AI Financial Corporation (JAN) Earnings Call Transcript & Summary

Good afternoon, everyone, and thank you for joining us for the JanOne telebriefing and corporate update call. Tony Isaac, CEO; Tony Giordano, PhD, Chief Scientific Officer; and Amol Soin, MD, Chief Medical Officer, will provide prepared remarks followed by a question-and-answer session. I will now take a brief moment to read the safe harbor statement. During the course of this conference call, we will make certain forward-looking statements and assumptions. All statements that address expectations, opinions or predictions about the future are forward-looking statements. Although they reflect our current expectations and are based on our best view of the industry and of our businesses as we see them today, they are not guarantees of future performance. These statements involve a number of risks and uncertainties, and since those elements can change, and in certain cases, are not within our control, we urge you consider and interpret them in the light -- in that light, excuse me. We also urge you to review the company's SEC filings for a discussion of the principal risks and uncertainties that affect the company's business and performance and of the factors that could cause actual results to differ materially. JanOne does not intend and undertake no obligation to publicly update or revise any forward-looking statements whether as a result of new information, future events or otherwise unless otherwise required by law. I will now turn the call over to Tony Isaac, JanOne's CEO. Thank you. You may begin.

Thank you, operator, and welcome to everyone. Thank you for joining us to hear more about JanOne. As you may be aware, JanOne transitioned last year from the recycling business into the biopharma business. Last November, almost a year ago, JanOne acquired an exclusive license to over 30 patents to do with peripheral artery disease, PAD, and the pain associated with it using sodium nitrite. The product was then known as TV1001SR and now known as JAN101. We bought it from -- the license from LSU, the UAB Research Foundation and TheraVasc. We believe that JanOne is a great candidate for the company being a last-stage biotech asset to do clinical studies and to dress the market that is closer to potential commercialization. The initial research patents and development were performed by Dr. Chris Kevil at the LSU Health and Dr. Rakesh Patel at the UAB Research Foundation. Both are respected individuals and scientists in their field. Dr. Tony Giordano, our Chief Scientific Officer, holds position as a Director of Innovation in the Cleveland Clinic and the Abbott Laboratories. He brings a lot of knowledge and expertise on the sodium nitrite and continues to help the company develop JAN101. We also have Dr. Amol Soin, who is our Chief Medical Officer, and he is a recipient of the Patients Choice Award, an honor given to only the top 1% of doctors in the country that deal with pain. So JanOne is looking forward to development of those new treatments for pain as we continue our search for potential assets to add to our pipeline and find novel ways to reduce pain and save lives, if we can. And this is to eliminate, or to address at least, the opioid abuse and the addiction to opioid. We're optimistic that we can get to a level where the PAD is relevant as a pain drug since it is the major cause of neuropathic pain in patients with the disease. In addition, also, we are addressing the possibility that we can use the same license -- the same drug, to work or treat patients of COVID-19. Because as you may have seen, there's lot of studies and articles in the medical papers that show that the COVID-19 is a vascular disease, and thus, it can help to the patients who are infected with that disease. We are applying soon also for an IND, which is the investigative new drug application, in order to be able to work on some cases for COVID-19 in the coming weeks. I will now turn the call to Dr. Giordano and Soin, our Chief Scientific Officer and Chief Medical Officer, as you may learn more about the technology and the potential treatment areas for our proprietary drug platform, JAN101.

