Aptorum Group Limited (APM) Earnings Call Transcript & Summary

Greetings. Welcome to Aptorum Group webcast. It is now my pleasure to introduce your host, Darren Lui, President and Executive Director. Thank you, Mr. Lui. You may begin.

Thank you very much. Hi. Hello, everybody, and nice to meet you here virtually. And my name is Darren Lui. I'm the President and Executive Director of the company. It is with great pleasure today to present to you a little bit about our company, Aptorum Group. Aptorum Group is a biopharmaceutical company. We focus on unmet medical needs. The company was founded, together with myself and our co-founder and CEO, Mr. Ian Huen. It was founded in 2016, with headquarters based in Hong Kong. Our pipeline focuses on unmet medical needs, so basically medical diseases that have no effective treatment or ineffective treatment right now. It can primarily be split into 3 major pillars of focus. First of all, is what we call the Smart-ACT drug discovery platform, which focuses on systematically repurposing existing FDA-approved drugs for orphan diseases, which we'll talk a little bit about. It's a very exciting area of development and growth as well. The second platform is the Acticule platform, which focuses on infectious diseases, including unmet viral and bacterial infections, obviously a very hot topic these days. Our third platform is what we call the Claves platform, which focuses on metabolic diseases, particularly focusing on how your microbiome can be an approach to finding druggable targets for some of these major metabolic diseases. The company has 2 development sites. We have a preclinical laboratory based in Hong Kong, focused on non-GLP, CMC and formulation work. And also, we have access to a GMP-grade laboratory based in Toronto, which is actually focused on GLP- and GMP-grade manufacturing and also our eventual clinical trial coordination in North America. The company has currently over 50 staff. Over half of them are scientists. And our company actually IPO-ed on the NASDAQ in December 2018, just over a year ago, under the ticker APM. Now we'll talk a little bit about our first platform, which is called the Smart-ACT platform. Now orphan diseases, or sometimes people know as rare diseases, actually is a huge growth area and largely untapped. In the U.S., the orphan disease landscape at the moment is there are over 7,000 orphan diseases identified by the U.S. FDA and increasing. This is compared to 2015 when that only 2,500 were identified. Now of these 7,000 orphan diseases right now, over 90% are still untreated or does not have effective treatment. On the other side of the world, in China, the NMPA has, in 2018, also announced a 140-plus-strong orphan disease list that the country and the China FDA is now actively encouraging companies to research and also expanding their reimbursement regime for these diseases as well. Now for those who don't know what repurposed drug is, it basically is the process of taking existing regulatory approved drugs, so these are drugs that are already in the market, in some cases, already been in the market for many, many years, and basically screening them to find new disease indications that the drug could be efficacious against. Now one of -- a number of advantages exist with drug repurposing in combination with orphan diseases, which includes, for example, smaller-scale clinical trials. Typically orphan diseases, rare diseases, involve much smaller clinical trial size in the lowest [ cases of capacity ], that's 15 people for the pivotal trials, all the way up to 200 and 250 people or so in the pivotal trials itself. So generally, much smaller-scale clinical trials. Orphan diseases also come with a 7-year marketing exclusivity, in addition to any patent protection that you may have. And typically, the regulatory agency has a much faster approval process and review process for orphan diseases. And now when you combine it with a repurposed drug, typically, you can bypass a lot of the GLP toxicology studies as well as some of the Phase I safety and tox studies which have already been done in the past because of the drug that has already been approved. And this is actually known as acceptable under the U.S. 505(b)(2) pathway. This allows us to greatly reduce the duration of drug development from the average of, for example, 12 years, all the way down to 4 years from discovery to NDA approval in around 4 years or so. For our platform, we're looking to systematically approach orphan diseases. In this manner, we are targeting to bring, on average, 12 to 18 months, to bring one, each candidate from discovery, all the way into IND submission within that period every year, 12 to 18 months. Now maybe just we'll talk a little bit about the -- our pipeline workflow. So the way we deployed our Smart-ACT platform is