BiomX Inc. Q4 FY2021 Earnings Call

Greetings. Welcome to BiomX Fourth Quarter and Full Year 2021 Financial Results and Corporate Update Conference Call. Please note, this conference is being recorded. I will now turn the conference over to Marina Wolfson, Senior Vice President of Finance. Ms. Wolfson, you may now begin.

Thank you, and welcome to the BiomX Fourth Quarter and Full Year 2021 Financial Results and Corporate Update Conference Call. The news release became available just after 6:30 a.m. Eastern Time today and can be found on our website at biomx.com. A replay of this call will be available in the Investors section of our website. Before we begin, I'd like to review the safe harbor provision. All statements on this call that are not factual historic statements may be deemed forward-looking statements. For instance, we are using forward-looking statements when we discuss potential market opportunities, the design, aim, expected timing, and interim and final results of our preclinical and clinical trials, the sufficiency of our existing cash, cash equivalents and short-term deposits, the potential receipt of additional cash if milestones are met, the potential benefits of our product candidates, and potential growth in shareholder value. Except as required by law, we do not undertake to update forward-looking statements. The full safe harbor provisions, including risks that could cause actual results to differ from these forward-looking statements, are outlined in today's press release. Joining me on the call this morning is Jonathan Solomon, Chief Executive Officer of BiomX. With that, I will turn the call over to Jonathan.

Thank you, Marina, and good morning, everyone. Let me begin by saying that I believe BiomX is now entering the most exciting period in our company's 7-year history, with proof-of-concept data expected within the next 12 months in both our cystic fibrosis and atopic dermatitis programs. We are poised to generate readouts that could have a significant impact on the value of our company. At the same time, with the recent equity investments from Maruho and the Cystic Fibrosis Foundation, we are also well positioned financially with existing cash expected to take us at least until the end of 2023. Additional tranches of up to $15 million under our existing loan agreement may further extend our cash runway into mid-2024. Let me now provide a brief update on each program, starting with BX004 in cystic fibrosis. BX004 is our novel phage candidate that is being developed for the treatment of chronic respiratory infection caused by Pseudomonas aeruginosa, a main contributor to morbidity and mortality in patients with CF. Chronic P. aeruginosa infection leads to epithelial surface damage and airway plugging, progressively impairing pulmonary function. CF patients chronically infected by P. aeruginosa show a steeper lung function decline, a higher number of pulmonary exacerbations, more hospital admissions, and a higher mortality than P. aeruginosa-free patients. P. aeruginosa infections usually start in childhood and, following prolonged and repeated broad-spectrum antibiotic courses, enhanced resistance to antibiotics develops, leading to the appearance of multidrug-resistant strains. Studies have shown that about 80% of CF patients are chronically colonized by P. aeruginosa by the age of 20, and the 8-year risk of death was found to be 2.6 times higher in patients with P. aeruginosa versus those without it. Research has also shown the continued colonization of P. aeruginosa eventually results in a point where the infection can no longer be controlled, which is further characterized by the expression of biofilm-forming genes within the bacteria itself. Biofilm and its assemblage of surface-associated microbial cells enclose an intracellular polymeric substance, one of the leading causes for antibiotic resistance. In preclinical studies, BX004 not only demonstrated activity against antibiotic-resistant strains of P. aeruginosa but also shows the ability to penetrate biofilm. We, therefore, believe BX004 holds significant potential to address this life-threatening infection in CF patients. The opportunity to address this unmet medical need is also significant. With an estimated 30,000 CF patients in the U.S. and 80,000 worldwide, chronic antibiotic-resistant bacterial infection remains one of the most challenging medical conditions in CF patients. P. aeruginosa is the most common and detrimental bacteria in lung infections of CF patients, and it is estimated that approximately 30% to 50% of these patients suffer from chronic infection due to this bacteria. Part 1 of this trial will evaluate the safety, pharmacokinetics, and microbiological clinical activity of BX004 in 8 CF patients in a single ascending dose and multiple dose design. Part 2 of the trial will evaluate the safety and efficacy of BX004 in 24 CF patients who will be randomized to receive treatment or a placebo cohort in a 2:1 ratio. Sites are now open, but we are seeing slow enrollment due to the recent COVID wave. So to be conservative, we now expect the readout from Part 1 of the study in the third quarter of 2022, and the readout from Part 2 in the first quarter of 2023. We are also proud to have the support of the Cystic Fibrosis Foundation for the development of BX004. In January, we announced the Therapeutic Development Award from the foundation in support of our ongoing Phase Ib/IIa study. The award is structured as an equity investment, and in December, the foundation made its initial investment of $3 million in BiomX common stock. Upon completion of patient dosing in Part 1 of the study, BiomX would have the right to receive the second tranche of $2 million. Now let me turn to the atopic dermatitis program. We are developing BX005 as a topical phage product candidate targeting Staphylococcus aureus, the bacterium associated with the development and exacerbation of inflammation in atopic dermatitis. By reducing Staph aureus burden, we believe BX005 has the potential to shift the skin microbiome composition to its baseline state, leading to clinical improvement. Atopic dermatitis not only represents a significant unmet need, but the commercial opportunity remains attractive with the current therapeutic market valued at $5 billion, which is expected to triple over the next few years. Given the size of the market opportunity, we recognize the importance of developing strategic relationships to maximize the value of this program. Last quarter, we announced an agreement with Maruho for BX005. As the largest dermatology-focused company in Japan, Maruho brings exceptional expertise in this therapeutic area, and we are very pleased to have their support for our program. Similar to the CF Foundation, Maruho's financial support for the BX005 program came in the form of an equity investment in BiomX. Maruho purchased $3 million of our common stock at a premium to the market share price. Funding from this investment is intended primarily to support the planned Phase I/II study. We anticipate initial data in the fourth quarter of 2022. With respect to our other programs, our IBD product candidate is expected to enter the clinic next year, and we also expect to build out our preclinical efforts surrounding our colorectal cancer product candidate in 2023 as well. I'm now turning the call to Marina Wolfson to cover our financial results for the fourth quarter and full-year results.

