GeoVax Labs, Inc. Q2 FY2021 Earnings Call

Good day and welcome to the GeoVax Second Quarter 2021 Corporate Update Call. I am Gran 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. All participants will be in listen-only mode. After today’s presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. I would now like to turn the conference over to Jules Abraham of CORE IR, who will provide a forward-looking statement regarding this call and the information discussed.

Thank you, Gran. Good afternoon, everyone. Please note that certain statements in this presentation may be considered forward-looking statements under the Private Securities Litigation Reform Act. These statements reflect management's current expectations and are subject to uncertainty and changes. Actual results may significantly differ from these statements due to various factors, including whether GeoVax can develop and manufacture its vaccines as intended and on schedule, whether the vaccines are safe for human use, their effectiveness in preventing targeted infections in humans, the achievement of necessary regulatory approvals for licensing and marketing, the ability to raise capital for vaccine development, the emergence of competitive products that may be more effective or easier to use, the ability to enter favorable manufacturing and distribution agreements, and other uncontrollable factors. GeoVax does not have an obligation to update these forward-looking statements and does not intend to do so. Additional information about these factors can be found in GeoVax's filings with the Securities and Exchange Commission, including those outlined as risk factors in GeoVax's Form 10-K. It is now my pleasure to introduce the Chairman and CEO of GeoVax, David Dodd. David?

Thank you, Jules. Good afternoon, and thank you for joining the second quarter update call for 2021. We are happy to have this chance to share our ongoing progress and to advance our key development programs toward clinical development while securing essential resources for GeoVax's growth. Over the past year, we have improved our cash position by reaching important milestones related to several of our programs. We are focused on delivering significant results over the next 12 to 18 months, particularly in our priority initiatives around COVID-19 and immuno-oncology, creating increased value for our shareholders, stakeholders, and global public health. We acknowledge that new variants of COVID-19 are continually emerging, posing ongoing pandemic threats to global health. Consequently, the NIH and SEPI have called for proposals for Pan-Coronavirus vaccine development projects, aiming to fund vaccines that offer broad and durable protection against coronaviruses, particularly COVID-19 and others with pandemic potential. It is evident that the COVID-19 virus will keep evolving and that we will need vaccines that cover various virus variants, similar to what is seen with influenza vaccines. Therefore, the challenge remains to develop vaccines that can adapt to emerging variants. Recent studies on long-term immunity highlight the necessity of a broad vaccine design that goes beyond merely targeting the spike protein and also enhances cellular immunity. This aligns perfectly with our strategy. Our objective is to deliver a single-dose, safe, durable, universal coronavirus vaccine that provides immunity against potential variants before they appear. Our technology offers minimal to no refrigeration needs, presenting a significant advantage over other solutions. In January, we announced receiving NIH funding for our universal coronavirus vaccine program. We are in ongoing discussions with NIH, BARDA, and other organizations to review our findings. Based on positive results from our animal testing, we have submitted a larger proposal to NIH in support of this development. We are also planning to submit substantial funding requests to other organizations based on the encouraging outcomes we have observed. Dr. Mark Newman, our Chief Scientific Officer, will share more updates on our universal coronavirus initiative shortly. Following the announcement of the initial NIH grant, we were able to bolster our cash position by raising over $10 million and an additional $3 million from warrant exercises. Currently, our cash position stands at approximately $20 million. We anticipate enhancing our balance sheet further as similar opportunities arise to grow our capital on favorable terms. In summary, we are well-positioned to push forward with priority programs in clinical development over the next 12 to 18 months, primarily focusing on the Universal Coronavirus initiative and immuno-oncology. We are also working to strengthen our resources and accelerate product development. As we noted in our previous corporate update, our IP portfolio is robust, now featuring over 70 granted or pending patent applications across 20 patent families, with additional submissions during the first quarter. In February, we filed both international and U.S. patent applications focusing on SARS-CoV-2 (COVID-19) and cancer immunotherapy. More recently, in July, we announced the issuance of a U.S. Patent for our Hepatitis B vaccine. We believe our strong IP position enhances our competitive edge in the market. Additionally, we are making progress in other initiatives, including immune-oncology, where the results from our animal testing have been positive and supportive of moving into clinical development. Our vaccine programs for Sudan, Ebola, Lassa, and Marburg are currently concluding animal testing supported by federal government funding. In summary, we have an impressive pipeline addressing significant medical needs and offering substantial commercial market opportunities with near-term value milestones. Our priority remains on progressing our universal coronavirus vaccine program and our immuno-oncology developments, while the other programs will continue to advance with minimal resources from GeoVax. As we move forward, we will also look for opportunities to expedite our progress through strategic considerations. Now, I would like to hand the call over to Mark Newman, our Chief Scientific Officer.

