Earnings Call Transcript - TOVX Q3 2023

Operator, Operator

Greetings and welcome to Theriva Biologics, Inc. 2023 Third Quarter Operational Highlights and Financial Results. This conference is being recorded. It is now my pleasure to introduce your host, Steve Shallcross. Thank you. You may begin.

Steve Shallcross, CEO

Thank you, Irene, and good morning, everyone. Thank you for joining our call today to discuss Theriva Biologics' Third Quarter 2023 results. I'm joined by Dr. Manel Cascallo, Director General of Theriva Biologics' European subsidiary, and Dr. Vince Wacher, Head of Corporate and Product Development. This morning, we released a press release detailing our operational highlights and financial results for the third quarter ending September 30, 2023. You can find the press release in the Investors section of our website at www.therivabio.com, along with the quarterly report on Form 10-Q, which we plan to file today with the Securities and Exchange Commission. This call is being streamed live via webcast, and it will be archived on our website for 90 days. During this call, we will make several forward-looking statements about Theriva Biologics and VCN Biosciences regarding our expectations and projections about future events. These statements can typically be identified by terms like may, should, expects, anticipates, intends, plans, believes, estimates, and similar expressions. They are based on our current beliefs, expectations, and assumptions and are subject to various risks and uncertainties outlined in our SEC filings. Actual results may differ materially from those projected. The information provided in this call is valid only on the date of the call, and Theriva Biologics has no obligation to update any forward-looking statements unless required by law. I would now like to discuss our progress during the quarter. In the third quarter of 2023, we made steady advancements in our oncology-focused portfolio aimed at addressing unmet needs for challenging cancers. With our cash runway extending into the first quarter of 2025, we feel positioned to execute our corporate objectives and advance multiple value-enhancing milestones. Our primary focus lies in pursuing various therapeutic opportunities for our lead clinical candidate, VCN-01, which is an oncolytic adenovirus designed to selectively replicate within tumors, degrade the tumor matrix, and enhance tumor immunogenicity. We believe VCN-01's multiple modes of action position it well for effective tumor killing across several indications and in conjunction with various therapies. We aim to utilize VCN-01 to enable and enhance chemotherapy and immuno-oncology products in difficult-to-treat solid tumors, a strategic focus for Theriva that could provide numerous opportunities in areas with high therapeutic need. Today, I am pleased to share recent highlights from our ongoing programs evaluating VCN-01 in various indications alongside chemotherapy, immune checkpoint inhibitors, and CAR-T cells. Building upon our exploration of the broad synergistic potential of VCN-01, we are pursuing new oncolytic virus candidates utilizing our innovative Albumin Shield Technology, designed to protect systemically administered oncolytic viruses from the host immune system, facilitating repeated administration of these therapies. This may allow our pipeline to be adopted in standardized treatment cycles, well-established in cancer treatment. Additionally, as part of our oncology focus, we remain active in screening and enrolling patients in the second cohort of our Phase Ib/IIa clinical trial of SYN-004, which aims to prevent serious adverse events in patients receiving allogeneic hematopoietic cell transplants for hematologic cancers. With this introduction, I will provide more details on our programs, starting with our lead program, VCN-01. Our confidence in VCN-01 is based on strong clinical data, as it has been administered to over 100 patients with various conditions, including pancreatic ductal adenocarcinoma, head and neck squamous cell carcinoma, colorectal cancer, ovarian cancer, and retinoblastoma. VCN-01 has received orphan drug designation in the U.S. and Europe for pancreatic cancer treatment and in the U.S. for retinoblastoma, presenting additional regulatory engagement opportunities and potential market exclusivity if approved. Our most advanced program for VCN-01 targets pancreatic cancer, which has one of the lowest survival rates among cancers and is an area primed for innovation. It's well understood that the PDAC tumor matrix significantly contributes to poor therapeutic outcomes. We believe VCN-01 could meet the urgent need for new treatment options for PDAC by degrading the tumor matrix and improving access for co-administered cancer treatments. The VIRAGE trial, a Phase IIb study evaluating VCN-01 with standard chemotherapy of gemcitabine and nab-paclitaxel, is progressing as patient dosing continues across sites in the U.S. and Spain. VCN-01 has been well tolerated with a safety profile consistent with earlier trials. We aim to complete enrollment with 92 available patients in the first half of 2024. As a reminder, the primary endpoint for the trial includes overall survival, along with safety and tolerability of VCN-01. Other endpoints will assess progression-free survival, objective response rate, and measures of VCN-01 biodistribution, replication, and immune response. Given that this is an open-label trial, progress will be closely monitored, and we may implement steps to accelerate the program based on emerging data. The VIRAGE trial will also help us evaluate the feasibility of repeated doses of VCN-01, potentially shifting towards standardized treatment cycles for improved patient outcomes in PDAC and other solid tumors. In addition to advancing the VIRAGE PDAC trial, we are engaging with key opinion leaders in the U.S., Europe, Central and South America to refine our clinical strategy for retinoblastoma. Given the variable clinical practices and lack of specific regulatory guidance for retinoblastoma drug development, we have submitted a meeting request with regulatory agencies and look forward to discussing the development pathway for VCN-01 in pediatric patients with advanced retinoblastoma. We believe intravitreal VCN-01 may effectively treat vitreous seeding in these children, and we plan to utilize our orphan drug designation to guide discussions with the FDA and other regulatory agencies