Earnings Call Transcript - MBRX Q3 2024

Operator, Operator

Greetings, and welcome to the Moleculin Biotech Quarterly Update Conference Call and Webcast. At this time, all participants are in listen only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It's now my pleasure to introduce your host, Jenene Thomas, Investor Relations. Please go ahead, Jenene.

Jenene Thomas, Investor Relations

Thank you, Kevin. Good morning and welcome, everyone. At this time I would like to remind our listeners that remarks made during this webcast may state management's intentions, beliefs, expectations or future projections. These are forward-looking statements and involve risks and uncertainties. Forward-looking statements on this call are made pursuant to the safe harbor provisions of the Federal Securities Laws and are based on Moleculin’s current expectations and actual results could differ materially. As a result, you should not place undue reliance on any forward-looking statements. Some of the factors that could cause actual results to differ materially from these contemplated by such forward-looking statements are discussed in the periodic reports Moleculin files with the Securities and Exchange Commission. These documents are available in the Investors section of the Company's website and on the Securities and Exchange Commission's website. We encourage you to review these documents carefully. Additionally, certain information contained in this webcast relates to or is based on studies, publications, surveys and other data obtained from third-party sources and the Company's own estimates and research. While the Company believes these third-party sources to be reliable as of the date of this presentation, it does not independently verify and makes no representation as to the adequacy, fairness, accuracy or completeness of any information obtained from third-party sources. Any data discussed regarding clinical trials and progress are considered preliminary and subject to change. This morning joining on our call from Moleculin’s leadership team are Walter Klemp, Chairman and Chief Executive Officer; Dr. John Paul Waymack, Senior Chief Medical Officer and Jonathan Foster, Executive Vice President and Chief Financial Officer. I would now like to turn the call over to Mr. Klemp. Wally, please proceed.

Walter Klemp, Chairman and CEO

Thanks, Jenene. Well, investors who have been following our presentations are not new to this, but we are resolute in our belief that our current market cap is nowhere close to reflecting the value of a Phase 3 company like Moleculin. Especially in light of how much risk we believe we have removed from the pathway to approval. Ultimately, we believe that just creates more opportunity for investors today. And I'm confident that as our MIRACLE trial unfolds, the magnitude of this opportunity will become more apparent. If you're new to Moleculin and asking why this opportunity even exists, we believe that for nearly a decade now the AML space has been betting on a big payoff from targeted therapies. But the reality is, that these new targeted therapies simply haven't delivered. In fact, they've been a big disappointment. And it's evidenced by the fact that Venetoclax, which is a non-targeted chemotherapy, has created far more value in the last five years than all of the targeted therapies combined in AML. Now, the fact is that anthracyclines continue to be among the most used and most effective cancer therapies available. They're used in 32% of breast cancers, half of all AML patients, 70% of lymphomas, and actually 60% of all childhood cancers. So if you're looking for a true disruptor opportunity, the Annamycin story deserves your attention. What we believe we have is a safer, more effective anthracycline than has ever been possible. And it's enabling clinicians to treat with higher dosages and for a greater number of cycles than what was ever thought feasible. And we aren't just filling an unmet need for more than half of AML patients. We're talking about potential uses far beyond just AML. Now in this presentation, we're focusing just on that latest updates. So if you're new to Moleculin, I urge you to review our online presentations and watch our explanatory videos. With that said, though, just to hit the high spots of the Moleculin opportunity, the key takeaways from this slide are that unlike currently available anthracyclines, Annamycin was designed to be 100% non-cardiotoxic. It avoids cross resistance with the leading AML drugs, which means it has the potential to work when the others fail. And Annamycin is patent protected through 2040, which is a remarkably long remaining patent life for a Phase 3 cancer drug. And in part because targeted therapies have been such a disappointment, we still have almost 60% of the AML population without an acceptable treatment option, there is still an incredible unmet need in AML. So let me now ask our Senior Chief Medical Officer, Dr. Paul Waymack to provide an update on patient data and our startup of the Phase 3 MIRACLE trial. Paul?

