Acurx Pharmaceuticals, Inc. Q4 FY2021 Earnings Call

Greetings and welcome to the Acurx Pharmaceuticals Fiscal Year 2021 Financial Results and Business Update Conference Call. All participants are currently in listen-only mode. This conference is being recorded. I will now turn the call over to Rob Shawah, Chief Financial Officer. Thank you. You may begin.

Thank you. Good morning, and welcome to the Acurx Pharmaceuticals fourth quarter and full year 2021 financial results conference call. This morning, we issued a press release providing financial results and company highlights for the fourth quarter and full calendar year 2021. This press release is available on our website at acurxpharmaceuticals.com. Joining me on the call today is Dave Luci, President and Chief Executive Officer of Acurx, who will provide a corporate update and outlook for 2022. Following his comments, I'll provide an overview of the financial highlights from the quarter and year ended December 31st, 2021, before turning the call back over to Dave for closing remarks. As a reminder, during today's call, we will be making certain forward-looking statements. These forward-looking statements are based on current information, assumptions, estimates, and projections about future events that are subject to change and involve a number of risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. Investors should consider these risks and other information described in our filings made with the securities and exchange commission, including our annual report on form 10-K, which we filed yesterday, Wednesday, March 16, 2022. You are cautioned not to place undue reliance on these forward-looking statements, and Acurx disclaims any obligation to update such statements at any time in the future. In addition, this conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, March 17th. Acurx undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances, after the date and time of this conference call. I'll now turn the call over to David Luci.

