Earnings Call Transcript - MTNB Q3 2020

Operator, Operator

Greetings. Welcome to Matinas BioPharma Third Quarter 2020 Results Conference Call. As a reminder, this conference is being recorded. I would now like to turn the conference over to Peter Vozzo, Investor Relations Representative for Matinas BioPharma. You may begin.

Peter Vozzo, Investor Relations Representative

Thank you, everyone, and thank you for joining the Matinas BioPharma third quarter 2020 results conference call. Earlier this morning, we issued a press release with our third quarter 2020 financial results along with business updates. The release is available on the Matinas BioPharma website under the Investors section. Speaking on today's call would be Jerry Jabbour, Chief Executive Officer, who would discuss the company's corporate progress and key milestones; and Keith Kucinski, Chief Financial Officer, who will then review third quarter financial results. We also have Dr. Terry Matkovits, Chief Development Officer, and Dr. Terry Ferguson, Chief Medical Officer, available to answer questions during the Q&A. At this time, I would like to remind our listeners that remarks made during this call may state management's intentions, hopes, beliefs, expectations, or projections of the future. 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 federal securities laws. These forward-looking statements are based on Matinas BioPharma's current expectations, and actual results may 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 those contemplated by such forward-looking statements are discussed in the periodic reports Matinas BioPharma files with the Securities and Exchange Commission. These documents are available in the Investors section of the company's website and on the SEC's website. An archive of this call will be posted to the company's website in the Investor Relations section. Following the company's prepared remarks, we will open up the call for a question-and-answer session. I will now turn the call over to Jerry.

