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

Good afternoon, and thank you for joining us for the Aytu BioPharma webcast and conference call discussing the company's acquisition of the assets of Rumpus Therapeutics. With me this afternoon are Aytu's Chairman and Chief Executive Officer, Josh Disbrow. And Mr. Disbrow is joined by Dr. Hal Dietz, Professor of Genetic Medicine at Johns Hopkins University School of Medicine and Investigator at Howard Hughes Medical Institute. Aytu BioPharma issued a press release this morning with details of the company's acquisition of the Rumpus Therapeutics' Rare Disease assets. A copy of the press release is available on the news page of the company's website at aytubio.com. I'd like to remind everyone that today's call is being recorded. A replay of today's call will be available on the company's website following this call. 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 like to call your attention to the customary safe harbor disclosure regarding forward-looking information. The conference call today will contain certain forward-looking statements, including statements regarding the goals, strategies, beliefs, expectations and future potential operating results of Aytu BioPharma as those relate to Rumpus Therapeutics asset purchase. Additionally, Dr. Dietz may make statements relating to enzastaurin, Ehlers-Danlos syndrome and related topics not necessarily reflective of the company's views, opinions or estimates. Although the company believes these statements are reasonable based on estimates, assumptions and projections as of today, April 12, 2021, these statements are not guarantees of future results. Time-sensitive information may no longer be accurate at the time of any telephonic or webcast replay. Actual outcomes 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 the forward-looking statements. I'd now like to turn the call over to Aytu's CEO, Josh Disbrow.