Thank you, David. I'll begin with a general overview highlighting that immune responses to viral infections involve both antibodies and cell-based mechanisms. Antibodies target virus surface proteins and their role is to prevent the virus from entering cells, a process known as virus neutralization. This term is commonly discussed in the media. Antibodies can also restrict both the initial infection and its spread by localizing the infection. The first generation of COVID vaccines primarily aimed to stimulate antibody production specific to the S Protein, the surface protein of COVID, with their effectiveness primarily gauged by their ability to neutralize the virus. However, cellular immune responses, particularly T lymphocyte activity, are also crucial since these cells help to limit virus replication and eliminate infected cells. For a vaccine to be fully effective, it must generate both antibodies and T-cells that work seamlessly together and include memory cells, which remain in the body and can quickly respond to future infections. The COVID virus poses a significant challenge for vaccines due to its potential for mutation, resulting in variants that may not be recognized by existing immune responses. Variants that evade recognition by pre-existing antibody responses are termed escape mutants. This graphic illustrates the variations tracked among COVID variants over the past year, demonstrating the virus's high variability. Originating from a single strain, the next slide highlights concerns noted by the World Health Organization. The S protein exhibits numerous mutations, potentially leading to variants that can evade immune responses from first-generation vaccines. These mutations can undermine both the antibodies' neutralization ability and the virus’s infectivity and transmissibility. Currently, we see the Delta variant, which is the most transmissible strain studied so far and shows some resistance to antibodies from the first-generation vaccines, presenting a significant concern. The accompanying table makes it clear that the Delta variant is just one among several variants flagged by the World Health Organization, with unknown risks and effectiveness of current vaccines against them, emphasizing the need for additional strategies. The GeoVax program aims to develop vaccines that also stimulate T-cell responses. Why focus on T-cells? Studies examining T-cell responses from individuals who naturally contracted and recovered from COVID underscore their importance. The data indicate measurable T-cell responses targeting various proteins, including the S protein and others. CD4 T lymphocytes are a significant part of this response, directly diminishing virus replication while simultaneously supporting other immune functions, such as memory formation and antibody production, alongside CD8 T-cells, which are responsible for clearing the virus from infected individuals. Crucially, research on severely infected patients shows that those with stronger T-cell responses tend to fare better, requiring less hospitalization and recovering faster. This is vital in vaccine development, linking back to the original SARS infections in 2003, where individuals who recovered still possess memory T-cell responses to the virus, indicating the lasting presence of T-cells can provide enduring immunity. Enhancing durable immunological memory is essential for successful vaccination, which we believe can best be achieved through targeted T-cell responses. The next slide elaborates on effectively targeting T-cell responses. Variants are typically tracked by changes in the S protein. The graph demonstrates that, upon examining the genomes of various COVID variants and related viruses, certain proteins remain stable, essential for the virus's basic functions. In contrast, the S protein shows significant variability, allowing the virus to change without compromising its replication capability. This indicates that proteins encoded by conserved genes are prime targets for vaccine design, as the virus can’t permit variation in these areas. The next slide illustrates our progress with the GeoVax program. We remain focused on creating vaccines that elicit immune responses against multiple COVID proteins. This ability stems from our use of the MVA viral vector, central to our approach. This vector enables the creation of vaccines that encode several viral proteins simultaneously. Our current efforts center on MVA-vectored vaccines that express various forms of the S Protein, along with membrane and envelope proteins. The combination drives the production of virus-like particles in the vaccinated animal's body. These virus-like particles present a non-infectious format that mimics the virus, helping to enhance immune responses effectively. The next slide introduces our lead candidate, referred to as CMO2. This construct is stable and can be produced, which is essential. We can visually confirm the presence of the S Protein, the target for antibody production, based on a pre-fusion stabilized form, akin to that in first-generation vaccines known for inducing strong neutralizing antibodies. Additionally, the virus-like particles incorporate M and E proteins, important in eliciting T-cell responses distinct from those targeting the S Protein. In conclusion, I want to emphasize that initial animal studies have supported the selection of the CMO2 product and other laboratory findings mentioned. These animal trials will contribute to our universal COVID vaccine initiative, as we aim to incorporate more gene products to broaden T-cell responses. More detailed results will be presented at the European Society of Medicine Conference on August 19 in Berlin. The MVA vector vaccine represents a crucial step toward achieving a universal vaccine goal as it aims to generate responses beyond just the S Protein, integrating highly conserved membrane proteins as additional T-cell targets. The CMO2 construct serves as a scaffold for developing new experimental vaccines focusing on other conserved COVID proteins to foster a comprehensive T-cell response alongside antibody responses. These next-generation vaccine development efforts are actively underway, including larger grant proposals with the FDA and submissions for support with Sepi. Now, I will turn the presentation over to Mark Reynolds.