Thank you, Tony. This is Dr. Amol Soin here. I'm Chief Medical Officer of JanOne. Thanks for attending this call, and good afternoon, everyone. I want to start by talking about JAN101 as a basic overview. And as you all know, JAN101 is our lead product to treat peripheral artery disease and pain. It's intended to address the 8.5 million Americans who may have peripheral artery disease, also known as PAD. Our drug candidate, JAN101, is a sustained release of sodium nitrite. It has already been shown to be safe in a novel treatment for improving vascular function and reducing neuropathic pain as well as other conditions resulting from poor blood flow. The drug is highly selective, acting only in damaged tissue. Sodium nitrite and sustained release promotes blood vessel growth and function, prevents inflammation of tissue and necrosis and has been shown in some studies to help treat diabetic peripheral neuropathy, which is a leading cause of pain in diabetics. There have already been 3 human clinical trials that have been found to significantly reduce pain. And I actually ran one of these studies, and it was a double-blind, randomized, placebo-controlled trial studying diabetic neuropathic pain with JAN101. Not only did we see statistically significant reductions in pain, at a higher dose, we also saw statistically significant improvement in nerve conduction velocity. Now that's really important because it shows that not only are we treating pain, we're actually helping improve nerve function. And I believe this could have significant implications in treating diabetic patients, and particularly, pain patients with neuropathic pain in the future. But by alleviating the disease associated with pain at the source, we may be able to reduce the need for opioid prescriptions. Oftentimes, we use opioids to treat severe pain, particularly in diabetic peripheral neuropathy, and this can lead to abuse and diversion and overdose death. But this drug, JAN101, can help treat pain without addiction and without sedation. And I can tell you, as Chairman and Founder of the Ohio Pain Clinic, which is a network of pain management centers in Southwestern Ohio, I see this almost every day. And I've devoted a good portion of my professional life to helping people in pain, and to try to help people live in pain without opioids is something that we've long been searching for. I'm also the President Elect of the American Society of Interventional Pain Management Physicians. This is the largest organized network of pain management physicians. And all of us physicians are searching for a drug that can treat pain without addiction and without sedation, and JAN101 checks both of those boxes. And I believe that if this drug reaches the market, personally, I think you'll see wide adoption amongst pain management practitioners. And all of you guys know doctors. You probably see doctors. And I think if you were to talk or meet with anyone that you know that's a physician and tell them that there is an opportunity to treat neuropathic pain with a new medication that's non-addicting and non-sedating, I think you'd see some excitement there. In addition to diabetic peripheral neuropathy, peripheral artery disease also is a very significant problem with 8.5 million Americans suffering from it. And this can also be painful. But we don't have a lot of good treatment options for that either. We expect to begin Phase IIb trials for PAD in early 2021. With that, I'm going to turn it over to Dr. Tony Giordano, our Chief Scientific Officer, to discuss the applications for JAN101 in patients suffering from COVID-19-related vascular complications.

Thank you, Amol. I'd like to transition now into the COVID-19 story. When this pandemic first hit and we started to learn about COVID-19, we became very excited about the potential of sodium nitrite in treating COVID-19 patients. In large part, this is because COVID-19 affects -- we knew affected the respiratory system. We knew that patients had a difficulty getting oxygen. And what we knew about sodium nitrite is that it does improve pulmonary function and it improves oxygen uptake in the blood. So we thought, for these reasons, this could be something that we should try in COVID-19 patients. And then very recently, in the prestigious medical journal, The New England Journal of Medicine, there was a report that showed SARS-CoV-2, which is the virus that causes COVID-19, actually damages endothelial cells that line the blood vessels. Now as Amol has already told you, we've completed 2 clinical trials with JAN101. And in both of those trials, we were able to show that we improved endothelial cell function. And so not only do we think that this drug could have a positive effect on the pulmonary functions and pulmonary deficits associated with COVID-19, but it may have an important effect on the endothelial functions that COVID-19 seems to be effective in these patients. And that's very important because it's actually been shown now that in patients that don't go into the hospital, there's still a potential for long-term tissue damage to these patients. And that's due to the lack -- in all likelihood, due to the lack of oxygen getting to these tissues. So you get organ damage with the heart, you get organ damage with the kidneys, liver, lungs. And one of the things that we know from various preclinical studies is that JAN101 can protect tissues and organs from problems due to poor blood flow. So we think that this could have a huge impact on all of these patients now, and in particular, the younger patient population that isn't ending up in the hospital but that has these long-term effects of COVID-19 infections. We recently received confirmation from the FDA, the Food and Drug Administration, that the original investigative new drug application, or IND, sponsorship was transferred for the JAN101 product from the original IND holder to JanOne. So we're now able to utilize that IND and move forward with these clinical trials. The clinical candidate, JAN101, is now being formulated to treat, and we're producing enough of this product. We're having enough of the product manufactured in a GMP facility to complete Phase II trials, both in COVID-19 patients, where we will file the IND shortly. And once accepted by the FDA, we'll begin those Phase II trials. We've hired CATO SMS, a leading Contract Research Organization, to assist in the development of JAN101 to treat COVID-19 applications and to submit the IND. And we've also been working on with another very prominent CRO in the PAD field to move this product forward in treating peripheral arterial disease patients. And I did want to mention one other thing about PAD, I know Amol has already spoken about that. But in my personal experience in running the original PAD trials for TheraVasc, one of the things that we found is that, again, not only did the drug significantly improve vascular function in these patients, there was also a report of significantly less pain. And these were patients with intermittent claudication and had significant pain walking down to the mailbox. In fact, one of the patients called me up after the trial and said, "I've been on this -- I was in your clinical trial, I wasn't able to walk down to my mailbox without pain. I've been -- after 10 weeks on your drug, the pain subsided. I've been able to get around again. Can I stay on the product?" I said, "Unfortunately not, the trial is done." He called me back again about 3, 4 months later and said, "Is there any way I can get more of your product? The pain is starting to come back again, and I'd really like to be pain-free." And again, I told him, "Unfortunately, we can't give you the product at this point, but I'll certainly let you know when the next clinical trial begins." And again, hopefully, the next clinical trial for PAD will begin sometime next year. So we have a real opportunity here to help potentially treat patients with COVID-19 protecting them from the long-term tissue damage that we see associated with this pandemic and also potentially improving and reducing the amount of time before they are getting back to functionality and reducing hospitalization. And then longer term, going after peripheral arterial disease and treating that disease so the patients' quality of life can improve back to what it was before they had the disease. Thank you for your time and your attention.

