Earnings Call Transcript - ACXP Q4 2022

Operator, Operator

Greetings and welcome to the Acurx Pharmaceutical Fourth Quarter and Full Year 2022 Financial Results and Business Update. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Robert Shawah, Chief Financial Officer. Thank you, Robert. You may begin.

Robert Shawah, CFO

Good morning. Thank you and welcome to our call. This morning, we issued a press release providing financial results and company highlights for the fourth quarter and fiscal year 2022. This press release is available on our website at acarexpharmaceuticals.com. Joining me today is Dave Luci, President and CEO of Acurx, who will give a corporate update and outlook for 2023. After that, I'll provide some highlights of the financials from the quarter and the year ended December 31, 2022, and then turn the call back to Dave for his closing remarks. As a reminder, during today's call, we'll 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 on Wednesday, March 15, 2023. 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. This conference call contains time-sensitive information that's accurate only as of the date of this live broadcast today, March 16, 2023. 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 Dave Luci. Dave?

David Luci, President and CEO

Thanks, Rob. Good morning, everyone, and thanks for joining us on this conference call to review our financial results for the fourth quarter and year ended December 31, 2022. I will also cover some recent updates and then would be pleased to take any questions. In the fourth quarter of 2022, we continued to enroll more patients in our Phase IIb clinical trial of ibezapolstat, our lead antibiotic candidate for the treatment of patients with C. difficile infection, or CDI. The Phase IIb clinical trial is a randomized 1:1 noninferiority double-blind trial of oral ibezapolstat compared to oral vancomycin, a standard of care to treat CDI. The primary endpoint is clinical cure at the end of treatment, and a secondary endpoint is sustained clinical cure measured at day 38 follow-up visit. Since this is a double-blind trial, results won't be known until the end of the trial. However, operationally, the trial is proceeding as expected with no safety signals reported to date, and the blinded observed data has been exceptional. The Phase IIb trial protocol includes an exploratory endpoint comparing the impact on the microbiome between ibezapolstat and the standard of care of vancomycin. Inferiority of ibezapolstat to vancomycin has demonstrated further analysis will be conducted to test for superiority. As we've previously discussed, due to slower-than-expected enrollment during the possible resurgence of COVID-19 infections, we expanded the number of clinical trial sites participating in the Phase IIb trial from the initial 12 sites to a total of 28 trial sites. This project commenced in July 2022 and was completed in the fourth quarter. We remain particularly excited about the dual impact of using ibezapolstat to treat acute CDI while appropriately managing the long-term care of each patient's microbiome, which we believe is exceptional for antibiotic therapy. Details of the impact on the microbiome were presented in oral and poster presentations at IDWeek in October 2022 and are available on our website. Most importantly, based on the blinded observed data from the ongoing Phase IIb clinical trial to date, in January 2023, the company filed a protocol amendment to its investigational new drug application, or IND, with the FDA to allow for an Independent Data Monitoring Committee, or IDMC, to review interim clinical data. If acceptable to the FDA, the IDMC will review the clinical data upon enrollment of 36 patients, I repeat, 36 patients, not 64 patients in the Phase IIb clinical trial. The company currently has enrolled 25 patients in the trial to date. The IDMC will determine and recommend to the company whether the most appropriate course of action moving forward is to early terminate the IIb trial as we did previously with our Phase IIa clinical trial or to continue patient enrollment. The company intends to report available data promptly after the IDMC conducts this interim review. The company assembled its IDMC independent medical committee in the first quarter of 2023 solely for this purpose. Other key highlights from the fourth quarter of 2022 or in some cases, shortly thereafter, include the following: the company has continued its R&D collaboration with Leiden University Medical Center in Holland to further evaluate the mechanism of action of Acurx's inhibitors against the DNA pol IIIC enzyme, which is the bacterial target of our antibiotic product pipeline for the systemic treatment of other gram-positive bacterial infections. Data generated from this program was critical to include in a recent non-dilutive grant application which I will describe in more detail in a minute. This grant application was submitted by the company in the fourth quarter of 2022. Based on this successful collaboration with LUMC, we have proposed a second stage, two-year project to further analyze chemical structure relationships of new Acurx compounds with a propensity for reduced antimicrobial resistance. At this point, this new project proposal is subject to review, approval, and funding by the Dutch government, but the grant is expected to be for about $500,000 in total, similar to the original grant amount that was provided by the Dutch government for the initial project. The company completed certain portions of its laboratory study at the University of Houston comparing the killing effect of ibezapolstat to vancomycin, fidaxomicin, and metronidazole using both in vitro and ex vivo analysis. Certain results were presented at the Anaerobe Society of America annual scientific conference, and results demonstrated that ibezapolstat has favorable killing kinetics compared to vancomycin to treat C. difficile infection at standard and high bacterial concentrations, supporting continued development of this first-in-class antibiotic to treat C. difficile infection. Comparisons of the killing effect of ibezapolstat to fidaxomicin and metronidazole are ongoing. In October 2022, the company filed for a non-dilutive grant of up to $11.3 million, which, if approved, will provide funding for ACX-375, our second antibiotic program, targeting the treatment of MRSA infections for a period of five years of drug development right to the start of Phase I clinical trials. The company is now in the third and final line of consideration for this non-dilutive grant, and a decision is expected in April 2023, just a few weeks from now. If approved, the company would need to pay approximately $5 million of the total project cost of approximately $16 million in total over a five-year period, and the grant would pay the other $11.3 million. Next month, the European Congress of Clinical Microbiology and Infectious Disease, one of the most comprehensive and influential scientific conferences in clinical microbiology and infection, will hold its 33rd session in Copenhagen. An abstract entitled 'Novel pharmacology and susceptibility of ibezapolstat against C. difficile isolates with reduced susceptibility to C. difficile-directed antibiotics' has been accepted. Dr. Kevin Garey, Professor and Chair, University of Houston College of Pharmacy, and the Principal Investigator for microbiome aspects of our ibezapolstat clinical trial program, will present on our behalf. Additionally, our Executive Chairman, Rob DeLuccia, has been invited to present the company's preclinical, systemic oral and IV program for treatment of other gram-positive infections caused by MRSA, VRE, and DRSP in their 'Pipeline Corner' featured session organized by Dr. Ursula Theuretzbacher, a world-renowned microbiology expert for antibacterial drug research, discovery and development strategies and policies for clinical and public health needs. More details on these presentations will be announced prior to the meeting date. Now back to our CFO, Rob Shawah, to guide you through the highlights of our financial results for the fourth quarter and year-end 2022. Rob?