Thank you, Mark. After the scientific review, I’m going to just go over some numbers here. I know that most everybody is more interested in the corporate updates, so I'll be relatively brief here. Starting with our balance sheet review, the cash balances at June 30 were $19.5 million, compared to $9.9 million at the end of last year. Our working capital was $19.3 million, as compared to $9.4 million at the end of 2020. The increase in our cash balances were due primarily to the February offering that David mentioned earlier, with net proceeds of $9.4 million. During the first quarter of the year, we also received a little over $3 million from the exercise of warrants, as warrants were issued in connection with the offerings that brought us onto NASDAQ last September. As a quick recap, those warrants are publicly traded under the symbol GOVXW. They have a $5 exercise price, and they expire in approximately four years in September 2025. After those recent exercises, there are still 1.9 million of those warrants outstanding, which, if exercised in full, could bring in another $9.3 million. Turning to the income statement, I'm going to focus mostly or compare figures for the six-month periods of 2021 versus 2020. Grant and collaboration revenues were $190,000 in 2021 versus $1.2 million in 2020. The 2021 period revenues relate entirely to our grants from the NIH supporting the COVID-19 vaccine, whereas 2020 numbers include revenues from the grant for a loss of vaccine in the U.S. Army and also related to a collaboration with Leidos to work on a malaria vaccine. R&D expenses were $1.4 million in 2021 versus $1.3 million in 2020, with the increase associated with the COVID vaccine program, manufacturing process development, and an overall generally higher level of activity. G&A expenses were $1.8 million in 2021 versus $930,000 in 2020. That is a big increase, but a large portion of the increase relates to our annual Delaware franchise tax, which is based on our capitalization. It was minimal in 2020 and very significant in 2021. Therefore, we have payment of 2020 tax and also estimated taxes for 2021. Other increases were in patent costs, legal fees, consulting fees, and personnel costs, all generally associated with a higher level of activity following capital raising. During the second quarter of 2021, we reported a $172,000 gain on extinguishment of debt that was associated with the forgiveness of the PPP loan we received in early 2020. Overall, our net loss for 2021 was $2.9 million or $0.49 per share, compared to $1.1 million in 2020 or $2.27 per share. I'll note that the variance in the per share amounts is largely due to the dilutive effect of the September 2020 and February 2021 stock offerings. Our net cash flow from operating activities during 2021 was essentially the same as the net loss for the quarter at $2.9 million, and in general, we expect our current cash resources to sustain operating plans at least through mid-2023. Our cash burn rate for core operations, personnel, facilities, lab operations, etc., is less than $5 million annually, but our incremental program spending will increase as we progress to clinical trials in several areas. So finally, a summary of our capital structure. We currently have 6.3 million common shares outstanding, and as I mentioned earlier, there are 1.9 million of the publicly traded warrants. There are an additional 1.5 million of other stock options and warrants with an average exercise price of about $4.25. That’s it. I'll be happy to answer any questions during the Q&A. I'll turn it back to David.

