Aytu BioPharma, Inc. (AYTU) Earnings Call Transcript & Summary

Good afternoon, and thank you for joining us today for the Aytu BioScience COVID-19 Initiatives Update Call. With me this afternoon is Aytu's Chairman and Chief Executive Officer, Josh Disbrow. I'd like to remind everyone that today's call is being recorded. A replay of today's call will be available by using the telephone number and conference ID provided in the press release form from Monday, April 20, 2020. In addition, a webcast will be accessible live and archived on Aytu's website within the Investors section under Events & Presentations at aytubio.com. Finally, I'd also like to call your attention to the customary safe harbor disclosure regarding forward-looking statements. The conference call today will contain forward-looking statements including statements regarding the goals, strategies, beliefs, expectations and future potential of operating results of Aytu BioScience. Although management believes these statements are reasonable based on estimates and assumptions as of today, April 21, 2020, these statements are not guarantees of future performance. Time-sensitive information may no longer be accurate at the time of any telephonic or webcast replay. Actual results may differ materially as a result of risks, uncertainties and other factors, including, but not limited to the factors set forth in the company's filings with the SEC. Aytu undertakes no obligation to update or revise any of these forward-looking statements. I'd now like to turn the call over to Aytu's CEO, Josh Disbrow.

Thank you. Good afternoon, and thanks for joining today's call. On today's call, I'll discuss the company's recent activities relating to our fight against COVID-19 and some specific developments at the company that we expect will enable us to further take the fight to the coronavirus and, at the same time, create revenue growth opportunities for the company as we move towards profitability. This is a very exciting day for Aytu BioScience as we've taken another important step in the battle against the novel 2019 coronavirus. I'm excited to be leading the company on the front lines of the fight to the coronavirus. Our entire team is highly energized, and we look forward to what we can accomplish together against COVID and beyond. Just yesterday, we announced an exclusive global license from a renowned research hospital, Cedars-Sinai. With this license, we secured a worldwide rights to a medical device platform that has the potential to become a novel treatment for COVID-19 and after the pandemic has ended, a new treatment option for other difficult-to-treat infections in severely ill hospitalized patients. This treatment is a medical device called Healight. This UV light technology has been in development since 2016 by Dr. Mark Pimentel and his colleagues, Dr. Ruchi Mathur and Dr. Ali Rezaie, the core research team at Cedars-Sinai's MAST Program. MAST, which stands for Medically Associated Science and Technology, has been the source of numerous medical innovations at Cedars-Sinai, including the discovery of rifaximin for IBS, a highly effective irritable bowel syndrome treatment, and numerous other technologies. The MAST research team has studied the human microbiome for many years, most notably in the context of gastrointestinal and metabolic disorders. Through the course of studying various methods of eradicating problematic gut pathogens, it became clear to the team their UV light technology platform has broad potential application to eradicate pathogens across a range of conditions. This technology utilizes ultraviolet light, specifically UV-A light to eradicate pathogens in a very specific way. The UV technology is unique in that it delivers UV-A light only and specifically filters out the UV-C light, which is known to harm human cells. And by developing a device small enough with tiny LED lights, essentially a light catheter, this device can be administered in small areas, like the upper airways where the coronavirus primarily resides. In the context of treating coronavirus patients, this small light catheter would be administered to ventilated ICU patients by sending the device through the patient's breathing tube. Once positioned in the tube, a series of LED lights, emitting a specific narrow band of UV-A light will illuminate for a specified time at a specific wattage. Preclinical work has already been completed across a wide range of bacterial and viral pathogens, including coronavirus, in a variety of cell models. The results are encouraging and demonstrate safety and effectiveness in these models. The MAST group's work has shown efficacy in curing -- killing bacterial and viral pathogens while preserving human cells, which is the key clinical concept in this treatment. Specifically, recent work has demonstrated that when treated with this technology, coronavirus-infected human tracheal epithelial cells are preserved, while the virus occupying the cells is killed. This is very exciting and serves as part of the basis for moving this into human use quickly. The Cedars-Sinai team has already been in discussions with the FDA about a plan to introduce Healight for clinical use, and we'll be joining those efforts. Because of its demonstrated effectiveness in killing the coronavirus, Healight, we collectively believe, is an appropriate candidate for emergency access use during the COVID pandemic. Therefore, if the FDA agrees, patient use can begin immediately. We expect Healight to progress quickly into human use and enable us to help the many thousands of patients suffering from COVID-19 who are intubated in the ICU. Thousands of patients are intubated and in critical condition all over the country. As a very recent example at NYU Langone alone, 186 patients were intubated in a single day as reported in a CNN article just last week. The outcomes for intubated patients are very poor, with some estimates citing 80% mortality rates. These patients desperately need a solution. We are excited to be in a position to help these acutely ill patients, and we're working tirelessly with the Cedars-Sinai team already. Pilot-scale contract manufacturers have already been identified, and prototypes have been developed. Upon authorizations by FDA, we'll be in a position to move quickly to get an initial quantity out and start to scale. And for those of you who may have questions, the criteria for emergency use of medical devices as published by the FDA are as follows: number one, the patient has a life-threatening condition that needs immediate treatment; number two, no generally acceptable alternative treatment for the condition exists; and number three, because of the immediate need to use the device, there's no time to use existing procedures to obtain FDA approval