Earnings Call Transcript - TOVX Q2 2022

Operator, Operator

Good day, and welcome to the Synthetic Biologics' Second Quarter 2022 Earnings Call. Today's conference is being recorded. And at this time, I'd like to turn the conference over to Chris Calabrese. Please go ahead, sir.

Chris Calabrese, Investor Relations

Thank you, operator, and good morning, everyone. Welcome to the Synthetic Biologics 2022 second quarter investor conference call. Leading the call today will be Steven Shallcross, Chief Executive and Chief Financial Officer of Synthetic Biologics; Dr. Manel Cascallo, General Director of Synthetic Biologics' European Subsidiary; Dr. Frank Tufaro, Chief Operating Officer; and Dr. Vince Wacher, Head of Corporate and Product Development of Synthetic Biologics are also on the call and will be available to answer questions during the Q&A session. Synthetic Biologics issued a press release this morning, which provided operational highlights and included the financial results for the second quarter ending June 30, 2022. The press release can be found in the investors section of the company website at syntheticbiologics.com, together with the quarterly report on Form 10-Q for the quarter ended June 30, 2022, which we plan to file today with the Securities and Exchange Commission, or SEC. In addition to the phone line, this call is being streamed live via webcast, which will be archived on the company website www.syntheticbiologics.com for 90 days. During this call, certain forward-looking statements regarding Synthetic Biologics and VCN Biosciences' current expectations and projections about future events will be made. Generally, the forward-looking statements can be identified by terminology such as may, should, expects, anticipates, intends, plans, believes, estimates, and similar expressions. These statements are based upon current beliefs, expectations, and assumptions and are subject to a number of risks and uncertainties, including those set forth in Synthetic Biologics' filings with the SEC, many of which are difficult to predict. No forward-looking statements can be guaranteed, and actual results may differ materially from such statements. The information on this call is provided only as of the date of this call, and Synthetic Biologics undertakes no obligation to update any forward-looking statements contained on this conference call on account of new information, future events or otherwise, except as required by law. With that, I'd like to turn the call over to Steve. Steve?

