Earnings Call Transcript - LTRN Q1 2024

Operator, Operator

Good afternoon, and welcome to our first quarter 2024 earnings call. As a reminder, this call is being recorded, and all attendees are in a listen-only mode. We will open the call for questions and answers after our management's presentation. A webcast replay of today's conference call will be available on our website at lanternpharma.com shortly after the call. We issued a press release after market close today, summarizing our financial results and progress across the company for the first quarter ended March 31, 2024. A copy of this release is available through our website at lanternpharma.com, where you will also find a link to the slides management will be referencing on today's call. We would like to remind everyone that remarks about future expectations, performance, estimates and prospects constitute forward-looking statements for purposes of safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Lantern Pharma cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those anticipated. A number of factors could cause actual results to differ materially from those indicated by forward-looking statements including results of clinical trials and the impact of competition. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements can be found in our annual report on Form 10-K for the year ended December 31, 2023, which is on file with the SEC and available on our website. Forward-looking statements made on this conference call are as of today, May 9, 2024, and Lantern Pharma does not intend to update any of these forward-looking statements to reflect events or circumstances that occur after today, unless required by law. The webcast replay of the conference call and webinar will be available on Lantern's website. On today's webcast, we have Lantern Pharma's CEO, Panna Sharma; and CFO, David Margrave. Panna will start things off with an overview of Lantern's strategy and business model and highlight recent achievements in our operations, after which, David will discuss our financial results. This will be followed by some concluding comments from Panna, and then we'll open the call for Q&A. I'd now like to turn the call over to Panna Sharma, President and CEO of Lantern Pharma. Panna, please go ahead.