for use. Based on the above, the Healight device is an appropriate candidate for such use. We'll be sharing more about the business model related to the Healight device as we move along. But generally speaking, for now, the Healight device is a razor-razor blade model, with a small device powering a disposable light catheter, which is inserted through the patient's breathing tube. The research team at MAST has already begun to build the supply chain, establishing initial product supply sources, production lead times, et cetera. With that knowledge transfer, we'll be able to progress the science into operational units with the ability to scale. We're very excited about this recent development and how this device may change the way we're treating COVID. Perhaps as exciting is the potential this device has outside of COVID-19. When you consider the broad application of UV-A light in the context of killing a broad range of pathogens, this device may have utility indefinitely in ICUs around the world. The team's experiments have already shown the impact of UV-A light and the impact it has on numerous bacteria and viruses, such that you can envision clinical utility in conditions like ventilator-associated pneumonia and influenza which has killed up to 62,000 Americans already this flu season alone. So think of Healight as a broad-spectrum antibiotic or antiviral that can be administered using a common procedure in intubated critically ill patients. In the immediate term, the focus of Healight is clearly on COVID. And as we move past this pandemic, we'll be able to shift our focus and resources and think long-term value creation for this device to address a broader range of infections. Today's COVID challenge is unique and we're working to address it, but we believe there is a product here that will live well past COVID and potentially help many patients around the world for years to come. Now a few words about our COVID rapid test initiatives. As you know, testing and specifically, antibody testing, is a key part of getting our country back to normal and to become fully operational as a society. These antibody tests or serology tests, as they're often called, are designed to identify the antibodies that develop in response to getting a COVID-19 infection. These tests are lateral flow immunoassays that deliver rapid results and require blood drawn from a finger stick or a venous draw. Importantly, the test we're distributing is one of very few tests with published clinical data demonstrating its performance, and the data are strong. Just last week, we announced the publication of data from a study done at Uppsala University in Sweden. This independent clinical study demonstrates a test accuracy of 98% and 94.1% for IgG and IgM, respectively, when using the gold standard PCR and PCR positive cases as true positives. Further, the study which included 29 COVID-19 positive cases confirmed by PCR and 124 healthy donors, the test showed an overall specificity of 100% and 99.2% for IgM and IgG, respectively. So in terms of the specific test performance, let me reaffirm that this is one of the very few tests that we're aware of that actually has peer-reviewed published data demonstrating the clinical performance. The performance data are out there for all to see and were generated by a true independent academic group. Importantly, the authors of the study note, "The high negative predictive value indicates that the rapid test will be useful for detecting past infections and possible immunity, which may be crucial for restoring social functions after lockdown." We expect the serology test to find an important place in large-scale testing, and we believe it is the antibody tests with strong data supporting their use, that will, of course, remain the most utilized. With Roche and Abbott having recently announced the launch of their antibody tests, we have gotten some questions relating to how these tests compare to the test we are distributing. In short, both the Abbott test and the Roche test will be used on these companies' large laboratory-based diagnostic machines. So these would not be tests that could be done in a physician office lab near the patient's point of care. These tests will undoubtedly be reliable and effectively identify COVID antibodies. However, the ability to deliver results in 2 to 10 minutes will remain an advantage of these rapid tests. In the interest of getting more tests out for broader use, the company announced last week that we're on track to get the current product shipment soon. While I'm not going to give an exact time line today, I can reaffirm that the product very much remains on track for near-term delivery. Also, we are very close to an agreement with a second supplier of a rapid test and expect to sign that distribution agreement very soon. This agreement will enable us to better keep up with the demand we're experiencing, so more to follow as we finalize that agreement. In summary, we've been very busy building a solid portfolio of COVID tools and we believe we can be an important part of the COVID solution. Aytu has stepped up to address the biggest health crisis in a generation, perhaps in our lifetimes, and we're very proud of that. And while we are spending a lot of our time addressing the COVID crisis through testing and now the Healight treatment, keep in mind that before this, we were already a business with a $43 million-plus revenue run rate and a newly expanded portfolio to include both Rx and consumer health products. Also, just today, we announced the publication of important data on our product, Natesto. Journal of Urology published data demonstrating in short that Natesto elevates testosterone levels while maintaining fertility parameters. In the first such study to show this, for the first time, the testosterone replacement therapy has shown solid evidence that men seeking low treatment who wish to maintain their fertility have a new option. But more on that in a few weeks on our upcoming earnings call when we address our fiscal Q3 March quarter. So just to wrap up, we're excited about playing an important role in the COVID fight. We thank you for the continued support of the company, and I'll now open it up for questions.

[Operator Instructions] At this time, we have no questions from analysts. I'll turn the call back to Mr. Disbrow for any final comments.

Thanks very much. Thanks, everyone, for joining the call today. I hope this was informative and gives you more insight into what we're working on, specifically the COVID projects. We'll keep you updated on our progress related to all of our COVID efforts and progress along the company's growth initiatives. Thanks again for joining. Have a good evening.

Thank you. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.