Atossa Therapeutics, Inc. (ATOS) Earnings Call Transcript & Summary

Next up, we have a clinical stage biopharmaceutical company seeking to discover and develop innovative medicines in areas of significant unmet medical needs with a current focus on breast cancer and COVID-19. Please join me in welcoming Atossa Therapeutics.

Well, good morning, folks. Thank you for joining us. This is Kyle Guse, the CFO and General Counsel of Atossa Therapeutics. And with me today also presenting is Dr. Steven Quay, the Founder and CEO of Atossa Therapeutics. We've been doing this for a number of years with LD Micro. And the online format is new for all of us. So thank you, everybody, for joining us this morning. Atossa Therapeutics is a public company. We're a NASDAQ-listed company. So I encourage folks to read our SEC filings before making an investment. Slide 3 is a summary of Atossa Therapeutics. We're a clinical stage biopharmaceutical company currently focused on breast cancer and COVID-19. We're sort of mid-stage development. On the breast cancer side, we have 2 programs we're focused on. And on COVID-19, we also have 2 programs that we're focused on. These are therapeutic programs contrasted maybe with the vaccines that you've heard a lot about. Slide 4 is a summary of the leadership of the company, starting off with Dr. Quay. Dr. Quay is a PhD and MD. His PhD is in chemistry. He taught at -- or he did his residency at Mass General and did post-doc work at a lab of a Nobel Prize winner at MIT at the same time. Then taught at Stanford for about a decade. I'll let Steve further introduce himself when he jumps in here. And there's also a bio there for myself and also for Dr. Fraser, our Head of VP, Clinical Regulatory and CMC. Slide 5 is a summary of the company. We have no debt as of the end of the year or as of the end of June, and we have cash of about $7.6 million at the end of June. Plus it should be noted that in July, after the end of the last quarter, we did completely utilized an ATM program we have set up with Oppenheimer and raised an additional $4.3 million in July. Another point I wanted to make is that a couple of days ago, we filed a new shelf registration statement. This is a common typical shelf registration statement, registering $100 million for future uses. These are effective for 3 years, as many of you know. And our current shelf is expiring in the next 30 days here. So we recently filed a new shelf to replace our old one. The next slide, Slide 6, here is a summary of our clinical development. Again, we have 4 programs here, 2 in breast cancer and 2 in COVID-19. Steve will talk more in detail about our program. So why don't I turn it over to Dr. Quay. Steve, if you want to pick up here. I'm on Slide 7.

Okay. Thank you, Kyle. And again, it's a pleasure to meet you virtually for this excellent conference. One of the things that we focus on, of course, besides the medicine and pharmaceuticals is large market opportunities. The key products in the COVID space are clearly dropping into a very high demand space. We all are very hopeful that a vaccine will be available in the not-too-distant future. But I think history tells us that, for example, in influenza, where we have a very well-established annual vaccine for influenza. In addition, the therapeutic market is over $1 billion a year. So there will always be a place for therapeutics, either in people who didn't take a vaccine or the vaccine didn't take itself for other important reasons. So we have 2 programs there, and I'll get into them a little bit later. But in the breast cancer area, we also are addressing very large unmet needs. Oral Endoxifen is being developed to improve a mammogram. And out of the 39 million mammograms a year, probably 10 million of them have high breast density, and therefore, those women are a candidate for our therapeutic approval. And the other opportunity is to try to introduce the first ER+ neoadjuvant treatment. Neoadjuvant is very common in the 30% of breast cancers that are either HER2-positive or triple negative but not common at all in most common breast cancer, ER+ breast cancer. Lots of sort of pharmacology reasons why that is, but we believe that our Endoxifen, which acts very, very quickly, reaches therapeutic levels the first day a woman starts taking it may finally be able to address this unmet need of presurgery treatment in women who have ER+ breast cancer. Next slide, Kyle. In order to talk about our clinical programs, let me see anything I could have answered.

Yes, I got you.

I want to just remind you of what we know now about how COVID-19 progresses. And it really has 3 phases in the body, and we like to think of our therapeutic acting in a particular phase. So get introduced by large droplets typically in nasal mucosa inside the nose, and it will spend probably 3 to 4 days there, developing, growing and expanding. If it gets beyond that, then it goes into the lungs in Phase II. And there, it has a pneumonia-like property. And there, you often are probably in the hospital by the time it gets to that stage. And then if it -- if you don't stop it in time, if your immune system doesn't stop it in time, then it does go into the systemic phase, and that's where it gets really serious. Next slide. So just to be sure, Kyle, the slide I'm seeing doesn't have any English language in it. Is that correct?

That's strange. The slide has been converted on the upload or something. Yes. The rest of the slides are fine. I'm not sure what happened -- what's going on there.

Okay. So yes. So let me just -- I can talk without the slide obviously.