Thank you, Paul. Good afternoon, and thank you all for joining us today. This morning, as Paul said, we issued a press release announcing that we have acquired the assets of Rumpus Therapeutics and its affiliates, and specifically, their pediatric onset rare disease assets. I'll go into more detail in a moment, but having acquired AR101 or enzastaurin for rare disease indications, inclusive specifically of vascular Ehlers-Danlos syndrome or vEDS, marks an important step in our evolution as we at Aytu seek to become a leading pediatric specialty pharmaceutical company with a growing pipeline of innovative treatments. Our evolution began over 18 months ago with the acquisition of suite of pediatric products, followed by the acquisition of pediatric and ADHD company, Neos Therapeutics, just a few weeks ago. That evolution continues with today's announcement. While we believe this transaction is an important value driver for Aytu, what's most important is the potential impact this asset may have on the vEDS patients we hope to serve. This late-stage development asset for a rare genetic disease with pediatric onset presents an opportunity for Aytu to provide much-needed hope to the patients and caregivers of the patients living with vEDS around the world. vEDS is a catastrophic life-shortening disease, and there are no FDA-approved treatments available. We seek to change that starting today. We believe that with AR101 in the hands of Aytu, we can progress this program into a single pivotal study such that pending clinical results, we'll be in a position to help the thousands of vEDS patients around the world living with this devastating disease. First, I'll share some highlights of the Rumpus transaction and the opportunity. And then I'll hand the call over to Dr. Hal Dietz, who is joining us today for our call. Dr. Dietz is a Professor of Genetic Medicine at Johns Hopkins and an Investigator at Howard Hughes Medical Institute. I'm very pleased to be joined by Dr. Dietz. He's the lead investigator and co-inventor of the intellectual property surrounding AR101 for the treatment of Ehlers-Danlos syndrome and other connective tissue disorders. We've asked Dr. Dietz to chair our Scientific Advisory Board for the enzastaurin program as we progress this asset into the clinic and we hope, ultimately, toward commercialization. I'll provide a more fulsome introduction to Dr. Dietz prior to handing the call over to him. Thanks very much, Dr. Dietz, for joining me on the call. Through the acquisition of the assets of Rumpus, we are acquiring a global license to AR101, enzastaurin for connective tissue disorders specifically inclusive of Ehlers-Danlos syndrome. We have structured the acquisition such that the consideration to Rumpus has paid largely in milestone payments upon achieving success at various future milestones. We're paying $1.5 million in cash upfront, and the remainder of the consideration is payable upon success. The success-based milestones are payable at Aytu's option in any combination of cash or stock. I'll also highlight that along with the acquisition of AR101 and the associated IP, the co-founders and principals of Rumpus Therapeutics will join the Aytu executive team. Topher Brooke and Nate Massari founded Rumpus with the mission of addressing some of the world's most difficult-to-treat rare pediatric conditions. Topher and Nate are seasoned pharmaceutical executives with extensive backgrounds in rare disease from early identification through licensing, clinical development and ultimately commercialization. Nate and Topher will add important elements to our management team given their experiences in rare disease, in business and product development and commercialization, but most importantly, their passion to see this asset progress through clinical development. I'm happy to have these 2 leaders join Aytu's executive team and excited that they'll be driving the AR101 program for the company. AR101 presents Aytu with a compelling opportunity to build the first and only approved therapy for the treatment of vEDS, an orphan disease caused by a genetic mutation of type III collagen that is fatal, with 50% of patients unable to survive past their 50th birthday. The foundational science behind AR101 is a result of research from the lab of Dr. Dietz. As you will hear from Hal in a moment, his landmark research is the first of its kind to replicate vEDS and implicate the protein kinase C or PKC pathway as the driver of the disease. Furthermore, robust preclinical efficacy models demonstrate that enzastaurin as an oral PKC beta inhibitor can regulate the cellular pathway and prevent vascular rupture in Ehlers-Danlos syndrome. This product candidate has a rich history and data set in over 3,300 patients and includes a significant amount of toxicology, preclinical, clinical and CMC work performed with enzastaurin in oncology and other fields. With the large clinical data set, coupled with the compelling preclinical work and novel modeling done by Dr. Dietz's group in Ehlers-Danlos, we are confident that there is an accelerated path to a single pivoted trial -- pivotal trial to meet the safety and efficacy standards from the FDA for the potential approval of AR101 in vEDS. Rumpus has already engaged with FDA, and conducting a single pivotal trial for the approval of 101 is our expectation. In the U.S. alone, over 7,000 patients are living with vEDS. Globally, the prevalence is 16,000 identified individuals. It's likely much higher. The opportunity to help these patients, all currently with no approved treatments, is what will motivate us throughout this program. Additionally, research suggests opportunities for life cycle management with 101 in other related rare and orphan diseases, such as Marfan syndrome, Loeys-Dietz syndrome and others. Ehlers-Danlos is the most near-term opportunity, but additional needs exist in these related inherited connective tissue disorders. To tell you more about the nature of this deadly disease, the scientific rationale and the next steps in clinical development, I'm pleased to introduce Dr. Hal Dietz. Dr. Dietz is the Victor A. McKusick Professor of Genetics in the Departments of Medicine, Pediatrics and Molecular Biology and Genetics at the Johns Hopkins University School of Medicine and Director of the William S. Smilow Center for Marfan Syndrome Research. He has also been an Investigator at Howard Hughes Medical Institute since 1997. He is recognized as a leading authority on connective tissue disorders and is the world's leading authority on Marfan syndrome. Dr. Dietz conducted genomic mapping and research on therapeutic agents for deficiencies in the genetic protein fibrillin, which is linked to Marfan syndrome specifically. He has received more than 50 national and international awards and honors, including the Antoine Marfan Award from the National Marfan Foundation and the Art of Listening Award from the American Heart Association. Dr. Dietz is a reviewer for 19 different organizations, including the American Journal of Cardiology, the Archives of Pediatric and Adolescent Medicine and the Journal of Clinical Investigation. Over more than 2 decades, Dr. Dietz has mentored approximately 50 predoctoral and postdoctoral researchers. Further, he's authored over 200 original publications in peer-reviewed journals, 22 textbook chapters and 226 abstracts and has also delivered more than 350 lectures on Marfan syndrome and related genetic disorders. Dr. Dietz completed his B.S. at Duke University and received his M.D. from SUNY Upstate School of Medicine. He completed a pediatric residency and cardiology fellowship at Johns Hopkins before joining the faculty there in 1992. He is also Board-certified by the American Board of Pediatrics. To discuss the impact of the Ehlers-Danlos syndrome and discuss his research on enzastaurin specifically, I'll now hand the call over to Dr. Hal Dietz. Hal, take it away.

