GeoVax Labs, Inc. Q4 FY2020 Earnings Call

Good morning and welcome everyone to the GeoVax Fourth Quarter Year-end 2020 Corporate Update Call. I am Jayson with Chorus Call and will facilitate today's call. With me are David Dodd, Chairman and CEO; Mark Reynolds, Chief Financial Officer; and Mark Newman, Ph.D., 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 a forward-looking statement regarding this call and information herein.

Thank you, Jayson. Please note the following 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, 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 is now my pleasure to introduce Chairman and CEO of GeoVax, David Dodd. David, please go ahead.

Good morning and thank you for participating in the 2020 fourth quarter year-end GeoVax quarterly update call. At the cusp of third to fourth quarter 2020, GeoVax capitalized the company and achieved the NASDAQ listing, securing significant resources and support for accelerating our development programs towards clinical development. We are focused on delivering meaningful results and value milestones over the next 12 to 15 months. Our focus is on advancing our priority programs related to COVID-19 and immuno oncology, developing increased value for shareholders, stakeholders and public health worldwide. In October, we announced a license agreement with NIH providing GeoVax full access to and use of critical NIH patents of materials in support of COVID-19 vaccine product development, clinical development and continued progress through FDA registration, manufacturing and commercialization. Executing that license underscores our commitment to and confidence in our unique vaccine development approach relative to COVID-19. In November, we announced another license with NIH providing GeoVax full access to and use of the NIH patents and materials in support of vaccine product development against numerous pathogens including within cancer immunotherapy. This additional broad-based product target license underscores our focus and commitment to advancing a high value, meaningful product pipeline for registration and commercialization. Once we decide to advance a specific product into clinical development, we anticipate executing a license with NIH similar to our COVID-19 agreement. In January, we announced receipt of NIH funding in support of our COVID-19 vaccine development programs. There's increasing evidence that the COVID-19 virus will continue to evolve, requiring expanded virus variant coverage, otherwise requiring annual reconfigured vaccines, similar to what is necessary relative to influenza vaccination. We hope to change that, encompassing potential variants before they emerge versus chasing the evolving virus as will be likely required of various competitive technologies. In November, this past November, less than a week following our previous corporate update call, the NIH issued a request for proposals for what it referred to as a pan-coronaviruses vaccine development project, specifically seeking to fund preventive vaccines able to provide broad and durable protection against coronaviruses specifically, SARS-CoV-2 and others with pandemic potential. That is exactly what we are pursuing using our differentiated technology focused on a single dose with minimal or no refrigeration required for the vaccine. We'll speak more about this a little bit later. Following the announcement of the NIH grant in support of our COVID-19 program, we had the opportunity to further increase our cash position, successfully raising over $10 million gross resulting in a total cash position of over $20 million with no debt. As a result, we are well capitalized to advance priority programs into clinical development over the next 12 to 15 months and more. Meanwhile, we continue to strengthen our IP portfolio, now having over 70 granted or pending patent applications spread over 20 patent families. We are confident that we have a strong IP position, providing an increasingly more competitive position. In summary, we have a compelling pipeline focused on major medical needs, providing significant commercial market opportunities with near-term value milestones. Included in our development portfolio are six indications that qualify for the FDA priority voucher program, most of which are continuing to advance with non-dilutive funding. Our priority focus remains on advancing our COVID-19 vaccine program and our immuno oncology developments, while these other programs will advance requiring minimal resources from GeoVax. Now I would like to turn the call over to Mark Newman, Ph.D., our Chief Scientific Officer.

