Earnings Call Transcript - PHGE Q3 2021

Operator, Operator

Greetings and welcome to the BiomX Inc. Third Quarter 2021 Financial Results. Please note that this conference is being recorded. I would now like to hand over the call to your host, Ms. Marina Wolfson, Senior Vice President of Finance for BiomX. Thank you. You may begin.

Marina Wolfson, Senior Vice President of Finance

Thank you, and welcome to the BiomX Third Quarter 2021 Financial Results and Corporate Update Conference Call. The news release became available just after 6:00 a.m. Eastern Time today and can be found on our website at biomx.com. A replay of this call will be available on 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 on the conference call the design, aim, expected timing and interim and final results of our preclinical and clinical trials, including the resumption of certain development programs, implications of changes in senior management, the sufficiency of our existing cash, cash equivalents and short-term deposits to fund our operations until the end of 2023, the potential to receive up to $15 million in additional loan tranches if certain milestones are met, our pipeline and momentum, future shareholder returns and the potential of our product candidates. Except as required by law, we do not undertake to update forward-looking statements. The full safe harbor provision, including risks that could cause actual results to differ from these forward-looking statements, are outlined in today's press release, which, as noted earlier, is on our website. Joining me on the call this morning are Jonathan Solomon, our Chief Executive Officer; and Dr. Sailaja Puttagunta, our Chief Medical Officer. With that, I will turn the call over to Jonathan.

Jonathan Solomon, CEO

Thank you, Marina, and good morning, everyone. In planning for the years ahead, BiomX has made the decision to prioritize the development of our cystic fibrosis and atopic dermatitis product candidates, as each has the potential to generate proof-of-concept clinical data readouts in 2022. BiomX will discontinue development of its acne program. We believe that by focusing on the efficient use of BiomX capital on selected programs that can generate clinically meaningful proof-of-concept data, we will best position our company to drive value creation for shareholders. With this decision, we will postpone our development efforts temporarily in inflammatory bowel disease and colorectal cancer and currently intend to resume development activities for IBD and CRC programs in 2023, assuming supportive platform data. Importantly, our new strategic focus will have a positive impact on our balance sheet. This may allow us to extend our cash runway by up to 6 months until at least the end of 2023. In addition, tranches that may become available to us under our venture debt facility upon satisfaction of certain specified milestones can further extend our runway through the first half of 2024. We therefore believe that we remain well-positioned financially through our expected clinical data readout in cystic fibrosis and atopic dermatitis. Let me now briefly review our cystic fibrosis, or CF, and atopic dermatitis or AD programs. Cystic fibrosis. BX004 is a phage cocktail candidate for the treatment of lung infections in cystic fibrosis patients. It is designed to target Pseudomonas aeruginosa, or P. aeruginosa, a bacteria that causes chronic respiratory infections and is the main contributor to morbidity and mortality in patients with CF. CF patients suffer from chronic infections and typically require prolonged and repeated courses of various antibiotics. Over time, the effectiveness of these therapies begins to diminish as multidrug-resistant bacteria strains appear. To address this significant unmet need, we have designed our product candidate, BX004, to not only be active against antibiotic-resistant strains of P. aeruginosa but also to penetrate biofilm, an assemblage of surface-associated microbial cells enclosed in extracellular polymetric substance that is known to cause antibiotic resistance. In consultation with the cystic fibrosis therapeutic development network, BiomX plans to conduct a Phase Ib/IIa trial comprised of 2 parts: part one of the Phase Ib/IIa trial will evaluate the safety, pharmacokinetics, microbiology and clinical activity of BX004 with a single ascending dose, followed by multiple doses in CF patients that are confirmed to have chronic P. aeruginosa respiratory infections. We now anticipate results on part one of this trial in Q2 of 2022. Part 2 of this trial will evaluate the safety and efficacy of BX004 treatment over 10 days in 24 CF subjects with chronic P. aeruginosa respiratory infections, the same population as part 1. Results in Part 2 of this trial are currently expected in Q3 2022. Now let me turn to our program in atopic dermatitis. In October, we were pleased to announce an agreement with Maruho for atopic dermatitis candidate BX005. As the leading dermatology-focused pharmaceutical company in Japan, Maruho is an ideal partner to help us maximize the potential value of BX005 in Japan. The agreement provides Maruho with the right of first offer to license BX005 in Japan, and this offer will commence following the availability of results from a proof-of-concept Phase I/II study, which is currently enrolling patients to evaluate the safety and efficacy of BX005. We are also pleased to announce that Maruho made an equity investment in BiomX of $3 million at a premium to the market share price, intended primarily to support the ongoing Phase I/II study. Given the depth of Maruho's expertise in dermatology product development, we were pleased to enter this agreement, which provides external validation for a phage-directed approach in treating AD. As a reminder, BiomX's phage cocktail, BX005 targets Staphylococcus aureus, or S. aureus, a bacteria implicated in the onset and exacerbation of inflammation in atopic dermatitis. Staph aureus is known to be more abundant over the lesional skin of atopic dermatitis patients compared to the skin of healthy individuals or non-lesional skin of atopic dermatitis patients. The target bacteria also increases in abundance and becomes dominant when the patient experiences flares. With respect to the timing of the Phase I/II readout, due to a scheduling backlog from the ongoing pandemic, we experienced a minor delay in meeting with the FDA to review this program. As a result, we now anticipate data in the third quarter of 2022. I'd like now to turn the call over to Marina Wolfson, our Senior Vice President of Finance and Operations to cover our financial results for the third quarter of 2021.