Steven Shallcross, CEO & CFO

Thank you, Chris. Good morning and I appreciate everyone taking the time to join us on this call today. In the second quarter of 2022, we continue to execute on our plan to advance our exciting portfolio of clinical assets and to address a number of structural and administrative items that we believe are critical to our long-term success. Today, I will present an update on our progress as well as outline our priorities and path forward. Our team continues to advance our highly differentiated oncolytic adenovirus programs and we believe we are well-positioned to lead the clinical path forward for oncolytic virus therapies. First, our VCN-01 product has been administered to 76 patients to date and we believe that there are very few, if any competing programs that have dosed as many patients by systemic administration as we have. Secondly, we've generated promising clinical data that gives us the confidence to advance our products into important planned clinical trials. Thirdly, our programs are led and advised by a world-class team of renowned scientists as evidenced by ongoing clinical collaborations and the formation of our Scientific Advisory Board earlier this year to advance our oncology pipeline. Finally, our strong cash position of approximately $53.5 million is expected to comfortably take us into the first quarter of 2024. This should enable us to deliver on a number of value-enhancing milestones before we need to raise additional capital. I am very proud of how we positioned our company for future growth as we continue to work diligently to advance the development of our pipeline. Our oncolytic adenovirus platform currently comprises our lead clinical stage drug candidate VCN-01, a systemically administered oncolytic adenovirus designed to break down the tumor stroma; and preclinical stage drug candidates VCN-11, the first candidate from the truly novel human shield technology that is designed to protect systemically administered oncolytic viruses from the host immune system. The differentiating mechanisms of action of these two product candidates are intended to improve the antitumor effect of both, oncolytic viruses and co-administered chemotherapies and/or other immuno-oncology products. Importantly, degrading the stroma can also expose new tumor antigens, turning cold tumors hot and enabling a sustained antitumor response by the patient's own immune system. In parallel with VCN-01 and VCN-11, our SYN-004 or ribaxamase program is progressing in a Phase 1b/2a clinical study of allogeneic hematopoietic cell transplant recipients for the prevention of acute graft versus host disease in bone marrow transplant patients. I would now like to provide an overview of our pipeline and walk you through key updates starting with our lead oncology product. VCN-01 is designed for intravenous intra-tumoral and intravitreal delivery. It is engineered to selectively replicate within the tumor and has the potential to remodel the tumor matrix in increased tumor immunogenicity. As a reminder, VCN-01 was granted orphan drug designation in 2011 by the European Medicines Agency for the treatment of pancreatic ductal adenocarcinoma or PDAC, and also granted orphan drug designation by the FDA in February this year for the treatment of retinoblastoma. If VCN-01 is approved by the FDA, orphan drug designation will provide critical market exclusivity, and we plan to take full advantage of the development benefits to which we could be eligible under the Orphan Drug Act, including tax credits, reduced user fees, and again market exclusivity. We are highly encouraged by the regulatory support for VCN-01, which builds on extensive Phase I data across 76 patients, primarily with PDAC and in children with retinoblastoma. We look forward to leveraging our encouraging findings from our Phase 1 studies in the planned implementation of a controlled Phase 2 study of intravenous VCN-01 in combination with gemcitabine and nab-paclitaxel, the standard of care chemotherapy as a first-line therapy in newly diagnosed patients with metastatic PDAC. We expect to initiate the Phase 2 study in the fourth quarter of 2022. During the second quarter of 2022, the protocol for the Phase 2 PDAC clinical trial was submitted to the FDA as well as Spanish and German regulatory agencies. The proposed trial is designed as a randomized controlled multicenter open-label Phase 2 study that is expected to enroll up to 92 adults with PDAC at sites in the US, Spain, and Germany. The study will have two treatment arms. In arm 1, patients will receive gemcitabine and nab-paclitaxel, the standard of care chemotherapy; and in arm 2, patients will receive VCN-01 administered seven days prior to gemcitabine and nab-paclitaxel. We are proposing that two doses of VCN-01 be administered approximately three months apart. The primary endpoints for the study may include overall survival and safety and tolerability. Additional endpoints may include progression-free survival, objective response rate, and measures of bio-distribution, fibrous replication, and immune response. Since this is anticipated to be a two-arm open-label study, we plan to monitor the study's progress very closely and may try to accelerate the clinical program if supported by the emerging data. The study will be led by Dr. Manuel Hidalgo, an internationally renowned oncologist, scientist, academic, and the Chief of the Division of Hematology and Medical Oncology at Weill Cornell Medicine New York Presbyterian Hospital. Now, moving on to our planned study for advanced retinoblastoma. We believe VCN-01 holds tremendous