Thanks, Josh. I'm really happy to be here today. vEDS is an autosomal dominant connective tissue disorder causing -- caused by heterozygous mutations in the COL3A1 gene that encodes type III collagen. Confirmatory diagnosis can easily be done by a genetic testing. Patients with vEDS face significant risk of vascular events. Onset often occurs in adolescents with 25% of individuals experiencing an event before the age of 20 and 80% before the age of 40. Unfortunately, half die before the age of 50. There is no currently approved therapy, and the standard of care involves watchful waiting via periodic arterial imaging. Our research has elucidated that vEDS is not a disease of vessel wall structure alone, but rather is driven by aberrant cellular signaling. As illustrated, the mechanism of disease is caused by the COL3A1 mutation, which results in a loss of cellular homeostasis. Abnormal cell signaling, more specifically, upregulation of the well-known PKC/ERK pathway is the driver of disease. As an analogy, the deficient collagen is essentially like dry kindling. Left alone, the structure may not be problematic. However, when combined with a spark or a highly active PKC/ERK signaling axis, the result is unfortunately life-threatening catastrophic ruptures, which can lead to death. Therefore, and quite critically, our findings highlight that nature has found a way to beat this disease and revealed a treatment strategy with PKC inhibition. From the outset, our preclinical model sought to mimic the human condition and recapitulate all features of the disease. We utilize the same class of genetic mutation most prevalent in vEDS patients, resulting in a model with representative timing and location of vascular events. Our model generated identical structural histology and mechanical characteristics, and our unbiased findings demonstrated that biomechanical fragility alone does not lead to vascular events. Objective comparative transcriptional profiling by high-throughput RNA sequencing of the aorta displayed a molecular signature for excessive PKC and ERK cell signaling. As a next step, treatment with a multitude of pharmacological agents was utilized to test for rescue of the phenotype. Based on the scientific rationale for intervention along the PKC/ERK axis, treatment with AR101 enzastaurin proved efficacious in multiple preclinical models and indeed prevented death due to vascular rupture. In order to provide a biological link from the preclinical model to vEDS patients, vascular tissue was studied, and the culprit PKC/ERK pathway showed a clear signature for upregulation in humans who had died from vEDS. From there, licensing the well-characterized PKC inhibitor enzastaurin provided access to a wealth of nonclinical and clinical data to marry with our vEDS specific findings. AR101 has been studied through Phase III, primarily in diffuse large B-cell lymphoma. While not yet approved by any regulatory authority around the world, enzastaurin has been evaluated in over 3,300 patients in more than 60 clinical studies. Taken together, the preclinical efficacy model and the human vascular tissue samples, along with the extensive previous pharmacokinetic safety and tolerability findings, provide robust support for once-daily dosing of 500 milligrams of enzastaurin in the potential treatment of patients with vEDS. Given the nature of this rare disorder, the high unmet medical need, the well-characterized nature of AR101 enzastaurin and guidance from the FDA, the right next step, we believe, is to study one of -- to study the efficacy of AR101 in vEDS patients. And that is the important next step here in the development of enzastaurin. I'll now hand the call back to Josh.