Thank you, Mark. Now my colleagues and I will answer your questions. So, I'm therefore turning the call over to the operator for instructions on the question-and-answer period.

Our first question will come from Jason McCarthy with Maxim Group. Please go ahead.

Hey, guys, thanks for taking the questions. The question for Dr. Newman, specifically around the talk of the mRNA – the currently available vaccines don't cover the Delta variant or other variants seemingly or the lack of immunological memory we've known as and we do not talk about this extensively. That's true. You know, this is done. It's like a dirty secret, but nobody talks about it. And do you think that there's a lack of attention to those two factors in the general public? Because when I mention that to people they look at me like I'm crazy. But I also know infectious diseases and they don't, but, you know, how does that impact your thinking when you're developing your vaccines? Is there a problem that needs to come out more?

Yeah, thanks for the question. You know, if you look at most vaccines, you know, your pediatric vaccines, the things, you have a cycle of these that you get at a certain time, and then you would get a booster once every 5 years or 10 years. So, if you get a tetanus shot, it's good for, you know, 10 years typically; hepatitis, once you're immunized, you'd only get a booster shot and at-risk situations. I think that in this case, there's two points. The number one, the pandemic response required that the industry move quickly with what they could do, and they attacked this with the target that made a lot of sense: it was the S Protein, inducing antibody responses, protect as many individuals as you can. These mRNA vaccines do induce some T-cell responses as well, but of course, it's limited to the S Protein and will be subject to variation just like the antibodies. How much memory they induce will have to be determined over time. The coronavirus is somewhat – if you read literature on coronaviruses that cause colds, the immunity is just short-lived. This might be a nature of the coronavirus, but there's also bias because you measure antibody responses; it's much easier to do. The groups that measure T-cell responses are fewer, and the assays are more laborious. So, it might just be that there's less work done in coronaviruses and targeting these kinds of responses. But yeah, we clearly believe that we need to induce both, and I think what – you're not going to see in the general population is people understanding that inducing a protective immune response via vaccination involves multiple cell types. It's your B-cells producing antibodies, it's your T-cells directly impacting the virus, and supporting the induction of memory. So, in the field, these are aspects that people are looking at, but I would agree it's not something that is generally talked about in the press. Antibody responses are easier to measure. You've got a vaccine, you can have your doctor request a diagnostic that will tell you, yes or no you have a high level of the S antibody, and you can't do that with a T-cell response. You can't measure immunological memory, even with a kit from a drugstore. So, I think we're measuring what we can easily. And as we move up into the more technical questions then they become more lab-based and more science-based. I don't have an answer to the question. Yeah, we should target. Yeah.

Yeah. It’s just more of just hearing your thoughts on it. So, you know, with that said, given everything that's happening with Delta, obviously, groups like the NIAID are clearly aware that there's an issue even with their current vaccines, and what they've done is incredible with what they had and how fast they did it. But you know, how much of the need now impacts how NIAID is willing to support groups like GeoVax with more funding to get next-gen vaccines, you know, from the bench and into the clinic? And on top of that, what's the timeline do you think to select a candidate from you guys and moving into a clinical study?

Well, so the first part of that question is NIAID is definitely, you know, aware of this. They have a program specifically targeting the development of universal COVID vaccines. And yeah, I think it's a research-based program; they're looking for new technologies. As I said, we have put a proposal into that program. My personal view is they're looking for new technology, believing it may be needed, or new formulations or something with old technologies. But, you know, they're clearly aware of that. And then, I'm sorry, what’s the second question?

What is the timing for GeoVax to select the candidate and move into the clinic?