Thank you, Jonathan. As a reminder, the financial information is available in the press release we issued earlier today and also in more detail in our Form 10-K, which will be filed later today. I will walk you through some of our brief highlights. As of December 31, 2021, cash balance and short-term deposits were $63.1 million, compared to $57.1 million as of December 31, 2020. The increase was primarily due to net cash provided by financing activities, partially offset by net cash used in operating activities. Research and development expenses net were $22.7 million in 2021, compared to $19.4 million for the prior year. The increase was primarily due to increased expenses related to conducting preclinical and clinical trials of our product candidates and an increase in salaries and related expenses, mainly due to the growth in the number of employees in research and development and clinical activities, offset by higher levels of grants from the Israel Innovation Authority. General and administrative expenses were $11.3 million in 2021, compared to $9.3 million for the prior year. The increase was primarily due to an increase in expenses associated with operating as a public company, such as directors' and officers' insurance, listing fees, and investor relations activity. Additionally, this increase was due to an increase in stock-based compensation and salaries and related expenses, mainly because of the growth in the number of employees and an increase in rent and related operational expenses resulting from moving into our new facility. Net loss was $36.2 million for 2021 compared to $30.1 million for the prior year. Net cash used in operating activities was $27.6 million for the year ended December 31, 2021, compared to $24.4 million for the same period in 2020. The estimated existing cash, cash equivalents, and short-term deposits will be sufficient to fund the company's current operating plan through the end of 2023. Additional tranches that would become available to the company under its venture debt facility upon satisfaction of certain specified milestones can further extend the company's cash runway through the first half of 2024. And now I'll turn the call back over to Jonathan for his closing remarks.

Thank you, Marina. We are obviously very excited about the opportunities that lie ahead for us in our leading product candidates, cystic fibrosis and atopic dermatitis. At the same time, we also recognize that the prevailing market conditions within the biotechnology sector have been difficult for companies and investors alike. Despite these ongoing challenges, we are exceptionally well positioned with a strong balance sheet, and two proof-of-concept readouts for our lead clinical programs are expected in the next 12 months. If either or both of these programs prove successful, we believe there will be a significant opportunity this year to grow shareholder value. We'd now like to open the call for questions. Operator.

Our first question comes from Joe Pantginis with H.C. Wainwright.

Two questions, Jonathan. First, on the CF program, I guess I wanted to get a little bit of a framework for the type of data we expect in the fourth quarter from Part 2. I guess I'll ask it this way: What kind of microbiological data do we expect? And then with regard to efficacy, what would you consider a success for 24 patients?

Good morning, Joe. It's an excellent question. I think we have two parts in the study, right? So you focused on Part 2, which is, I think, the more significant inflection point; Part 1, which has a readout in the third quarter, is actually eight patients. Those two are on placebo; six are on treatment. It's a bit of a SAD/MAD study. So we'll kind of give them low dose, high dose, and then a few doses of the high dose, right? So it's mostly safety. I think we know that phage is relatively safe, so we're not expecting any surprises there. I think there is a chance that we might see some signs of microbiological efficacy, right, in terms of just reduction of the bacterial count. And again, I think in CF, what makes the indication exciting is that we know that these patients are actually succumbing to the bacterial infections, right? So basically, if you reduce the bacteria significantly, you're going to have a clinical effect, right? And to your point, the readout in Part 2, that's 24 patients randomized to a 2:1 ratio, following the design that Yale did in some of their Compassionate Use studies, right? So we're going to treat these patients for 10 days; we're going to measure the bacterial count before and after treatment. We want to see a significant effect, hopefully greater than in order of magnitude, and that should also translate to some signals on clinical parameters such as FEV1. Hope that helps clarify.

