GeoVax Labs, Inc. Q3 FY2020 Earnings Call

Good morning and welcome to the GeoVax Third Quarter 2020 Corporate Update Call. I am Cole with Chorus Call and will facilitate today's call. With me are David Dodd, Chairman and CEO; Mark Reynolds, Chief Financial Officer; and Mark Neumann, Chief Scientific Officer. Please note this event is being recorded. I would now like to turn the conference over to Scott Gordon of CORE IR, who will provide forward-looking statements regarding this call and information herein. Please go ahead.

Thank you, Cole, and thank you everyone for joining the call. Certain statements in this presentation may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors, including whether: GeoVax can develop and manufacture its vaccines with the desired characteristics in a timely manner, GeoVax's vaccines will be safe for human use, GeoVax's vaccines will effectively prevent targeted infections in humans, GeoVax's vaccines will receive regulatory approvals necessary to be licensed and marketed, GeoVax raises required capital to complete vaccine development, there is development of competitive products that may be more effective or easier to use than GeoVax's products, and GeoVax will be able to enter into favorable manufacturing and distribution agreements and other factors, over which GeoVax has no control. GeoVax assumes no obligation to update these forward-looking statements and is not intended to do so. More information about these factors is contained in GeoVax's filings with the Securities and Exchange Commission, including those set forth risk factors in GeoVax's form 10-K. It's now my pleasure to introduce Chairman and CEO of GeoVax, David Dodd. David, please go ahead.