You know, this sort of thing is somewhat flexible. Remember, we've got the immuno-oncology program, and I think we presented previously that this is the lead candidate, where we are forming our business relationships and working out all the processes for manufacturing. So yes, the timeline, theoretically could be that and if we decide to focus on the current generation, which is the first step towards universal. If something were to come up and tell me that, you know, we could actually make a bigger bang for the box by waiting for the next step to the universal, we could start incorporating these other targets in the CMO2, then it could be, you know, the plans could be delayed. But the manufacturing efforts are now all focused on the cancer program with this program to be the next in line as we work out all the bugs and move forward.

Our next question will come from Kumar Raja with Brookline. Please go ahead.

Hi, I'm calling in for Kumar from Brookline. Thanks for the update. Regarding the preclinical studies of the COVID vaccine, are you planning to include studies with non-human primates as well? When do you anticipate sharing the preclinical data?

So as I mentioned in the talk, the initial preclinical studies will be presented in about a week at the first scientific conference. We're trying to present the experimental data through the normal venues. We have a second set of studies ongoing with a different small animal model. We would expect to be able to talk about that data at the end of the year. There are multiple animal models for this. Some measure pathogenesis recovered from disease. Some of them are live-dead experiments where you have an animal that is not protected, which would be lethal. The primate study is an open question. We are keeping our options open on that. The issue is the primates are very difficult to secure now. There's just a shortage of primates for these studies. The FDA does not require primate studies for us to move into a Phase 1 trial. Thus, the value has to be questioned at each step. If we can do toxicology studies, which should be very limited because of the MVA history in an animal model like a rabbit, we can move right into people. The non-human primate studies may not add a lot of value, but it will change as we see what the availability of these animals is.

Right. Thank you. And with regards to the clinical trials, could you talk a little bit about how you're thinking about subject recruitment, including age group now that a large adult population is already vaccinated? And are you thinking of having sites in the U.S. or internationally as well?

Well, so you've heard David Dodd talk before, you know, we recognize that the MVA is that there are particular niches where this vector technology may be really well-suited. There are specific programs looking at immune-compromised individuals who are not responding for one reason or another to the existing current vaccines, people who cannot tolerate a particular product. So, we're well aware that anything we do will have to be considered as a booster, because as you said, if the current campaigns are successful, recruiting patients will come down to recruiting patients that are either recovered from a natural infection or among patients that have already been vaccinated. Now, that's not a difficult thing for us to control because remember, we're not immunizing with just the S Protein; we'll also be immunizing with the M and E proteins. The way you would design a study with that is to ask the question, if I come back with a booster or if the MBA serves as a booster, can I increase a higher titer of S Protein antibodies? And can I expand the response or increase the pre-existing response to the M and E proteins? So, the study is a little more complex, maybe on the lab side; it's not necessarily more complex to design and recruit. It's just that we will do it with the recognition that either or will be a specific niche market, immune-compromised individuals or something where we need a more potent product, or it will be reviewed as a booster.

Thank you. Thanks for the color. I’ll get back in queue.

Our next question will come from Jeffrey Kraws with Crystal Research. Please go ahead.

Thank you, David or Dr. Newman. Recent data from the CDC, which began its study on July 3 in Provincetown, reviewed 469 cases and showed that three quarters of the cases were in fully vaccinated individuals, with about 69% among eligible adults at that time. The study also indicated no significant difference in the viral load of breakthrough infections in fully vaccinated individuals compared to others, suggesting that the viral load in both vaccinated and unvaccinated persons infected with the coronavirus is similar. Given that there is an emphasis on wearing the right mask, and the CDC has raised concerns that vaccinated individuals can transmit the virus, are you receiving adequate attention from the CDC or the World Health Organization? I understand the major pharmaceutical companies have garnered significant attention due to their rapid vaccine rollout. In light of what was discussed regarding the SM and E proteins and your ability to boost titer levels, are you getting enough engagement from these organizations to warrant serious examination of your findings? I know you're going to conduct tests, but are they paying sufficient attention, or are they solely focused on the existing vaccines, considering the large number of individuals already vaccinated with the three available options?