Jerome Jabbour, CEO

Thank you, Peter. Good morning, everyone, and thank you for taking the time to join us today as we provide a business update and discuss our 2020 third quarter results. Overall, we made great progress across our entire business during the third quarter, which was marked by several very important accomplishments. First, as everyone is aware, in July, we commenced Part 2 of the EnACT study with MAT2203 dosing in the first cohort of 10 patients. Taking all necessary steps and precautions to initiate dosing, following a temporary pause due to COVID-19, was a key objective for the company in the third quarter. More recently, we completed this portion of the study, and in October, the independent Data and Safety Monitoring Board reviewed the first cohort data and unanimously recommended progression into the second patient cohort. This was a significant milestone for the company and provides great optimism as the EnACT study moves forward. Our enthusiasm is not only focused on the development of MAT2203 as the potential gold standard for the treatment of invasive fungal infections, but also extends to our overall LNC platform and the potential broad therapeutic applications that are available for medicines that can be orally administered with less systemic toxicity and with targeted intracellular delivery. I will go into more detail on EnACT and our LNC platform shortly. But we believe that the market has yet to fully appreciate the differentiating characteristics of our LNC platform and the significant challenges that it may be poised to solve, challenges that lipid nanoparticles and viral vectors have unfortunately not been able to overcome despite widespread adoption. Second, we completed enrollment in the ENHANCE-IT study, a second head-to-head comparative study of MAT9001 versus Vascepa. We continue to be on track to report top line data from this study in the first quarter of 2021. Lastly, we had a very successful end-of-Phase II meeting with the FDA and are fully aligned with them on the key elements of our Phase III development program for MAT9001, which we expect to initiate in the first half of 2021. I will go into more detail on our MAT9001 program and recent FDA interaction later in the call. Let's begin with MAT2203, our lipid nano-crystal or LNC formulation of the highly potent broad spectrum antifungal drug, amphotericin B, currently in Phase II development in the EnACT study, which explores the use of MAT2203 for both induction and maintenance treatment of cryptococcal meningitis in HIV-infected patients in Uganda. The EnACT study, which is financially supported by the National Institutes of Health, has two distinct parts. The first part focused on safety and was completed late last year and demonstrated that MAT2203 was well-tolerated and safe in subjects infected with HIV, but who did not have an active cryptococcal meningitis infection. Coming out of the first part, we identified the highest possible tolerated dose to bring forward into the second part of EnACT, which is designed to assess both safety and efficacy of MAT2203 in HIV patients with an active cryptococcal meningitis infection. This second part of EnACT is divided into four distinct patient cohorts with sequential adjustments to the timing of MAT2203 and the duration of exposure to IV amphotericin B, the existing standard of care for patients with cryptococcal meningitis. Cohort 1 of the EnACT study got underway early in the third quarter of this year and included 10 patients on active treatment, who initially received five days of IV amphotericin, followed by nine days of MAT2203 to complete the normal 14-day induction period. Thereafter, patients continued MAT2203 as maintenance therapy for an additional four weeks. In October, the EnACT Data and Safety Monitoring Board reviewed both safety and efficacy data from the first cohort of patients and unanimously recommended moving forward into the second cohort of 40 active treatment patients. Based on our discussions with the principal investigator and given the vulnerability of this patient population, we believe that the Data and Safety Monitoring Board would need to see a combination of favorable safety and efficacy data to advance the study to the next cohort. We are very optimistic as we head into cohort 2, where patients will receive only two days of IV amphotericin before transitioning to 12 days of MAT 2203, again, followed by four weeks of maintenance therapy on MAT2203. We believe cohort 2 will provide even more insight into the potential for MAT2203 in this deadly disease. Enrollment in cohort 2 is expected to begin shortly following local IRB approval and the Data and Safety Monitoring Board evaluation of data from completed cohort 2 is anticipated to occur by the middle of 2021. We believe that as we consider the broader implications for EnACT on both the development of MAT2203, as well as for the future of our LNC platform, it is important to provide some context on how an oral, less toxic and well-tolerated amphotericin B could provide substantial value to both patients and providers. First, I would like to comment on the overwhelming preference patients have indicated for oral MAT2203 versus IV amphotericin so far in EnACT. The results of the first phase of EnACT were published in the Journal of Antimicrobial Agents and Chemotherapy in September and highlighted that 96% of subjects preferred taking MAT2203 as compared to IV amphotericin. Anecdotal feedback from the first cohort of patients in Part 2 of EnACT suggests a similar preference. Second, an orally administered, less toxic and better tolerated formulation of amphotericin B would provide much more flexibility for treatment and can decrease the cost and complexity of care through reduced hospital stays, fewer hospital-acquired infections, and most importantly, fewer amphotericin-related side effects with less treatment-limiting toxicities. A 2014 study reported that up to 85% of the cost of IV amphotericin associated hospitalizations for invasive fungal infections arose from managing side effects of this drug. A better tolerated oral option could dramatically improve the patient experience, provide more options for treating disseminated fungal infections, and substantially reduce the cost of care associated with treating these deadly infections. Cohort progression in the EnACT study is not only an important milestone for the development of MAT2203, but also yet another critical step forward in validating the enormous clinical potential of our LNC platform. The Data and Safety Monitoring Board's unanimous recommendation to move forward is a promising sign that our LNC formulation of amphotericin B is both safe and potentially capable of crossing the blood-brain barrier to deliver drug to an active infection in the brain. This has important, positive, broader implications as we consider extending this technology to target other diseases and conditions where highly effective therapies may have significant drug delivery challenges and/or treatment-limiting toxicities. Our LNC formulation of amphotericin B represents a true gateway opportunity for both advancing the standard of care of patients with life-threatening fungal infections and as a tangible demonstration of the potential significant and far-reaching capabilities of our LNC platform. With our recent cohort progression in EnACT and the anticipated Data and Safety Monitoring Board evaluation in the middle of 2021, we are very close to delivering data, which could represent a transformational opportunity for Matinas. Turning next to MAT2501, which uses our LNC platform to orally deliver the broad spectrum and potent aminoglycoside