Robert Shawah, CFO

Thanks, Dave. Our financial results for the fourth quarter and full year ended December 31, 2022, were included in our press release issued earlier this morning. The company ended the year with cash totaling $9.1 million compared to $13 million as of December 31, 2021. Research and development expenses for the three months ended December 31, 2022, were $1.4 million compared to $0.7 million for the three months ended December 31, 2021. The increase was due to an increase in Phase IIb trial-related costs. For the twelve months ended December 31, 2022, research and development expenses were $4.8 million versus $2 million for the twelve months ended December 31, 2021. The increase was due primarily to Phase IIb trial-related costs. General and administrative expenses for the three months ended December 31, 2022, were $1.8 million compared to $1.9 million for the three months ended December 31, 2021. The slight decrease was primarily due to a decrease in professional fees. For the twelve months ended December 31, 2022, general and administrative expenses were $7.3 million versus $10.8 million for the twelve months ended December 31, 2021. The decrease was primarily attributable to a decrease in professional fees and stock-based compensation expenses, partially offset by an increase in insurance costs. The company reported a net loss of $3.3 million or $0.28 per diluted share for the three months ended December 31, 2022 compared to a net loss of $2.6 million or $0.26 per diluted share for the three months ended December 31, 2021, and a net loss of $12.1 million or $1.12 per share for the twelve months ended December 31, 2022 compared to a net loss of $12.7 million or $1.49 per diluted share for the twelve months ended December 31, 2021, all for the reasons previously mentioned. The company had 11,627,609 shares outstanding as of December 31, 2022. With that, I'll turn the call back to Dave.