for new treatment options for this challenging cancer. In parallel with our initiatives, VCN-01 is also being studied in several investigator-sponsored studies at leading oncology institutions worldwide. Today, I will highlight recent updates from our collaboration with the Catalan Institute of Oncology for head and neck cancer and the University of Pennsylvania for pancreatic and ovarian cancer patients. Recent data from the ongoing study of VCN-01 combined with durvalumab in recurrent metastatic head and neck cancer were presented at ESMO, showing notable patient survival improvements of close to 4 years in one case. This correlates with increases in CPS score, a key determinant for outcomes in anti-PD-L1 therapies. Such results are striking, especially since these patients had exhausted prior lines of anti-PD-L1 treatment. Additionally, we hosted a virtual KOL event featuring Dr. Ricard Mesia from ICO, who highlighted the unmet needs in head and neck cancer, treatment limitations, and VCN-01’s potential. Dr. Mesia reviewed data from the ICO Phase I study where VCN-01-treated patients experienced improved responses to subsequent therapies, consistent with VCN-01’s matrix-degrading effects. We also observed significant increases in the infiltration of anti-PD-L1 positive immune cells correlated with patient survival. The University of Pennsylvania is progressing with their Phase I investigator-sponsored study, administering VCN-01 alongside huCART-meso cells to ovarian and pancreatic cancer patients. VCN-01 is intended to enhance tumor immunogenicity and improve access to additional therapies like huCART-meso cells. While efficacy has been limited against solid tumors, we are encouraged by initial results indicating the feasibility of administering VCN-01 with these cell therapies, which were recently presented at the SITC annual meeting. The study has not reported dose-limiting toxicities to date, and we will continue exploring higher doses of VCN-01 in combination with huCART-meso cells to assess patient outcome improvements. Moving on to our ongoing Phase Ib/IIa clinical trial at Washington University, evaluating SYN-004 ribaxamase aimed at reducing severe adverse events related to IV beta-lactam antibiotic use in allogeneic HCT patients, including aGVHD and overgrowth of pathogenic organisms like C. difficile and vancomycin-resistant enterococci. This study assesses the feasibility of using SYN-004 across three sequential cohorts, comparing different IV beta-lactam antibiotics post-conditioning therapy. Patients in each cohort will receive either SYN-004 or placebo. Although data remains blinded, early analysis indicates SYN-004 is well tolerated and was not detected in the blood samples of most patients. We have commenced the second cohort, evaluating SYN-004 in combination with piperacillin and tazobactam, to gather further safety information, particularly regarding oral SYN-004’s potential influence on IV antibiotic levels. Overall, we are optimistic about the progress of our pipeline and the clinical data supporting our oncolytic adenovirus in key indications and combinations. We remain committed to advancing our clinical programs and exploring opportunities to leverage our Albumin Shield Technology and other exciting initiatives from our OV discovery platform. Our strong cash position and forthcoming catalysts lay a solid groundwork for execution and value generation. We aim to complete enrollment for the VIRAGE trial in the first half of 2024, meet with the FDA to discuss the clinical program and registration pathway for VCN-01 in pediatric retinoblastoma before year-end, and finalize enrollment for the second cohort of our Phase Ib/IIa study of SYN-004 in the same timeframe. Now, I will briefly go over our financial results for the third quarter ending September 30, 2023. General and administrative expenses decreased to $212,000 for the quarter compared to $2.4 million for the same period last year, a 91% reduction mostly due to decreased fair value of contingent consideration by $1.6 million, along with reduced salary and bonus costs, investor relations fees, audit fees, travel, and administrative expenses related to VCN not recorded in the prior year, partially offset by an increase in consulting fees. Stock-based compensation expense was $95,000 for the quarter, only slightly higher than last year's $93,000. Research and development expenses rose to $4 million for the quarter from approximately $2.6 million last year, a 56% increase primarily due to higher clinical trial costs for our VIRAGE Phase II clinical trial of VCN-01 in PDAC, counterbalanced by fewer expenses related to our SYN-004 trial, SYN-020 trial, and a decrease in manufacturing costs linked to the SYN-020 trial. We expect R&D expenses to rise as we continue enrollment for the VIRAGE trial, advance the Phase I trial in retinoblastoma, expand GMP activities for VCN-01, and support the development of VCN-11 and other preclinical initiatives. Stock-based compensation for this quarter was $40,000, compared to $28,000 the previous year. Other income amounted to $388,000, up from $161,000 the prior year, primarily due to interest income of $382,000 and an exchange gain of $6,000, versus interest income of $170,000 and an exchange loss of $9,000 the previous year. Moreover, during the quarter, we recognized a $1.4 million tax credit receivable and an offsetting deferred R&D tax credit resulting from our involvement in a Spanish government-sponsored research and development initiative. This program reimburses specific expenses incurred in R&D efforts within Spain. To participate, we must maintain certain workforce levels and R&D expenditures over the next 24 months. Starting in Q1 2024, we will amortize the deferred R&D credit monthly as a contra expense through 2024 and 2025, with full cash payment anticipated by the end of 2024. As of September 30, 2023, cash and cash equivalents totaled $31.2 million, down from $41.8 million at the end of December 2022. We remain fully dedicated to enhancing patient outcomes in these challenging cancer types. Before concluding today's call, I want to express my heartfelt gratitude and appreciation for the invaluable work that brings us closer to fulfilling our mission. I would like to thank the entire Theriva team, our investors, and everyone who has supported us along the way, including our patients and their families. With that, we are happy to take a few questions.