Panna Sharma, CEO

Thank you, Mary, and good afternoon, everyone. I appreciate your joining us to discuss our productive first quarter of 2024 and our financial results along with other corporate developments. As I’ve mentioned previously, computational and AI-driven approaches are increasingly being adopted by both large and emerging pharmaceutical companies in all aspects of drug discovery and development. This trend is particularly evident now in early 2024, where various areas of pharmaceutical development, including molecule design, disease modeling, simulations, and even aspects like manufacturing and clinical trial recruiting, are being reconsidered due to the widespread availability of computational capabilities, high-quality data, and automation. Our leadership in the innovative application of AI and machine learning is set to significantly transform the costs and timelines associated with the development of precision oncology therapies, which we believe will benefit both investors and patients as our industry evolves toward an AI-centric, data-driven methodology for drug development. We recently showcased this with our collaboration with Oregon Therapeutics, where we are assisting them in expediting their transition to clinical testing and will also share in the insights and intellectual property that arise from this partnership. We anticipate further collaborations where we can harness our AI platform, RADR, as a valuable tool for partnerships and co-development opportunities. The year 2023 was transformative for Lantern Pharma in many aspects, as I shared during our earnings call on March 18. So far this quarter, we continue to maintain a strong pace of progress across our three AI-guided molecules now in clinical trials: LP-184, LP-284, and LP-300. Each of these targets areas of high unmet medical need, with LP-184 expected to provide clinical readout later this year, likely in late summer or early fall. Additional highlights, besides LP-184 and LP-284, include obtaining regulatory approval to initiate our Phase II trials in Japan and Taiwan, where we anticipate quicker enrollment, particularly since 30% to 35% of all lung cancer cases in those regions occur in individuals who have never smoked. We have seen an excellent safety profile in our Phase I trials for both LP-184 and LP-284, with no dose-limiting toxicities reported across all cohorts enrolled and treated to date. Collectively, these two drugs have the potential for annual global sales exceeding $12 billion. We are also making progress with Starlight, our subsidiary focused on CNS and brain cancers, particularly with STAR-001. We filed a clinical trial protocol for the Phase Ib dose optimization and expansion cohort in a very aggressive type of brain cancer, recurrent IDH wild-type high-grade gliomas. Additionally, our AI-powered module for antibody-drug conjugate development is advancing, allowing us to streamline the creation of novel ADCs, which will be crucial for new drug candidates, not just within our company but throughout the industry. We have established a unique AI-driven collaboration with Oregon Therapeutics, which is exploring a small molecule aimed at transforming cancer metabolism, and we'll be using RADR for this first-in-class inhibitor. Let’s now discuss our pipeline. Many of our initial findings supported by RADR are now being validated in clinical settings. RADR has guided the swift and efficient development of our three AI-guided drugs into clinical trials at an unprecedented pace and cost in our industry. Allow me to outline some highlights from our portfolio before discussing Starlight and our emerging ADC efforts. With LP-184, there is considerable interest from clinicians regarding these first-in-human synthetically lethal drug candidates. We have completed five cohorts of patients in LP-184, progressing through dose levels 1 to 5. We are now at dose level 6. This Phase I trial is focusing on multiple solid tumor types that are generally advanced or resistant to current standard treatments. The trial is currently enrolling at dose level 6, with a median of approximately four prior lines of therapy reported among these patients. We have yet to observe any dose-limiting toxicities and expect enrollment to be finalized by this summer, with data readouts anticipated shortly after. Our current recruitment efforts are particularly tuned toward patients with DNA damage repair deficiencies, which we refer to as DDR-deficient tumors. For those who have seen our recent press release, we published significant findings on the sensitivity of DDR-deficient tumors to LP-184. Various genomic alterations, particularly in non-CNS solid tumors, such as BRCA1 and 2, PTEN, PRKDC, ATR, POLE, ERCC6, ERCC3, FANCM, DDB1, SLX4, MLH3, and MDC1, highlight a diverse range of genomically defined cancers that will define our approach to DDR-deficiency. Many of these mutations are already available in current panels. Moreover, we submitted Supplement A and Supplement B to the FDA regarding LP-184, targeting non-CNS solid tumors like TNBC and focusing on dose optimization in recurrent IDH wild-type tumors in collaboration with Starlight. We are already strategizing for upcoming phases, anticipating sharing results and moving into exciting, targeted indications. The genomic identification of these patients and biomarker characterization of their tumors are vital towards personalizing treatments and facilitating efficient later-stage clinical trials. To support this effort, we have initiated the development of a PCR-based molecular diagnostic test to better identify cancer patients most likely to benefit from our treatments. We are making strong strides with LP-184 across various fronts. For LP-284, the initial two cohorts of patients have been successfully dosed, and we, again, have not observed any dose-limiting toxicities in the Phase Ia trials. We are looking to open new sites as our Phase I trials for both 184 and 284 are staggered, with 284 a few months behind 184. Evidence shows LP-284 has nanomolar potency across several in vitro and in vivo evaluations, addressing conditions like mantle cell and double-hit lymphomas, aggressive advanced NHL subtypes, and specific sarcomas exhibiting DDR deficiencies. LP-300 is a unique candidate targeting never-smokers affected by non-small cell lung cancer, which is becoming a substantial issue globally. We have gained regulatory clearance to start our trials in Japan and Taiwan, where the incidence of non-small cell lung cancer is significantly higher than in the U.S., allowing us to collect patient and response data more rapidly and anticipate reading out results sooner. We are collaborating with Dr. Yashushi Goto, a leading physician and researcher on lung cancer at the National Cancer Center of Japan, who will act as our primary investigator for the Phase II trial in Japan. This collaboration positions LP-300 for potential partnerships with global biopharma firms focused on the Asian markets. Now, regarding Starlight, we have made progress launching our clinical-stage subsidiary focused on CNS and brain cancers, which has been primarily developed through data and computational insights meant to optimize our understanding of mechanisms. Starlight and our new Chief Medical Officer, Dr. Chamberlain, have filed a clinical trial protocol for Phase Ib dose optimization and expansion in recurrent IDH wild-type high-grade gliomas. These tumors represent a significant challenge, with median survival post-diagnosis at only around 15 months. Besides this trial, we see potential indications in brain metastases related to TNBC, certain mutations in non-small cell lung cancer, as well as a range of pediatric CNS cancers, further enhancing the pipeline at Starlight. This program was developed at costs between $1 million to $2 million per initiative, an unprecedented achievement in oncology drug discovery and manufacturing, largely attributed to our AI-focused business model. We believe this approach is the future for the industry, as it greatly reduces the timeframes associated with early-stage development, indication selection, mechanistic refinement, and biomarker identification. We are also advancing our next major discovery effort in antibody-drug conjugates, specifically with a novel cryptophycin-linked ADC currently in collaboration with partners in Germany, which we will discuss later in the call. As we enter what we consider an AI golden age in medicine, we see just the beginning of the transformative changes ahead. This is fueled by vast computing power and a continuous influx of high-quality healthcare and cancer biomarker data, and we are proud to lead this evolution alongside other tech bio companies. Biopharma is increasingly recognizing the potential of these advances, and we are at the forefront of innovating the pace, risk, and cost structure associated with oncology drug discovery and development. This transformation promises quicker, more affordable medicines, enhancing precision for patients and reshaping R&D productivity, ultimately adding value to cancer patient groups that currently lack optimal therapeutic options. I would now like to transition to our financial update and introduce our CFO, David Margrave, who will guide us through our financials. David?