Thank you, Rob. Good morning, everyone. Happy St. Patrick's Day. Thank you for joining us on this morning's conference call to review Acurx's financial results. During today's call, we will review our financial results for the fourth quarter and year ended December 31, 2021, as well as some key corporate highlights, and then we'd be pleased to take any questions. In the fourth quarter, we commenced enrollment in our Phase 2b clinical trial of our lead antibiotic candidate, ibezapolstat, in patients with C. difficile infection. The Phase 2b clinical trial is a one-to-one randomized, not inferiority, double-blind trial of oral ibezapolstat compared to oral vancomycin, the standard of care to treat C. difficile infection, in a total of 64 patients. The primary endpoint of the Phase 2b trial is clinical cure of the C. difficile infection at day 12 end of treatment, and the secondary endpoint is sustained clinical cure measured at the day 38 follow-up visit. In addition, we have an exploratory endpoint comparing the impact on the microbiome, between the ibezapolstat arm and the vancomycin arm of the trial. Additionally, in the event non-inferiority of ibezapolstat of vancomycin is demonstrated further analysis will be conducted to test for superiority. The Phase 2b clinical trial will include up to 16 U.S. trial sites with enrollment expected to be completed in the second half of 2022. We reiterate that with the closing of our IPO in June 21, we have more than enough cash to complete the Phase 2b trial as well as to allocate resources to continue the development of ACX-375 C, our second DNA polymerase 3C inhibitor that is at the lead optimization stage of preclinical development. Other key highlights from the year end December 2021 include the following. In November 21, we initiated a laboratory study entitled effective ibezapolstat versus comparators on the microbiome in vitro and ex vivo analysis. We're doing this through our collaboration with Dr. Kevin Garey, Professor and Chair, University of Houston, College of Pharmacy, and the principal investigator from microbiome aspects of the ibezapolstat clinical trial program. The objective of this study is to expand upon our quite positive Phase 1 and Phase 2a microbiome data by comparing microbiome changes associated with ibezapolstat to other antibiotics used to treat C. difficile infection, including fidaxomicin, vancomycin, and metronidazole. This laboratory study is being conducted using an in vitro gut model that mimics human gastrointestinal physiology. Additional data on the favorable effect of ibezapolstat on the gut microbiome was developed and presented at three prominent international scientific conferences during 2021. First, in June 21 at the World Microbe Forum, we presented a poster and abstract with data from the Phase 1 healthy volunteer trial, using a novel analysis technique showing beneficial anti-recurrence changes in the gut microbiome when compared to vancomycin. Our scientific advisors suggest that these data may be predictive of lower risk of C. diff recurrence or reinfection. These results were presented by Dr. Kevin Garey, who we already mentioned, and who is the principal investigator for microbiome aspects of the ibezapolstat clinical trial program. Second, in October 2021 we presented a scientific poster and abstract with additional data from the ibezapolstat Phase 2a trial in patients with C. diff infection at the Infectious Disease Society of America IDWeek 2021 scientific conference. Specifically, Dr. Garey presented newly available data from our completed Phase 2a clinical trial in a scientific poster. Dr. Garey noted that favorable microbiome changes in these patients with CDI, including overgrowth of actinobacteria and firmicutes virus species, were observed in patients during therapy with ibezapolstat and that the results begin to confirm the microbiome effects seen in the Phase 1 healthy volunteers. Accordingly, in our scientific advisor's opinion, use of ibezapolstat may very well be beneficial to the microbiome, and these results are predictive of beneficial patient outcomes in our late-stage trials, including anticipated low recurrence rates. Third, in November 21, Dr. Garey presented additional microbiome data from the completed Phase 2a trial at the 9th Annual International C. diff conference. These data demonstrated complete eradication of colonic C. diff by day three of treatment with ibezapolstat as well as the observed overgrowth of healthy gut microbiome actinobacteria and firmicutes virus species both during and after treatment. Very importantly, emerging data showed an increased concentration of secondary bio acids, which is known to correlate with a low risk of reinfection. Moreover, a decrease in primary bio acids and the favorable increase in the ratio of secondary to primary bio acids provides more scientific evidence, suggesting recurrences may be very low in future trials. These presentations are available on our website at acurxpharma.com. We remain particularly excited about the dual impact of using ibezapolstat to treat the C. diff infection, while appropriately managing the long-term care of each patient's microbiome, which we believe is exceptional for antibiotic therapy. Other recent publications from 2021 include an article published in Nature Biopharma on October '21 titled Advancing a promising Antibacterial against C. Difficile. In August 2021 Health Holland awarded a grant of approximately $0.5 million to Leiden University of Medical Center to further study the mechanism of action of pol IIIC inhibitors in a consortium partnership with Acurx. This innovative research, entitled Bad bugs, new drugs, elucidation of the structure of DNA polymerase IIIC of multi-drug resistant bacteria in complex with novel classes of antimicrobials, and will study three-dimensional structures of DNA polymerases and their binding interaction with Acurx's product pipeline, including ibezapolstat and 375. The antibacterial molecular target of Acurx's pipeline of DNA pol IIIC inhibitors has been clinically validated by ibezapolstat's recent completion of a Phase 2a trial in patients with C. difficile infection. The research outcome is intended to accelerate lead product candidate selection for our ACX-375 program for systemic treatment against a wide variety of problematic resistant bacteria, including MRSA, vancomycin-resistant enterococci, and drug-resistant Strep Pneumoniae. These are bad bugs, which the WHO, CDC, and FDA all include as high-priority drug-resistant gram-positive pathogens, where new classes of antibiotics are sorely needed. This project was initiated by Leiden University of Medical Center in September 2021, and emerging data are expected to contribute to the 375 development program. In terms of finance matters, highlights from 2021 include the following. The company consummated its IPO in June '21, raising gross proceeds of $17.25 million. The closing of the IPO included the full exercise of the underwriters' over-allotment option on the closing date. We are pleased to report that in November '21 Maxim Group initiated independent research coverage on Acurx through its research analyst, Dr. Jason McCarthy. In terms of investor relations, we participated in a number of healthcare conferences in 2021, including the Wainwright 23rd Annual Global Investment Conference and the Emerging Growth Conference, and management continues on an aggressive investor relations strategy forward into 2022. We also joined the Russell Microcap Index in the third quarter of '21, raising the company's corporate profile in helping to develop our investor relations profile. So 2021 was a very active and productive year driven by our success in raising capital in a challenging financial environment for the biopharmaceutical sector. I'd now like to turn the call back over to our CFO, Rob Shawah, to guide you through the highlights of our financial results for the fourth quarter and full year 2021.