drug amikacin, which is commonly used to treat both chronic and acute bacterial infections. We remain particularly enthusiastic about MAT2501 given its favorable profile and the significant unmet medical needs it potentially addresses. For example, an oral, less toxic and well-tolerated aminoglycoside would allow physicians to treat gram-negative infections quickly and effectively without the need for lengthy hospital stays, repeated infusions, and debilitating side effects. In fact, MAT2501, if approved, would become the first oral aminoglycoside available to physicians and patients. MAT2501 has been positioned for an initial indication for the treatment of nontuberculous mycobacterial lung disease or NTM. NTM infections have emerged in recent years as an increasing problem for individuals with cystic fibrosis and other pulmonary diseases, and they are increasingly resistant to most available antibiotics and becoming extremely difficult to treat. Moreover, achieving adequate levels of drug in lung tissues can be very challenging, especially in patients with cystic fibrosis. Current therapies are limited and can be highly toxic to patients. MAT2501 is formulated to address these limitations and provides a therapy that is well-tolerated, orally bioavailable, and demonstrates efficient intracellular delivery. We believe that once delivered into a cell, MAT2501 is transported by cells directly into the lung at the site of infection, resulting in efficient delivery and less toxicity than observed with other treatments. This profile is exactly what initially attracted the interest of the Cystic Fibrosis Foundation, with whom we have been working since 2016. As previously guided, we applied to the Cystic Fibrosis Foundation earlier this year to help support the continued development of MAT2501, and we expect a decision imminently. In the interim, we have reformulated and potentially improved MAT2501 from its first iteration and stand ready to commence a series of preclinical toxicology studies and a single ascending dose Phase I study with this promising new formulation. With the continued support from the Cystic Fibrosis Foundation, we plan to be in a position to begin Phase II in 2022. We draw confidence from the clinical and commercial success of Insmed's ARIKAYCE as we determine both the viability and large market opportunity for MAT2501. ARIKAYCE, which administers amikacin through an inhaler, was approved under the FDA's new LPAD pathway, but has significant limitations in its indicated use, including not being able to be used in cystic fibrosis patients. Further, it is accompanied by a comprehensive black box warning related to toxicity and the potential for serious adverse events in patients. We believe that MAT2501, if approved, would represent a significant improvement over ARIKAYCE and other treatments for chronic pulmonary infections, giving patients and physicians an effective oral alternative in the fight against NTM. And unlike ARIKAYCE, MAT2501 would also potentially be able to treat more acute bacterial infections like gram-negative bacterial infections, which generally occur outside of the lungs. Before moving to a discussion of MAT9001, we would like to provide brief commentary on our broader ongoing LNC platform collaborations, where we continue to make good progress despite the impact that COVID-19 has had on the short-term strategic priorities of some of our collaborators. We continue to work very closely with Genentech in developing formulations of multiple molecules per our existing agreement. We are encouraged by the limited data we have seen, although we are precluded from commenting further under the terms of that agreement. However, Genentech recently approached us and extended our agreement for at least another year, which we believe is indicative of progress to date and the continued enthusiasm shared by both organizations for the potential benefit our LNC platform technology can provide. We continue to aggressively explore opportunities through the National Institute of Allergy and Infectious Disease to utilize our LNC platform in the fight against COVID-19 and remain optimistic that we will be a meaningful participant soon. Finally, as we advance MAT2203 and MAT2501 and generate important clinical data, we continue to receive increased interest from potential partners on those assets as well as other potential applications of our LNC platform delivery technology, both inside and outside the United States. We believe that establishing collaborations and licensing relationships on these assets, especially outside the United States, could be a significant opportunity for Matinas in the coming quarters. These discussions and relationships obviously take time to develop and formalize, but we are very pleased with the interest expressed to date and the quality of the potential partners. Now, I will turn to MAT9001. As I mentioned at the beginning of the call, there are two very important milestones for our MAT9001 program during the third quarter that are worth mentioning. First, we completed enrollment in ENHANCE-IT, our second head-to-head crossover comparative study of MAT9001, our next-generation prescription omega-3 therapy versus Vascepa. This clinical trial will directly compare MAT9001 and Vascepa's effectiveness in reducing triglycerides and their effect on other important direct and indirect lipid markers such as PCSK9 as well as blood levels of eicosapentaenoic acid and other omega-3 fatty acids. Despite the challenges presented by COVID-19, we continue to expect top line data from this trial in the first quarter of 2021. Given the complexity of the continually evolving omega-3 market, the ability to show differentiation and potential head-to-head superiority versus Vascepa is extremely important. We believe we are in the final stages of exactly the right study at exactly the right time to again demonstrate the overall superior profile of MAT9001 to Vascepa and any other prescription-only omega-3, including generic copies of those drugs. Second, following an end-of-Phase II meeting and review of the official minutes, we believe we are aligned with the FDA on key next steps for the MAT9001 Phase III development program and the 505(b)(2) registration pathway for an initial indication to treat severe hypertriglyceridemia, which is patients with triglyceride levels at 500 or above. The main agreed upon elements of a Phase III program to support an NDA filing include: one, approval to go directly into a Phase III study without any additional clinical work; two, the requirement for a single 12-week study to support efficacy in severe hypertriglyceridemia; and three, flexibility in the totality of patient safety data needed to meet regulatory requirements for NDA submission. We continue to evaluate several ways to both meet these requirements and to potentially provide additional data, clinically differentiating MAT9001 from other prescription omega-3 drugs, and we remain on track to initiate our Phase III program for MAT9001 in the first half of 2021. As Amarin recently restated its commitment to continue to educate physicians on the benefit of EPA and to expand the market for Vascepa and branded omega-3s in the face of generic competition, we continue to view MAT9001 as the potential best-in-class prescription omega-3. MAT9001 was designed with the goal of clear differentiation in pharmacokinetics and impact on direct and indirect lipid markers, such as triglyceride and PCSK9. And we believe that ENHANCE-IT provides an important and near-term opportunity to validate the results from our first head-to-head study and separate MAT9001 from the rest of the omega-3 class.