Thanks very much, Hal. Pursuit of an indication for AR101 enzastaurin in vEDS not only offers the chance to help patients in desperate need, but also provides a substantial commercial opportunity for Aytu. The prevalence of vEDS totals roughly 16,000 patients in major global markets, at least those that have been identified. And with market penetration and pricing in line with orphan, enzastaurin provides substantial commercial potential. Furthermore, AR101 offers the potential for a pipeline and a product, so to speak, given the additional life cycle management opportunities in adjacent vascular disorders such as, I previously mentioned, Marfan syndrome, Loeys-Dietz and other inherited aortic aneurysm conditions. So given successful product development efforts, commercialization support will be offered by intellectual property inclusive of a suite of patents we're pursuing around the world with the priority date of March of 2017 and the market exclusivity that would a company orphan drug designation. Accordingly, we'd expect 7 years of exclusivity in the U.S. and 10 years in other major markets. That, plus an expected patent term through 2038 through the Hopkins patents, and we are excited about the broad protection we expect to have with the enzastaurin asset. Before we conclude the presentation and then open up for Q&A, let me express my sincere gratitude for Hal and his groundbreaking research and for my appreciation to the community, including several key thought leaders and the numerous patient advocacy organizations that are behind these patients. We're excited for the opportunity to tackle this disease together and hopefully provide a novel treatment option for these patients as this program gets underway. So with that, I'll pause, and we can now open the call for questions. So Paul, go ahead and open it up.

[Operator Instructions] Our first question comes from Jennifer Kim with Cantor Fitzgerald.

And again, congrats on the build-out of a peds-focused pipeline. Maybe to start off, could you walk us through a few more details around the development plan for AR101? In the single pivotal study, what are your expectations around the sizing and the timing of that trial? And what's really the bar for success in this kind of study? And as part of that, I'm wondering, would the trial exclusively enroll pediatric patients? Or would it be inclusive of adult patients?

I'm just taking some notes here. I want to make sure I get all these, Jennifer. So realistically, the timing, Jennifer, this is a 3-year build in the context of start to finish. So the folks at Rumpus, specifically Nate and Topher, have had dialogue with FDA, have gotten general agreement on the protocol. Sizing is going to be in the neighborhood of 220-or-so patients. It would be randomized 1:1 for patients in the active arm plus standard of care compared to standard of care. So realistically, we think we can be in a position to have the IND submitted by the end of this calendar year and essentially a 3-year track, assuming enrollment over the next 12 months or so following submission of the IND. Bar for efficacy, it's relatively straightforward. You're really tracking events, and you're really looking to identify over the course of the treatment time frame reduction in aneurysms dissection, pseudoaneurysms and the like. So essentially looking for -- and that will be done exclusively via imaging as the primary endpoint, but there'll be a significant number of secondary endpoints. And we'll be in a position to detail the specifics around the study once we have full agreement from the FDA and are ready to start. So hopefully, that gives you some sense for timing.

Yes. Great. Maybe a small follow-up on that. Do you have timing in mind on when we could expect, I guess, like a finalized update following your discussions with the FDA that the pivotal study is all set and agreed upon?

Yes. Realistically, Jennifer, we -- realistically not this coming quarter, but very likely the early part of -- or I'm sorry, not this current quarter, but realistically, early to mid part of our fiscal '22, which starts July 1. So realistically, in the July to September time frame, we would expect to be at agreement with FDA and in a position to submit with the hope that the IND gets submitted by the end of the year -- calendar year.

Okay. That's great. That's super helpful. And I did have a question for Dr. Dietz. What is your confidence in the translatability of preclinical work and modeling done around PKC inhibition for vEDS? Maybe into the clinical such real-world setting, is that translatability higher than it would be in other disease settings? Or how do you think about that?