twofolds. First way, we look at a computational approach, which basically involves a library of over 2,600 approved small molecule drugs that we have internally on our database and screening them against selective targets of chosen orphan diseases. Now that will allow us to narrow down to a substantially much smaller population sample of small molecule drugs, which then we deploy into what we call the wet lab validation, which involves a number of processes, including the typical in vitro validation in the cell culture as well as the in vivo validation in animal models itself. After which, we put through -- we got a very stringent IP selection process, we will talk a little bit about in a bit, before we then select one final candidate to move them on into the U.S. FDA 505(b)(2) development pathway. Now as already mentioned, I mean, these orphan diseases, actually, it's a huge landscape out there, and largely, 90% of the 7,000 or so orphan diseases is still undeveloped. So at this stage, although we would like to actually cover all the 7,000 orphan diseases, we do have a priority list, which is based on a number of disease selection criteria, namely, for example, we take into account factors such as the unmet need of the drug, of the disease, the IP protection landscape, the competitive landscape, the ease of the clinical trial design. And we also take into other factors, including whether the disease is pediatric or not, and obviously also depends on the disease knowledge of the particular target itself. So through this number of selection criteria, we have a priority shortlist of 30 or so orphan diseases that we'll be screening in the next year to achieve the -- to actually be prioritized for some of our drug screening and development process. Now moving on a little bit about the patent strategy because we get this question quite a lot from investors. So -- and in fact, actually, the repurposed drug typically has some challenges. For example, if you've taken previously approved drugs, typical questions arise, would be whether the drug could still be under a previous company's patent protection or whether it's completely off-market. Now the way we select our drugs for moving forward is that it's usually already off-patent drugs or typically that has a patent expiry well within the next 5 years. Now on top of that, for our selected candidate to go forward into clinical trials, we typically file a number of patents to further protect that candidate, which includes what we call the disease indication patent. We also look at what we call the reformulation patent, also look at combination patent, [ to the extent the FDA has a small molecule drug that ] needs to be combined with another drug to deliver the efficacy and also the dosage pattern, which usually, during the clinical drug dose escalation studies, we'll be able to assess the exact dosage per patient in that -- for that particular drug. So usually, we have at least 3 to 4 further patents protecting the drug before we decide to bring this particular molecule into the 505(b)(2) development pathway. Now put in another way, if we cannot patent this particular drug, we will not bring this drug forward into the program and we will move on to our next program. So just to cover [ off ]. So at the moment, this is a snapshot of our pipeline right now. We have 4 assets that we are actively under investigation. The development right now, our most leading asset, is called SACT-1, which targets an indication -- orphan indication called neuroblastoma. Neuroblastoma is basically one of the most solid -- a common solid tumor in children. It is still largely unmet. We'll talk a little bit about that in a few slides. This [ vector or ] drug, we have a candidate right now that we're completing our final stages of preclinical preparation. We expect to be filing the IND and commence the Phase II clinical trials in the second half of this year, the second half of 2020. We also have a number of other earlier-stage assets. One of the assets we are actively investigating right now is for COVID-19 as well as other efficacy, 2 and 3, which are also targeted for orphan diseases under a similar process, which we'll be announcing to the market in due course. Now actually, maybe we'll touch a little bit about the COVID-19. We have made an announcement a couple of weeks ago, quite recently, that we've initiated a Smart-ACT drug for targeting the COVID-19 coronavirus. Now as we all know, the WHO has now declared the COVID-19 disease as a global pandemic. Despite actually the mortality rates of this COVID-19 disease, it's still relatively lower than the 2003 SARS or the 2012 MERS-CoV virus, it is highly infectious. And then therefore, our company strategy, we believe that we do need -- around the world, we need a multidimensional approach towards this -- tackling this disease, including both from a therapeutic standpoint, vaccine and diagnostic standpoint. So we've -- since, we've announced we have initiated a program under our Smart-ACT platform, deploying both our Smart-ACT technology and our infectious disease expertise and also in collaboration with the University of Hong Kong's microbiology team. That team was particularly famous back in 2003, when it was the first team that discovered the 2003 SARS virus itself. So it comes with a lot of experience for the past decade. For this particular project, we are particularly focused on 2 protein targets. One of them is called the 3CL-Protease. The other enzyme is called the RNA dependent RNA polymerase, the RDRP. Both of these enzymes are specifically involved in the replication process of this quite deadly virus itself. Now at the moment, with this -- we have identified, out of about 2,600 or so [ pretty ] small molecules, at least 3 small molecule candidates that we've shown potential interference against these 2 enzyme targets. We're currently still under preclinical investigation. We'll be reporting back to investors during this quarter as to our findings for the preclinical validation. Now because of the fact that these are repurposed drugs, we hope that it could actually move on to the human clinical trials under existing FDA and other regulatory agencies' accelerated review process relatively swiftly, hopefully, within the second half of this year. Now coming onto one of our lead assets, which is neuroblastoma for SACT-1. SACT-1 neuroblastoma is a -- it's a very -- it's an orphan disease that accounts for up to 15% of childhood cancers, and it's the most common type of solid tumor in children. The value of the global neuroblastoma market is over $2.6 billion right now as of 2017, with a compounded annual rate of growth of 3.7% per year. And neuroblastoma also accounts for 50% of all the cancers in infants, making it the most common tumor in infants younger than 1-year-old. The 5-year survival rate, despite the current treatment right now, which is the combination chemotherapy and then monoclonal antibody treatment, is still relatively low. The 5-year survival rate is somewhere between 40% to 50% at the moment. So this is an area where we're heavily focused as our lead asset. Now in our in vitro studies, the SACT-1 is able to demonstrate that in neuroblastoma cell line studies, our candidate has an IC50 of 2.97 micromolar. It's effective in killing neuroblastoma cells over 4 cell lines. And on top of that, in other further studies, we were able to demonstrate that they were -- the candidate actually has a synergistic effect in combination with standard chemotherapy as well, which is significant because it potentially implies that in pediatric patient cases, who often -- very often do not survive under the chemotherapy process, it's a very toxic process, we can actually structure the clinical trial and the end user to benefit from a reduced dose of chemo in combination with our SACT-1 candidate, which will still be able to achieve similar, if not better, efficacious results. This will, of course, be subject to further clinical trials as we move on into our Phase II trials in the second half of this year. Just a quick snapshot. This particular candidate, again, because this repurposed drug already has a very well-established safety and tolerability profile, even at a very high dose at 150 milligrams per day over a 91-subject clinical trial, no deaths were observed at such a high dose. On top of that, it also has a very well-established pharmacokinetics record. It has a very, particularly, long half-life, close to around 48 hours. And this PK result, as well as the previous safety and toxicity profile, will both be used to submit for our -- as part of our IND package to the FDA shortly. And then coming onto -- just to wrap it up. Under our Smart-ACT platform, as I mentioned, we have 30-or-so other orphan diseases that we have in our pipeline we are looking to screen in the next 12 to 18 months. We have a little snapshot here. The 30 orphan diseases right now is split between a combination of orphan cancers as well as noncancer, including genetic, immune and metabolic diseases. Now we expect to bring perhaps 3 to 5 of these candidates to be completed under the similar systematic process towards our Phase II already by the end of 2021. Now moving on to our infectious disease platform very quickly. So this is not a repurposed drug platform. It's a new molecule platform. We actually -- obviously, infectious disease is now a very hot topic right now. We have a portfolio of 4 assets, ALS-1, 2, 3 and 4, with a leading asset called ALS-4, targeting what we call staph aureus, including MRSA. So some of you could know this bacteria as the superbug right now. This is a first-in-class