Quoin Pharmaceuticals Ltd. (QNRX) Q1 2023 Earnings Call Transcript

Good morning and welcome to the Quoin Pharmaceuticals First Quarter Financial Results and Business Update Conference Call. All participants will be in a listen-only mode for the duration of the call. After today's presentation, there will be an opportunity to ask questions. Please also note that this event is being recorded today. I would now like to turn the conference over to Gordon Dunn, Chief Financial Officer. Please go ahead, sir.

Thank you, and good morning. We appreciate you joining us on today's conference call. With me on the call are Dr. Michael Myers, CEO; and Denise Carter, COO. We're pleased to provide an update of our progress in the first quarter of 2023, as well as discussing our Q1 2023 financial results. Please note that our operational and financial results press release is now available on Quoin's website. In keeping with our normal procedure, to begin, Michael will provide a corporate clinical and operational update following which I will review our Q1 financial results. I'll then hand the call back to Michael for closing comments. We will be pleased to answer any questions at the end of the call. Before we begin, I'd like to remind everyone that statements made during this conference call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties that can cause actual results to differ materially from the information expressed or implied by these forward-looking statements. For more information regarding such risks and uncertainties, please see the risk factors outlined in the company's filings with the SEC. Any forward-looking statements are made only as of today, and we disclaim any obligation to update these forward-looking statements other than as required by law. Please see the forward-looking statements section in our financial results press release issued this morning for more information. It is now my pleasure to turn the call over to our CEO, Michael Myers.

Thank you, Gordon and good morning, everyone. I'm very pleased to report that Quoin has had a very strong start to 2023. Both of our Netherton Syndrome clinical trials, which are being conducted under an open IND, are fully up and running, actively recruiting and dosing patients. We look forward to providing clinical data later this year. Our commercial partners in 60 countries outside of the US and Europe continue to make progress in their respective territories as they engage with regulatory authorities, key opinion leaders, and advocacy foundations to deepen their understanding of the requirements, both for entry into early access programs as well as for full regulatory approval. Our partners are also working with insurance providers and reimbursement experts to ensure that once our product is approved, a smooth and efficient commercial rollout will occur with established pricing and reimbursement criteria. As you know, there are currently no approved treatments for Netherton Syndrome anywhere in the world, so these interactions by our commercial partners with various regulatory agencies and insurance providers are the first of their kind, which is why the work has been performed in advance of approval. Our earlier stage programs with Queensland University of Technology, or QUT, in Australia continue to advance during the quarter. While these programs are at an earlier stage of development than QRX003 for Netherton Syndrome, we continue to believe that they are important components of our development portfolio and have the potential to generate significant downstream shareholder value. During the quarter, we successfully completed a capital raise of $7 million prior to fees and expenses. I think it is worth noting that the terms of this raise were more favorable than those obtained by a majority of companies in our peer group that also completed a capital raise this past quarter. As we have previously discussed, a primary reason for conducting this raise was to strengthen our balance sheet and provide the company with additional firepower as we actively pursue M&A opportunities to broaden our product portfolio beyond rare skin diseases. We are particularly interested in late-stage assets in the rare and orphan disease space that are underpinned by strong clinical data and highly favorable commercial opportunities based on readily identifiable competitive strengths. We are actively considering a range of therapeutic areas beyond our current focus on rare skin, with the primary evaluation criteria being the path to commercialization and the scale of the commercial opportunity thereafter. This current market environment has proven to be highly challenging for many companies, and as a result, we have had an opportunity to assess a quite large number of potential M&A opportunities throughout the past quarter, and that momentum has been maintained into this quarter. Our team has deep experience in M&A, and we employ a systematic and thorough approach to due diligence across a number of important metrics. While there can be no guarantees that a transaction will be consummated, I can tell you that we are in advanced discussions with a number of companies regarding several very exciting opportunities, including some that could potentially be fundamentally transformational for Quoin. We look forward to updating everyone if and when we have an announcement to make, but I do want to reiterate that broadening our product portfolio through M&A is a key priority for Quoin this year. On a different note, we are frequently asked questions about the competitive landscape for QRX003 in Netherton Syndrome. We are aware that another company has filed an IND with the FDA and received a study may proceed notification to initiate the clinical development of their product as a potential treatment for Netherton Syndrome. I do want to take a moment now and highlight a number of key differences between their clinical program and ours. Principally, their study is at a much earlier stage than ours, as it has been labeled by the company itself as a Phase 1b study. Please recall that we are currently testing our product in what is potentially the first part of a registrational study. In addition, their study differs from ours in terms of dosing duration, two weeks for them versus 12 weeks for us, and according to publicly available information, their clinical endpoints appear to be somewhat different than the true efficacy endpoints being assessed in both of our ongoing clinical studies. Finally, again, based on publicly available information, we believe our well-defined cost-effective and reproducible manufacturing process may confer significant advantages over the other company. As of now, it does not appear that the company has initiated their clinical study, and to the best of our knowledge, Quoin remains the only company conducting clinical trials in Netherton Syndrome under an open IND. While acknowledging the presence of a potential competitor in this space, we believe the advanced stage of our clinical program coupled with a well-established cost-effective manufacturing process provides us with substantial first-mover advantage, and we believe we are on track to obtain the very first regulatory approval for a product to treat Netherton Syndrome. As outlined previously, the combination of our planned commercial infrastructure in the US and Europe, coupled with the commercial partnership network we have established in 60 countries outside those territories, will enable Quoin to affect what is essentially a global launch of QRX003 once approved. We know of no other company in our peer group that could make a similar claim. With that update on our operational progress, let me turn it over to Gordon to discuss our first quarter financial results.