Thank you, Scott. Good morning and thank you for participating in this inaugural GeoVax quarterly update call. During the third quarter of 2020, GeoVax capitalized the company and achieved a NASDAQ listing, securing the resources in support of accelerating our development programs towards clinical development, hopefully leading to eventual preventative vaccines and meaningful cancer immunotherapies. We are focused on delivering meaningful results and value milestones over the next six to 12 months. This would not have been possible without the support and commitment of our existing investors as well as our dedicated, highly capable staff and our excellent external support resource teams. Thank you to all of those individuals, and we hope that our efforts will provide improved health for people worldwide, while delivering attractive financial returns to our investors and career development opportunities to GeoVax staff. We look forward to your continued commitment and support as we advance our programs as well as value developments for shareholders, stakeholders, and public health worldwide. Throughout 2020, GeoVax has been highly focused on what many are calling the scourge of the century, now known as COVID-19. Our response to this pandemic has resulted in the development of four vaccine candidates that have either already begun or will soon begin animal testing, for which we are seeking federal funding support to more rapidly accelerate our program through animal testing, selection of the lead candidate, manufacturing scale-up, and ultimately, critical human testing. The recent NIH license illustrates our confidence, confirming GeoVax's access to critical NIH patents and materials in support of product development, clinical development, and continued progress through FDA registration, manufacturing, and commercialization. Despite vaccines that have entered clinical testing, constructed using different approaches and different vector platforms than ours, there is increasing evidence that alternative vaccine approaches, including vaccines for various cohort populations, will be necessary to successfully address COVID-19 and related coronaviruses. Most of the desired attributes of such vaccines, reflecting high efficacy of 75% or greater, single-dose administration, extensive safety validation, durability, and minimal refrigeration, appear to remain elusive when considering the current first-tier candidates. This is where we believe the GeoVax approach can make a meaningful difference, potentially delivering on most, if not all, of these targeted attributes. With over 250 COVID-19 vaccines at various stages of development, critical challenges remain as to the timing of public use and distribution, attributes of the various vaccines, and long-term preparedness for potential future pandemic challenges. The initial COVID-19 vaccines in clinical trials funded by BARDA under Operation Warp Speed are primarily focused on vaccine technologies where established relationships exist between the federal government and specific vaccine developers. Because those vaccine technologies are largely unproven, major questions exist regarding safety, efficacy, and durability, as well as the eventual public acceptance based on their performance profiles, not to mention the feasible distribution of populations across the world's various environments. RNA and DNA vaccines, such as those from Moderna, Pfizer, and Inovio, only allow for specific genetic fragments, meaning that they could potentially result in a tight and narrow focus, such as the COVID-19 virus S protein as the target for preventive success. Adenovirus-based vaccines, such as the AstraZeneca and J&J platforms, simply do not provide a broader-based approach and typically require multiple dosing and additional components or adjuvants to achieve meaningful efficacy. Finally, there remains the challenge of feasible distribution to the public across various environments and localities. This critical issue presents a major challenge, especially when extreme frozen refrigeration, such as minus 70 or minus 80 degree Celsius, is required with most of these technologies. The GeoVax approach enables the insertion of multiple antigen fragments, potentially allowing broader spectrum virus prevention. As such, we have our core COVID-19 vaccine candidates in animal testing with the intent of selecting our lead candidate to proceed with human testing. Using our approach, the inclusion of COVID-19 proteins supports the virus-like particle or VLP formation, becoming targets for the cellular immune response, thereby increasing the overall immune response since the VLPs closely mimic what might be seen within a recovered patient. As a result, we anticipate a potentially stronger and broader immune response without presenting an increased infectious risk to the vaccinated patient. The same GeoVax approach used in constructing our infectious disease vaccines has shown excellent progress in cancer, in both therapeutic and preventive animal models. Our cancer immunotherapy concept combines a tumor-associated antigen vaccine with potent anti-tumor agents such as immune checkpoint inhibitors, resulting in regression of tumor growth and development. Starting with the MUC1 tumor-associated antigen, or TAA, we have identified additional TAAs which we intend to incorporate into such an approach depending on the targeted tumor type. For example, since the MUC1 TAA is highly expressed in many different solid tumors, we constructed an MVA-VLP, MUC1 TAA vaccine, combining it with a checkpoint inhibitor or CPI, testing it in a humanized mouse model against a human tumor. The result of this combination was a 57% difference in tumor growth within the cohort that received the vaccine CPI combination versus the cohort that didn't receive such therapy. Also, the GeoVax combo therapy was superior to that of either the vaccine or the CPI alone. In preventive evaluation, again using humanized mice and a human tumor, the GeoVax MVA-VLP MUC1 vaccine plus a MUC1 peptide provided 100% prevention of tumor development versus 100% development of the tumor in the cohort that didn't receive the GeoVax vaccine peptide combination. This result encouraged us to proceed as quickly as possible towards initiating a clinical development program. We believe that the GeoVax MVA-VLP combination approach provides an exciting and promising basis for novel efficacious cancer immunotherapy. While our primary focus is on accelerating our COVID-19 vaccine and Immuno-Oncology Programs, GeoVax has several programs advancing that are supported by non-dilutive funding that address compelling areas of medical need and significant commercial opportunities. In addition, several of these programs target medical areas within the FDA's priority review voucher program. These present significant non-dilutive capital development opportunities as the products advance post-development completion of regulatory registration. To date, our developments in the areas of hemorrhagic fever virus vaccines, such as Lassa, Marburg, and Sudan, as well as our malaria vaccine continue to advance towards completion of animal testing via non-dilutive funding, similar to what we've seen with our Ebola and Zika virus vaccine programs. Let me again underscore that all six of these vaccine programs target medical areas within the priority review program. Currently, our Ebola vaccine has completed non-human primate testing, demonstrating 100% protection with a single dose and no adjuvants, ready to advance into human testing. The Lassa vaccine is being supported by the U.S. Army and is now in animal testing, funded through non-human primates and preparation of CGMP material for clinical development. We expect results of the animal testing of the Lassa vaccine either late this year or early next year. Both the Marburg and Sudan vaccines, having previously demonstrated 100% protection in rodent models, are being tested via the NIH preclinical services program through non-human primates at no cost to GeoVax. We expect results of the animal testing to begin in the first quarter of 2021. Our malaria vaccine candidates have recently entered animal testing, with results expected yet this year. Our Zika virus vaccine, for which major health concerns remain in the Southern Hemisphere, meaning South America and parts of Africa, is ready to proceed into clinical development, having demonstrated excellent preclinical results. Most notably, our Zika virus vaccine avoids the risk of antibody-dependent enhancement. Our development programs are all focused on areas of major medical needs, representing significant commercial opportunity. Ultimately, the commercial value of these opportunities will be dependent on numerous parameters, starting with the eventual success of our development. Beyond that obvious hurdle, we believe that the GeoVax technology and approach has the potential to deliver single-dose, safe, highly efficacious durable vaccines while also providing new advancements in cancer therapies. The commercial opportunities are significant and we're focused on advancing them into clinical development as soon as possible. Now I'd like to turn the presentation over to Mark Reynolds, GeoVax's Chief Financial Officer, for a review of our recent results and financial status. Mark?