It certainly does. And I wanted to ask my next question regarding the atopic dermatitis program, also looking a little historically. When you look at the, I don't know, we'll call it an issue, just the reasons why we feel there might have been issues with the acne program and skin penetration into the hair follicles and different aspects of the sebaceous gland or what have you. What gives you confidence based on the different skin morphology and underlying pathology of atopic dermatitis that you would not necessarily have that issue?

It's a great question, right? We've debated at length with multiple experts in the industry. I think the main difference is that in acne, the bacteria, as you said, resides inside the hair follicle. So when we're measuring superficially with a skin swab, we're not really seeing what's going on inside the hair follicle. In our Phase I, we've actually seen a reduction of the bacterial count, but we measured this with a swab. And obviously, in a cosmetic study, we're not going to do skin biopsies or punch biopsies on the faces of volunteers. So definitely, I think that was the case we saw the effect happening superficially. It probably did not translate to deeper layers, and the phage is a relatively large structure, and we just did not have a clinical effect, right? Penetration is most likely the issue. Now we're looking into implementing more takeaways from this study on atopic dermatitis. But what gives us comfort is that in the end, the bacteria, Staph aureus, is a superficial bacteria, right? It's on the skin. When you look at the lesions before, there's low levels of Staph. When you look at the lesions themselves, there are high levels of Staph. You can see from the skin swabs that there are very high levels. Interestingly, when we looked at different lesions in the same person, you see that it's the same strain over the different lesions. It looks more like an infection. It's not a bacteria that can go deep into the skin, right? C. acne is one of the most unique bacteria; it only appears in humans, only above the shoulder line. There's no other animal that has Staph aureus/C. acne. There are no good models. So I think, in that aspect, it's unique, and Staph, again, is probably a more accessible target, and that's why we give a higher likelihood of success in this study.

That's very helpful. And if you could just indulge me, if I can just ask a housekeeping question of Marina. Since the 10-K is not out, would you be able to just give the shares outstanding as of today in the fully diluted count?

Sure. Thank you for your questions. So first of all, the 10-K is going to be filed later today. So we have approximately 30 million shares outstanding and approximately 47 million fully diluted.

Our next question comes from Keay Nakae with Chardan.

So Jonathan, regarding CF 004, is there anything else that might be delaying the start of Part 1?

Good question. Good morning, Keay. I think what we've seen, not unlike many of the other companies now, is that when you initiate these studies, first there are issues with the CROs because of COVID, right? So there have been delays just in terms of manning positions at the CRO. A lot of the site logistics have been slower. We've seen this both in atopic dermatitis as well as in CF, and that's why we decided to be more conservative and give our guidance a bit more time on both of the studies. Specifically with CF, these patients are a lot more vulnerable to COVID; they're much more worried and haven't been in contact with their physicians for a while through the wave, so they do not show up in the clinic. Now that we've opened all the sites on time, we see there's greater time since they last talked to them, and they don't know their status, so we want to make sure we know all the parameters when we enroll these patients. We're seeing enrollment slightly slower. So we face these two issues: issues related to CROs around manpower, which I think a lot of other companies have been experiencing, and specifically with CF, there's an additional difficulty since they're so worried about showing up to the clinic given their vulnerability.

Okay. And in terms of finding patients with Pseudomonas aeruginosa, is testing or screening for that? Is that difficult? We don't think that it is, but is it difficult? And is there some sort of baseline level of infection that matters, or is the fact that they simply have a chronic infection sufficient for them to be part of the study?

I think our main takeaway is that in phage therapy, it's crucial to ensure there are enough bacteria present. Our research indicates that having more bacteria increases the likelihood of the phage being effective. We have a minimum threshold for bacterial levels that we consider essential. Additionally, it's important for patients to be able to produce enough sputum for sampling. While we are encouraged by the number of patients reaching out who wish to participate in the study and have been dealing with these infections for years, we must also recognize the challenges posed by COVID. The medical system needs to recover after the disruptions caused by the pandemic, and we hope that new variants like Omicron remain manageable.

Okay. And then I'll ask a similar question about atopic dermatitis once you get started there. But in screening for those who have Staph aureus, is there a threshold that you need to see for them to be included?

Yes. You're spot on, right? I think the reason we're going to moderate to severe is we want to have high levels of bacteria. We think based on KOLs and some of the studies that have been conducted is that the more bacteria there are, the more likely you're going to have an effect, so that's exactly the same rationale. We're taking skin swabs. There is a minimum threshold, and only those that have a minimum threshold and can ensure their phage cocktail is relevant to their strains are the patients we enroll. Here, we are also proceeding in our original timeline in terms of executing the clinical study, and the patients are not worried about COVID; that's not the issue. We are seeing some of the logistical issues we talked about as the CROs.

It seems there are no further questions at this moment. I will now hand it over to management for additional comments.

Thank you all for joining us this morning. We look forward to providing you with future updates on our cystic fibrosis and atopic dermatitis clinical programs throughout the next 12 months. Have a wonderful day, and please reach out to us if you have any questions.

This will conclude today's conference. Thank you for your participation. You may now disconnect your lines at this time.