John Paul Waymack, Senior Chief Medical Officer

Thank you, Wally. Well, as Wally said, there is an incredible unmet need in AML and specifically it is for those patients who either don't respond or quickly relapse after first line induction therapy. As you can see from our most recent Phase 2 data, this is where Annamycin excels. As previously reported, we saw a 50% complete remission rate in these second line patients, which is more than double the performance you would expect from existing therapies. Since our last update, the bone marrow transplants in subjects with a response have increased to four of the nine patients. This is remarkable for second line patients, as bone marrow transplants is the key to potentially long-term durability as you will see in the next slide. And the durability of these responses just keeps getting better. We're now up to a median of eight months and still climbing. In addition, these responses are considered high quality complete responses by the Hematology community with 78% of them recorded as negative in terms of measurable residual disease. And now with 44% of our responders bridging to a potentially curative bone marrow transplant. Again for second line subjects, we believe that our durability is shaping up as truly a game changer. Of course, it's this remarkable response rate that has led the FDA to encourage us to use an adaptive trial design for our Phase 3 approval trial, as we call it the MIRACLE trial. For those new to this trial, it begins with Part A, which is designed to establish an optimum dose for Annamycin, and then it expands that dose into additional subjects in Part B. This trial design is responsive to a new FDA initiative called Project Optimus, the purpose of which is to avoid simply defaulting to the maximum tolerated dose and instead seeks a balance between safety, tolerability and efficacy. It's worth clarifying, though, that we don't view this dose optimization process as resulting in any increased risk in approval risk. To the contrary, the FDA actually specified the two doses they would prefer to see compared as the two doses in the MB106 trial that demonstrated both efficacy and safety. And they're leaving it up to us as the sponsor to ultimately choose between the 190 milligram per meter squared and the 230 milligram per meter squared dosing regimens. Also, our initial PK analysis, that is pharmacokinetic analysis, showed that there is no correlation between area under the curve or concentration maximum and the change from the 190 to the 230 dosing regimens. Or in layman's term, the increase in dosage doesn't appear to increase the amount of drugs in circulation. And this corroborates our clinical findings to date, as we have seen strong efficacy at both dose levels. So, to be clear, we don't see the optimization process resulting in any increased risk in this trial. In fact, it's just the opposite. To facilitate the dose selection, the data must be unblinded early, which we believe dramatically reduces risk for our investors.

Walter Klemp, Chairman and CEO

Yes, that's absolutely right, Paul. Remember, most Phase 3 approval trials leave investors and prospective big pharma partners in the dark for years until the data can finally be unblinded. Our ability to unblind early because of this adaptive design means we won't have to wonder whether our Phase 3 trial is tracking with endpoint expectations. And by the way, we're still looking at additional ways to improve early visibility in this trial. So stay tuned for additional updates on this. Now, this becomes even more meaningful when you look at the endpoint we need to hit. Look, let's face it, biotech is a high-risk business, which is why the potential upside returns can be astronomical. In oncology, it's estimated that only about 40% to 45% of Phase 3 trials will succeed. And the vast majority of those that fail do so because of a lack of efficacy. That's why it's so critical for investors to understand just how much we have de-risked our Phase 3 trial. The FDA is asking us to compare to one of the few standards of care that is approved for use in second line patients. It's called high dose Ara-C or HiDAC. Now this is great news for us, because the efficacy of HiDAC in this class of patients is well documented and very consistent with a CR rate of around 17% to 18%. That means the performance of Annamycin plus HiDAC is almost three times greater than HiDAC alone. As a comparison, one of our key opinion leaders in the AML space recently commented that the new drug approvals in AML are justified if the new drug is at least 30% better than the standard of care comparison. Well, by this standard we are over 280% better. But there is likely less risk than even this massive disparity in performance suggests. That's because of how HiDAC was measured in these prior large studies. In the Mirros study you see on the left, patients were allowed two cycles of treatment in order to reach a CR. And in the Classic 1 trial, they were allowed even more, up to 120 days of treatment before reaching their endpoint. In contrast, our CRs were accomplished in less than 49 days with just one cycle of treatment. What this means is that the performance delta between test and control could be even greater than we're predicting. So now let's look at the potential impact this endpoint could have on the timing of approval. And let me caveat, this is not the plan, it's just a look at some potential upside. We had an investor recently challenge us on our trial design. Now, he had a decent understanding of statistics and said, if your performance is expected to be so much better than HiDAC, why do you have 330 patients in the total trial? Shouldn't you be able to achieve statistical significance with closer to 100 patients? The answer is that this is what Big Pharma has asked us to do. In our discussions with prospective partners, we have heard more than once that these players have been burned by buying into a Phase 3 trial only to end up having the trial miss its endpoint because they didn't have sufficient subjects to power the trial because the delta between test and control ended up being closer than management estimated. In essence, small biotech teams facing tight budgets and timelines get lured into overly optimistic assumptions that result in underpowered studies. Big Pharma would much rather buy into a longer, more expensive study that they believe has a higher likelihood of success. And that's what we tried to do here. But what happens if our numbers play out closer to what history suggests? What if at the unblinding of 90 patients, we're really outperforming HiDAC by 280%? Well, under those circumstances, assuming drug safety is also in line with our experience to date, it's very likely that our independent data monitoring committee could conclude that the continuation of the control arm of the trial would be considered unethical. And at that point we would likely request a Type A meeting with the FDA to discuss converting Part B of our trial into a smaller single arm study designed to complete the safety analysis and satisfy DEI requirements. Essentially, it could take a year or more off of the approval timeline and virtually eliminate any remaining efficacy related approval risk. Now, in no way are we asking investors to plan on this, but we want to make sure you understand how dramatic the upside could be here. What we are saying is, if you want something to worry about regarding Moleculin it shouldn't be the traditional efficacy risk associated with most Phase 3 trials. Our biggest focus right now needs to be on recruitment, because the pace of recruitment is going to drive our data milestones. We are in a race to open sites and start recruiting patients just as quickly as we can to ensure that we get to the interim data readouts that everybody wants to see. To date, we have 60 sites interested and 17 more sites we're targeting. And you can see by this map that this is happening on a global scale. But Paul and I are committed to ensuring these sites are engaged and productive. To that end, we are actively physically visiting any of these sites that we think could be big producers to make sure their facilities and systems are up to the task and that the principal investigators understand the science and the protocol and are truly bought into the importance of this trial. It takes a lot of effort to meet face to face with every one of these investigators, but we believe it will pay off in terms of the data readouts.