Thanks, David. Obviously, the most important financial event during the third quarter was the closing of our public offering on September 29, and our uplisting to NASDAQ. So I'm going to start the financial review with our balance sheet, since it really sets the stage for our progress moving forward. Cash balances at September 30 were $11.6 million as compared to just $283,000 at December 31, 2019. Working capital at September 30 was $10.8 million as compared to a negative $1.6 million at the end of 2019. That increase is primarily due to the September public offering, where we received net proceeds of approximately $11.2 million. There are a few other events that are also worth mentioning that happened during the year. Over the past several years, this is a very important point I want to make, all of GeoVax's officers and directors took significant salary and fee deferrals to help the company conserve its cash resources and allow it to advance where we are today. Concurrent with the public offering, $1.5 million of those deferrals were converted into equity, under essentially the same terms as units sold to the public. This removed a significant liability from our balance sheet, further strengthening our financial condition moving forward, and also demonstrates the commitment from our Board and management team to the success of GeoVax. In June, we received net proceeds of approximately $900,000 from the issuance of convertible debentures or bridge loans that gave us the cash runway we needed to complete the public offering. Again, concurrent with the offering, those debentures were also converted into equity, thereby removing another significant liability from the balance sheet. In April, we received $170,000 under a bank loan from the Paycheck Protection Program or PPP provision of the CARES Act. That loan is still on our balance sheet at September 30, but we recently applied for full forgiveness, which we expect to receive, so that liability will be eliminated as well. In summary, with the proceeds of the offering and the elimination of a number of significant liabilities, our balance sheet is strong and will support the acceleration of all of our development programs. Turning now to the income statement, I'll focus mostly on the comparable figures for the nine-month periods of 2020 versus 2019. Grant and collaboration revenues were $1.6 million during 2020, versus $907,000 in 2019. The 2020 period also includes $1.2 million related to our grant from the U.S. Army supporting our Lassa Fever vaccine program, compared to $445,000 in 2019. At September 30, there was still a little over $400,000 remaining under that grant to be recognized in future periods. The 2020 period also includes $385,000 related to our collaboration with Leidos for work on a malaria vaccine. Research and development expenses were $1.7 million in 2020 versus $1.5 million in 2019, representing an increase of 14%. G&A expenses were $1.4 million versus $1.2 million, representing an increase of 12%. Interest expense was $143,000 in 2020 versus just $3,000 in 2019, with the increase primarily representing interest expense and debt discount amortization from the bridge loan that I mentioned earlier, which has now been eliminated. The net loss for the nine-month period was $1.6 million versus $1.8 million in 2019. The variance in the per share amounts is not really comparable, it's $2.85 per share in 2020 versus a little over $14,000 per share in 2019. That difference results from the retroactive restatement of our common shares outstanding from the reverse stock splits we effected in January and September of 2020. Our net cash flow from operating activities during the nine-month period of 2020 was approximately $1.2 million or $134,000 per month on an average basis. We do expect that to increase as we've eliminated the salary and board fee deferrals. We plan additions to our scientific staff. We're investing in our laboratory infrastructure, and we will incur incremental external costs for advancing our development programs. But in general, we expect our cash resources to sustain our operating plans through early 2022. The final comments are related to GeoVax's capital structure. Over the past 12 to 18 months, we made a concerted effort to clean up the capital structure, culminating in the September offering. I won't go into those details here, but it's all discussed in the footnotes to our financials and the MD&A section of our 10-Q. As of September 30, subsequent to the offering, we had common shares outstanding of 3.6 million with another 3.9 million shares subject to warrants with an average exercise price of $4.53 per share. Most importantly, none of those warrants contain any of the toxic conversion features associated with some of our prior securities, which are now fully converted and fully behind us. Our capital structure is clean and well positioned for supporting our further growth. And now I will turn it back over to David.

Thank you, Mark. My colleagues and I will now answer your questions. Therefore, turning the call over to Cole, the operator for instructions on the question and answer period. Cole? And our first question today will come from Jason McCarthy with Maxim Group. Please go ahead.

