Acurx Pharmaceuticals, Inc. Q3 FY2021 Earnings Call

Thank you, Rob, and good morning to everyone. Thank you for joining us on this morning's conference call to discuss Acurx's financial results. During today's call, we'll review our financial results for the quarter and nine months ended September 30, 2021, as well as some key corporate highlights, and then we'd be pleased to take any questions. In the third quarter, we continued on our critical path forward initiating our Phase 2b clinical trial of our lead antibiotic candidate, ibezapolstat, in patients with C. difficile infection. In total, we have activated 12 clinical trial sites and we anticipate enrollment to begin this month. Our clinical development team is now working on the administrative aspects of getting additional backup clinical trial sites through the onboarding process to be added, if necessary, to ensure completion of enrollment as quickly as possible. We reiterate that with the closing of our IPO in late June 2021, we have more than enough cash to complete the Phase 2b trial as well as to allocate resources to continue to advance our development pipeline of polymerase IIIC inhibitors. In parallel, we presented additional data from the Phase 2a trial of ibezapolstat in patients with C. difficile infection at the IDWeek Scientific Conference shortly after the close of the third quarter. Specifically, Dr. Kevin Garey, Professor and Chair, University of Houston College of Pharmacy and Principal Investigator for microbiome aspects of our ibezapolstat clinical program, presented newly available data from our completed Phase 2a clinical trial in a scientific poster presentation in early October 2021. Dr. Garey noted that favorable microbiome changes, including overgrowth of Actinobacteria and Firmicutes phyla species, were observed in patients during therapy with ibezapolstat and that the results begin to confirm the microbiome effects seen in Phase 1 healthy volunteers, indicating that microbiome effects may be predictive of beneficial patient outcomes, including anticipated low recurrence rates. Additional microbiome data from the completed Phase 2a trial was reported by Dr. Garey at the 9th Annual International C. Diff Conference on November 5th after the end of the third quarter. Our Phase 2a data demonstrated complete eradication of colonic C. difficile by day three of treatment in a 10-day treatment regimen with ibezapolstat as well as the observed overgrowth of healthy gut microbiota, Actinobacteria and Firmicutes phyla species, both during and after treatment with ibezapolstat. Very importantly, emerging data show an increased concentration of secondary bile acids, which is known to correlate with a low risk of reinfection. Moreover, a decrease in primary bile acids in these patients with C. diff was measured, and the favorable increase in the ratio of secondary to primary bile acids provides more scientific evidence suggesting that recurrences may be very low in future trials. We remain particularly excited about the dual impact of using ibezapolstat to treat the acute C. diff infection, while appropriately managing the long-term care of each patient's microbiome, which we believe is exceptional for antibiotic therapy. We also commenced the previously announced R&D program in collaboration with Leiden University Medical Center in Holland, which received a grant from Health Holland to further evaluate the mechanism of action of Acurx's pol IIIC inhibitors against the DNA Pol IIIC enzyme, which is the bacterial target of our antibiotic product pipeline, including ibezapolstat. In addition, we joined the Antimicrobial Working Group in August 2021 to participate in the effort to heighten awareness of the next pandemic, which many see as antimicrobial resistance, and to promote critical policy changes to support the cause. From a finance perspective in the third quarter, Acurx joined the Russell Microcap Index in September and participated in a number of health care and investor conferences, including the H.C. Wainwright 23rd Annual Global Investment Conference and the Emerging Growth Conference in August and September of 2021. I will now turn the call back over to Rob Shawah, our Chief Financial Officer, to guide you through the highlights of our financial results for the third quarter of 2021.

Thanks, Dave. As mentioned earlier, our financial results for the quarter and nine months ended September 30, 2021, were included in our press release issued on Friday. Acurx ended the quarter on September 30, 2021, with cash totaling $14.5 million compared to $3.2 million as of December 31, 2020, representing an increase in cash of $17.3 million from our initial public offering, offset by IPO-related cash expenditures of $2.5 million and operating expenses for the nine-month period of $3.5 million. Cash provided by financing activities for the nine months ended September 30, 2021, was approximately $14.8 million, attributable to the net cash proceeds from the initial public offering. Cash used in operating activities for the nine months ended September 30, 2020, was $2.4 million, of which approximately $1.8 million was spent on research and development-related activities. Cash provided by financing activities for the nine months ended September 30, 2020, was $3.3 million, primarily attributable to the net proceeds of one of the company's private placement offerings. Research and development expenses for the three months ended September 30, 2021, were $1.1 million compared to $0.7 million for the three months ended September 30, 2020. The increase is primarily due to Phase 2b trial-related costs. For the nine months ended September 30, 2021, research and development expenses were $1.3 million compared to $1.7 million for the nine months ended September 30, 2020. The decrease is due to the Phase 2a trial-related costs, which were completed in 2020. General and administrative expenses for the three months ended September 30, 2021, were $3.5 million compared to $0.7 million for three months ended September 30, 2020. The increase was primarily due to non-cash stock-based compensation and increases in professional fees, insurance, and legal costs. For the nine months ended September 30, 2021, general and administrative expenses were $8.9 million compared to $1.8 million for the nine months ended September 30, 2020. The increase in general and administrative expenses is primarily attributable to an increase in non-cash stock-based compensation, professional fees, stock-based director fees, insurance, and legal costs. The company reported a net loss of $4.6 million or $0.46 per diluted share for the three months ended September 30, 2021. This compared to a net loss of $1.3 million or $0.21 per diluted share for the three months ended September 30, 2020, and a net loss of $10.1 million per diluted share for the nine months ended September 30, 2021, compared to a net loss of $3.5 million or $0.58 per diluted share for the nine months ended September 30, 2020, all for the reasons previously mentioned. The company had 10,126,903 shares outstanding as of September 30, 2021. With that, I'll turn the call back over to Dave.

