Acurx Pharmaceuticals, Inc. (ACXP) Earnings Call Transcript & Summary

Greetings, and welcome to the Acurx Pharmaceuticals First Quarter 2023 Financial Results and Business Update. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rob Shawah, Chief Financial Officer. Thank you, sir. You may begin.

Thank you. Good morning, and welcome to our call. This morning, we issued a press release providing financial results and company highlights for the first quarter of 2023, which is available on our website at acurxpharma.com. Joining me today is Dave Luci, President and CEO of Acurx, who will give a corporate update and outlook for 2023. After that, I'll provide some highlights of the financials for the quarter ended March 31, and then turn the call back to Dave for his closing remarks. As a reminder, during today's call, we'll be making certain forward-looking statements. These forward-looking statements are based on current information, assumptions, estimates and projections about future events that are subject to change and involve a number of risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. Investors should consider these risks and other information described in our filings made with the Securities and Exchange Commission, including our quarterly report on Form 10-Q, which we filed today, Friday, May 12, 2023. You are cautioned not to place undue reliance on these forward-looking statements, and Acurx disclaims any obligation to update such statements at any time in the future. This conference call contains time-sensitive information that's accurate only as of the date of this live broadcast today, May 12, 2023. Acurx undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date and time of this conference call. I'll now turn the call over to Dave Luci. Dave?