John Paul Waymack, Senior Chief Medical Officer

Wally. Hold on. I know you're going to skip this part, but I'm sorry to interrupt. Look, I got to point out to everybody on this call what you and Paul did the last few weeks. I know you weren't going to do it, but look, they believe in Annamycin so much, they went into a country at war and another where they were experiencing riots. War and riots. Ukraine and Georgia. Wally and Paul spent two nights in a bomb shelter in Kiev just to be able to meet the investigators face to face. They went from there to Tbilisi right in the middle of the rioting in the streets, I think over the contested presidential election. But I asked the analysts and the people on this line, how many senior management teams do you know that would do this all at their own personal risk to ensure the success of a cancer drug? Think about it. Sorry, Wally.

Walter Klemp, Chairman and CEO

Thanks, John. Well, the fact is, my wife wasn't very happy about it. And look, maybe it was a little extreme, but as you said, John, we believe deeply in Annamycin and we are all committed to doing what has to be done to get this drug approved. This is a fight worth winning, and we believe we're going to win. Now, we've been focusing 100% on AML today, but we should never forget that Annamycin has potential applications far beyond AML. In fact, the growth potential is probably in the range of 20 times that which would come just from AML. And successful drugs in the AML space are often valued in the billions. So, Jon, let's go back to you and ask you to wrap things up here with the review of the financial situation.

Jonathan Foster, CFO

We concluded the quarter with $9.4 million in cash. This is sufficient to carry us into the first quarter of 2025, accounting for our fully diluted shares outstanding, which also includes the pre-funded warrants. Our market cap stands at approximately $15.9 million, and our stock sees an average trading volume of about 40,000 shares daily. If we refer back to the MIRACLE chart, we have several key inflection points ahead. As Wally mentioned, we are looking to expand further, so let's go over the key milestones in our plan. First, we anticipate sharing more details on contracting and site recruitment later this year. The first subject in the MIRACLE trial is expected to be treated in the first quarter of 2025. In the second half of 2025, we will provide updates on the overall CR rate and recruitment progress, which should allow us to assess the trial's CR rate, potentially exceeding 20% to 25%, given HiDAC's historical CR rate. This will highlight the efficacy of Annamycin as its treatment progresses. We estimate that it will take around $15 million to reach this stage. The significant data readout is scheduled for mid-2026, which will include interim primary efficacy and safety results for the first 75 to 90 patients. I believe this data will clearly illustrate both the potential and risks associated with the trial's success. After the interim data readout in mid-2026, we will transition into more activities, wrapping up Part B and beginning enrollment for MIRACLE2 targeting third-line subjects. By 2028, we will have the primary efficacy data for second-line subjects. Achieving the final primary efficacy data for these subjects will enable us to initiate the rolling NDA submission in the second half of 2028 for accelerated approval targeting the primary endpoint of CR from the MIRACLE trial. In summary, as Wally highlighted, the MIRACLE trial is distinct from other Phase 3 trials, being significantly de-risked while offering numerous insightful data points along the journey. We aim to enhance that visibility as Wally noted.

Walter Klemp, Chairman and CEO

Yes. Thanks, John. Before we conclude, let's see if we can address questions from the analyst community. Jenene?