Thank you, Tony. I'm now going to move on to our pipeline update. The company has made a strategic decision to initially pursue PAD, peripheral arterial disease, and our planned Phase IIb PAD study is scheduled for early 2021. In this study, we'll evaluate the efficacy of 2 doses, 40 and 80 milligrams of JAN101, to treat diabetic patients with PAD in a placebo-controlled 12-week study. We have plans to study 300 diabetic adults with PAD in 3 cohorts, 100 patients each. Our primary endpoint will be that -- the patient's ability to walk without pain or muscle fatigue as a result of vascular function restored by our drug candidate. Our secondary endpoints will be a reduction in pain over the course of treatment, improved sensory nerve function and improved quality of life. In conclusion, we continue to advance our high-value, late-stage biotechnology asset. And we believe that the targeted indication of peripheral artery disease, pain management in COVID-19 as a vascular disease represent a strong treatment area for our proprietary drug platform. And the COVID-19 one is unique and interesting because we're looking at COVID-19 as a vascular disease. And this is something that may provide some significant advancements forward, in my opinion, in treating this disease. So I work at a hospital in Dayton, Ohio. We have a network of 8 hospitals in our system, and our COVID units are full of patients. We have actually enrolled 200 patients in various COVID studies, everything from stem cells, to steroids, to convalescent plasma. And we continue to struggle with COVID-19 complications and issues. And I think some of those complications and issues result from the fact that COVID-19 is indeed a vascular disease. Because when you think about it, we're seeing long-term damages to the heart and other organs and even the lungs. And there are so many mysteries about COVID-19, right? And some of it doesn't make sense because we call it an inflammatory disease. We say there's cytokine storm, getting anti-inflammatories like ibuprofen [ aren't ] bad. And some steroids which treat inflammation are shown to not help the situation. But what does all this have in common? Drugs like ibuprofen, nonsteroidals and steroidal anti-inflammatories, is that some of those drugs actually damage or impair vascular function? So if we actually have a drug that could treat the vascular component of the disease, I think you would see a significant leap forward. And I truly look forward to studying this drug as an exciting new and novel treatment for the disease. Because I believe COVID-19 or a variant of this disease state may be around for a long time, even if we have a vaccine that comes out. And having an option and opportunity to treat and potentially prevent long-term complications could be truly transformative. And this is one thing that JAN101 has that the other candidates that I've studied in my hospital system, and as I mentioned, we've enrolled over 200 patients in various studies, this was one thing that's unique to this drug candidate that the others don't have. And I look forward to being a part of that study. The planned Phase IIb study for PAD and the planned IND submission for COVID-19 are compelling upcoming catalysts for the advancement of our company. We have a world-class team in place, and we believe the value proposition of JanOne, in conjunction with our intellectual property, are sure to gain continued recognition from investors and the medical community alike. We continue to make progress with the FDA and intend to announce applications that address COVID-19. Thank you for dialing in to hear more about our company and its applications. Now I would like to turn the call back over to the operator for the Q&A portion of the call.