Keith Kucinski, CFO

Thanks, Jerry, and good morning, everyone. Turning now to our financial results. For the third quarter of 2020, the company reported a net loss attributable to common shareholders of approximately $5.7 million or $0.03 per basic and diluted share compared to a net loss attributable to common shareholders of approximately $4.6 million or $0.03 per basic and diluted share for the same quarter of the previous year. Research and development expenses were approximately $3.3 million in the third quarter of 2020 compared to approximately $2.7 million in the same quarter last year. The increase was due primarily to higher clinical development expenses and employee compensation. General and administrative expenses were approximately $2.4 million in the third quarter of 2020 compared to the previous year's third quarter G&A expenses of approximately $1.9 million. The increase was due primarily to an increase in headcount. Turning to our balance sheet. We ended the third quarter of 2020 with approximately $62.8 million of cash, cash equivalents, and marketable securities compared to approximately $27.8 million at the end of 2019, and this increase includes net proceeds of approximately $46.7 million from the company's public offering completed in January. Based on current projections, we continue to believe that cash on hand is sufficient to fund operations into the first half of 2023.

Jerome Jabbour, CEO

Thanks, Keith. In summary, Matinas has made important advancements in several key areas. There has been meaningful progress in cohort progression for MAT2203 and EnACT, and this has also provided validation for our LNC platform delivery technology. In addition, by completing enrollment in ENHANCE-IT and gaining clarity and alignment with the FDA on our planned regulatory and clinical plan, MAT9001 is now positioned to generate top line data in Q1 of 2021 and commence our Phase III study in severe hypertriglyceridemia soon thereafter. We are laser-focused on continued execution as our lead drugs advance in the clinic, and we are excited about the growing momentum behind our LNC platform as we look forward to even more promising applications of this exciting new technology. We believe that MAT2501 is poised to become our third clinical stage asset, and we remain extremely optimistic about continued support from the Cystic Fibrosis Foundation in the near term. Matinas has never been better positioned operationally, scientifically, and financially, with near-term catalysts that potentially enhance the value we strive to provide to patients, caregivers, and shareholders. In looking ahead to 2021 and beyond the top line data from ENHANCE-IT, we await the next Data and Safety Monitoring Board evaluation regarding progression from cohort 2 to cohort 3 in EnACT in the middle of 2021, and we continue to generate promising data through our collaboration with Genentech. Finally, we are pleased that our strong cash position provides the existing capital to advance all of our product candidates towards significant data readouts and inflection points without needing to access the capital markets for additional funds for the foreseeable future.

Operator, Operator

Our first question comes from Bert Hazlett with BTIG.

Robert Hazlett, Analyst

I have two general questions. One is on MAT9001. Jerry, thank you for the description, and looking forward to the head-to-head work upcoming in Q1. Regarding the Phase III study, could you elucidate a little bit more about the size of the trial? And then I think we understand the primary endpoint, but could you also talk about maybe key secondary endpoints for that Phase III trial in particular?