promise as an adjunct to intravitreal chemotherapy in patients who fail standard systemic or intra-arterial therapeutic treatments. We are working closely with key opinion leaders from well-known treatment centers in the US, Europe, and South America to develop the protocol for a Phase II/III study of intravitreal VCN-01 to treat vitreous seeds in children with retinoblastoma. There is currently no regulatory guidance for the development of retinoblastoma medicines, so we plan to engage regulatory agencies to determine the appropriate study design and endpoints. We expect to initiate this Phase II/III study of VCN-01 in the second half of 2023. In addition to the planned company-sponsored studies, there are several investigator-sponsored studies underway exploring the therapeutic potential of VCN-01 at world-leading oncology research institutions. In July of 2022, the first patient was dosed and cleared in the safety evaluation period in the University of Pennsylvania's investigator-sponsored open-label non-randomized Phase I clinical trial evaluating VCN-01 in combination with mesothelin-directed lentiviral-transduced human chimeric antigen receptor modified T cells for patients with pancreatic and serious epithelial ovarian cancers. Mesothelin is a tumor antigen that is highly expressed in many human cancers, including malignant mesothelioma, pancreatic or ovarian and lung adenocarcinomas. A human chimeric antigen receptor-modified T-cells are autologous T cells engineered to express an extracellular single-chain variable fragment with mesothelin specificity. The Phase I trial is designed to evaluate the safety and feasibility of this novel combination therapy. We will continue to report on progress of the study, as we receive updates. We are also excited about our collaboration with the University of Leeds to evaluate VCN-01 in patients with high-grade brain tumors. This study is designed to evaluate whether systemically administered VCN-01 could reach tumors in the brain. Treatment of these tumors typically requires surgery and/or direct injection. If systemic VCN-01 can reach the brain to exert a therapeutic effect, it could potentially transform the way these cancers are treated. The investigator-sponsored study is currently recruiting patients, with dosing of the first patient expected in the second half of 2022. In addition to our clinical trials with VCN-01, we are keenly advancing our albumin shield technology platform. Albumin shield oncolytic viruses incorporate a preparatory albumin binding domain in the viruses' outer shell. This is designed to improve systemic delivery by enabling the virus to coat itself with host serum albumin and prevent inactivation by antiviral neutralizing antibodies. Ideally, this may enable multiple administrations of a systemic oncolytic virus in traditional therapeutic cycles that could improve treatment outcomes. Preclinical proof-of-concept for the technology has been demonstrated with VCN-11, an albumin shield modified version of VCN-01, and we are exploring other albumin shield modified oncolytic viruses with different potential therapeutic payloads. IND-enabling studies are being planned and we expect to begin these following the completion of ongoing preclinical studies in CMC activities. We look forward to building upon our foundation of compelling proof of mechanism data and continuing to advance our VCN-11 program through clinical development. As part of our company's transition to an oncolytic or oncology focus, we are exploring options to unlock value around our SYN-020 and SYN-004 assets which have significant potential opportunity in non-oncology indications. We are currently evaluating the best path forward for these assets and whether to advance these programs internally, out-license, or partner. In the interim, Washington University continues to screen and enroll patients in our Phase 1b/2a clinical study of SYN-004 or ribaxamase in alternate HCT recipients for the prevention of acute graft versus host disease in bone marrow transplant patients. The Phase 1b/2a study is designed to assess the feasibility of using SYN-004 in this specific patient population and to provide key information requested by the FDA regarding the safety and tolerability of SYN-004 in patients with impaired intestinal barrier function. Last year we announced that enrollment in patient dosing had commenced in the first of three sequential antibody cohorts that will each be administered a different IV beta-lactam antibiotic to treat fever following conditioning therapy. In total, eight participants in each cohort will receive SYN-004, and four will receive placebo. To date, we have dosed 19 patients in the first antibiotic cohort, 12 that are currently considered available. This completes the enrollment requirement for the first cohort and we expect to report topline data from the first cohort in the second half of 2022. Shortly after, we plan to initiate dosing of the second cohort in the fourth quarter of 2022. In summary, we have made steady progress throughout the second quarter of 2022. With a cash runway into the first quarter of 2024, we are well positioned to reach potentially transformational inflection points across our impressive pipeline. Near and long-term clinical milestones include the initiation of our Phase II study in patients with metastatic PDAC in the fourth quarter of 2022; topline data from the first cohort in our Phase 1b/2a clinical study of SYN-004 and HCT recipients for the prevention of acute graft-versus-host disease in bone marrow transplant patients in the second half of 2022; the data from