Thanks, Rob. Good morning, everyone, and thanks for joining us to review our financial results for the first quarter of '23 and to cover some recent updates, then we'd be pleased to take any questions. In the first quarter, we continued to enroll more patients in our Phase IIb clinical trial of our oral ibezapolstat, our lead antibiotic candidate for the treatment of patients with C. difficile infection. The IIb trial is a randomized 1:1 non-inferiority, double-blind trial of oral ibezapolstat compared to oral vancomycin, the standard of care to treat C. difficile infection. The primary endpoint is clinical cure at the end of treatment and a secondary endpoint is sustained clinical cure measured at day 38 follow-up visit. Since this is a double-blind trial, results won't be known until the end of the trial. However, operationally, the trial is proceeding as expected with no safety signals reported to date, and the blinded observed data has been exceptional. The Phase IIb trial protocol includes an exploratory endpoint comparing the impact on the microbiome between our ibezapolstat and vanco. In the event non-inferiority of ibezapolstat to vanco is demonstrated, further analysis will be conducted to test for superiority. Due to slower enrollment than expected during COVID-19 and its aftermath, we expanded the number of clinical trial sites participating in the IIb trial, from the initial 12 sites to now we have a total of 28 trial sites. Most importantly, in March 2023, the FDA accepted our protocol amendment to our IND, which will allow an independent data monitoring committee, which we've assembled to review interim clinical data upon reaching 36 patients enrolled and then to provide its recommendation either to early terminate the IIb trial as we had done with the IIa trial, you may recall, or alternatively continue enrolling. We anticipate completing enrollment of the 36 patients in the second half of '23. The company intends to report available data promptly after the IDMC conducts this interim review. The company has -- we remain particularly excited about the dual impact of ibezapolstat to treat C. diff infection while appropriately managing the long-term care of each patient's microbiome, which we believe is exceptional for antibiotic therapy. Other key highlights from the first quarter of '23 or in some cases, shortly thereafter, include the following. In April 23, 2 presentations were made at the 33rd Annual ECCMID Conference in Copenhagen, Denmark. First, a scientific poster entitled "Novel Pharmacology and Susceptibility of Ibezapolstat Against C. difficile Isolates with Reduced Susceptibility to C. difficile-directed Antibiotics," was presented by Dr. Kevin Garey, Professor and Chair, University of Houston College of Pharmacy and Principal Investigator for microbiome aspects of our ibezapolstat clinical trial program. Dr. Garey's work demonstrated that ibezapolstat's mechanism of action is not only bactericidal to C. diff, but also inhibit some of its virulence mechanisms, meaning its capability to cause disease. Dr. Garey also noted that C. difficile strains with reduced susceptibility to metronidazole, vanco and fidaxomicin were, in fact, susceptible to ibezapolstat. Ibezapolstat's antivirulence effect, namely reduced flagellar movement of the C. diff organism was a positive, unexpected finding reflecting the unique mode of action in inhibiting DNA pol IIIC. The second of the 2 ECCMID presentations was by our Chairman, our Executive Chairman, Bob DeLuccia, who presented an update regarding the company's preclinical systemic oral and IV program for treatment of other gram-positive infections caused by MRSA, VRE and DRSP at the Pipeline Corner featured session at ECCMID, organized by Dr. Ursula Theuretzbacher, a world-renowned microbiology expert in antibacterial research. Following the clinical validation of the pol IIIC bacterial target in our Phase IIa trial, showing 100% cures with no reinfections, we've made significant improvements in cytotoxicity, solubility and protein binding, in vitro and in vivo safety and have demonstrated oral and IV efficacy in a number of mouse infection models. Both the poster and the presentation are available on our website. Additionally, we wanted to mention Dutch sponsorship. The company has continued its R&D collaboration with Leiden University Medical Center in Holland, under a previously awarded grant from the Dutch government of approximately $0.5 million to further evaluate the mechanism of action of our inhibitors against the DNA pol IIIC enzyme, which is the bacterial target of our antibiotic pipeline for the systemic treatment, IV and oral of gram-positive bacterial infections. Data generated from this program was critical to include in a recent nondilutive grant application to CARB-X, which I'll describe in more detail in a moment. But based on this successful collaboration, we're hoping to receive an additional 2-year grant for more research in this regard, which if it comes through, we're expecting in the middle of the year, and it would be in the range of $800,000 for this second component. Let's now turn to CARB-X. We remain in the running for funding our second antibiotic candidate, targeting the treatment of MRSA infections by CARB-X, and we expect the final decision no later than October of this year. Just to reflect on how this came about in October of '22, we applied to CARB-X for a nondilutive grant of up to $11.3 million, which, if approved, would provide funding for our second antibiotic program, targeting MRSA infections for a period of 5 years up to the start of Phase II clinical trials. CARB-X recently informed us that our application is in the active review pool. And the final decision is to be rendered by CARB-X no later than October '23. We believe that based on our recent development progress and the unique nature of having a new class of antibiotics, together with our understanding that CARB-X already made final decisions on most candidates, we remain under active review. For these reasons, we believe we have a strong possibility to gain CARB-X approval for funding later in the year. If approved, CARB-X would fund the $11.3 million of a $16 million project and that would cover oral and IV formulations of our second antibiotic candidate, ACX-375. Now just looking ahead a bit, the AMR Congress later this year in September, the World Anti-Microbial Resistance Congress will convene its annual meeting in Philadelphia, where experts in the field from both public and private sectors weigh in on the latest innovations to address AMR. Our Executive Chairman, Bob DeLuccia, was invited too and will speak at the Innovative Showcase section of the conference and will present an update entitled "Novel DNA pol IIIC Inhibitors for Gram-positive Bacterial Infections: Preparing for the Next Pandemic." After the presentation, it will be available on our website. Also looking ahead a bit, we'd like to mention that PASTEUR Act, last month, U.S. Senators, Michael Bennet from Colorado and Todd Young reintroduced the PASTEUR Act: The Pioneering Antimicrobial Subscriptions To End Upsurging Resistance, to encourage innovative drug development, targeting the most threatening infections, improve the appropriate use of antibiotics and ensure domestic availability of antibiotics when needed. According to Senator Bennet, the bipartisan PASTEUR Act, is the strongest bill ever written to strengthen antibiotic development and use. It will fix our market failures, expand the pipeline for next-generation antibiotics and save lives. If approved, PASTEUR has the potential to enhance the commercial prospects for our antibiotics by providing funding for our Phase III clinical trials and stockpiling our antibiotic at public health facilities in the U.S. each year for 5 to 10 years. As currently drafted designation as a critical need antimicrobial under the PASTEUR Act, if approved, would apply to sponsors of antibiotic candidates, which are a new class of antibiotics and that target the treatment of serious or life-threatening infections, as is the case with our lead antibiotic candidate, ibezapolstat. Accordingly, we're quite enthusiastic about the prospects of the PASTEUR Act being passed into law. Now back to our CFO, Rob Shawah, to guide you through the highlights of our financial results for the quarter. Rob?

Thanks, Dave. Our financial results for the first quarter ended March 31, 2023, were included in our press release issued earlier this morning. The company ended the first quarter with cash totaling $7.2 million compared to $9.1 million as of December 31, 2022. Research and development expenses for the 3 months ended March 31, 2023, were $1 million compared to $800,000 for the 3 months ended March 31, 2022. The increase was due to Phase IIb trial-related costs. General and administrative expenses for the 3 months ended March 31 were $1.9 million compared to $1.9 million for the 3 months ended March 31, 2022. The company reported a net loss of $2.9 million or $0.25 per diluted share for the 3 months ended March 31, 2023, compared to a net loss of $2.7 million or $0.26 per diluted share for the 3 months ended March 31, 2022. The company had 11,671,795 shares outstanding as of March 31, 2023. With that, I'll turn the call back to Dave.