Thank you, David. What I'm going to do is go over the MVA vector program that we're working on. So as we've noted previously, the GeoVax vaccine is based on the use of the modified Vaccinia Virus Ankara, abbreviated MVA. So MVA was developed as a smallpox vaccine for use in the elderly and immune-compromised individuals with an enhanced focus on safety. So it's really ideally suited as a vaccine vector for use within the general population. The primary advantage of MVA is the large genetic coding capacity, which allows us to include multiple genes for a given target. This is shown in the pictures as antigen 1, antigen 2, and antigen 3. This allows us to develop vaccines that will actually support the generation of virus-like particles within the body of the vaccinated individual. So these accurately mimic the structure of the infectious virus and induce the correct immune responses, but they're totally non-replicating whatsoever, particularly safe. These will induce both antibodies and cellular immune responses, and because they mimic the virus ideally, they will be recognized and induce protective responses within a single dose. Now, our experimental COVID vaccines are designed to take advantage of the MVA-VLP technology and encode the spike protein, which is the focus of most current generation vaccines. And we're producing these in combination with matrix and envelope proteins, M & E. So the M & E proteins provide the structural components required for the VLP formation within the body. They also serve as additional targets for cellular immune responses. So this design represents the first critical step toward a COVID vaccine that will induce immune responses that are not significantly impacted by variants that are evolving within the population, which we've all heard about. These are typically characterized as variants within the spike protein. We are working to get ahead of the evolution of COVID rather than chase the new variants as David noted. So we won't be producing modified vaccines on a yearly basis; rather, a universal coronavirus vaccine. The first three experimental vaccine constructs are in the final stages of small animal testing, and this testing includes infectious challenges. So we're looking at protection. The product that proves to induce the most protective immune responses will be the basis for the initial clinical development. Additional vaccine designs which will allow us to target additional coronaviruses and based on the additional proteins from coronaviruses will be selected based on existing population data, which is evolving over the coronavirus pandemic. These will be considered for future use to design new products to expand if necessary. Now, immuno-oncology is the other program that we're focusing on. The MVA-VLP platform is ideally suited for inducing immune responses to selected tumor-associated antigens, typically abbreviated TAA. So the VLPs produced within the body of a vaccinated individual are composed of a virus structural protein, which allows us to form the VLP, but also in connection with the tumor-associated antigen. These present the immune system with a highly concentrated form of the tumor-associated antigen to increase potency and induction of both antibody and cellular responses. Now, our approach is to combine vaccines with a potent antitumor agent such as checkpoint inhibitors, which will result in immune responses that can contribute to the existing tumors and theoretically prevent the development and expansion of metastatic lesions. Our initial focus is on the MUC1 or Mucin 1 tumor-associated antigen. This is a well-studied target for both antibody and cellular immune responses. But there are also multiple other tumor-associated antigens, which we intend to investigate using this approach. Preliminary data generated with the MVA-VLP MUC1 tumor-associated antigen, we tested our products in combination with two different experimental peptide vaccines and the checkpoint inhibitor in transgenic mouse models, which allowed for the evaluation of the vaccine effect against actual humanized tumors in a humanized setting. So in the treatment model using MVA plus the MT1 peptide in combination, we observed a 57% difference in tumor growth in animals immunized with a combination of MVA plus the MT1 peptide compared to control animals. Also note that the combination of the vaccine was superior for reducing protection against the tumor compared to either peptide alone or a checkpoint inhibitor alone. So this significantly represents an additive step to the existing standard of treatment. And in a preventive model which is actually designed to mimic a post-treatment recurrence setting in cancer, the MVA-VLP MUC1 peptide vaccine plus MUC1 peptide induced immune responses that provided almost 100% protection against tumor development. So these results have encouraged us to proceed quickly towards initiating our clinical development program, starting with the product manufacturing consistent with GMP regulations. We believe that the GeoVax VLP combination provides an exciting and promising basis for novel and efficacious vaccine immunotherapies, which will be added to the current standard of treatment. Now I'm going to turn the presentation over to Mark Reynolds, the Chief Financial Officer.