Marina Wolfson, Senior Vice President of Finance

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-Q, which we plan to file later today. I will walk you through some of our brief highlights. As of September 30, 2021, our cash balance and short-term deposits were $68.3 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. During the third quarter, BiomX raised $15 million in a registered direct offering and entered into a debt financing agreement of up to $30 million, of which $15 million has been received. As mentioned earlier in the call, based upon the company's new strategic focus on the cystic fibrosis and atopic dermatitis programs, we now expect existing cash, cash equivalents and short-term deposits to be sufficient to fund the company's current operating plan until the end of 2023. Additional tranches that may become available to the company under its venture debt facility upon satisfaction of certain specified milestones could further extend the company's cash runway to the first half of 2024. Research and development expenses were $6.6 million for the 3 months ended September 30, 2021, compared to $6.1 million for the same period in 2020. The increase was primarily due to increased expenses related to conducting preclinical and clinical trials of the company's product candidates and an increase in stock-based compensation and salaries and related expenses, mainly due to the growth in the number of employees in R&D and clinical activities. General and administrative expenses were $2.8 million for the 3 months ended September 30, 2021, compared to $2.4 million for the same period in 2020. The increase was primarily due to an increase in stock-based compensation and salaries and related expenses, mainly due to the growth in the number of employees as well as an increase in expenses associated with operating as a public company, such as directors' and officers' insurance and due to expenses resulting from moving into new premises. Net loss for the third quarter of 2021 was $10 million compared to $8.8 million for the same period in 2020. Net cash used in operating activities for the 9 months ended September 30, 2021, was $18.5 million compared to $17.3 million for the same period in 2020. And now I'll turn the call back over to Jonathan for his closing remarks. Jonathan?

Jonathan Solomon, CEO

Thank you, Marina. We are also announcing today that our Chief Medical Officer, Sailaja Puttagunta, will be stepping down as CMO and transitioning into a consulting role starting at the beginning of 2022. Since joining BiomX, Sailaja has made significant contributions in helping advance our product candidates into clinical development. We thank Sailaja for her dedication and numerous accomplishments, and we look forward to working with her in this new capacity. The steps we have taken to focus on the CF and AD programs are intended to strengthen our company, preserve our strong financial position and are expected to ultimately drive shareholder returns. As we near 2022, BiomX remains well-positioned with our new strategic focus, we have a significant opportunity to demonstrate proof-of-concept data that would succeed in producing important value inflection points. We'd now like to open the call for questions. Operator?

Operator, Operator

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

Joseph Pantginis, Analyst

I have 2 questions, Jonathan. First, with regard to the sort of postponed plans as you described it for IBD and CRC, I guess I would ask it this way: do you have any optionality where these programs can percolate in some fashion, either through ISTs or potential business development activities?

Jonathan Solomon, CEO

Joe, definitely, it's something we're looking into. I think a lot of the strategic focus is being aware of the external environment in the microbiome. So I think we want to focus on what can generate data in patients. But there's obviously continuous IBD activity and sort of exploring potential partnerships that can support it with additional external support, right? I think we're getting interest in these programs. They are interesting, but we really want to focus, at least in the existing resources that we have on CF and atopic derm.

Joseph Pantginis, Analyst

Of course. And then I guess, more general question as well. We live in interesting times right now with global supply chain constraints, et cetera. I was just curious if you've had to plan ahead or are experiencing any difficulties with regard to manufacturing readiness for your existing studies and planned studies?

