want to make, Slide 23 is really a big kudos to our team. So we have in the first half of this year, 8 open trials. We have dosed more than 400 individuals around the globe. The trials are really run off by us. Don't think Novartis is doing this alone. We have a obviously a large CRO but we're in the driver's seat with Novartis there and just amazing work done not only Ensovibep also on the oncology side, and this is amazing, and this was abled by excellent team and really using the innovation power of the platform and turning it into patient value in our trials, big thanks for that. And it's amazing to see another key differentiator to many other platform companies here.

With that, I would actually go to the last slide to summarize the key catalysts. I'll go fast here, as I have already said that before, Amgen 506, 310, setting the dose on the weekly dosing scheme. I don't know if we can share the data, but we'll definitely get the data. We're a bit more restricted here sharing data as this is in collaboration. First-in-human on 317 and then nomination of the AML candidate. I have stressed several times the EMPATHY and the ACTIV-3 readout. These are a bit different. So for EMPATHY, we see a full Phase IIb readout with the potential then for an EUA application and don't only think U.S. think that a bit broader and a bit more global. ACTIV-3 is a futility analysis after 300 patients and both lead into the BLA submission 2022.

And then on the antivirals, as I said, we will announce a few new activities that we have there, and we are excited to do that at our R&D Day, which my last slide will cover. But I want before going there, I want to stress, as Andreas said, we are well funded into the second half of '23, and we have some significant milestones that are reachable rather near term.

With that, let me go to Slide 25, that is an invite to all of you to join us in the R&D Day. It's December 15. So just before Christmas, I'm sure we'll have a lot of updates by then and looking forward to share those with you.

With this, I wanted to thank you all for your attention, thank Andreas and Seth for their parts in speaking and open the floor for questions.

(Operator Instructions) Our first question comes from Ken Cacciatore with Cowen and Company.

Congratulations on all the progress. And clearly, a lot of events coming up by the end of the year. Just wanted to take some time, Patrick, if you could talk about for Ensovibep the bar of efficacy that you believe you need to demonstrate in order to know that you have a competitive products. So if you could give us some nuance behind some level of expectations we should have?

And then in terms of the Novartis potential option to licensing. Can you discuss whether that would be around the interim analysis? Or would it be with the acceptance of the EUA? Can you give a little nuance around when we might expect them to make a decision? And then you did touch on it. So just lastly, can you just talk about Novartis' readiness in terms of manufacturing at this point? A little more detail how quickly they could get this to market.

Sure. I think I'll start with the first one. The second one, which you asked, so what is a good moment for Novartis to strike the option. And I think for us, the way I see this developing, I would guess it's somewhere in between the data and the EUA submission as Novartis will be -- want to be the owner for any submission.

So I think with the data, that should trigger the option that they are in the lead for really all the regulatory work leading towards approval. And Novartis is a great partner. They're putting a lot of work into this compound. They're getting everything ready I mean this is around the corner. And you can believe me, there's many people at Novartis working, I would say, day and night on this to get ready, and they're obviously planning for success.

Then I'll go to the manufacturing question, and that was one of the key reasons also to work with Novartis next to the global region, clinical development, it's mostly manufacturing. And there, we are working with Sandoz and the [Kundal] site. And we are, at this point in time, scaling up to the 13,000 liter fermenter for then commercial supply.

We are, at this point in time or have manufactured or manufacturing several spots at the AGC at 1,000 liter. But then if you want to do this on a global basis, you will need the 13,000 liter fermenter. And there, Novartis is very active. They have everything in place the first runs are planned. They haven't been done, but they are happening in the coming weeks, months. This should all gear up that we have commercial supply early next year. I think that has to be the line in side. But for details, I think we should then let Novartis speak to those.