David Margrave, CFO

Thank you, Panna, and good afternoon, everyone. I'll now share some financial highlights from our first quarter ended March 31, 2024. We recorded a net loss of approximately $5.4 million for the first quarter of 2024 or $0.51 per share compared to a net loss of approximately $3.9 million or $0.36 per share for the first quarter of 2023. For the first quarter of 2024, our R&D expenses were approximately $4.3 million, up from approximately $2.6 million for the first quarter of 2023. This increase was largely driven by an increase in clinical trial activity and clinical trial site initiations. These R&D increases in Q1 2020 were partially offset by decreases in product candidate manufacturing-related expenses of approximately $204,000. Our general and administrative expenses for the first quarter of 2024 were approximately $1.5 million, down slightly from $1.7 million for Q1 2023. The decrease was primarily attributable to decreases in payroll and compensation expense and other professional fees. Our R&D expenses continue to exceed G&A expenses by a strong margin, reflecting our focus on advancing our product candidates and pipeline. Our loss from operations in the first quarter of 2024 was partially offset by interest income and other income net totaling approximately $291,000. Our cash position, which includes cash equivalents and marketable securities, was approximately $38.4 million as of March 31, 2024. We anticipate this balance will provide us with a cash runway into at least Q3 of 2025. Importantly, we believe our solid financial position will fuel continued growth and evolution of our RADR AI platform, accelerate the development of our portfolio of targeted oncology drug candidates and allow us to introduce additional targeted programs and collaboration opportunities efficiently and effectively. As of March 31, 2024, we had 10,758,805 shares of common stock outstanding, outstanding warrants to purchase 81,496 shares, and outstanding options to purchase 1,077,292 shares. These warrants and options, combined with our outstanding shares of common stock, give us a total fully diluted shares outstanding of approximately 11.92 million shares as of March 31, 2024. Lantern issued 20,132 shares of common stock during Q1 2024 relating to the cashless exercise of warrants to purchase 79,021 shares. Also in Q1 2024, Lantern issued 17,481 shares of common stock for aggregate proceeds of approximately $55,000 relating to the exercise of warrants for cash. With these warrant exercises, the amount of common shares covered by warrants was reduced by approximately 97,000 shares. Following these warrant exercises, Lantern now has warrants outstanding to purchase 81,496 shares at a weighted average exercise price of $16.55 per share. Our team continues to be very productive under a hybrid operating model. We currently have approximately 20 employees and 4 FTE consultants focused primarily on leading and advancing our research and drug development efforts. We see this number expanding slightly in coming quarters as we add additional experienced and talented individuals to help advance our mission. I'll now turn the call back to Panna for an update on some of our development programs. Panna?