the VCN-01 Phase 1 investigator-sponsored study in head and neck cancer to be presented at a major medical conference in the third quarter of 2022; dosing of VCN-01 in the first patient with high-grade brain tumors at the University of Leeds in the second half of 2022; the initiation of the second cohort in our Phase 1b/2a clinical study of SYN-004 for the prevention of acute graft-versus-host disease in bone marrow transplant patients in the fourth quarter of 2022; a planned pre-IND meeting with the FDA for our planned Phase 2/3 study in retinoblastoma by early 2023; and the initiation of our planned Phase 2/3 study in retinoblastoma in the second half of 2023. As you can see we've positioned our company to deliver on a number of key value-creating milestones over the next six to 18 months. By prioritizing our three core clinical programs, VCN-01, VCN-11, and SYN-004, we have the ability to effectively utilize our current cash position, which carries us into the first quarter of 2024, to deliver important clinical data and related milestones. During the remainder of 2022, we have also planned a number of initiatives to expand our presence with the scientific and investment communities through targeted conferences, outreach, and rebranding activities. We expect to provide more information on our efforts in the months ahead. Before turning to our financial results, I would remind you that the company's common stock began trading on a split-adjusted basis on July 25, 2022. The reverse stock split was effected to ensure we could continue to meet our per share price listing requirements of the NYSE American Stock Exchange. We believe maintaining our listing on the NYSE American is important to the company's performance, corporate visibility, and will provide greater flexibility with respect to future capital market access. On July 29th, with MSD Credit Opportunity Master Fund, we closed a $3 million private placement of 275,000 shares of Series C convertible preferred stock and 100,000 shares of Series D convertible preferred stock. Each share of Series C and Series D preferred stock has a purchase price of $8. Each of these shares are also convertible into shares of the company's common stock at an initial conversion price of $1.22 per share. The proceeds of the offering will further support the advancement of our clinical development programs. The purpose of this financing was twofold. First, the structure of the transaction will aid us administratively during our upcoming shareholder meeting to ensure that we have the necessary quorum for the meeting and the votes needed to help pass key initiatives that we believe are critical to our long-term success and viability. And second, and this is very important, we've added a significant and highly respected institutional investor who is very supportive of the management team, our technologies, and our strategy. Now, I'd like to turn briefly to our financial results for the three months ended June 30, 2022. General and administrative expenses increased to $1.5 million for the three months ended June 30, 2022 from $1.3 million for the three months ended June 30, 2021. This increase of 19% primarily comprised of increased consulting and legal costs related to the VCN acquisition, higher insurance costs, audit fees, public relations expenses, and VCN administrative expenses not included in the prior year. The charge related to stock-based compensation expense was $86,000 for the three months ended June 30, 2022, compared to $83,000 for the three months ended June 30, 2021. Research and development expenses increased to $3.5 million for the three months ended June 30, 2022 from approximately $1.9 million for the three months ended June 30, 2021. This increase of 80% is primarily the result of VCN research expenses related to VCN-01 not included in the prior year and to a lesser extent higher manufacturing expenses for SYN-020 costs incurred related to our Phase 1a clinical trial of SYN-020 and expenses related to our Phase 1b/2a clinical trial of SYN-004 in allogeneic HCT recipients. We anticipate research and development expenses to increase as we plan for and initiate enrollment for our Phase 2 clinical trial for VCN-01 in PDAC, Phase 2/3 clinical trial in retinoblastoma, expand GMP manufacturing activities for VCN-01, and continue to support our VCN-11 and other preclinical and discovery initiatives. The charge related to stock-based compensation expense was $27,000 for the three months ended June 30, 2022 compared to $19,000 related to stock-based compensation expense for three months ended June 30, 2021. Other income was $17,000 for the three months ended June 30, 2022, compared to other income of $2,000 for the three months ended June 30, 2021. Other income for the three months ended June 30, 2022 is primarily comprised of interest income of $26,000 offset by an exchange loss of $9,000. Other income for the three months ended June 30, 2021 is primarily comprised of interest income. Cash and cash equivalents totaled $52.3 million as of June 30, 2022, compared to $67.3 million as of December 31, 2021. Our cash and cash equivalents totaled approximately $53.5 million as of August 1, 2022. We believe with an advanced clinical pipeline and strong cash position we are now well positioned to execute on our priorities despite geopolitical and macroeconomic uncertainty as well as headwinds in the biotech marketplace. We are more excited than ever about the outlook of the company and we look forward to providing further updates as we advance our technologies and products. With that, we're happy to take questions.