David Luci, President and CEO

Thanks, Rob, and to all of you for joining us today. We're very enthusiastic about our continuing strong fundamentals, and we're especially pleased to report Acurx' progress in the fourth quarter of 2022. We look forward to building on this momentum in the coming months, even during these most challenging times, and to update you as we do so. I'd now like to open up the call to questions. Operator?

Operator, Operator

Our first question is from Jason McCarthy with Maxim.

Jason McCarthy, Analyst

When do you expect an outcome or response from FDA on the IND for the IDMC?

David Luci, President and CEO

No problem. Thanks for joining us today, Jason. We expect to receive a response from the FDA regarding the amendment in the coming days or weeks, certainly within March. We are confident that there will be no issues with our ability to take an interim look at the data. This is a Phase II trial, not a Phase III registration trial, and there is ample precedent backing this approach, with no opposing precedents suggesting that we can't proceed with the interim analysis. We believe we will be able to move forward. This is a protocol amendment, which is a highly technical scientific document, so we expect to receive comments that may be substantive or linguistic in nature. However, we are highly confident that the overall theme of taking the interim look will be well received.

Jason McCarthy, Analyst

Do you think the interim look will be based on non-inferiority? Or are you looking for superiority like you observed in the Phase IIa? Will that data be reported, or would you halt the trial for efficacy or continue as planned?

David Luci, President and CEO

No. So we've always said that when we get to the end of the trial, in the end, may very well be 36 patients, well after testing for non-inferiority, which is the primary endpoint, we do have an exploratory endpoint to go ahead and test for superiority as well. So that process isn't changed by taking the interim look. I think what we'll probably do is get out as soon as possible the top line data from the IDMC when we receive it with the understanding that we'll get out another press release with a full data set down the line when the database is locked and the data is scrubbed, and we get the final study report.

Jason McCarthy, Analyst

Just last question. With the increase in the number of trial sites, have you seen enrollment start to tick up? And if so, how long do you expect it to take to get to the 36 patients for the IDMC?

David Luci, President and CEO

The enrollment has definitely increased somewhat. However, our primary focus is on ensuring that patients successfully navigate the prescreening process, which often depends on their willingness to consent. For instance, just yesterday, we had a patient in the West who qualified but chose not to consent to participate in the trial. While we can’t control such decisions, we have made significant efforts by adding numerous trial sites, resulting in an average of 5 to 7 patients being prescreened each week. This leads us to the question of how long it will take for those 5 to 7 prescreened patients per week to translate into 11 enrolled patients. Opinions on the timeframe for that vary widely, ranging from a couple of months to a few months, but it’s certainly not expected to take a long time.

Jason McCarthy, Analyst

And just quickly, can you just review your thoughts on what treatment guidelines could look like with an ibezapolstat getting to approval? Would fidaxomicin and vancomycin kind of go into the rearview mirror and they would move to whatever comes out next because ridinilazole seems to be out, right? Ibezapolstat that seems to be kind of the only game in town, new antibiotic that's out there.

David Luci, President and CEO

Yes. Well, it will be subject to the data. If the data holds the way the ibezapolstat data has been trending, the people that write the guidelines, the IDSA treatment guidelines suggest the next approved drug to treat C. difficile that comes out that makes the recommendation list is going to kind of mean the twilight of oral vancomycin, similar to how metronidazole was twilighted a couple of years ago and is no longer recommended. So that's kind of where the intelligence is in the C. difficile space. You're quite right, ridinilazole didn't make it. There have been a number of things that haven't made it down the line, fecal transplant, stuff like that. But we think that we would be used frontline; fidaxomicin isn't a bad drug. In my view, it's better than oral vancomycin in a lot of ways, but it's so prohibitively expensive. And with the Medicare and Medicaid reimbursement rules, it's therefore used as a last line. We don't expect that to change. And remember, that's not a QIDP drug. Fidaxomicin was approved before QIDP was a law, and therefore, it wouldn't qualify for things like the DISARM Act, which was put branded antibiotics on equal footing with generics to ensure that hospitals could use the best antibiotic frontline instead of the cheapest antibiotic frontline.