I want to ask a couple of questions on the ID side and one on the oncology side after. On the ID side, obviously so much focus on COVID. David, can you give us a sense of the timeline to select one or more of your candidates to get through animal studies and get into the clinic? Just the announcement, we think, just the announcement of the candidate is significant. And also, as it relates to COVID vaccines, can you speak a little bit broadly about the safety aspects of an MVA vaccine in terms of it being at that type of backlog being used in immunocompromised or high-risk patients and deemed as safe just from smallpox work that's been done? It's applicable we think to what you're doing.

Yes. Thank you, Jason. In terms of timing, based upon the current testing that we've initiated and moving forward, what we are looking at is we don't know if we'll end up, obviously, because we haven't completed the results, but we don't know if we'll end up with one lead candidate or if it might be two that we have a difficult decision to make, which would be a good situation to be in. We are targeting the second half of 2021 to be ready to move into the clinic. Now, that includes our continued negotiations and discussions with BARDA specifically related to accelerated funding. We have had good encouraging discussions with them. We continue to have those, and I think to a large extent, it's dependent on what we end up reporting with the animal results, and I think we'll begin to start seeing animal results probably in the latter part of the first quarter, but definitely early in the second quarter. We are currently in the queue right now to go faster with that. We have things on order. There is a challenge across the industry of access to and scheduling for non-human primates, as you might imagine. The one thing we've been able to do in this recent period following the financing is begin to step forward, take a little more risk in terms of getting in the queues and scheduling stuff. So, our current plans are that in the second half of 2021, we would be initiating our clinical development. Also, regarding your question about MVA in general as the backbone, many are aware that MVA was developed specifically as a smallpox vaccine for individuals with compromised immune systems or comorbidities, etc. It has been tested in over 150,000 individuals. It is extremely safe. I would underscore that for our COVID-19 program, the FDA has agreed to exempt us from having to do the full traditional toxicology testing because we are using MVA. From that perspective, we believe that eventually there will be multiple vaccine approaches needed for different types of cohort populations. There is no better illustrated and validated platform for safety than MVA. It has the most information behind it. We believe with our approach of creating the in-vivo VLPs, we give ourselves the edge in terms of durability, but most importantly, safety. And that's a major issue for many people: how safe will it be? We have seen issues crop up related to adenovirus-based vaccines, and we don't know about the safety of the RNA and DNA vaccines—that is to be determined. However, we do know that we're going in with a well-recognized validated safe backbone. I'll just ask if Mark Neumann has anything he'd like to add to answer this question. Mark?

No, I think that covers it all. As you mentioned, the MVA is the vaccine on its own, and that is, as you said, an approved vaccine in the European and U.S. stockpiles. So, it's an ideal place to start.

Right. And just building a little bit further, because for the investment community, I think sometimes they can look at vaccines for COVID as maybe a noisy, crowded space right now, especially if you're in the early stages. But to our knowledge, you are the only other group that's working on MVA-based vaccines. Can you help us understand the history behind MVA in terms of being a potential booster or an add-on to another COVID vaccine? That's what we saw with the MVA backbone for J&J's Ebola vaccine, and that was a big deal in 2014 and 2015. Mark, can you talk a little bit about that?

Yes, sure. As David mentioned, and I think you're alluding to, the DNA and RNA products are totally experimental. There's nothing licensed. The adeno products—that's a viral vector based on adenovirus. So, that's AstraZeneca and J&J—and those products are based on viruses that don't circulate at high levels in the population. But when you start immunizing several million people, you're now going to be inducing immune responses to both the vector and to the COVID antigens. So, you are inducing anti-vector immunity. We believe that as boosters are going to be needed—just like a flu shot—for a number of reasons, boosters will likely become part of this, and it would be difficult to boost with an adenovirus vector vaccine because you're introducing an immune response to the vector, which could inhibit the vaccine's efficacy. So, it's not only a primary response but then a booster. Additionally, as David mentioned, the virus-like particles—that's a much more complex antigen structure in the vaccine compared to what you see with the Warp Speed products, which are based primarily on the S protein. The constructs designed to induce antibody responses can be amplified with the VLP, which will induce the same antibody responses, plus helper and cytotoxic T lymphocyte responses. These are critical to amplify the response and induce immunological memory so that if you are re-exposed later, you can respond more rapidly. This provides a considerable advancement in vaccine design based on what we know in immunology.