Operator, Operator

We will now take our first question from Laura Suriel from Alliance Global Partners. Please go ahead.

Laura Suriel, Analyst

Hi. This is Laura calling in for Jim Molloy from AGP. Thank you for taking our questions and congratulations on all your progress this quarter. Regarding VCN-11, what is the current status of the IND filing with the plans for IND-enabling studies? Also, how are the discussions for potential partnerships regarding your infant candidates progressing? Thank you.

Steven Shallcross, CEO & CFO

Okay. So first I'll take the SYN-004 and SYN-020 question. And then I'll have Manel give you an update on our plans to continue to advance VCN-11. So as I stated last quarter, the SYN-020 program has interest from outside parties. We've had diligence discussions on that asset and they continue. And as I've previously stated, once we have something that is definitive and more clear cut, we'll certainly get that information out there. For the SYN-004 asset or ribaxamase, there is a nice fit within an oncology platform and that is a preventative for acute graft versus host disease in bone marrow transplant patients. We just completed the first cohort of that study and we announced we'll have that data released here in the second half. We're very encouraged about that program and we're getting it teed up, once we clear the safety data monitoring board at Wash U, to advance that into the next cohort. I think there will be a real opportunity and an inflection point for us to make a decision around that asset once we complete this Phase 1 study and demonstrate the safety of this program in this more fragile patient population. And the decision point once we complete the study will be whether to partner that or to continue to advance that on our own. So that one, I think the decision is a little bit further down the line. The discussions on SYN-020 continue and we'll have some information on that once we have something that's a little bit more concrete. Manel, why don't you take the status on the VCN-11 program?

Manel Cascallo, General Director

Okay. Perfect, Steve. So with VCN-11, we have been conducting several preclinical activities and we have definitively stated towards the candidate definition. We have a very clear idea about the safety, the pharmacokinetic, and the toxicity profile of the product. And we have also been conducting several activities related to establishing the different mechanisms of action of the product and the effectiveness of the antitumor activity in several preclinical models. In parallel to all these activities, we have also been working under the final definition of the manufacturing process for VCN-11, which is very similar to VCN-01 but with some specificities, not major but obviously we need to test that. And that's what we are doing right now in our internal CMO department, and we are planning to start manufacturing as soon as we have all these internal activities finished, which we expect to be in the next months probably. As soon as we have this done and we can translate the refactoring process to the CMO, we are going to have the material to conduct the IND-enabling studies. So we are progressing quite smoothly with this candidate and we are pretty convinced that in the next months we are going to have major advances with them.

Operator, Operator

Thank you. We will now take our next question from Michael Okunewitch from Maxim Group. Please go ahead.

Michael Okunewitch, Analyst

Hey guys, thank you for taking the question, and congratulations on the progress in the quarter. I guess my first question I'd like to ask a bit more just about the rationale for targeting retinoblastoma. Is this largely based on the relatively short path to market, or are there any particular mechanistic rationale that make this indication particularly attractive?

Steven Shallcross, CEO & CFO

I'll take the first part and then I'll hand it over to Manel to talk about the scientific rationale. For me, this is really exciting because there's no approved treatment for this serious type of cancer that affects these pediatric patients. And if you would see the outcome opportunities, they're not very pleasant. If present treatments, whether it's cryotherapy or different forms of chemotherapy don't work, these eyes get enucleated to prevent the cancer from spreading to the brain and ultimately cause death. So we're very excited not only to be able to utilize our technology, but to hopefully prevent the serious destruction of the eyes of these types of patients and prevent their deaths with orphan drug designation. I think that gives us a real opportunity, assuming the data that we continue to generate from our Phase 1 study and ultimately, the data we hope to generate from a Phase 3 study to separate us from anybody else who's tried to advance a serious treatment for these patients. I'll turn it over to Manel and let him talk about the scientific rationale and maybe some of the observations we've had as we've used VCN-01 to treat these patients.