Thanks, Dave. As mentioned earlier, our financial results for the fourth quarter and full year ended December 31 were included in our press release issued earlier this morning, Acurx ended the fiscal year on December 31, 2021, with cash totaling $13 million compared to $3.2 million as of December 31, 2020, which was an increase in cash of $17.3 million from our initial public offering offset by IPO related costs of 2.5 million and operating related expenditures for the year ended December 31, 2021, of approximately $5 million. Cash provided by financing activities for the year ended December 31 was approximately $14.8 million attributable to net proceeds from the initial public offering. Cash used in operating activities for the year ended December 31, 2020, was 3.4 million, of which approximately 2.2 million was spent on research and development related activities. Cash provided by financing activities for the year ended December 31, 2020, was approximately $4 million, which was attributable to the net proceeds from our private placement offerings. Research and development expenses for the year ended December 31 were $2 million compared to $2.2 million for the year ended December 31, 2020. The decrease is due to lower consulting expenses, partially offset by higher manufacturing costs associated with the commencement of the Phase 2b trial. For the three months ended December 31, 2021, research and development expenses were $0.7 million compared to $0.5 million for the three months ended December 31, 2020. The increase is due to the Phase 2b trial related cost which commenced in the fourth quarter. General and administrative expenses for the year ended December 31 were $10.8 million compared to $2.4 million for the prior year. The increase was primarily due to non-cash stock-based compensation as well as increases in professional fees, insurance, and legal costs. For the three months ended December 31, 2021, general and administrative expenses were $1.9 million compared to $0.6 million for the three months ended December 31, 2020. The increase in general and administrative expenses is primarily attributable to increases in employee compensation costs as well as increases in professional fees, insurance, and legal costs. The company reported a net loss of $2.6 million or $0.26 per diluted share for the three months ended December 31, 2021, compared to a net loss of $1.1 million or $0.16 per diluted share for the same period in the prior year. For the full year, the company reported a loss of $12.7 million or $1.49 per diluted share compared to a net loss of $4.6 million or $0.74 per diluted share for the year ended December 31, 2020. The company had 10,215,792 shares outstanding as of December 31, 2021. With that, I'll turn the call back over to Dave.

Thanks, Rob. And thank you all for joining us today. We're very enthusiastic about the strong fundamentals of our company, and we are especially pleased to report Acurx's continuing progress in the fourth quarter and full year 2021. We look forward to building on this momentum in 2022, and to updating you in the coming months. I'll now open the call for questions, Operator?

Thank you. Our first questions come from Jason McCarthy with Maxim Group. Please proceed with your questions.

Good morning, David. Thanks for taking the questions, a couple of questions. First, a more broad question on the competitive landscape. Can you talk about some of the recent challenges in the space? In particular, we saw Summit fail a trial on the therapeutic side. We also saw Pfizer, I think it was Pfizer, miss on a huge vaccination study on the preventative side, and kind of where does Acurx fit now in that competitive landscape?