Thanks, Rob, and to all of you joining us today. As you've heard, we've kicked off 2023 with advances in several areas that we believe will spur continued growth and momentum to build on our strong fundamentals. We look forward to sustaining this momentum even during these challenging times and sharing future updates in the coming months. I'll now open the call for questions. Operator?

[Operator Instructions] Our first question comes from Ed Arce with H.C. Wainwright.

This is Thomas Yip asking a couple of questions for Ed. Perhaps first question regarding -- to see continued progress in the Phase IIb study. So -- and it's a first question, the interim analysis that will be triggered with the enrollment of the 36 patients as you mentioned earlier. It was previously expected in midyear and now the second half of 2023. Can you discuss what are the major factors behind this change?

Well, thanks, Thomas. I appreciate the question. We're really putting our finger in the air, if you will. As we sit here today, it's close to midyear right now, right? It's May 12. So are we going to be done by the 4th of July? Could very well happen. Our Chairman would say, it's definitely going to be done in the third quarter. But he's the one that's in charge of R&D, so I'd like to say it's second half. And this way, we have a nice conservative cushion.

Okay. That makes sense. And can you talk about other than the primary efficacy endpoint, what other efficacy can investors look for in this interim analysis?

Well, I mean, we'll know when we see the data, but we're fairly certain we're going to see something between 90% and 100% efficacy out of our side of the study given that we were 100% in the IIa. It's 1:1 randomized. So based on 60 years of data, we're going to expect to see something around 85% in that area for oral vancomycin on the primary endpoint end of treatment. And then we expect it to slip possibly significantly from there at the follow-up visit. What I can also say is for the first time that we've seen, we're testing a portion of the patients for all the way out to 90 days after the end of treatment, and we expect to see that our drug is not going to be having any reinfections even that far out.

Great. Thanks for the additional detail. That's certainly important considering the microbiome aspects of these patients. And then perhaps one more question from us regarding the CARB-X grants. I recall previously, a decision was expected in April and now it's October. Does that mean you have advanced to the next round? And what type of announcement should we expect?

Well, we understand that their decision will be rendered no later than October pending the outcome of their omnibus capital call that they referenced, it's basically their annual fundraising effort. So what we're told is that most of their decisions have been made already. And as you may expect, most of those decisions were rejections. And sure, a handful, I'm sure, got through. But we're still in the actively pending pool. So we're really excited by that. I mean for folks that thought that perhaps it was a small possibility going into the last conference call, I think our chances are a lot higher than maybe people originally thought. Of course, we were uniquely advantaged by knowing how much development had happened. So we were particularly enthusiastic going into the process because we're real close with lead optimization now. That's a little of the color behind it but...

And looking forward to the interim analysis and best of luck on the CARB-X position as well.

Thank you so much, Thomas.

Our next question comes from Jim Molloy with Alliance Global Partners.

David, one of the comments you made in your prepared remarks was the blinded data is exceptional. Can you expand a little bit on that, the blinded data, how exceptional it can be or you can know how closer it is?

Yes. I mean we have almost all cures that we see. It's blinded data, so we don't know which patients are in which baskets. But -- so for people that are thinking that one of the possibilities at the interim review could be futility, the answer to that is if every last remaining patient is a negative outcome from here forward, I don't see futility having any possibility. So it's all really good and the patients that are cured or going out 90 days without reinfections. So it's data that we haven't seen the likes of in this space as we reviewed it over the past few years.

And I guess on the patients that have been in to date, it's been 1:1 active versus vanco, and they've been holding true to that? Or did you know the ratio?

It's 1:1, Jim, but it's a 1:1 randomized at the clinical trial site level. So as you kind of boil that all the way up to the data center, it may be 1 or 2 patients different than that. So when we get to 36, it could be that we're 20 and 16 or 19 and 17. It just really depends on if we had, say, a trial site that enrolls 5 patients, they're going to have 3 in one and 2 in the other. So if you have the same disproportion in one other site, maybe that's 6 and 4. So it could be a little off of the 18 and 18, but it will be close.