Jerome Jabbour, CEO

Thanks, Bert. The trial is designed to look very similar to the Phase III trials in severe hypertriglyceridemia that the other prescription omega-3s have done, just as a general matter. It may not look exactly like MARINE, for example, which was the Phase III that Amarin ran with Vascepa in severe hypertriglyceridemia. But in our discussions with the FDA and our belief that the closer these studies look, the easier it will be to compare data, although that's always a tough thing to do, study-to-study. It's going to be a better tool, we think, to be able to determine the overall impact that MAT9001 has in this patient population. But Dr. Ferguson, why don't you walk through the design of the Phase III study and the size?

James Ferguson, Chief Medical Officer

The Phase III study is designed to reflect previous research in the severe hypertriglyceridemia area. It will include around 300 patients, with 200 receiving active treatment and a 2:1 randomization to placebo control. This is a placebo-controlled trial that will last for 12 weeks. The main goal is to achieve a percentage reduction in triglycerides from the baseline in patients whose triglyceride levels exceed 500, which defines severe hypertriglyceridemia. This approach aligns with established methods, and the FDA is familiar with this design. They expressed comfort with the trial's efficacy assessment regarding the active treatment, placing us in a favorable position. The trial will be conducted globally, and we are already making significant progress in finalizing the trial details.

Robert Hazlett, Analyst

That's very helpful. And then I have a separate question on the LNC technology side. Fabulous progress with 2203 and the cohort progression and exciting developments with 2501 as well as with your partners, Genentech. Jerry, how do you think about the LNC platform, kind of near-term versus long term, as you think of the capital within the company, partnerships, and value-adding partnerships versus internal development with this technology? You could make a case for either or both, but how are you thinking about it strategically kind of near-term and then longer term?

Jerome Jabbour, CEO

I believe that biotech is primarily about creating value and fostering relationships. The value is generated by advancing our clinical candidates to significant milestones, providing data that make these products attractive to physicians and patients. We are making progress with MAT2203 and aim to advance MAT2501 as well. Additionally, even with these two assets, forming strategic collaborations on a global scale or in areas where our development and commercial expertise may not apply can create valuable opportunities. These relationships require time to develop, and we have received considerable interest, particularly outside the U.S. Ultimately, we think the most value comes from advancing our own products. However, given the broad applicability of the LNC platform, it is sensible to explore collaborations like the one with Genentech, particularly in areas beyond our current focus on infectious diseases, where we can leverage the expertise of larger pharmaceutical companies in more innovative or emerging medicinal fields. It is important not to rush the process; we need to make sure that the value of our products aligns with the partnerships we form so that we can fully benefit from them.

Robert Hazlett, Analyst

Thank you for the reminder of the proxy that the Novo deal, and I look forward to more progress on both business lines.

Operator, Operator

Our next question comes from Yasmeen Rahimi with Piper Sandler.

Yasmeen Rahimi, Analyst

I have three different questions for you. So the first one, Jerry is, if you could kind of walk us through as you're in discussions with partnerships in regards to the utility of the LNC platform, what is the type of checklist that partners are wanting to be performed before committing to work together, so that might be the first question. And then the second one is on the Phase III design on 901. Can you comment on what the total safety data set you need to show in regards to filing? And then I have a third question in regards to MAT901.

Jerome Jabbour, CEO

So in terms of an overall checklist, it really depends on the partner and on the therapeutic area in which you're looking to investigate. For example, for our first three announced collaborations, there was no checklist or history other than a review of data that we had generated over time at the LNC platform in areas like small molecules or DNA plasmids or vaccines, which attracted the interest. But that is why those collaborations sort of began with proof of concept. The reality of the LNC platform is that it's not cookie cutter to the extent that the same way we would formulate amphotericin, for example, is different than how we formulate amikacin. Fundamentally, they all fall within the umbrella of the LNC platform, but you're not necessarily going to be able to just quickly formulate from one sort of chemical molecule to another. A lot of things make a difference there. And that's even different with Genentech, for example. So, but as we enter into collaborations with new pharma, who are interested in their molecules, the checklist is pretty simple. Please formulate our molecule. We'll give them a number of different formulations, which they will then test in a variety of preclinical models. They'll be assayed, and then there'll be some in vitro study before you get to some in vivo preclinical studies. If, for example, we're talking about something in the gene therapy space, there are going to be immediate tests on an in vitro basis on things like toxicity or protein expression, for example, that's going to be a little different than what you would do with a small molecule for infectious disease. But our belief is that upon these proof of concepts that we will then move quickly into situations where we're talking about a license. Does that take into account an option to license structure? We're open to a variety of structures there. But what we're intently focused on now is delivering solid formulations that can then be evaluated. But I think Dr. Ferguson is going to add something.