Thank you, Michael. As Michael highlighted earlier, in February, we completed a $7 million public offering, which further strengthened our cash position and runway. As of March 31, we had approximately $17 million in cash and marketable securities compared to $12.9 million as of December 31, and we expect that will be sufficient to fund our operations into late 2024. Our operating loss for the first quarter was $2.8 million compared to $2.2 million for the first quarter of 2022. The increase in operating loss was primarily due to increased R&D costs associated with our clinical studies of QRX003 and our research collaborations with QUT, as well as non-cash stock compensation expense. Our net loss for the first quarter was $2.6 million compared to $1.7 million for the first quarter of 2022, which included $490,000 in exceptional income items. I will now turn the call back to Michael to make some closing remarks and begin our Q&A.

Thanks, Gordon. As outlined, we have had a very productive and indeed a very exciting start to 2023. Operationally, we continue to advance the development of our preclinical and clinical programs as we work to lay the foundation for a strong commercial rollout of our lead assets in anticipation of approval. We are excited by the quality and scope of the M&A opportunities we are seeing, and our team is extremely focused on pursuing R&D transactions that could be major inflection points for our company. We will, of course, keep you fully apprised of our progress across all of these fronts once we have news to share. With that, operator, we are now ready for questions.

We will now begin the question-and-answer session. At this time, we will take our first question, which will come from Naz Rahman with Maxim Group. Please go ahead with your question.

Hi, guys. Thanks for taking my question on the progress so far. I just want to start on the open label portion of your study. Could you provide some color as to how many patients have already enrolled? And also do you have any color on what percentage or how many of those patients are adults versus children in like the rough age ranges?

Thank you for the question, Naz. Regarding your inquiry about the number of patients, please stay tuned for an update on that very soon. You will have a clearer picture. All our ongoing clinical studies are focused on adults only. The next phase of the registrational study will involve both adults and children, with a primary emphasis on children. The age range for adults is generally around 20 to 50 years old. These participants are all adults.

Got it. And based on the interest you've seen in the study thus far, have you considered potentially expanding the study for more than 10 patients?

That's a really good question, Naz. And to be honest, it's something that we have discussed among ourselves, so no decision on that yet. But again, I would say stay tuned and there may be an update on that, but it's certainly a conversation we're having.

Got it. My next question is about the asset. Could you discuss what the study design might look like for the initial study that your partner plans to conduct? Also, what type of data are you hoping to gather?