Jenene Thomas, Investor Relations

Great. Kevin, can you please open up for Q&A?

Operator, Operator

Certainly. We'll now be conducting a question-and-answer session. Our first question today is coming from Jonathan Aschoff from Roth. Your line is now live.

Jonathan Aschoff, Analyst

Thank you. Good morning, guys. And I have four questions for you. The first is, you last reported a median OS of greater than or equal to six months in 10 second line patients. But I don't see an updated number there. Is there any update to that median OS currently?

Walter Klemp, Chairman and CEO

Yes. So Paul, do you want to just re-summarize what's in the chart? Because we've made a lot of progress since that last report.

John Paul Waymack, Senior Chief Medical Officer

Our overall median survival now is over seven months in this population, which again, is far greater by almost a factor of two than what the literature would suggest would predict.

Jonathan Aschoff, Analyst

Yes, it's a highly conservative trial. I think given what you have to hurdle. I think it's well designed, the MIRACLE trial. Anyway, so why was MIRACLE enrollment bumped? And maybe you've explained this before in a different form, from 40 to 45 for the first look you said 75 before but now you're saying 90. Like the 10-Q says 90. The PR says 75 to 90. And then I had in a prior note that after that when you determine the optimal dose, I had 120 and 120 is now 240 to be enrolled. And I'm just kind of curious, what specifically led to that increase at all three of those looks?

John Paul Waymack, Senior Chief Medical Officer

Yes, there are several factors at play here. To clarify, the issue of 120 versus 240 relates to the specific paragraph descriptions. It has always been 120 per treatment arm, but we were concerned that people might interpret that as a total of 120. Therefore, we typically referred to it as 240. We haven't increased or doubled the size of the trial; we simply ensured clarity to avoid any misunderstanding between 120 per treatment arm and 240 in total for Part B. Regarding the numbers in Part A, they have been changing, partly due to optimizing statistics. Global clinical trials like this are extremely complex, especially with 60 to 90 treatment sites across six continents. This complexity can lead to challenges with startup requirements, as each hospital needs a contract, and ethics review boards must be involved, which takes time. These processes can only commence once we finalize the protocol. The biostatistics analysis continues for an extended period due to numerous refinements and what-if analyses. However, we didn't want to delay the start of contracting and ethics reviews, so we set a preliminary threshold that we considered sufficient. We'll continue to refine the trial numbers as we approach the starting point, and that work is ongoing. There may be minor adjustments as we get closer to launching. At this moment, we anticipate potential for earlier visibility than currently expected, so please stay tuned as we finalize everything.

Jonathan Aschoff, Analyst

Yes, it's definitely wise to do everything you can to not swing and miss at that accelerated approval opportunity. Absolutely. A lot of lead time. More than waiting for 240. The last one, I mean the third one is a little nitpicky. Is the 3Q 2024 R&D, is that a new run rate or does that include a lumpy slug of Annamycin production?

Walter Klemp, Chairman and CEO

I'm going to let Paul answer that.

John Paul Waymack, Senior Chief Medical Officer

Yes, sorry to jump in there, but yes, that was a slug of Annamycin production as well as some sponsored research really accelerated at MD Anderson. We've had some additional programs going on there, so we accelerated some sponsored research there as well.

Jonathan Aschoff, Analyst

Okay. John, can you tell me the number of shares from prepaid warrants that are not included in your 3 million share count as of November 1st? I was curious about that.

John Paul Waymack, Senior Chief Medical Officer

Roughly 2 million.

Jonathan Aschoff, Analyst

Roughly 2 million. Okay. And then the last part of that is why is that 3 million November 1st count so much lower than the average weighted for the third quarter of 3.7 million?

John Paul Waymack, Senior Chief Medical Officer

The warrants we issued in August as part of the deal are now in a favorable position, which means they are included in the fully diluted share count.

Jonathan Aschoff, Analyst

Okay, that's all. Thank you, guys.

Walter Klemp, Chairman and CEO

Thank you, Jonathan. Take care.

Operator, Operator

Thank you. We'll now be conducting a question-and-answer session. Our next question is coming from Jason McCarthy from Maxim Group. Your line is now live.

Jason McCarthy, Analyst

Hi, guys. Thanks for taking the questions and congrats on the progress.

Walter Klemp, Chairman and CEO

Hey, thanks, Jason.

Jason McCarthy, Analyst

Yes, I was just wondering, how much do you expect the Phase 3 to cost?

Walter Klemp, Chairman and CEO

John, you want to tackle that?