James Ferguson, Chief Medical Officer

Yes. Just to sort of take it to a very high level, what a partner is looking for is basically two things. They're looking for, 'Can you make it? Can you take our compound? And can you deliver it?' And then, 'Can you measure it?' Because in the traditional drug development world, it is all about drug levels, but given the unique characteristics of our platform, you have to be able to measure the effect. And the simple question that a lot of these discussions revolve around is once we have established, we can provide them with confidence that, yes, we can make a particular product; and two, we can measure the effect of that product. If it's an antibiotic, if it's an antiviral, if it's gene therapy, how do you measure that beyond the drug levels? Those are the two boxes that really need to be checked.

Jerome Jabbour, CEO

Okay. So question number two is about the Phase III safety database and our recent interaction with the FDA. At the end of the day, we're still in discussions with the FDA on the size of that safety database. But what I will say is during our meeting, we talked exactly about the type of patients that would need to be included for an evaluation of safety. And one of the important things that came out of that FDA meeting was a great amount of flexibility. This additional patient safety data does not need to be in patients with severe hypertriglyceridemia, for example, or trigs above 500. That obviously provides some challenge for recruitment. It also would provide some challenge for running into our pivotal 12-week trial in severe hypertriglyceridemia. We do know that we will need to generate additional data in patients with elevated triglycerides, but that's also an opportunity for MAT9001 to potentially show additional differentiation in maybe a different trig level patient population than in our Phase III pivotal program. So we continue to engage with the FDA on that. We expect to have that answer at some point in the first quarter of 2021. But nothing will stop us from starting that pivotal Phase III study in severe hypertriglyceridemia. And then the addition of patients to satisfy the patient safety database based on our current projections and our discussions with the FDA, will do nothing to change that timeline to NDA filing.

Yasmeen Rahimi, Analyst

Can you comment on whether you are considering adding a Vascepa arm to that study? Also, any insights regarding the manufacturing and supply chain would be very helpful for us, as that continues to be a significant concern among investors.

Jerome Jabbour, CEO

Sure. So in terms of adding an active Vascepa arm, it's probably premature to comment on that and there's a lot of different things that we would evaluate. But I would also say that we will now have, after ENHANCE-IT reads out, done not one but two head-to-head studies versus Vascepa. So the utility necessarily of adding a Vascepa arm to a study that's designed to essentially only get you additional safety data so you can file an NDA, is probably a bridge too far. I think we will be comfortable that we will have assembled a very strong and unique head-to-head data set versus Vascepa from the two planned crossover studies. That's not to say that it has not been entertained, but I would say that we are going to be more focused on generating data with MAT9001 versus placebo. In terms of manufacturing and supply chain, everything is progressing well for us. Despite having a global supply chain, we've noticed some effects from COVID-19, particularly regarding the delivery of technical batches needed for our CMC requirements as we prepare for Phase III. However, everything is now back on track. We are also looking into creating redundancy in our current program. We are confident in the supply available for our entire clinical program. It's important to note that we have our proprietary formulation for MAT9001, allowing us to work closely with our key suppliers. Additionally, our proprietary capsule technology sets us apart and creates a barrier to entry for others. We are assured about our supply, knowing that this product has a significant cost of goods associated with it. This likely provides Amarin with added confidence in its relationships with suppliers of icosapent ethyl, ensuring this will not be a typical generic launch. We are in a distinct position, with more than enough supply and plans to increase that as needed.

Operator, Operator

There are no further questions in queue at this time. I would like to turn the call back over to management for closing comments.

Jerome Jabbour, CEO

Thank you, everyone, for joining us today. We appreciate your continued interest in Matinas, and the team here looks forward to providing you with updates on our future progress. Have a great day and a good weekend.

Operator, Operator

Thank you. This does conclude today's teleconference. You may disconnect your lines at this time, and have a great day, and thank you for your participation.