Operator, Operator

The first question we have is from James Molloy of Alliance Global Partners.

James Molloy, Analyst

I had a question on expectations for the Phase IIb VIRAGE in PDAC and if you expect to complete first half '24, the enrollment completed first half '24, when should we anticipate sort of final data? And what are our expectations for next steps of that trial? Is that something that should the data look good enough potentially go to the FDA and we're talking about registration? Or do you think you need additional trial regardless of the locking the FDA about that?

Steve Shallcross, CEO

Right. So thanks for the question, Jim. A couple of points here. So first and foremost, the plan is to have the trial completely enrolled in the first half of '24, and that's consistent with our guidance. I can tell you that we're on track with our enrollment expectations as we speak, and we should be able to achieve that objective. The primary endpoint of the trial is overall survival. And if you recall from our Phase I study, we had a cohort where the mean survival was over 21 months. Obviously, completing the trial in early '24 is not going to bridge you to that primary endpoint and that data won't be available until mid to late 2025. However, there are other endpoints that we're evaluating in this trial. The next probably more important endpoint is response rate. And because the trial is open-label, we will have the ability to evaluate the data as it comes in real-time from both of these arms, and if we are in a position to observe response rates that were along the lines of the observations in the Phase I study, that will give us an opportunity to perhaps have discussions with regulators, both in Europe and the FDA. And if you recall that Phase I data at the high dose, we had a response rate of over 80% where the response rate for the standard of care treatment, nab-paclitaxel, and gemcitabine was around 23%. So obviously, one of the reasons for running this Phase II trial with 92 patients is to see if we can replicate the observations that we had in the results we observed in the Phase I study. With that type of data in hand, we'll have that option, if you will, to have discussions with regulatory authorities and anything is possible. Obviously, the agencies, both in the U.S. and abroad, want to get these types of treatments to the patients as quickly as possible, especially if we're seeing significant improvements in survival. So I guess an option is if the data are as robust as we observed in the Phase I to convert this ongoing Phase II into a pivotal trial. And I guess there's always the possibility of some form of accelerated approval with the continuance of enrollment to collect additional data. Does that help answer your question?

James Molloy, Analyst

It does indeed. Much will depend on how the data looks, of course.

Steve Shallcross, CEO

Exactly. It's all about the data.

James Molloy, Analyst

There are a couple of INDs. I think that previously, you guided to potentially filing by the end of '23, the adjunctive to chemo, in retinoblastoma potential IND guidance for the end of this year? And then also the next-gen oncolytic adenovirus VCN-11, a potential IND filing with trials starting sort of fourth quarter '23. Could you please update where those stand? I know that maybe timelines have adjusted.

Steve Shallcross, CEO

Right. Let me talk to retinoblastoma very quickly, and then I'll have Manel discuss where we're at in our research and development initiatives. The retinoblastoma program continues. Interestingly, we continue to enroll patients in the Phase I study. And as that data further matures, we'll have something to talk about at a later date. We do have a meeting with the FDA in December to discuss a path forward for the retinoblastoma program. And together with our key opinion leaders around the world, we've come up with some ideas about potential designs for a retinoblastoma program. As we mentioned in our discussions earlier, there's no approved treatment for retinoblastoma, and those patients today that get treated are done so in multiple different ways, depending on what part of the world those patients are being treated. So having an approved treatment with the set protocol is something that not only we're very much interested in, but I think treating physicians around the globe would be interested in. So after our meeting in December, I think we'll have a bit better idea about how that program in that trial design may look. And then after those discussions have been finalized, then we could talk to all of you about what the timing of a program like that may look like.