Thank you, Mark. The most significant financial event this past year was our public offering in September and the subsequent uplisting to NASDAQ. I will begin the financial review with our balance sheet, which highlights our progress. Our cash balances at the end of the year were just under $10 million, specifically at $9.9 million, compared to $283,000 last year. Our working capital improved to $9.4 million from a negative $1.6 million at the end of 2019. This represents a substantial enhancement of our financial position. The cash balance increase is primarily due to the September public offering, which generated net proceeds of $11.2 million. Additionally, we raised $900,000 through a bridge loan that was converted into equity at the time of the public offering. Earlier in the year, we also secured a $170,000 bank loan under the paycheck protection program and are currently seeking forgiveness for that loan. It's worth mentioning that our officers and directors converted $1.5 million of deferred salaries and fees into equity under the same terms at the conclusion of the public offering. Following the year-end, as David mentioned, in February, we raised an additional $9.4 million through an overnight offering priced at $6.25 per share, above last year’s offering, with no warrants issued. Additionally, around 690,000 warrants from the public offering were exercised early this year, providing another $3.2 million in proceeds. In total, as David stated earlier, we have current cash balances exceeding $20 million. Now, regarding the income statement, grant and collaboration revenues in 2020 were $1.8 million compared to $1.2 million in 2019. The 2020 figure includes $1.4 million from our grant with the U.S. Army for our Lassa Fever vaccine program, where we received $674,000 in 2019. Additionally, $385,000 was generated from our collaboration with Leidos Corporation for malaria vaccine work. At the end of the year, we have $165,000 remaining under the Lassa Fever grants, which will be recognized in 2021. We also received a Phase 1 SBIR grant from the NIH in January for our COVID vaccine program, adding $300,000 to be recognized in 2021. R&D expenses rose to $2.4 million in 2020 from $1.9 million the previous year, reflecting a 28% increase. General and administrative expenses grew to $2.2 million from $1.6 million, a 34% increase. These rises are driven by greater expenditures in our grant-funded programs, costs related to NIH licenses, and increased spending on investor relations following the September offering. Interest expense was $144,000 in 2020, up from $4,000 in 2019, primarily from interest and debt discount amortization related to the bridge loan, which has been fully repaid. Consequently, our net loss in 2020 was $3 million or $2.14 per share, compared to $2.4 million in 2019 or $781 per share. The difference in share amounts primarily reflects the retroactive restatement of common shares due to reverse stock splits and the resultant capital restructuring and public offering, including the NASDAQ uplisting. Our net cash flow for 2020 was approximately $2.8 million, averaging about $230,000 per month. We anticipate this cash burn to grow as we have eliminated all salary and board fee deferrals since the public offering, plan to expand our scientific team, invest in laboratory infrastructure, and incur additional external costs to advance development programs, which is what the funds raised are for. Overall, we expect our cash resources to support our operating plans through at least the end of 2022, potentially beyond. Our annual cash spending run rate is currently under $5 million, in the range of $4 to $4.5 million. However, we will invest additional funds in our programs as we move towards clinical trials. Finally, regarding our capital structure after the 2020 offering, the February 2021 offering, and the warrant exercises to date in 2021, we have approximately 6.3 million common shares outstanding, plus around 1.9 million publicly traded warrants exercisable at $5 per share. There are also about $1.5 million in other stock options and warrants with an average exercise price of around $4.25. Importantly, none of these warrants include any toxic conversion features that have been linked to previous capital structures of the company. Therefore, our capital structure is now clean, and we are well-positioned for future growth. I will now turn the floor back to David.

Thank you Mark. My colleagues and I will now answer your questions, and therefore turning the call over to the operator for instructions on the question-and-answer period. Thank you.

Our first question is from Jason McCarthy from Maxim Group. Please go ahead.

Hi, everyone. Thank you for taking my question. I think it's directed at Mark Newman. You mentioned that part of the interaction with the NIH or regulators is their recognition of the need for a different variant of a COVID vaccine. Could you explain a bit about why MVA and VLPs are effective in producing T cells and B cells for antibodies? Specifically, why is the production of T cells important? In the immunology community, there's a belief that mRNA vaccines primarily provide antibodies and that the effects last only about 90 days. It seems regulators are aware of this perspective, although they don't often discuss it openly. Can you provide some more details on this?