Jonathan Solomon, CEO

One of the significant advantages we have is our in-house manufacturing, which allows us a level of control. However, it's true that not everything is within our control. We have encountered some supplier issues that are causing a slight delay in the CF program. We are continuously monitoring the situation and doing everything we can to navigate the supply chains, but it's important to recognize that not all factors are under our control.

Operator, Operator

Our next question comes from the line of Michael Higgins with Ladenburg Thalmann.

Michael Higgins, Analyst

Just a follow-up here, I guess, on 003. Was there anything in the Phase Ia data that you didn't like? Or is it more a market opportunity, cost to get to the data? Any additional help there would be helpful.

Jonathan Solomon, CEO

Right. So Michael, I think we really like the BX003 data. I think this is a PK profile as good as we could have hoped for. So I think giving phage orally does look very promising. I think to your point, we just want to be cognizant because with the data that we can generate within 2022 with BX003 is a proof of mechanism, meaning can we reduce the bacteria load in healthy volunteers. I think that we just deprioritize over getting data in patients, right, in CF and atopic derm. So with all the resources in a favorable environment, we definitely pursue all of those. I think just being cognizant of what's going on, we're putting CF and atopic derm first because they have data in patients and can indicate not only target engagement, meaning reduction of target bacteria, but also, hopefully, some signals of the clinical effect.

Michael Higgins, Analyst

Makes sense. Appreciate that. And then one on 004. In the trial design in the Phase IIa portion, are patients allowed to enter the trial on antibiotics? Is it basically standard of care plus or minus 004?

Sailaja Puttagunta, Chief Medical Officer

Yes. Thanks, Jonathan. Yes, you're correct. It's the standard of care, inhaled antibiotics will be continued. And then some of them will have phage added on to them. So it's phage plus antibiotics versus antibiotic alone.

Operator, Operator

Our next question comes from Kristen Kluska with Cantor Fitzgerald.

Kristen Kluska, Analyst

The first one I have is, could you discuss how much of this pipeline prioritization was based on the understanding of the target bacteria, the potential market unmet need and the early effects you've observed? And then could you please remind us of how you're thinking about the potential market opportunities for each for atopic dermatitis and cystic fibrosis respiratory infections?

Jonathan Solomon, CEO

Sure, that's a good question. I'll try to explain. In terms of our pipeline, all the programs are exciting, which is why we pursued them initially. The market potential for inflammatory bowel disease is the largest. However, considering the current market conditions and sentiment around the microbiome, we decided to focus on projects that not only target bacteria reduction but also show clinical effects. The investor community is looking for results from phage interventions that go beyond just targeting bacteria. We approached our prioritization with that perspective. We believe that there are opportunities that have significant market potential, which is why we aim to produce patient data for cystic fibrosis and atopic dermatitis in 2022, compared to the inflammatory bowel disease program where we can generate data from healthy volunteers and mechanistic studies. Cancer is at an earlier stage requiring further in vivo studies. Regarding market potential, atopic dermatitis represents a massive opportunity worth $5 billion, which analysts expect to nearly triple in the next five years due to high unmet needs. Most of the market relies on biological treatments, primarily injectables, which carry safety concerns. Thus, there is a demand for safer options, particularly since one-third of that patient population is children. A topical treatment that is safe could capture a substantial share of the market, which is an exciting prospect for us, demonstrated by the interest from potential partners, including our partnership with Maruho. In cystic fibrosis, the leading antibiotic for patients generates over $600 million in sales annually, representing another significant opportunity. If we can develop a product that is potentially more effective, it could lead to even greater market advancements. Looking at the cystic fibrosis landscape, Vertex has built a substantial franchise with annual sales of $6 billion, and while I don't expect us to reach that level, we see our product fitting somewhere between what tobramycin offers and the sales that Vertex has achieved.

Kristen Kluska, Analyst

And as it relates to BX001 and acne, I know in the past, you discussed that you were looking at different gel and topical compositions. So given that atopic dermatitis is also intended to deliver phage topically, wondering if there are any important read-throughs to consider from these acne data, specifically related to this delivery route?

Jonathan Solomon, CEO

Right. So Kristen, I think we're all kind of thinking and analyzing the additional acne data, and I think we are thinking what ways do we want to improve and then gather more insights into the atopic derm study. I think one thing we do know, one of the key challenges with acne is that the bacteria deep inside the sebaceous gland, right? So it's deeper in the hair follicle. There are no other bacteria there. That's for the C. acne bacteria so that's an extra challenge. In atopic derm, the Staph aureus is a much more mobile bacteria. This isn't deep inside the layers; you can sort of move back and forth. So I think there's a lot of support that the bacteria will be a lot more accessible. Having said that, I think we're still analyzing all the data and compiling all the data to think about whether there are any takeaways that we want to implement in the atopic derm study.