Yes. I'll scroll back.

Yes. Okay. So the program I'd like to talk about -- yes, perfect, so is the AT-H201 program. This is for patients in that third stage, where they're in the hospital and they either are on a ventilator or about to go on a ventilator. And the goal now is to treat -- aggressively treat the pulmonary phase of the disease to either get them off the ventilator or prevent them from going on it. The drug was designed to be nebulized that is to make like a fog of it or a mist of it, and the patient can inhale it themselves or if they're on a mechanical ventilator, the ventilator inhales it -- ventilates it for them. This program we're in discussions with the FDA around finalizing the design of this. We want to very rapidly go into patients. I mean we certainly are doing better as a country, but we still have over 30,000 new cases 2 days ago in a single day in the U.S. That's the program for late-stage COVID. Next slide. So this is a typical in vitro laboratory experiment. These are the necessary first steps, but they're never sufficient to show efficacy at a final level. But this is the inhibition of the virus growing -- the SARS-CoV-2 virus growing in a standard laboratory cell line, where green is the virus growing that you see on the far right. And as you start to introduce the therapeutics of our formulation, you see the green disappears and all you see are the blue nuclei. So this is an example of an extremely positive result. This is what you'd expect from something that's very effective in the laboratory and which is the first test of many tests for -- that have to be ultimately in patients. Next slide, please. So the other end of the process at the very beginning is where we've developed a therapeutic called AT-301 as a nasal spray to either stop that first infection in the nasal mucosa or to greatly attenuate it if it starts. The intent is to use this in patients in the first 72 hours of their positive diagnosis. They would take this home. They would use it, say, 3 times a day is what we think in our -- we're testing in our Phase I study. And the intent is to have it to not progress to the pulmonary phase. And we're very excited about the progress that this is making. We announced just this week we completed the first cohort. We've been given permission by the Safety Board of the IRB to go to the next dosage level, which is -- requires a review of all of the safety information on the first cohort of patients, subjects -- excuse me, these interval volunteers. And so we're on to the second phase of this. And we want to be very quickly in a position to go into patients if we get sufficient safety and tolerance out of this Phase I study. Next slide. It's -- again, it's important to think of the entire armamentarium necessary to treat this disease. Here, I put a comparison in place between the properties of a vaccine, the one that's furthest along, the Moderna RNA vaccine and the 2 Atossa programs and really to give you the profiles of these in one place. They both target the spike protein, which is the key that this virus uses to unlock the cells and get into your body. We actually have secondary targets in our formulation. The key is recognized by host entry gene products, and the host actually invites the virus in by using a protease to clip the surface of the spike protein and make it more accessible for getting into the cell. We've included those in our formulation. The current formulation of vaccines don't include that element. They're all directed to virus. We direct our formulation partially at the host entry process. Our products have been through the FDA process before, so there's no unknowns involved with this. We expect ours to work while they're being treated. So it's not a long-term treatment, but it should be effective during the period of time. Next slide. So I'm going to switch now to the other major program that we have in the breast cancer. And of course, everyone knows the magnitude of this problem. One out of every eight women who experience breast cancer, 0.25 million women a year will be diagnosed each year, and it's the second leading cause of cancer death in American women. Next slide. Our first program is the Phase II Window Of Opportunity study or neoadjuvant study. The concept is Window of Opportunity is an expression for the time, usually measured in weeks or maybe a month between the diagnosis and the definitive surgery and then radiation. And as I said, right now, the major breast cancer in women has no treatment during that period because -- not because it hasn't been tried, but no drug has been found worked quickly enough on the cancer cells in ER+ cancers to be effective. So we've entered that phase with -- that space with a drug that we think will work very quickly in our Phase I study. We got blood levels within 4 hours that are predicted to be therapeutic. In the study that we did, this is a very small study, but careful study, our primary endpoint was reduction in cell activity, tumor activity. It's a term called Ki-67, and we had secondary endpoints of safety and whether the drug was tolerated well. The next slide is the summary of some results that we put out earlier this year. So with respect to the marker itself, we saw a 74% reduction in the tumor growth activity as measured by the Ki-67 was highly significant, even with only 6 subjects. All patients had a greater than 50% reduction and all patients got below 25% of the cells having a Ki-67 expression. Why is that important? Because a large study of 70,000 women show that if you can get below 25% in that initial phase with Ki-67 measurements, you have a long-term reduction in recurrences in death from breast cancer. So our results were both statistically significant and clinically significant in a very small sample. We had only 22 days of activity, 6 women. So we believe this is an unmet need that we can address, and we're looking pretty aggressively to go into this further. We want to expand the study to include more women and get FDA approval on the design for a definitive study. The next slide talks about another challenge that Endoxifen is addressing. And that's the challenge of -- I'm sorry, just one more slide on expanded access. So we have 1 woman who get both neoadjuvant before her surgery, 51-year-old ER+ and then has been on adjuvant treatment that is treatment after surgery for 18 months. And at this point in time does not have a recurrence, and the drug is very well tolerated. So these NF ones are only useful for observational purposes, but nonetheless, it's extremely encouraging. Next slide. So I begin to say the other important point for Endoxifen is to treat breast density. The breast on the right is an example of a dense breast. And as radiologists sometimes say, finding a small cancer in that dense breast is like finding a polar bear in a snowstorm. So if you can see -- if you can change the background density from the way it is on the right panel to the left panel, bingo, a cancer appears that wasn't there -- I'm sorry, it was there, but it was masked by the background density. This is what we are targeting with our product. Again, we have some -- unfortunately some grammatical issues with our slides here. Next slide, please. The other purpose of reducing density is to actually reduce the risk of cancer going forward into the future. So these are the standard densities from lowest density on the left to highest density on the right in a very, very great agent. And the scale below is the fivefold increased risk of breast cancer because of high density alone. So density is one of the most powerful risk factors for breast cancer. It's only slightly less powerful than the BRCA gene that Angelina Jolie had and others. But it's also the one that's modifiable. It can be changed. So we're very excited about addressing the 10 million women in the U.S. and as many overseas that have this high density, both to make the mammograms improve and to lower the density just as a reduction in breast cancer itself. Next slide.