Mark, would you like me to comment, and then if you want to pick up on it?

Sure, you can manage the geopolitical aspects, and I will take care of the other matter.

Thank you, Jeff, for your question. We are well aware of the Massachusetts study and the subsequent comments from the CDC. Generally, we feel we haven't received the level of attention we should. This doesn't necessarily mean that's the right conclusion; it's more of a sentiment we have. We would appreciate more focus from those organizations. On a serious note, the NIH and SEPI are certainly aware of the need for a variety of approaches, as Mark mentioned earlier. It wouldn't be wise to alarm the public by emphasizing the importance of looking beyond just targeting the S Protein. This is evidenced by the fact that NIH, NIAID, and SEPI are actively pursuing initiatives under their Pan-Coronavirus funding programs. However, if we were to indicate that our current solutions may not suffice due to variants, it could cause unnecessary concern. The current approach is sensible, and there is significant behind-the-scenes attention on this issue. This is why we prepared a strong proposal in response to NIAID’s requests, which they are aware of, and we submitted it in July. We are now focusing on submitting to SEPI. Those who should be informed understand the critical need for a broader strategy to deliver vaccines. We don't often discuss the importance of having vaccines that can be administered in a single dose and ease of distribution. In some parts of the world, if a vaccine is complicated to deliver, requiring extreme cold storage and is only viable for a few hours after thawing, it becomes a significant challenge. While these issues are recognized, they are not frequently acknowledged, and perhaps rightly so.

Because they just want – because you said, they don’t want people to panic, but it is a fair statement to say that the vaccines out there, you know, there are a lot of people getting COVID, despite being vaccinated. I mean, that's, you know, people are talking about falling the science, so…

That is true. I think, you know, the greatest event, one of the greatest events certainly in life science and maybe in vaccine development was the speed with which people brought forward vaccines to provide an initial level of protection. That's unprecedented. We all know that. And so, I don't want to diminish anything about that. But I do want to underscore that as some of the slides that Mark showed, there is such a continued emergence of variants, and you saw the slide we showed that WHO is far ahead just simply of the Delta and is looking at what is occurring here. There's strong recognition that other technologies are necessary. mRNA and the Adenoviruses cannot multiple encode these protein components as we are able to. We can't manufacture as fast and simply as they can. There are trade-offs. Working together, we ought to be able to arm the world with the right types of vaccines.

Well, yeah, I'm going to take the glass half-full approach and point out that while the vaccines are not necessarily stopping infection, they're keeping people out of the hospital. And so while we are seeing breakthrough responses, the Cape area is kind of a special area regarding how people were behaving and the exposure with concerts and things like that. So, it's a very harsh test of a vaccine. While the secondary infection of fully vaccinated individuals, there are two more population studies that I just saw the announcement on indicating that it is much lower. So keeping people out of the hospital, you know, looking at a super-spreader event versus the general population, I think the story is the vaccines are working, can they be made better? Yes, absolutely. I think the NIAID, rural health, everybody believes that, that's why these programs are out there. I'm with David in that we would love more attention, but we think we are putting ourselves in that position.

And I’d just also like to add that people may have seen the announcement this week of the first outbreak of the Marburg virus in West Africa. If you're familiar with that, you know that the fatality rate exceeds 50%. The Angola strain of Marburg, for instance, has a 90% fatality rate. These are things we don't discuss unless it suddenly occurs in the U.S. But this is again, one of the hemorrhagic fever viruses. As we've mentioned, we're in development work through non-human primates with – in conjunction with NIH preclinical services. These are other areas that we're focused on utilizing, again, our MVA VLP approach to try and deliver single-dose very effective vaccines that will save lives and protect lives. So let me just say that I want to thank everybody for your interest and continued support, and we will continue to update you on the progress and the transformation of GeoVax. We do look forward to staying in touch, making announcements. So, thank you for supporting our goals. And as always, I want to finally thank and acknowledge our staff and the many other parties that continue support, assist, and advise us towards achieving success. Have a great rest of the day, and we look forward to updating you in the near future on more progress. Thank you.

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