Manel Cascallo, General Director

Thank you, Steve. There are several scientific reasons for selecting retinoblastoma as the target indication for VCN-01. Primarily, the genetic factors associated with retinoblastoma stem from mutations in the retinoblastoma protein, which give the tumor its name. Our bioselectivity is rooted in the retinoblastoma pathway; it pertains not just to the mutation of the retinoblastoma itself, but also to any mutations within that pathway. The mechanism of action aligns very well, as our use of VCN-01 is based on the specific mutations present in this tumor. Another notable aspect for this indication is the major issue of chemotherapy toxicity in treating retinoblastoma. Many treatments can damage the patient's retina, leading to a situation where a patient may be tumor-free but suffers from significant visual impairment. VCN-01 has shown in our Phase 1 trial to be highly selective for retinoblastoma cells. We have collected biopsies that reveal the virus's replication capability in tumor cells, while it spares the normal retina, ensuring that patients retain their visual capacity. This is crucial for retinoblastoma, as there's a significant need for selective therapies that preserve both eye viability and visual acuity. Additionally, the convenience of administering VCN-01 is well-suited for retinoblastoma patients, who are accustomed to this form of treatment. With a single or a limited number of doses, our product can maintain patient responses over extended periods. For instance, we have recorded a complete response in a patient who has remained disease-free for over 3.5 years following treatment. These multiple factors illustrate why retinoblastoma presents an ideal target for VCN-01.

Michael Okunewitch, Analyst

Thank you very much. I appreciate the additional clarity. As a follow-up, at least talk a bit about the Albumin Shield program in VCN-11. And specifically, how you're viewing that program strategically? Is this more of a follow-up to VCN-01, where it can excel in the same indications, but you have the option for multiple dosing, or does it open up new indications where a single dose may not be ideal?

Steven Shallcross, CEO & CFO

So, let me take the first part and then I'll hand it off to Manel again. We see this as a strategic asset to build on the data that we're generating in VCN-01 and we believe this has a really nice opportunity to treat more difficult cancers out there. One of the keys has always been neutralizing antibodies, and I think the design of this allows us to address that. And as you suggested, to allow us to use multiple dosings with these more difficult-to-treat cancers. Manel, do you want to comment further on the technology?

Manel Cascallo, General Director

Yes. As Steve mentioned, the primary objective of this program is to expand the range of tumors that can be treated with a product like VCN-01. We are also diligently working on enhancing and integrating albumin binding technology with other payloads while maintaining their effectiveness, which we believe is essential for the therapeutic impact we see in our patients with VCN-01. We are looking to incorporate additional payloads, and ultimately, these new payloads combined with the albumin shield technology could advance these products to a different level. Currently, we are still in very early preclinical stages, but this could lead to new opportunities beyond what we currently have with VCN-01. At this point, VCN-11 seems to be a direct continuation of VCN-01, but it does pave the way for new technologies and products that could be even more innovative.

Operator, Operator

Thank you. There are no further questions. Pardon me, we do have a question. One moment. Sorry, the caller has stepped away. There are no further questions. I will turn the call back to your host.

Steven Shallcross, CEO & CFO

Thank you, Emma, and thank you to everyone for taking the time to join our call today. Looking ahead, we are well positioned to deliver on our focused clinical development strategy as well as our key objectives that we believe will drive significant value for our shareholders in the months and years ahead. We remain deeply committed to improving patient outcomes for hard-to-treat cancers and we look forward to providing updates on our progress. Once again, I would like to thank our shareholders, the entire team, and the many people who have been supportive along the way, including our patients and their families. Once again, thank you for joining us today and have a great weekend.

Operator, Operator

Ladies and gentlemen, that will conclude today's conference. You may now all disconnect.