Yes. Do you want me to run through these upcoming milestones?

Kyle, yes, why don't you finish with the upcoming milestones, if you would? Thank you.

Yes. So these are all focused on the upcoming, being completed by the end of the upcoming quarter. So we have 2 milestones in each of our COVID-19 programs and 2 milestones in our breast cancer program. So in COVID-19, our H201 study, that is for patients who are severely ill and are on or about to go on ventilators. We have 2 upcoming milestones for that program. One is IRB and regulatory approval to open the study and the other is to actually start enrolling patients in the initial study. For COVID-19 AT-301 program, this is our nasal spray program for patients who are mildly ill and will likely go home and not stay in the hospital. We have completed enrollment -- or we will complete enrollment in the upcoming quarter in that study. Some of you might have seen from our press releases that we finished dosing the first cohort in that study and that we also received a positive interim safety assessment in that study. And the next milestone upcoming this next quarter will be then to finish the dosing in that study. So both finish dosing and complete the enrollment. Then over on the breast cancer side, we have 2 milestones coming up next quarter as well. One is to get regulatory approval to open the breast density study. And the other is to then begin enrollment in that study. So we expect all these milestones to be achieved by the end of the year, and that should create a nice stream of news for us. I think I'll skip the rest of the slides so we can get in the Q&A before we run out of time here. I'm just flipping through them, so everyone can see them. We have obviously a highly experienced and well-rounded Board of Directors as well as an Advisory Board. And from here, why don't we go into the Q&A queue.

All right. We have time for questions. Do you need a moderator to do questions or...

No.

Okay.

Yes, I can just read them. The first question that we have here is will you seek a partner to commercialize your COVID-19 therapeutics? And if so, after or before approval? Very good question. Of course, we're always opportunistic about a partner at any point in the development. I think for COVID-19, we do need a co-marketing partner to launch our products worldwide. Given the extremely large commercial market for the COVID-19 therapies, we will seek a partner to ultimately commercialize these products. Anything to add to that, Steve? I think that pretty much...

Yes. Well, yes, actually just in the COVID-19 space, I mean one of the unusual things is that, very often, the distribution partner is not a marketing partner, but the distribution partner could be the federal government. So we're seeing with diagnostics and with vaccines that at a point where the emergency use authorization by the FDA at least typically being end of 2, the U.S. government has stepped in and become the major distributor of products that are approved in this space. So that's obviously something that goes along with the FDA review and approval process. Kyle, why don't you take the next question?

Yes. Yes. Next question, are we still pending FDA approval for AT-H201? It is still pending approval. It is still being reviewed by the FDA. So that has not been approved by the FDA yet. That being said, it's taken a long time to get this through the FDA, and we're frustrated with the process as our stockholders are. So we're also exploring other countries to potentially conduct a study of AT-H201 as well. We're not going to wait indefinitely for the FDA to act favorably on this. So we are exploring approval in other countries. And so when we talk about AT-H201, we generally talk about regulatory approval as opposed to just FDA approval. And with that, I show that our time is up, so maybe we'll conclude there. Again, thank you, everybody, for joining the virtual conference. This is a highly effective way to reach a lot of people. It's a little clumpier than usual, but I think it went well. So I appreciate everybody's time.

I do too. And if you want to catch the slides in a different format, they are on our website, atossa.com. So I appreciate your time, folks. Thank you very much.