Yeah. We really can't give any information on that as of yet, Naz. They are working on the protocol and the proper endpoint. Bear in mind, bit like Netherton Syndrome, there really is no approved treatment for this, so there's no validated endpoints, really not a lot of precedent here. So, what we, and in particular them, are looking to do is see what the best endpoints will be. But I really don't have anything to share at this stage. Hopefully for the next conference call, I'll be able to provide you with more color on that.

Got it. Thanks for taking my questions.

Thanks Naz.

Our next question will come from Jim Molloy with Alliance Global Partners. Please go ahead with your question.

Hey, good morning. Thank you for taking my question. I have a quick question on it sounds like the progress is advancing rather swiftly on both the open label and the Phase 2, 3. Are we still anticipating the open label to finish first and Phase 2, 3 here in the second half of 2023, and then potentially getting the Phase 3, mostly children trial up and running here in the second half of 2023?

Yeah. That's still the plan, Jim. So thanks for the question, but you're spot on. The open label will read out earlier, followed by the first part of the registrational study and then obviously the second part, so that continues to be the sequence of events.

Excellent. And then, a little earlier stage, the RDEB and the 007 for Netherton and 008 for Scleroderma, are those still progressing in trials? Or how do you prioritize between progressing those versus essentially bringing in a transformative asset?

We believe that pursuing our plans for Scleroderma and Netherton is not mutually exclusive. Our initiatives for 07 and 08 are well established, and QUT in Australia is handling all the work, which is very cost-effective due to the nearly 50% rebate from the Australian government. These programs are ongoing. While they are still in earlier stages, we expect them to enter clinical trials and believe they have significant potential for value down the line. Our stance on EB remains unchanged, and we are monitoring the market closely. We are observing the six to eight companies conducting clinical studies this year, which will yield important data. For instance, if Crystal secures approval, other companies may also release pivotal clinical data soon. As we have mentioned before, we will act quickly if an opportunity arises, but we are cautious about investing without being sure of its viability. Entering a market as the third or fourth player often means there’s no market at all. To summarize, 07 and 08 are progressing, and we prioritize acquiring additional assets, confident in our ability to do so.

Excellent. And it sounds like an active acquisition market. Do you characterize it as a buyer or seller's market that given the pressed stock prices a number of companies are seeing out there?

It seems like it's a buyer's market, Jim. Companies are making sensible decisions by realigning their portfolios and ensuring that the assets they keep make sense in this challenging environment. What we're seeing is very healthy, and for us, it's quite exciting. We're energized by the quality and breadth of the opportunities available. It's been a very stimulating start to the year for us. We'll continue to conduct our due diligence thoughtfully and systematically. We have turned down opportunities that initially appeared promising but, upon further investigation, did not align with our goals. We're not seeking perfection, as we know it doesn't exist, but we want to ensure that our decisions will benefit the company in the long run. Stay tuned for potential announcements.

Very good. Then the last question for me, I'll hop back in the queue. Any thoughts on whether there have been any discussions with digital partners that have come forward to potentially partner rather than self-launch, given that this is a market you could self-launch into with a fairly reasonably sized Salesforce?

We're approached all the time, Jim. We get constant approaches from companies who are either looking for US rights, European rights, or both. That's part and parcel of our daily existence almost. But we remain convinced that given the size of the patient population, the limited number of treating physicians, the access to patient registries, the best long-term value we can do for this company is to self-commercialize in these territories, leveraging our own experience in selling products into these markets. So, look, never say never. If somebody comes and makes an offer that sweeps us off our feet, then we obviously have to have a conversation. But right now we remain committed and focused on establishing our own commercial infrastructure in Europe. And as you know, we have worked very effectively to establish a global distribution network outside of those territories.

Thank you for taking the questions.

Thanks, Jim.

And that concludes our question-and-answer session. I would like to turn the conference back over to Dr. Michael Myers for any closing remarks.

Just want to say, look, thank you for participating here today. We appreciate you taking the time to be here. If there are any further questions outside of what was covered on the call, we are always available to answer them. So, feel free to reach out at any point in time. Other than that, have a great day everybody. Thank you.

The conference has now concluded. Thank you very much for attending today's presentation. You may now disconnect your lines.