Good morning, Jason, and thank you for your question. We view the current situation as a significant turning point. We now see a clear path to frontline therapy, informed by our strong data and recent setbacks from others in the field. Pfizer's shortfall in its vaccine study was a major disappointment for them, especially since they had aimed for frontline therapy with a potential peak sales of $1 billion if the vaccine was used in that capacity, which aligns with our goals. Notably, Pfizer has stated that they will remain involved in this area, planning to develop a niche vaccine for complex recurrent cases of C. difficile in the future. We believe Pfizer's continued presence in this arena highlights the market's vast potential, and having both frontline and specialty components could benefit them mutually. For us, this represents a business development opportunity. On the other hand, we think Summit Therapeutics is no longer a contender for frontline therapy after their recent trial failure and the FDA's rejection of changes made to their primary endpoint. Ultimately, we see Summit potentially targeting a niche market for patients with autoimmune diseases or COVID histories, positioning them away from frontline therapy. This situation distinguishes the competitive landscape for us. You may remember that Sanofi previously failed its C. difficile vaccine in 2017, and just recently, Finch Therapeutics has been placed on clinical hold regarding a microbiome program, despite some positive Phase 2 results. Their therapy reportedly only reduced the recurrence rate of C. difficile by about 15% compared to placebo. In contrast, our current recurrence rate from our Phase 2a trial stands at 0%. Therefore, even if Finch's therapy resumes, it appears to be positioned as a niche option beyond frontline therapy. While we are not rooting for others to fail, this situation certainly reflects positively for our company and provides reassurance to our shareholders.

And you had mentioned in the beginning of that response about business development, can you talk in addition to something or group like a Pfizer, wanting to have the front and backend possibly in C. diff? How about other potential business development activities even regional partnerships small and large in other countries?

Yes, we have an aggressive business development program, which involves territorial licensing deals. ACX 375, the second product candidate, that's preclinical at the moment. And you know, everything is on the table, so we're quite delighted with how it's been going and we expect to continue to be aggressive with it while we're continuing to enroll the Phase 2b trial. But there are prospects there for sure, and we're active with it every week.

And just a more long-term question, I suppose because of the Phase 2a data, I know it's a small sample size and, you know, we're expecting to see very similar results in this upcoming trial hopefully. But from a labeling or a potential labeling perspective, is there an opportunity to get anything on the superiority side, even though you don't technically need it or even something related specifically to microbiome that would make ibezapolstat really, really stand out above any other therapeutic out there?

Yes, there definitely is. It's funny, this is a bit tongue-in-cheek, but as competitive therapies become less relevant, it might seem less important, yet we are still moving forward. We, along with our scientific advisors, believe we have the right data to present. We are starting with the Phase 2b trial, where we have an exploratory endpoint comparing the microbiome impact of ibezapolstat to vancomycin. This trial is partly designed with the expectation that, if successful, the data will support a broader endpoint comparison for the microbiome in Phase 3 when we meet with the FDA. Additionally, after assessing non-inferiority for the primary and secondary endpoints of the Phase 2b trial, assuming we achieve non-inferiority, our statisticians will perform an analysis designed to evaluate superiority. This data will also be part of our discussions as we design Phase 3 in partnership with the FDA.

Got it. Just one last question. Do you have any updates or insights on the progress of the Pasteur Act, considering the challenges with the overseas conflict? It seems like Congress may have shifted their priorities. We haven't heard anything, and I wanted to know if you had any information.

Yes, there was an Antimicrobial Working Group Meeting, just a few days ago. And there was an omnibus bill that was passed very recently through Congress. And quite insightful as you mentioned, the Ukraine conflict, as we understand it, the Pasteur Act was kind of replaced with some defense spending that got inserted and took that allocation out of what would've been an omnibus bill that included the Pasteur Act. So it’s at the top of the list, as we understand it, but the Ukraine conflict did kind of change the world a little bit in a lot of perspectives. So, it may take a little bit longer than we had hoped. But we have other things going on, like non-dilutive grants from the NIH and potential upfront payments and territorial licensing deals. So, we do have some other stuff that is kind of a priority of ours. And from our conversations, Jason, what we try to do is throw everything we have up against the wall and see what sticks, but we think it could be a few more months for the Pasteur to pass.

I mean, one could argue that this is an example of, it's more important than ever to have control over antibiotics in this country, given what's happening overseas right now. Thank you so much, David, for taking the questions.

There are no further questions at this time. And with that, this does conclude today's teleconference. We do appreciate your participation. You may disconnect your lines at this time. Enjoy the rest of your day.

Thank you.