And then just last question on the oncology side, on that vaccine side. Can you guys talk just a little bit about combination therapies? It seems like investors ask about combination therapies for various cancer vaccines, but significant changes have occurred in cancer therapies over the last five or six years, where checkpoint inhibitors have opened the door for cancer vaccines to finally achieve the success that they were looking for previously. Can you talk about how that dynamic has changed and why the opportunity is now for cancer vaccines like GeoVax?

David, do you want to take that, or do you want me?

Yes, I take that. Mark, I'll let you expand further scientifically. The cancer vaccines have been a target within the research and medical communities for quite some time, yet they have never generated the types of immune responses needed to be truly effective in cancer therapy. The reason has been with the auto-regulatory components—something that checkpoint inhibitors control. The checkpoint inhibitors inhibit the checkpoints and stop the immune response from being downregulated, allowing it to increase over time with continued therapy. The more potent the response, the more likely you're going to see anti-cancer effects. The checkpoint inhibitors have reopened the cancer vaccine field in my opinion. This creates a new environment in which to induce the type of response desired. The nice thing about cancer vaccines, as far as treatment is concerned, is that it fits well into existing therapy protocols. If you consider normal cancer therapy, you'll typically include surgery, radiation, and chemotherapy as all individual components that can be mixed and matched, while checkpoint inhibitors are a form of both chemotherapy and immunotherapy. The cancer vaccines would add another component that could enhance treatment regimens. So while it's not a total reinvention of the wheel, it's moving a step further. I personally believe that the cancer vaccine field has significant opportunity right now, primarily because of the checkpoint inhibitors working effectively, combined with new technologies like the MVA-VLP and potentially new adjuvants.

It does. Very helpful, thank you, guys.

Let me just add, if you think about it, the approach we are following in cancer therapy with this combination approach is analogous to the trials that we are currently entering in HIV under the functional cure goals. At the University of California, San Francisco, they're using our vaccine to stimulate the immune system, and then they follow that with a cocktail of antibodies and peptides to help suppress the viral level and maintain it at a certain level, eliminating the need for antiviral drugs. American Gene Technology, certainly, in one of their arms, will use our vaccine for a similar purpose of stimulating and priming, followed by their gene therapy. So, this follows the same general concept but applies it to cancer. Thank you.

And our next question will come from Jeffrey Kraws with Crystal Research Associates. Please go ahead.

Thank you very much, David. You have taken a number of different approaches to the vaccines, which I commend you for. A couple of questions: one, which of the collaborations that you're seeing that you've partnered in HPV? You went after head and neck cancer with Emory University. You've also worked on technology and partnered other technology, as you mentioned just with UCSF. And you've got partnerships with Virometix and other companies. Which of the vaccine programs, because you've got so many: cancer, COVID, HIV, and malaria, which two do you expect to move ahead first? It would be very difficult to focus on all of them.

Well, the first two programs, one will be the COVID-19 vaccine. But if we look at the cancer immunotherapy area, the first one we think we'll be moving ahead with would be in conjunction more than likely with Olivera Finn at the University of Pittsburgh, into the clinic with the MVA-VLP MUC1 approach. That is what we're targeting from that standpoint. The other collaborations have all been established to really validate our technology and convince us that this approach works and makes sense to move forward with. None of the others are collaborations that would necessarily move forward. We're interested in continuing discussions in-depth with ViaMune because that has been going very well. That also targets the MUC1 area, and we probably combine that association with what we're doing with Olivera Finn. The other projects that we have in infectious diseases are all being led through government entities, with the exception of malaria, where we've been working with Leidos but with funding for that vaccine. Depending on the results, we could see malaria moving forward because there’s only one vaccine around today that requires four doses and has an efficacy of less than 40%. It’s a major need worldwide. Those results, which are currently in animal testing, look promising. We could see that program accelerate, but it would largely be led through non-dilutive financing. We would be helping manage R&D in those parts but it would not distract from the cancer area and the COVID effort, which are our two primary focus areas. I will note that the Zika virus vaccine is one that has been on hold for over a year now. We've had promising discussions for a joint development entering the clinic based on our achievements thus far, yet that has been placed on hold due to our capital challenges. But with recent capitalization, we can move much more quickly now. That's one that would be very nice to see get started and progress quickly, as there’s significant medical need and commercial opportunity. We believe our vaccine greatly differentiates from others currently in development as most do not utilize the NS1 protein, avoiding issues related to antibody-dependent enhancement. So I hope that answers your question and gives you some clarity, but primarily, our focus is getting to the decision point on the COVID-19 vaccine and moving into the clinic with MUC1.