[Operator Instructions] Our first question comes from Jeremy Roe with Integra.

And after hearing the presentation, to be honest, I'm a lot more excited about it than what I understood it was that you guys were doing. I also believe that this is a vascular disease. But real quick, can you talk a little bit about the safety profile and the prior clinical work that was done here. And why you feel that this can move to Phase II right away for the indications, both COVID and PAD?

Yes. So I was running TheraVasc when we were originally developing this product. And one of the things -- actually when COVID hit, one of the things that excited me the most is I thought, okay, this drug could potentially benefit patients because of the oxygen and pulmonary functions. But the other thing I knew is that the drug is extremely safe. I mean the sodium nitrite is normally found in your circulation. It converts to nitric oxide in areas that are damaged by different -- lack of oxygen, and then that nitric oxide promotes the endothelial cell function. But everywhere else, sodium nitrite does nothing. So in -- we've been in -- between our trials and our collaborators' trials, we've treated over 100 patients to date with sodium nitrite. And the only side effects we saw were headaches and dizziness, and that was associated -- and no one dropped out of the trial. They were not severe. They all resolved without any kind of treatment. And that was because of the bolus release of nitrite causing the blood vessels to dilate and in getting blood flowing quickly away from the brain causing a headache. So while that trial was going on, we actually developed a sustained release formulation that we tested in pigs and looked at -- and to see if it would change the blood pressure. And it did not have any effect on blood pressure at all in the pigs. So we knew then that we're getting away from that vessel dilation that we saw with the immediate release. We then -- and this was the trial that Amol ran, went ahead and tested that sustained release in diabetic neuropathy patients. And no one -- there was no difference between the 3 treatment groups in reported headaches and dizziness. So the only side effect we saw was headache and dizziness. Now there is one other side effect that's associated with high levels of sodium nitrite, and that's methemoglobinemia. But we've never come close to even seeing any methemoglobinemia. Somewhere around 10% to 15% is worrisome, and we've never gotten above 2%. And that was at a dose that we're not planning on using. The doses that we're planning on using, we never saw any methemoglobinemia increase -- increase in methemoglobin levels. So in short, I think this drug is extraordinarily safe and will be well -- very well tolerated.

Our next question comes from [ Ray Bittar ], a private investor.

I just have 2 questions for you regarding the patents. Do they cover regular sodium nitrite and sustained release sodium nitrite for the indications? Or is it only the latter? And have you filed for your COVID patent or some protection around COVID-19?

Thanks. Again, that's a great question, and of course, a critical question in this field. And yes, so sodium nitrite, since it's been out there forever, the composition of matter is not covered. But JanOne has licensed a patent of state -- a pretty extensive patent state that covers various uses of sodium nitrite to treat PAD, inflammatory diseases, pain, neuropathic, non-neuropathic pain and infections. In addition, we do have a patent that has issued on the formulation of the sustained release sodium nitrite. So we have patents on the JAN101 product itself, which is the sustained release sodium nitrite, and on methods of use of those sodium nitrite products. Now to your second question, we have actually filed as soon as -- as I mentioned to the previous caller, as soon as the pandemic hit, we started to think about that this might have value in treating COVID patients even before we knew about the endothelial function, which has convinced us that this will have value. So as soon as we started thinking about this, we filed another patent for JanOne to protect this product in treating COVID-19 infections -- for use in treating COVID-19 infections.

Our next question comes from Robert Carlson with Janney Montgomery Scott.

Can you talk a little bit about your cash situation and your cash burn?

Tony Isaac, do you want to handle that one?

Sure. So JanOne owns some legacy assets that is -- that make profit and revenues, and we already disclosed that we have intentions of potentially disposing of those assets. But until we get the right price and dispose of them, the -- we're generating the revenues and we have enough assets to keep things going. And we are very profitable.

Are you profitable presently?

Yes, we are.