Kristen Kluska, Analyst

Okay. And then I just wanted to clarify for BX003 that PSC still intends to remain an indication you intend to focus on in the future here along with IBD?

Jonathan Solomon, CEO

Yes, some people find PSC even more intriguing than IBD. It shows that there is no approved treatment available, highlighting a significant unmet need. I apologize for any lack of clarity, but the program is certainly important for both conditions.

Operator, Operator

Our next question comes from the line of Keay Nakae with Chardan Capital.

Kaey Nakae, Analyst

Now that CF and AD are even more important, could you explain the kind of data we can expect from those programs in 2022? Starting with CF, we obviously have single multiples or single ascending dose and multiple dose. In that first tranche, what additional information will we receive regarding CF patients beyond safety?

Jonathan Solomon, CEO

Certainly. In the CF study, as you mentioned, there are two parts guided by the CF Foundation with their valuable support. Part 1 involves a small match study with 8 patients, where 6 are receiving treatment and 2 are on placebo. The treated patients start with a low dose, then move to a high dose, but their exposure is limited. This stage is primarily focused on safety, although we are looking for initial signs of a reduction in the target bacteria. We anticipate some reduction from the baseline, but we do not expect any statistically significant results due to the small size of the study and the short duration, so no clinical improvements are expected in this phase. Moving to Part 2, this involves a 10-day dosing regimen with 24 patients, of which 16 are receiving treatment and 8 are on placebo. This phase is influenced by earlier compassionate use observations involving phages in the U.S., where we noticed a stronger signal in reducing the target bacteria and some early indications of lung capacity improvement. In Part 2, we aim to observe a clear reduction in Pseudomonas aeruginosa and are hopeful to see initial signals similar to those observed in the compassionate use study.

Kaey Nakae, Analyst

Okay. And then how about for atopic derm. What will we see in the second half of this year in terms of any type of efficacy signal?

Jonathan Solomon, CEO

So in the atopic derm study, it's obviously a 48-patient study, then we're dosing them for a certain number of weeks. Here, we want to see that we can pick up a reduction of the target bacteria. That's where we want to do a robust signal. And we're also looking for at least trends or any indication that there's improvement in clinical outcomes, such as the EASI or SCORAD scores, right? So we're not necessarily expecting here a statistically significant robust signal, but we're looking for some separation as was seen in early studies with other compounds that went after Staph or others.

Operator, Operator

Our next question is a follow-up from the line of Michael Higgins with Ladenburg Thalmann.

Michael Higgins, Analyst

You discussed the out-licensing of some rights in Japan. Just wanted to take a bigger broader look, I guess, across the portfolio. Are you looking to out-license assets in Europe, others in Japan, et cetera? Just trying to get a sense for your IBD efforts and the timing for such.

Jonathan Solomon, CEO

That's a great question. We are currently considering potential partnerships as a platform player. There are some programs we would like to partner on and others we prefer to keep internal. This was also part of the earlier discussion mentioned by Joe. For instance, IBD could be a program we look to partner on in the future, keeping in mind the cost and complexities associated with advanced clinical studies. CF is a program we wish to keep in-house due to its orphan designation, and we're receiving substantial support from the CF Foundation, which will help us make further progress. Atopic dermatitis is another program where we see potential; we're excited about finding a partner in Japan while retaining rights in the rest of the world, which provides us with valuable input and external validation. It’s about evaluating each program based on market conditions, investment needs, and risk. For example, colorectal cancer is an intriguing program that could lead to early partnerships as we potentially expand into various cancer types, allowing us room for growth even if we focus on a specific bacteria and tumor.

Michael Higgins, Analyst

That really makes sense. And then last one, your cash guidance through 2023. Is this with or without any programs besides 004 and 005?

Jonathan Solomon, CEO

I believe the guidance implies that we will not be fully committed to all three programs at the start of 2023, but it does support our pipeline.

Operator, Operator

Ladies and gentlemen, this concludes our question-and-answer session. I'll turn the floor back to Jonathan for any final comments.

Jonathan Solomon, CEO

So I want to thank all of you again for joining us this morning. We look forward to providing you future updates on our CF and atopic derm clinical programs throughout 2022. Have a wonderful day, and please reach out to us if you have any questions. Thank you.

Operator, Operator

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