Well, thank you for that question. I think it's important to emphasize that these are truly bonafide mouse models of vascular EDS. In fact, we introduced specific mutations that had previously been seen in people with vascular Ehlers-Danlos syndrome. We have comprehensively characterized these mice and showed that they recapitulate virtually every aspect of vascular EDS that have been examined, including the timing and location of vascular events, including the predisposition that associates with adolescents, for example, in patients with vascular EDS. We've also examined patient tissues. So we've been doing reality checks along the way to make sure that we find concordant alterations and cellular signaling, and that has proven to be the case. So really, we've done, I think, a very detailed job of making sure the animal model is truly replicating the mechanism of disease. We validated that there are concordant findings in human tissues. So as mentioned, we think that the only correct next step is to move forward to a trial, and we're quite optimistic about the potential.

Okay. Great. I have one last question. I think it's direct to everyone, but maybe Topher and Nate as well. I think in the press release, you said you're leading further development of the overall pediatric onset rare disease pipeline. For the overall company, as you continue building out the peds pipeline, is rare diseases the more attractive opportunity here given the rather speedy pathway to approval that might be allowed? Or are you looking at, I guess, all sides of potential pediatric diseases?

Yes, I can take that. And Nate and Topher, if you guys feel inclined, you can jump in as well. I'll say, Jennifer, we'll continue to be opportunistic, but we certainly believe that rare disease is a ripe opportunity for the reasons you mentioned and, frankly, for the ability to help these patients that are currently without options. So we'll evaluate opportunities once we get this up and running. This is the priority here in the near term. But as we get the program established and obviously have enrollment underway, we'll continue to evaluate things opportunistically. Nate and Topher, we're bringing them on not just to run this program, but to really continue to canvas opportunities and specifically in and around pediatric onset rare disease. And let me say, I apologize, I didn't answer one of your questions earlier. The trial will be largely adults. That's where -- really where -- when you get to events and you start to obviously see the catastrophic events and the ability to accumulate the context of a study, the majority of the patients will be adult, understanding that, obviously, this is a pediatric onset disease where you -- patients can begin experiencing events, relatively young in life for boys sort of as they enter and move through puberty and for women as they enter child-bearing age. So sorry, I missed that -- missed the answer on that one. But yes, so we'll be focused around efficient avenues to commercialization with an eye towards pediatric rare disease.

Okay. Fantastic. Topher and Nate, as you're leading further development in that pipeline, are there any particular areas of disease that you would highlight as attractive or still canvassing?

Yes, go ahead, Nate or Topher.

This is Topher. Thanks for the question, Jennifer. So I would offer this, and there are critical criteria that we evaluate these programs by. And we think that there's some magic by taking science forward and market back. And that sort of methodology is the one that led us to our great relationship with Dr. Dietz and the chance to do some great -- some good in vascular EDS. We looked at over 300 technologies from major pediatric academic institutions all the way from the Great Ormond Street Hospital in London to Toronto SickKids down through the Florida institutions and out to California. We've got great depth of relationships amongst these major pediatric academic institutions and have a great deal of confidence that the right next program will come along. The first order of business is to focus on standing up this clinical trial and doing the definitive trial in vascular Ehlers-Danlos syndrome.

Okay. Great. That's all for me. And congrats again.

Thank you. Thanks, Jennifer. Appreciate your questions.

[Operator Instructions] There are no further questions at this time. I would like to turn the call back over to Josh Disbrow for any closing comments.

Thank you, Paul. Thanks again to everyone for attending today's call. I hope we were able to convey the large AR101 opportunity and our sincere excitement about this transaction. We're optimistic about the potential of 101 to provide much-needed hope for patients everywhere with Ehlers-Danlos syndrome. Thanks again to Hal for joining us today and to him and to his team for their robust research. Between Dr. Dietz's research in connective tissue disorders and with over 3,300 patients having been studied with enzastaurin and other indications, we have a solid basis of understanding the safety of the molecule and have reason to believe this program will yield a positive outcome. Additionally, we believe we, at Aytu, are the right company to take this opportunity forward based on our focus on pediatric medicine and our desire to build a pipeline addressing significant needs such as this. We look forward to getting started on this important program and to keeping you all informed of our progress as we move along. Thanks again. Have a good day.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a wonderful evening.