For the efficacy benchmarks or numbers, I'll hand over to Michael. But where I am is, I would say, for outpatient setting, we have clear numbers from the antibodies. They are all showing activity. And the key readout is reduction in hospitalization. We are following hospitalization in our trial. We have statisticians looking at that making sure that kind of we are not enrolling patients in the end that nobody is going to the hospital, meaning our numbers are off -- would be off. And as of so far, I think we feel that we have a relevant number of patients. But then I think the exact numbers, I'll hand over to Michael.

And in the hospitalized setting, I think there, we're really looking for, can we prevent people early hospitalized going to the emergency room. This trial is, let's say, very strongly powered because we had several antibodies in there in ACTIV-3, and it then will be a decision of the NIH and the guys running the trial, what the cutoff is. My guess is at this point in time, it is not very high as there is really nothing approved. But let's let Michael give us maybe some of his thoughts as he is really on these daily or weekly calls with the experts and he's much closer to what's happening in the clinic.

Thanks, Patrick. Thanks, Ken. Really great questions. And as always, not so easy to quickly answer. I think the special emphasis I want to put here is we are fighting against the delta variant of the SARS-CoV-2 virus. And to my knowledge, there is not really a clinical data set out there, which would really allow you to say this is the number to hit.

Of course, you can compare to previous versions of the virus, but who knows maybe delta is different, it's harder to fight. So we will, of course, wait for the data and the statistical analysis then was built with all the previous knowledge. So just look at the numbers from our competitors. And the other one is, of course, in hospitalized patients that would be interesting to see there were not really successes out there. Every company I'm aware of show the benefit in one subgroup, but unfortunately, lack of benefit or even worse in another subgroup. So this will be tricky.

But by and large, of course, as Patrick said, prevention of hospitalization ER visits, that would be the goal. And we believe with the numbers we have in the back there should be a meaningful outcome. But of course, we need to get some luck as well.

Our next question comes from Richard Vosser with JPMorgan.

A few, please. Firstly, just on the recruitment and the time to that sort of 400 patients, Patrick, you mentioned you've recruited 400 patients across all trials. Does that mean that we're sort of 50% or 75% done in terms of the recruitment of EMPATHY given that size of number that you've recruited already this year? Just some color -- more color in terms of, I suppose, that recruitment, the timing that we could expect that data, is it this quarter or next quarter?

Second question, just on the commercial discussions that might be ongoing. Of course, you had early discussions and an early contract with the Swiss Government. Can you shed any light in terms of -- with the pandemic and delta variant coming up and hospitalization is coming up, are you participating now in Government becoming more interested again? Are you seeing any evidence of those contracts?

And then one final question on -- is. I presume, but just a clarification, you're allowing vaccinated patients that have caught the virus and maybe severe, there are some of them out there. Are they being allowed in the EMPATHY trial? Or is it just sort of the unvaccinated patients? And are you stratifying between those types of patients?

Thanks, Richard. Really good questions, and I'm happy to ask and I'll start with the last one first, the vaccinated one. And that was a huge debate that we had, and I can tell you there were different camps at Molecular Partners and I think we were very lucky that we have included vaccination. At the time, it was the moment when we were a bit hesitant as we thought vaccines might be really long-acting. And as we now know from several data points, vaccines wane after a while.

And our trial allows those patients who are vaccinate -- that were vaccinated but then suffer from disease to still enroll I think for the just market calculations, that's very important that some competitors have excluded vaccine -- vaccinated individuals, which really will hamper their reach into the market, which we will not have. So we allow vaccinated individuals on our trial.

What we do try to add is this rapid antigen test as a little, let's call it, a trick because there, you I guess that you will have a higher viral load and maybe a person that is vaccinated and where the vaccine is still full force, you would not reach that high numbers of viral particles leading to maybe a negative readout in that test. But those are the thoughts, the thinking going in. And from what we see now, I think we can say, obviously, we will collect data with and without vaccination, but we're not excluding them.