Thank you, Rob and thank you all for joining us for today's earnings conference call. We're very pleased to report Acurx's achievements and activities in the third quarter, and we look forward to building on this momentum in the fourth quarter and going into 2022. I would now like to open up the call for questions. Donna?

Hey, guys, thanks for taking the questions. David, can you talk just a little bit about the FDA and their openness to looking at microbiome data as a part of the data package, and how that landscape has changed over the last couple of years since more microbiome know-how, particularly with you guys has emerged? You have a non-inferior drug; maybe it'll be superior, who knows. But that microbiome component type is a pulse that really matters. We think it does. Can you talk a little bit about that?

Sure, Jason, and thank you for the question. We agree with you, the microbiome has almost become a cottage industry with folks, different groups working on different therapies to help get the microbiome back to equilibrium with the healthy bacteria in the gut to avoid diseases of all types, including cancer, diabetes, and in our case, recurrence of C. diff infection. We know that the FDA is in tune and up to speed with the modifications in clinical programs and protocols related to the microbiome. And in fact, in our Phase 2b program, we do have a secondary endpoint regarding the microbiome, and it's a superiority endpoint, which provides for success if ibezapolstat shows that it is restoring the microbiome significantly better than vancomycin, the standard-of-care. That's an investigational endpoint in our Phase 2b. Based on the data that we have today, we're highly confident that we're going to meet that superiority endpoint. And we look forward to meeting with the FDA after Phase 2b, assuming a successful trial, to build that in a more prominent position in the protocol for our Phase 3.

Sorry, I muted myself; I still can't figure it out.

If I may, I think it's an investigation. I think it's an exploratory endpoint as opposed to.

Yes. Can you use something broad on the microbiome side, like alpha diversity? Is that sufficient? Or do you need to get more granular beyond looking at just phyla analysis?

We think that the alpha diversity in the phyla analysis will be sufficient for the FDA purposes, but we are looking at other aspects. And we'll be prepared to analyze other aspects of the microbiome changes in addition to that, should the FDA go in that direction.

Okay. And for my last question, which is more about the long-term perspective. If the Phase 2b trial aligns with what you observed in the Phase 2a, do you think the size and quality of that data would be adequate to potentially serve as one Phase 3 trial, or would two Phase 3 trials be necessary? I'm asking this because we've observed activity in the field concerning another antibiotic, which experienced some adjustments to their Phase 3 trials, combining two of them, and we are uncertain about the outcome.

Yes, that's an interesting point, and we agree, we're unsure about the direction. We understand that the endpoint was changed during the enrollment period, which is unclear to us. However, we expect to have more information in the first quarter. We are evaluating the Phase 2b and Phase 3 options, as it may be that we need to conduct two Phase 3 studies, and we'll know more after our meeting with the FDA following the completion of Phase 2b. We already have FDA Fast-Track designation and are recognized as a qualified infectious disease product. We hope that the data demonstrates significantly better cure rates and microbiome impact compared to vancomycin, allowing us to argue for one Phase 3 registration study instead of two. Regardless, the Phase 3 patient enrollment numbers will likely be in the hundreds, around 400 to 500 patients, and the key question will be whether we can manage this in a single trial or if we need to divide it into two separate trials.

Sorry. Just really briefly, and I'm sure there's other people. Outside of that program and your own, are those the two really most advanced programs that are out there? If you dig in the literature, there are a few other antibiotics, but they seem to be much further behind. Is that a fair assessment?

Yes, that's our understanding as well.

Hi David. Just a couple of questions and the last one answered a little bit, but I'm a little bit more of a Layman investor. Just when do you expect enrollment of the trials to kind of be complete? And then, again, in Layman's terms, could you kind of explain to me how important the microbiome and bile acid data is kind of to the company?

Thank you for the question, Lucas, and welcome back to this quarter's call. Our goal is to finish enrollment in the Phase 2b trial by the second quarter of 2022. We have already activated 12 clinical trial sites, including five high-enrolling centers. We will continue to monitor the enrollment pace and have identified four additional high-enrolling sites that we can activate in the first quarter if necessary. This serves as a backup plan to ensure we meet our enrollment timeline. Regarding the microbiome, we believe this data is crucial because when looking at the 10 patient data from the Phase 2a trial, it's easy to question the validity of a 100% cure rate across just 10 patients. However, the trial was initially set for 20 patients and was stopped early by the Scientific Advisory Board due to its success, showing no safety or tolerability issues and achieving impeccable results. The microbiome data reveals that after just three days of treatment, we are able to restore the microbiome while curing the C. diff infection, demonstrating a stark contrast with vancomycin, which drastically depletes healthy gut bacteria. This depletion is a significant factor in the recurrence of C. diff infections. Additionally, having higher levels of secondary bile acids is linked to a lower chance of recurrence. Our 10 for 10 success after 30 days of treatment can be attributed to restoring a healthy microbiome and maintaining a favorable secondary to primary bile acid ratio, which differs from the structure seen with vancomycin that contributes to its high recurrence rates.

Thank you. That's exciting stuff. Thank you, David.

Well, thank you, Donna and thank you all for joining us for this quarter's conference call. It's an exciting time for Acurx Pharmaceuticals and we appreciate your involvement and your investment in the company. And we look forward to the next earnings call financial update, which will be in late March of 2022, and we're hoping for some exciting news at or around that time. Thank you very much.

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines at this time and enjoy the rest of your day.