Panna Sharma, CEO

Thank you, David. Over the last three years, we've successfully developed and launched 11 new programs, which highlights the flexibility, efficiency, and innovative nature of our strategy. On average, these programs progress from initial AI insights to first-in-human clinical trials in only 2.5 years, with costs averaging between $2 million and $3 million per program. These figures are remarkable in the realm of oncology drug discovery and represent achievements that even larger AI biotech companies have struggled to maintain consistently. We currently have several drugs administering treatment to patients. We are not merely speculating about the potential of AI in drug development; we are actively designing, developing, validating, patenting, manufacturing, and launching drugs into clinical trials with unprecedented speed and cost efficiency. This highlights the changes that major pharmaceutical companies need to adopt regarding their pace of operations. Traditional big pharma R&D strategies are unsustainable and ineffective for improving drug pricing or availability in the current climate of rising economic and political pressures surrounding drug costs. It is evident that our industry must fundamentally rethink its approach, and we believe that increased use of AI and data-driven technologies will play a crucial role in the future of pharmaceutical drug development. The value we’re creating is exemplified in the establishment of Starlight Therapeutics, which will start its clinical journey right from inception and aims to redefine oncology drug discovery, potentially establishing a new standard. We see Starlight as a promising opportunity for creating innovative assets and new long-term cancer-focused companies. On June 26, Dr. Marc Chamberlain, our Chief Medical Officer at Starlight, will discuss the highlights of STAR-001 and outline future development plans and upcoming trials. We encourage you to join us at 1:00 p.m. on that date. Marc is incredibly knowledgeable about neuro-oncology and related trials, and his insights will be truly engaging. Now, let me share what excites me about STAR-001. This molecule has an antitumor effect approximately 3,000 times more potent than temozolomide, the current standard care drug. Importantly, its efficacy is unaffected by MGMT status, which is crucial because many tumors become less responsive due to MGMT-related changes. We have explored both temozolomide-resistant and responsive GBM cell lines, and our drug demonstrates remarkable potency in both cases, often showing superior effectiveness, particularly in MGMT-positive cell lines that do not respond to temozolomide. No single therapy has been approved for adult GBM, but we have received orphan drug designation for treating malignant gliomas, including GBM. Our preliminary data is promising, and we aim to initiate trials targeting recurrent IDH wild-type tumors, a high-need area, in the latter half of 2024. Additionally, STAR-001 is a prodrug, and we envision it playing a vital role in the treatment of GBM. Its IC50 values have shown sub-100 nanomolar potency in various cancers. This drug works through alkylation, creating DNA breaks in a unique manner that prevents repair. In early assessments, the bioactivation of this prodrug occurs intracellularly, meaning its impact on surrounding healthy cells is minimal, and we have not encountered dose-limiting toxicity yet, although we anticipate some typical responses such as nausea. Moving to a new area we are exploring, antibody-drug conjugates (ADCs) show significant promise for growth. Our RADR platform has advanced the development of these ADCs through meticulous identification of clinically valuable targets and indications. Recent collaborations, such as with the University of Bielefeld, led to advances in our cryptophycin ADC, which has shown remarkable picomolar potency across a range of solid tumors, achieving a cancer cell kill rate of 80%. This level of effectiveness is significant compared to existing ADCs, particularly in tumors with medium or low HER2 expression. We continue to pursue various targets and hope to further leverage our ADC module. Our aim is to develop and characterize ADCs that can be brought to clinical settings rapidly. We have already seen the potential in using different payloads and structures in our research, which were not feasible last year. As part of our commitment to transparency and education, we are launching "Webinar Wednesdays" to update both investors and the oncology community on our progress. We had positive feedback from our recent webinar on LP-300, and we have more sessions lined up on other critical areas, including pancreatic and bladder cancers, led by renowned experts. Lastly, we are excited about our poster presentation at the AACR Annual Meeting regarding our candidate LP-284, which has demonstrated efficacy in non-Hodgkin's lymphomas. We are currently in a Phase Ia/Ib clinical trial with this product and have not faced any dose-limiting toxicities thus far. We also published a paper on LP-184, which shows promise against solid tumors with specific DNA repair deficiencies. Our findings suggest this molecule could be highly synergistic when used alongside existing therapies. As we look ahead, 2023 is proving to be pivotal for us, laying the groundwork for significant advancements in 2024 that will ultimately benefit patients battling cancer. We are moving towards a future where we can provide effective and affordable solutions with increasing innovation speed. I’d now like to open the floor to any questions or clarifications. The first question comes from John. Thank you for your question, John. Regarding the Oregon arrangement, it's an interesting AI collaboration. They see many exciting opportunities with their inhibitor, which operates through a unique mechanism. It's a first-in-class drug that inhibits cancer metabolism and seems to be potent across a wide range of cancers. There are many PDI enzymes, around 20, that Oregon has mentioned. The challenge lies in deciding which ones to inhibit, especially since they have overlapping purposes. Their drug targets four key enzymes crucial for cancer cell metabolism, and determining the combinations and potential synergistic effects with other drugs is critical. These insights will inform the design of a trial's success. The ability to model data, gain insights in silico, and validate them in the lab is essential, especially for generating new intellectual property. This IP will be beneficial when collaborating with larger pharmaceutical partners, particularly regarding targeted combinations and specific cancer subtypes. The advantages for Lantern are significant—we will jointly own the collaboration's IP with Oregon and have the right to license their drug. We are excited about this collaboration, as it aligns with our interests. The molecules involved are promising; they are unique, highly effective, and have the potential to work across various cancers with combinatorial options. We need to delve deeper into the collaboration, but it looks like we could have a successful drug that makes a significant impact across multiple cancer types. We are eager to support Oregon and the development of this molecule. Thank you. I see we have a question from Ashok. Ashok, you can go ahead and speak now if you're still on the line.

Ashok Kumar, Analyst

I have a three-part question. The AI-driven ADC development program seems to be progressing well clinically. What are the key inflection points and timelines for potentially advancing an ADC candidate into the clinic? Additionally, Starlight Therapeutics appears to be gaining momentum with the Phase Ib protocol filing for STAR-001. What are the anticipated milestones and timing to initiate adult and pediatric clinical trials? Lastly, Oregon Therapeutics represents an interesting AI collaboration opportunity. How do you see the RADR platform accelerating your drug development efforts, and how might this collaboration expand over time?