Then I'll jump to the third question, which is kind of the 400 patients now to say the 400 obviously, is overall trials, and it's so difficult to give numbers. But I think you are not totally far off that we are now recruiting well. And I think the important piece of information I put on this slide is that we are now recruiting better than ever. And that's the good news is that, that went up from a slow start and now with the medical need up, we're recruiting much faster. I cannot really comment when we reach the 400 or 300 patients is that Q3, Q4, but you can maybe do that calculation, if you really want to have the full data this year, you have to clean the data set, you have to do all the readouts. That's not done overnight, also not for Novartis.

So we will be expecting to have the full enrollment of the 400, let's say, not in December, but earlier on that we can in December have some, hopefully, data from that trial. Maybe for government interactions, I will hand over to Michael, is that is a dynamic space, as you just said, I mean depending a bit on the variant of the months and the numbers, the interest is going up or down. But I do know we are in contact, and I think Michael can add some shade. Obviously, this is also led by Novartis as once this goes commercial, Novartis will be in the driver seat.

Richard, this is Michael. I think it's been a new situation for most governments now, maybe going into the summer holidays, everything was peaceful at least in some parts of the world and people thought, yes, that's fine. Now the situation is very different and talk shows are being set in place and so on and so forth. Together with Novartis, we have teams in Germany that have prepared everything are reaching out. We haven't been contacted by a lot of governments yet.

So I think that would be an overstatement, but we are very, very active to make sure once the data come in and we are ready with the launch that we can actually supply the people in need and the governments in need. But it's a lot of hard work between now and then. So thanks for the question.

(Operator Instructions)

Our next question comes from Daina Graybosch with SVB Leerink.

This is Dilip sitting in for Daina. I just want to clarify for your expense guidance. What are the costs are running EMPATHY beyond just the supply costs? And for the next-gen program or 423, have you completed all the preclinical work or filed an IND already? And just want to confirm that further development of that program would be dependent on Novartis exercising its option?

This is Michael. I can try to answer. So 423, unfortunately, is not showing the same powerful profile across the variant. So we've reduced investments and efforts, and we have not filed an IND. So that depends really on the pandemic, if another variant comes up where maybe 423 has an edge. But for now, we are waiting and giving all the priority to Ensovibep 420. The other question was the...

IND -- oh no, sorry.

What was your first question? Sorry?

Can you repeat that question? I was not clear.

Expense guidance, right?

Yes, exactly.

Yes. The costs are running EMPATHY beyond just the manufacturing.

I think I can take that.

Go ahead.

Okay. So Novartis is carrying all the cost for the clinical trials, except for the Phase I, which we are running, then the Phase II and III is with Novartis or than with the NIH on the ACTIV-3. We carry some manufacturing costs there for the supply. And that's covered in a payment Novartis gave us. So we're sort of covered for that. So it's all in the agreement. The large bills are taken up by Novartis, obviously. And our costs are capped with the CHF 20 million upfront that we got extra for that.

And Dilip, this is Seth, one last point to the as 423 is ready to go, but obviously, and even within the range of efficacy that we were showing for Enso being well below 10 nanograms per milliliter and all the test against the variants. 423 still remains active against those as well, just at a lower scale. But since Enso continues to outperform the next-generation thinking is that, okay, let's look forward to what the true two to three potential year look per COVID may look like and what should we focus our efforts on in a forward-looking way.

And to your point, and the question on the options, Novartis would still have an option to have first right to negotiate on that program.

And I'm currently showing no further questions at this time. I'd like to turn the call back over to Patrick Amstutz, for closing remarks.

Very good. So I would really like to thank my team here for presenting and preparing all the slides and everything and hard work that went into achieving all those results. So big thanks for that. Then also my co-presenters of the host here and to all the people on the phone and especially the analysts asking those questions, very helpful to know where you are. and very much looking forward to share future updates coming in the next two quarters. A very exciting time for us and very much looking forward to being close interactions with all of you. Thanks and have a good afternoon or morning wherever you are on this world and stay safe and stay COVID free.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.