Dr. Manel Cascalló, Director General

So very briefly, our R&D team is working very intensively in the development of new candidates right now. So we have a bunch of different technologies that some of them have already been published. For instance, the ABB technology, as you are perfectly aware, it's the technology that allows our products to escape the interaction with neutralizing antibodies. But our scientists have also developed a new technologies right now, and they are evaluating the combination of these new technologies with ABB technology to generate a more powerful product. And in fact, that's something they are very actively working on just fine-tuning the best candidate to move to the clinic. That's something that we expect to occur probably at some point during the first half of next year also. And in parallel to that, the team has also been working in all these assets related to manufacturing, which is an intrinsic part of the development of products, and it's very relevant because, as you know, for our products, the application capabilities, it's a critical feature that allows for much better clinical behavior. So we have been increasing our capabilities here also in terms of manufacturing for testing the process development for the new candidates that we are developing, and we have acquired new equipment in our labs here in our facilities in Europe. We are very convinced that with this new capability, we are going to generate very relevant data for just moving ahead with the new candidates faster than we have done previously.

James Molloy, Analyst

Maybe the last question about the pipeline. I believe you discussed most of your early-stage ISTs. Did you mention the retinoblastoma project with the University of Leeds and where that IST stands? As you assess your trials, are there one or two that appear more promising than the others at this point?

Steve Shallcross, CEO

Vince, do you want to take the Leeds question first?

Dr. Vince Wacher, Head of Corporate and Product Development

Thank you, Jim. Regarding the University of Leeds study, the investigators made an amendment to the protocol to facilitate the scheduling of the surgery involved. As you may know, in the U.K., all processes go through the NHS, which made scheduling challenging. They submitted the amended protocol, which has recently received approval from the MHRA. We are now arranging the necessary drug supply for them to proceed with the study. This study is primarily a pharmacokinetic investigation to determine whether intravenous virus can enter the brain. There is one patient who has been treated, but we do not yet have their final results. The study is progressing somewhat slowly due to the time it took to approve the amendment.

Steve Shallcross, CEO

So then maybe I'll just touch briefly on what I think we're learning from what we're doing in the clinic and what offers the most promise for unlocking the most value for the shareholders. Obviously, PDAC is the most important program to the company. It's the one where we're committing, I would say, 90-plus percent of our financial resources to. The other program that is very exciting that we just recently talked about from ESMO is the data using VCN-01 in combination with durvalumab in head and neck cancer patients. We had an investigator call following the release of the data at ESMO, and when we put that press release out, that interview and conference is still available on our website, and I encourage investors to go listen to it because it was quite revealing. Essentially, this was a group of 20 patients that had failed checkpoint inhibitor therapy. These patients typically die within 7 months after they've failed multiple rounds of checkpoint inhibitor therapy. These patients were then given VCN-01 and then started up on checkpoint inhibitor therapy once again. And we had some pretty remarkable results. On average, at the low dose, we had a survival rate of 15.5 months, and at the high dose, 17.3 months. So this is an interesting program and potentially a program for partnering, and we have engaged with folks that should be interested in a program like this, and we'll keep you updated on the progress of those types of discussions.

James Molloy, Analyst

Last question. I know that you touched on it in the prepared remarks, but G&A, pretty remarkable drop in the quarter. Is this the level we should expect going forward? Or is it going to go back to more of that $2 million roughly per quarter that it had been over the last number of quarters?

Steve Shallcross, CEO

It will go back to more of the $2 million. That was an anomaly resulted from the accounting for the contingent consideration. We had a payment to Grifols. And obviously, every quarter, you readjust and revalue the future payments that are all milestone driven. So that was more of an anomaly for the quarter.

Operator, Operator

We have no further questions at this time. I would like to turn the floor back over to Steve Shallcross for closing comments.

Steve Shallcross, CEO

Thanks, Irene, and thank you to everyone for taking the time to join us today. Again, we remain focused on driving our key programs forward, and we’ll continue to evaluate strategic opportunities that we believe have an opportunity to drive significant shareholder value and long-term success. Once again, thanks for joining us today, and we look forward to keeping you updated in the future. Have a great week.

Operator, Operator

This concludes today's conference. Thank you for joining us. You may now disconnect your lines.