oral form-based small molecule drug. We're expecting to submit IND filings to the U.S. FDA in around the second half of this year in order to commence Phase I trials in the second half of this year. We also have in our portfolio of other assets, ALS-1, that focuses on anti-influenza as well as ALS-2 and 3, focusing on a more broad-spectrum gram-positive bacteria group. Just to very quickly cover up the ALS-4 market size. The staph aureus market is actually extremely huge. Every year, there's over 150,000 patients in the U.S. alone that requires hospitalization, and mortality rate is up to 30%. And we talk about MRSA sepsis, the mortality rate may be even up to 55%. The value of the global market right now, it was $3 billion, in fact, in 2016, and it has a compound annual growth rate of 3.2%. It's also an area that attracted some of the large deals in the last couple of years. In 2014, Merck made an acquisition of the Cubist Pharmaceutical company for $8.4 billion. And in 2018, Roivant also in-licensed a Korean-based iNtRON Phase II asset for $667 million in upfront and milestone payments as well. It's a very exciting area. Now our ALS-4 drug is what we call an anti-virulence drug. So it's actually not an antibiotic. What anti-virulence means is that it's actually not a bactericide, but it actually focuses on reducing the pathogenicity of that bacteria, which is basically the armor or the weapons of the bacteria group. It reduces our selective pressure. And as a result of that, it also allows the bacterial cleansing to be done and mediated by a human's own immune system itself. Our asset, actually, if you focus on the next slide, ALS-4 actually targets a particular enzyme that prohibits the biosynthesis of staphyloxanthin. Now staphyloxanthin is actually, if you can look under the microscope or the MRSA, it's actually the golden carotenoid pigment that is synthesized by the staph aureus. It is actually an important factor because of its antioxidant property. It basically allows the bacteria to evade our immune system's neutrophil-based killing. So by inhibiting this particular biosynthesis of staphyloxanthin, we'll be able to disarm the bacteria and as a result of that, allowing the bacteria to be cleansed by our own immune system. Coming onto the next slide, we'll talk a little bit about our Claves platform. At the moment, we have 3 assets right now that are actually in our portfolio, focusing on metabolic diseases. This particular platform focuses on druggable targets inside our microbiome, so inside our gut. A lot of research has now gone in to look at how you metabolize inside your body. So these are tiny chemicals released by the microbiome [ antibody ], could be responsible and plays a crucial role in some of the metabolic diseases. Now at the moment, out of the universe right now, there are well over 70 identifying metabolites that are responsible for various different metabolic diseases. Our most leading asset right now is called CLS-1, which is targeted on a particular metabolite that plays a critical role in causing obesity. This particular asset, we'll be bringing this forward into IND-enabling stage towards the end of the year. We'll be expecting Phase I trials commencing towards the end of the year or the beginning of next year. This one, the CLS-1 in our animals, have shown some very impressive results right now. So over a -- in our preclinical in vivo studies, we were able to demonstrate over a 50-day high-fat diet. CLS-1 was given up to 30 days and was able to demonstrate significant weight loss over the course of 2 weeks. So it's a very exciting area. And on top of it, it does not upregulate any inflammatory markers. We have data to show that as well as it doesn't impact with our liver and renal functions itself. Now just coming onto -- maybe just to wrap up a little bit. So a little bit about financials for the company right now. As I mentioned, the company, we IPO-ed in December 2018. During the December IPO, we raised USD 12 million. 2 months ago, in February, we did a registered direct offering. We raised another $10 million or so. So as of mid-March 2020, our cash and undrawn credit facility exceeds $20 million. In terms of our share issuance, our share structure, we have 30 million -- just over 30 million shares issued, of which a percentage of the company owned by insiders and founders are close to 69%. I think I'm coming up to the end of my presentation. I thank you very much for your patience in listening to our conversation. If you have any questions, please feel free to contact us on our Investor Relations contact, which is investor.relations@aptorumgroup.com. A lot of information is also available on our website at ir.aptorumgroup.com. So thank you very much for the time today. Yes.

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