Operator, Operator

Our next question is from Ed Arce with H.C. Wainwright.

Unidentified Analyst, Analyst

This is Thomas asking a couple of questions for Ed. So first, regarding the Phase IIb study, just wondering will patient screening and enrollment continue while the interim review is ongoing?

David Luci, President and CEO

No, I don't think it will. We'll put a pause. In other words, we won't terminate the trial; we'll put a pause on further enrollment while the evaluation is happening, but we don't expect the evaluation to take a long period of time. It should take a few days, not an extensive period of time.

Unidentified Analyst, Analyst

Right. Got it. Okay. And then another question on the Phase IIb specifically for the IDMC. Can you tell us how long this will go and the background? Does it include anyone with regulatory experience?

David Luci, President and CEO

Absolutely. It's folks in microbiology, statisticians, significant clinical development. It's quite a star-studded team. If you'd like to find out more details about their CV information, we could certainly have an offline conversation about that, and I'm sure we can make you comfortable. It's a powerful group.

Unidentified Analyst, Analyst

Okay, that sounds good. I have one last question regarding the $11.3 million grant that was filed. Is this a CARB-X grant? If not, could you provide any additional details?

David Luci, President and CEO

Yes. It is a CARB-X grant.

Operator, Operator

Our next question is from James Molloy with Alliance Global Partners.

James Molloy, Analyst

Following the interim look, I guess, presuming things go well and you are looking at an early stoppage for success. What's the thinking on timing for, I guess, for going forward with the non-inferiority trial or sort of the next steps post that interim look?

David Luci, President and CEO

So after the interim look, we would promptly release top line data and then wait for the database to be locked, data scrubs, final study report, and then that will be put into an FDA post-Phase II meeting package. We would meet the FDA to outline and negotiate what Phase III will look like. That whole process from the time we get the final study report to the time we have the FDA's concurrence is probably a 90-day process. During that time period, we'll also be going out to recruit more clinical trial centers, probably at least 50 or 75 trial centers to start with, just to get us off the ground for Phase III. Phase III would formally start sometime in the first half of 2024.

James Molloy, Analyst

Excellent. And then maybe a bigger picture, has there been any updates on the PASTEUR Act and anything going on there that you can talk about?

David Luci, President and CEO

Well, we signed on to a letter from dozens of members of the Antimicrobials Working Group who are in our space to Congress just about two weeks ago. We find out through our affiliation with the Antimicrobials Working Group that there are 60 U.S. senators now that approve of the content of the PASTEUR Act. So having passed the house, one would think that it is extremely close. We know that Patty Murray, the Democrat who's been leading the charge from the state of Washington, is very supportive. I don't know where President Biden is on it conceptually. I do know that there is now a budget battle in Washington. I don't know exactly how that's going to turn out, generally, or specifically with regard to whether PASTEUR will be included in some component of that massive piece of legislation. So it's percolating. It was days away from being approved twice in 2022, so you just never know.

James Molloy, Analyst

Great. To follow up on my previous question, regarding operating expenses, you have consistently managed shareholder capital well. Should we expect operating expenses to remain at these levels in 2023? Additionally, as for the Phase III changes, what is your current cash run rate with the $9 million?

David Luci, President and CEO

So we're spending on average about $2.2 million per quarter currently. It would certainly be nice for the CARB-X grant to be approved. We'll find out in April if that is approved; that will be a nice shot in the arm for us. It's about $1 a share in value non-dilutively. But clearly, we have enough money to get through the end of the year. Phase III, obviously, is going to be an expensive endeavor. Our objective is to get through the study, see if we get the CARB-X grants, and go from there. If we can opportunistically add a nip or a tuck here or there, capital-wise, we will; it wouldn't be anything tremendously large, but at some point, we'd probably do a little something. Keep in mind, our original business plan from day one is to get through the Phase IIb clinical trial and explore strategic alternatives. We certainly love what we're doing in Phase III; it would be quite exciting. But since our job is to deliver shareholder value, we'll give it an honest look.

Operator, Operator

Thank you. There are no further questions at this time. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.