Okay. And so this -- you try to get to the heart of -- this is what you're meaning when you're saying it looks exceptional, as far as you guys can tell everyone is getting cured. So assuming that the 1:1 randomization is pretty true or close enough to true, it would seem unlikely that you're not having an effect.

Yes, there's no chance that we're not having an effect. There is a real, real lot of cures. I can tell you that.

It seems like vanco is doing pretty well as well, just traditional cure rates for vanco.

Well, there's about 60 years of clinical data on vanco. I've seen it as low as 79% and as high as 92%. So that's why we expect something in the mid-80s. And I haven't seen anything to shake my confidence that it's going to be in the mid-80s.

Got it. And then can you speak to the unique challenges on the Phase IIb recruit? I think the Phase IIa, I think, you started that in March 2020, your top line data at the end of the year or maybe I have the time line incorrect. So what are the challenges on the IIb that you guys are able to avoid in the IIa for recruiting?

Well, as time has gone by, the culture of clinical trials has changed. So there's more telemedicine. There's less people that are deciding to go to the doctor at the trial sites. You have varying degrees of physical presence in the -- at the site with the site administrator and the principal investigator on the same day. You also have patients that uniquely with C. difficile trial need to get to the trial site within 24 hours of being diagnosed with C. diff. So if the patient is at a referring physician site, in Fort Lauderdale, for example, Monday at noon they're diagnosed with C. diff, they have to be willing to go to Miami by noontime Tuesday. And then they have to agree to go back to Miami 10 times over a 2-month period. So that's because of the trial design in part and largely due to COVID. And interestingly, Jim, I should say, there have been a number of patients who could have gotten in, but at the last minute, they qualified, but they had COVID and decided not to participate.

Understood. Great. Then maybe last question on my end. What does -- sorry, last couple of questions, what does active sort of review mean? And what other things of CARB-X fund did you know off-hand? What has already approved or agreed to fund?

Well, they're not -- I look at the CARB-X website, which folks can do. And I haven't noticed that they put anything up yet. And I think that's probably because once a company gets approved, we'll never, of course, know how many got rejected, but you can imagine it's like probably over 90% get rejected. But those that get approved, the approval is subject to negotiation and execution of definitive agreements, which usually will take 30-day period. So if you check that website, the CARB-X website, in about a month, I think you'll probably see.

Perfect. And then last, what should we be looking for on the PASTEUR Act? I know it's in the Senate and that can sort of be slow. What are you guys watching for? I'm just trying to see if this thing gets through.

It's the government, and you know how those things go. But from our position in the Antimicrobial Working Group, the expectation is at the end of the third quarter, they expect it to be included in a piece of legislation. Just to clarify a little bit more, my personal view because of the budget battles and stuff like that, that are going on, even though this is bipartisan supported in both houses of Congress, I think they're going to come through with PASTEUR [ Light ] which would be instead of $750 million to $3 billion for the sponsor over 10 years, I think it will be approved as more like $375 million to $1.5 billion over 5 years. That's just my educated guess.

Certainly good numbers either way.

From where we sit today, it's irrationally exceptional for us and great for public health.

[Operator Instructions] Our next question comes from Nick [ Meyer ].

Thanks for the clarification so far on the conference call. One question I do have is have you started seeing enrollment tick up now that COVID has fully subsided and the COVID restrictions and the pandemic has officially "came" to the end?

No, no. We haven't -- I mean what we've seen tick up is more prescreening. So we have more patients that were able to get into the prescreening process. So it's probably about the same in terms of the patients that get through prescreening successfully and choose to be in the study.

Okay. It's the same included. Okay. One thing that I've wondered is the Phase IIa rate seemed to have been a lot faster than what we've seen in Phase IIb. And I just wanted to know -- and that was during COVID, so I just want to know what the disparity was, but it seems like it's still just COVID related.

Yes. It's still COVID related. And as people -- I mean COVID -- the aftermath of COVID, I guess, we can call it is such that less people are still going to the doctor, to the hospital. People are more focused on things like bacteria and avoiding it. There's more telemedicine. And a lot of the sites are operating remotely like the rest of the world operates remotely instead of kind of going into the office all the time. So these are all challenges, which are heightened by our trial design, which by necessity, the patient has to get into the study within 24 hours because they have a life-threatening infection. So it would be medically unethical to have them hanging out with C. difficile that could kill them for a long period of time without being treated.

We have reached the end of our question-and-answer session. This concludes today's conference. Thank you for your participation. You may disconnect your lines at this time.

Thanks, Maria.

Thank you.