Next question is about your success and interest in the HIV-AIDS area. Clearly, with over a million people in the U.S. with HIV, while people have been able to extend survival, there is still a significant need to stop the spread. Several people have partnered with you, showing interest in your technology. You're able to partner with American Gene Technologies, UCSF, and you were also able to initiate a clinical trial. Your AGT trial has been cleared by the FDA, and you expected the vaccine to be added to the trial in 2021. Is that still very much on track? And do you have any thoughts, since that vaccine program has shown promising results through Phase 2A? Might it be expedited toward market due to its strong, durable humoral and cellular immune responses?

Yes. The AGT trial; you're correct. We expect that everything we know from AGT indicates they anticipate that their IND and program, which would include our vaccine, will be in 2021. I believe they plan to start patient enrollment in early 2021. I do not think that has started yet. However, UCSF began patient enrollment in early August, so that program is operational. The other, HVTN 132, is a Phase 1 program using our vaccine involving 70 patients, looking at our vaccine with a novel booster. Again, that is scheduled to start in 2021. Originally, it was to start last year but was impacted as one of the participants had to redo some work. It was then rescheduled for this year, but COVID-19 pushed back planning as sites are focused on COVID clinical trials. The challenge with HIV remains major—it is a significant health need in the U.S. and worldwide. We will never end it until we have a preventive vaccine. Despite 35 years since being introduced to HIV/AIDS, we remain without a vaccine. A prominent study published last year out of NBC News interviewed Dr. Fauci and Dr. Buchbinder discussing the potential for a successful HIV vaccine by 2021, unfortunately, shortly thereafter, no significant findings were reported for HPT and 702 trials conducted by Sanofi and GSK. The challenge we face to move to a pivotal trial is major. Pivotal trials are often costly, sometimes in the range of $50 million and more, requiring significant financial contributions, typically expected from collaborators. That's why we’ve only seen advances from companies with substantial resources, such as Sanofi or J&J. We are prepared to move forward into the pivotal trial—we just need financial backing. We believe that focusing as we are now in infectious diseases and cancer immunotherapy is a better strategy for us as a company to build value and bring products to market.

One last question on a comment: speaking with investors, they've been impressed that your entire team has supported the company significantly by taking salary cuts and converting cash compensation into equity when the company faced challenges. How are your patent estates looking? We hear that a lot from investors, as having strong IP protection is key when embarking on so many projects. Your worldwide patent estate appears to include about 56 granted or pending patent applications, about 16 patent families. Am I correct that having these protections in place is critical?

That is correct. I always get it wrong; it’s either 56-16 or 58-15, but you are essentially right. The commonality is the MVA backbone, and we reflected that in the recent NIH license, a very important agreement that covers us in terms of rights all the way through commercialization; so all aspects of it. Yes, that is what we have, and we individually file patents on every product that we design and develop. So, yes, that is the plan.

This will conclude our question and answer session. I'd like to turn the conference back over to David Dodd for any closing remarks.

Thank you and thank you to everyone for your continued support and interest in the progress and transformation of GeoVax. We look forward to updating you on our advances when we discuss fourth quarter and full year 2020 results. The successful capitalization and NASDAQ listing of GeoVax provided the foundation from which we hope to develop a highly valuable company, contributing to improved health options against various infectious threats and cancers. In the interim, we will provide timely updates regarding the various results and progress of our infectious disease vaccine and immuno-oncology programs. Thank you for your continued support and commitment to these goals. I also want to again acknowledge and thank our GeoVax staff and the many other parties that continue to support, assist, and advise towards achieving success. For all of us, it is a great pleasure to serve our shareholders and to be part of this team. Thank you. Have a safe and enjoyable day.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.