John Paul Waymack, Senior Chief Medical Officer

I was concerned you would ask that. As Wally mentioned, when it comes to recruitment, the number of sites needed really requires a solid initial plan that you continue to refine. As shown in the chart, a significant factor in the trial costs is the location of the trial. In the US, costs per patient are ten times or more compared to those in Eastern and Western Europe, and Western Asia. A reasonable estimate would be around $15 million every three quarters, considering some costs associated with Annamycin production. You can extend that projection to 2028. However, if we're able to expedite the process, as Wally noted, that would greatly affect our numbers. We are continuously adjusting our estimates as we determine the sites and regions we'll target. You'll see Sofria on the map, but it's not heavily involved in many sites in the Pacific Rim, which helps manage the budget concerning CRAs and drug inventory in that region. We expect to gain more clarity as we progress.

Jason McCarthy, Analyst

Got it. And then just as far as the STS program, so that's likely final data in the first half of 2025, moving to a pivotal after. But is this something you guys would look forward to do in your own or seek a partner?

John Paul Waymack, Senior Chief Medical Officer

We are committed to finding a partner for that project. The costs associated with the MIRACLE trial are significant, and that's where our internal resources need to be focused. Therefore, for any major initiatives like a pivotal trial for STS, we will seek external funding sources, possibly through investigator-sponsored trials or similar arrangements.

Jason McCarthy, Analyst

Okay, got it. Thanks for taking the questions.

Operator, Operator

Thank you. Next question is coming from Vernon Bernardino from H.C. Wainwright. Your line is now live.

Vernon Bernardino, Analyst

Good morning. Wally and John, thanks for taking my question. Just Hi. You've never mentioned this before, but I was wondering if you have pursued or perhaps intend to pursue discussion with the FDA on a special protocol assessment for the MIRACLE trial?

Walter Klemp, Chairman and CEO

So we've had a number of discussions about that, but let me hand this over to Paul to talk about our present thinking about special protocol assessments.

John Paul Waymack, Senior Chief Medical Officer

Thanks for the question. Very insightful. And when we went to the end of Phase 1/2 meeting with FDA, we broached the subject of should we submit a protocol for special protocol assessment? And they advised not to do that. It was a very amicable meeting, and they advised not to do it because it takes time. You have to create the protocol, submit it, there's a review period, discussion period. It adds many months. And they said they would be more than happy to review it, but they recommended not doing it because at the end of the meeting, we were all in agreement. There were no contentious issues. So the thought was, why delay things for many months when we're in full agreement?

Vernon Bernardino, Analyst

I see. So that's very positive.

Walter Klemp, Chairman and CEO

There’s also a factor, Vernon, that you may have encountered before, which tends to limit our options a bit. For an SPA to have any real value, it is crucial to adhere strictly to the agreed protocol in that letter. Paul’s point was that there can be significant delays and lead time involved in this process, and any changes you want to make in the future would invalidate the SPA, essentially meaning we have to start over. While there are situations where an SPA might be beneficial for the company’s protection, we believe we have the FDA’s support regarding the trial design and the path to approval. Consequently, it didn’t seem worthwhile to endure both the lead time and the risks associated with making adjustments to the protocol later on.

Vernon Bernardino, Analyst

Okay, thank you. I appreciate the additional insight into the Phase 3 trial design process.

Walter Klemp, Chairman and CEO

You bet. Jenene, are there questions?

Operator, Operator

Thank you. We've reached the end of our question-and-answer session. I'd like to turn the floor back over for any further closing comments.

Walter Klemp, Chairman and CEO

Well, I appreciate everybody making time for an update on Moleculin. I'd just like to leave you with this. AML drugs that are close to approval have consistently been valued in the billions of dollars. And we believe the only rational reasons to be bearish about an asset like Annamycin that's in Phase 3 are that: A, you doubt the ability to hit the endpoint; B, you doubt the likelihood of approval if that endpoint is hit; or C, you doubt the marketability of the drug once it's approved. Well, we've shown you the data that explains why we believe with a very high degree of confidence that we will hit the endpoint of this trial. And we've explained that this is the endpoint that the FDA has requested for approval. And we have KOLs on record saying that just a fraction of our expected performance should be sufficient for approval. And finally, I can tell you without reservation that every single investigator we've met with, and we're now well into the dozens, has agreed that Annamycin has the potential to fill a desperate unmet need for AML patients. And to be clear, they've all said they would expect to use it extensively in their practice. We simply need to execute on our strategy, and that's exactly what we're doing. I can't wait for the next update. In the meantime, have a great week.

Operator, Operator

Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.