Panna Sharma, CEO

Great questions. We'll start with the ADC. We think the key inflection points for us are to determine if HER2 or a HER2/HER3 bispecific is a better option. We're exploring the target a bit. We've seen remarkable data in low and medium expressing cases. So we're assessing whether this is the right approach or if a bispecific HER2/HER3 is preferable. We have a few more months of preclinical analysis planned. After that, we will return to some wet lab studies, and we need to go through IND studies and manufacturing. We are targeting 2025 to get this into the clinic. Of course, I'd love to expedite this, but manufacturing complex biologics takes time. We are considering new formats that might expedite the process. We're exploring fragmented design and possibly conducting some efforts in parallel. Recent FDA guidelines on ADC manufacturing are very favorable, especially if we work with antibodies that are already characterized and in the clinic. We are examining all options to streamline the manufacturing and IND studies. There are also opportunities for us to license technology that might help us reach the clinic more quickly. In any case, our focus for 2024 will be to execute our existing trials, and we anticipate executing the next wave, including the ADC and other drug conjugates, in 2025. Regarding STAR-001, we expect to receive feedback from the FDA on the new Supplement B for the Ib and beyond for Starlight. We also plan to continue recruiting for Starlight and may consider independent financing to support its launch. These events are scheduled for this year. Starlight is very much a priority for us this year, and ADC represents the next phase. I hope this provides some clarity on our timelines. We've got another question. John, are you raising your hand or answering the questions? Okay. Let me read the question out for everybody. His question is, 'Does the Oregon Therapeutics partnership serve as a template for other potential partnerships?' I think it does. We always like to think of being able to stamp something. But we've got one with Actuate, we have one with TTC, we have one now with Oregon. Each of those, very unique molecules in each. Good teams. Because as you get into a collaboration, you're not only collaborating, betting on your capabilities, you're also betting on the partner. These are real partnerships. And so we like the teams in all companies. We like the molecule. We like their path because if they don't succeed, we don't succeed, right? We're getting upside in equity in those molecules. So we're pretty focused on making sure we pick the right kind of chances to win. And our platform helps us do that, right? We can really understand a lot about the molecule, the indication, and the unmet need, just even during conversations because we start doing that modeling and analysis with RADR even prior to looking at their data. Now tech companies, as I mentioned in the last call, we are in discussion with tech companies for partnerships. I don't know how long those take, but we're having discussions with many of the ones you can imagine. Those things just take time. I think we're not one of the big names like a Recursion or an Exscientia. Unfortunately, they had some issues with their management. Or Benevolent. Again, they had some business model issues. But they're some great big companies that suck up all the air in the room. So I think as we show our proof points and have more discussions with the Amazons and Apples and NVIDIA's and Googles and others, there's a whole range of Tier 2 players as well. I think there can be suitable long-term tech partners to enable our platform to get to a scale that can be monetized independently longer term. Another question from John is a great question. Do you want to ask it, or should I read it? I'll read it. So when will the sites be finalized for the Harmonic trial in Asia? And when will we see any sites outside of Japan and Taiwan? I think we'll approach that in phases. We currently have some very good sites in Japan, five that we've identified, I believe. Is that correct, David? Five?

David Margrave, CFO

Yes.

Panna Sharma, CEO

David will be visiting the sites next month with our head of clinical development and Dr. Goto to get them operational. We also have five additional sites planned in Taiwan, making a total of ten sites. These ten sites will provide us with the majority of the patients we need. We are also considering other countries, including South Korea. However, there are currently issues due to strikes by doctors in major hospitals, making it a challenging time for a foreign clinical trial. While there is strong potential in South Korea because the incidence of lung cancer among never-smokers is higher than in Japan, the strikes have made us hesitant to proceed, as we want to avoid wasting resources if the trial is delayed. Instead, we believe we can achieve similar results in Japan and Taiwan, with Taiwan being even more cost-effective. We are excited about the ten sites we have in these two countries, which could be very productive and meet our trial needs. Thank you for your question, John. In closing, I want to express my deep gratitude to our team for making this happen. I know organizing these webinars, slides, and scripts is not easy. It requires gathering a lot of information, delivering it, and truly understanding it. The broadcast allows people to access it anytime, which is fantastic. I appreciate my team's constant support and information, as well as our partners and stakeholders for their unwavering support. Together, we are building a much better, scalable, and brighter future in oncology. We are addressing real-world problems with proprietary AI solutions and a pragmatic approach. The rapid development of genomically-guided targeted therapies has the potential to change the cost and timelines in oncology drug development. I believe this will place us at the forefront of a new golden age of unprecedented productivity in medicine development. Thank you, everyone, for your time today.