Yes, I can address your point. There are currently four circulating variants of coronavirus that cause severe common colds. Over the past 15 years, we've had SARS-1, which was deadly, and MERS, which is still present in the Middle East, as well as SARS-2, CoV-2, which has become a pandemic. Coronaviruses pose a significant issue. We are focusing on the core elements of the coronavirus. There is a specific component within the virus that defines it as a coronavirus, and these properties cannot be altered significantly, much like the S protein where many variations occur. When mutations happen, new variants evolve, leading to an immune response that needs to adapt, especially since vaccines have generated responses against earlier variants. We are targeting more fundamental features of coronaviruses to stimulate cellular immune responses. A substantial amount of animal data, along with accumulating human data during the pandemic, indicates that these cellular immune responses are crucial. Individuals who have been exposed tend to generate memory cells. Antibody levels may decline after about 90 days, but we expect memory cells to be reactivated during new coronavirus infections. The goal is to achieve conservation against all coronaviruses that infect humans, as these elements are less susceptible to mutation and evolution since they define the coronavirus. A significant mutation in these protein types would result in a non-viable virus. There is awareness within the field, and as David mentioned, government support has been announced to advance the universal coronavirus program, which we will target. The MVA technology is well-suited for this, allowing us to incorporate multiple coronavirus gene products into the vaccine. Our current vaccines involve three gene products and are in the final stage of animal testing. We’ve also initiated design meetings for next-generation products, reviewing literature to identify the best designs and targets. We are beginning to produce some of these products and evaluating their expression within the MVA. While we are not the only ones pursuing this, MVA technology is particularly advantageous due to its substantial coding capacity.

Yes, that's helpful. To your knowledge in the literature, or from some of the other vaccine developers has been, particularly the ones that are using viral vectors. Are there any data out there, or population based data from exposed people that there are antibodies and T cells circulating targeting E & M proteins, not just S proteins?

Well, there is data existing from population studies that show that individuals who have never had COVID actually do have responses to T cell responses to COVID gene products. So they have preexisting immunity to coronavirus. It's not actually a COVID. It's caused by something else. So those types of things are recognized. But it's never been studied to the extent that we need to study it now, right, because if there was interest in a cold vaccine, you probably would have seen it before. But people aren't necessarily becoming severely ill. But when you get these pandemics, then that drives a response. It's a reactive response; it would be better to be proactive. But it's just not how necessarily work. So we know what's out there; lots of people are aware of it. And now there is significant interest in moving ahead with these new approaches.

And just last question. What is the timing to move into at least a Phase 1 study?

We will have the animal data and will select the first candidate we believe is the right choice within the next 2 to 3 months. After that, we will begin manufacturing the MVA, which could take up to a year. Therefore, we expect to start a Phase 1 trial in the second or third quarter of next year for the first step of the universal coronavirus vaccine.

Got it. Thank you, Mark.

There are no more questions in the queue. This concludes our question-and-answer session. I would like to turn the conference back over to David Dodd for any closing remarks.

Thank you, and thank you to the participants for your continued support and interest in the progress and transformation of GeoVax. We have several near-term data milestones in which we look forward to updating you. Following the successful capitalization, NASDAQ listing and progress in our development portfolio, we remain focused on developing a highly valuable company, contributing to improved health options against various infectious threats and cancers. We anticipate issuing updates regarding the near-term data milestones and continued progress with our development programs. Thank you for your continued support of our commitment to these goals. Finally, I want to acknowledge and thank our GeoVax staff and the many other parties that continue to support, assist and advise us towards achieving success. For all of us, it is a great pleasure serving our shareholders and being a part of this team. Have a safe and enjoyable day. And again, thank you for your interest and support for GeoVax.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.