CNS Pharmaceuticals, Inc. (CNSP) Earnings Call Transcript & Summary

Good afternoon, and thank you for joining us today for a Virtual Investor CEO Connect segment, featuring CNS Pharmaceuticals. My name is Jenene Thomas. I am CEO of JTC IR, and I will be the moderator for today's event. I am very pleased to be joined by John Climaco. He is Chief Executive Officer of CNS Pharma. Great to have you on, John.

Thanks, Jenene, great to be here.

Well, for today's event, we will start with a brief overview of CNSP followed by a Q&A session to provide the opportunity for each of you to connect with John, hence, the CEO Connect segment. So before we get started, I want to remind our audience that CNS Pharma is publicly listed on NASDAQ and trades under the ticker CNSP. And during today's discussion, the company will be making forward-looking statements, and I encourage everyone to view the latest SEC filings on their website at cnspharma.com for the latest information. So John, we're going to dive right in. I'm going to turn it over to you for a high-level overview of CNS Pharma.

Great. Thank you. Yes. So CNSP, again, we trade on NASDAQ under that symbol. We are a drug development company specializing in neuro-oncology. We, as of recently, have 2 very exciting programs in this space, both targeting glioblastoma, which is the most primary -- most common primary and most deadly form of brain cancer. Very difficult to treat cancer, primarily because it lies within the source -- the tumor lies within the blood-brain barrier. This is this very specialized network of cells that we talk about a lot that generally speaking, prevents harmful substances from getting into the brain. Unfortunately, an unintended consequence of that design, of course, is that helpful drugs, helpful substances like chemotherapy agents often are prevented from getting into the brain as well. So we have 2 very exciting drugs, and I think you'll notice a commonality between the 2 of them. One is Berubicin, of course. We've been working on this for many years. It's the subject of a design to be pivotal study that will read data next year, and it is a novel anthracycline that was designed specifically across the blood-brain barrier, making it the first drug in its class to do so. It also has thus far in studies of over 250 people demonstrated no cardiotoxicity and that is a novel feature of anthracycline as well. So this study is a large study. It's a multi-center study currently here in the United States and in Europe. It will reap top line data in recurrent GBM patients in the first half of next year. And again, what we love about this is it's a molecule from a tried and true class. This is anthracyclines. They've been around for 70 years in clinical use. Before Berubicin, no anthracycline had been shown to cross the blood-brain barrier and actually treat primary or metastatic brain tumors in human beings and Berubicin can do just that, making it potentially a revolutionary addition to the oncology armamentarium. Now very recently, we announced the in-licensing of a drug, TPI 287, this is novel abeotaxane, similar idea ultimately derived from the taxane family. So another common blockbuster class of chemotherapy drug, it has been around for a very long time. Typically, these drugs also do not cross the blood-brain barrier. However, TPI 287 was specifically designed to do that. And once it's inside the brain, it has a completely different mechanism of action from Berubicin. This is a microtubular inhibitor. So basically, it stops -- prevents microtubular dynamics, which is a function of the of the cell that allows elements of the cell to break apart when the cell divides in have, obviously, a key component of cell division and replication, which is what tumor cells are doing that we're trying to inhibit. So this is another drug from a tried and true class that has now been modified across the blood-brain barrier. TPI 287 has already been tested in over 300 individuals in a variety of different cancers, including GBM with some extremely exciting results, 60% overall response rate, 40% progression-free survival at 6 months and a 13.4-month median overall survival for these patients, which is just extraordinary because most of these patients, of course, live only 4 to 6 months. So we're very excited about bringing TPI into the program alongside Berubicin, again, in keeping with our overall philosophy of designing and testing best-in-class drugs to help these very sick patients who have almost no treatment options today. So that's CNS.

Great. Okay. I appreciate that overview. So we are going to go to Q&A, and we have had the option for our participants to presubmit questions.

So we have some questions in hand. [Operator Instructions] And John, while we have people looking or thinking of some questions, I know I have a few for you. So the first one is, can you share with the audience what excites you most about Berubicin?

What excites me about Berubicin is how logical the design process has been. So it's -- I've said many, many times, it's great to work on novel mechanisms of action. It's great to work on really exciting, completely outside-the-box thinking products and projects, especially for diseases like this that have nothing. But what excited me was the opportunity to have a tried and true tool, do something that tool had never been designed to do before. And that is have an anthracycline cross the blood-brain barrier. So to me, the whole goal here for the company and how we create shareholder value and how we change patients' lives is to get drugs approved. And I believe that the fastest way to do that is to start with a class of drugs that's already been approved, that's been approved for 70 years that has hundreds of millions of doses of experience in clinic behind it. And say, if we could take and preserve the efficacy from that drug class, but get that class to do something that's never done before, that is cross the blood-brain barrier, wouldn't it stand to reason that, that drug would behave in a similar manner once it's inside the brain as all other anthracyclines do outside the brain. That is, it's a topoisomerase II inhibitor. It's going to reduce the ability of that enzyme to help cells divide and it's ultimately going to result in apoptosis of these cancer cells. Well, we've seen that for decades in the bench with anthracyclines, but no one could get them to cross the blood-brain barrier. We've done that with Berubicin. And so now my belief is that this trial, again, designed to be pivotal is going to demonstrate to FDA and EMA that we have an anthracycline that performs exactly like lots of other anthracyclines do, does the same thing. It just does it inside the blood-brain barrier on GBM tumors, and that will be a tremendous breakthrough. So I feel like -- at its most basic, we're starting with the deck stacked in our favor. We know that this mechanism of action and these drugs work against tumor cells. What we didn't know, and we will know conclusively at the end of this study is do they function that same way once you can actually get them inside the brain, and we believe the answer will be a definitive guess.

Great. Okay. Can you explain the rationale for in-licensing TPI 287 and why now?

Yes. So the rationale is simple. The mission of the company has always been the same. We want to develop drugs that help patients with primary and metastatic brain cancer. These patients have almost no options today. It's just a disaster for them clinically. And every neuro-oncologist in the world will tell you the same thing. So that's the clinical need. Now we have also always said that as excited as we are about Berubicin, and believe me, we are excited this is the best-looking drug that any of our investigators have seen coming through the drug development pipeline globally in many, many years. It's why we have as many patients as we do. It's why we have as many leading neuro-oncology centers collaborating with us. However, we have said there is no silver bullet for this cancer. This is a very difficult-to-treat cancer. It's very aggressive. It's very adaptable. Sadly, these tumors often respond to the insult of treatment by becoming even more aggressive. And so we have always known that we were going to need additional drugs in the pharmacopia to treat this cancer and it's very hard to find a drug that fits our high standards. Again, looking for something that we had confidence would work based on clinical outcomes in that class of drugs going back decades. We had that with Berubicin. We now have that with TPI 287. We needed a drug that conclusively crossed the blood-brain barrier. We've seen that with Berubicin. We've now seen that with TPI 287. We looked for 4 years at over 250 other compounds that we potentially might have licensed in to start another clinical program. Eventually, we settled on TPI 287 as the one with the most promising clinical data in over 300 patients to date. It took some time as these things do to put a transaction together with Cortice Biosciences, but we finally did. So what you're seeing today is not some sort of magical timing. It's really just a result of years of behind-the-scenes work, diligence, research, analysis, et cetera, finally coming to fruition in this transaction. So it's always really, I would say, been in our plan to do something like this. All the stars have finally lined or up and we found the drug and we're able to put a program and a transaction together.

Well, great. And congratulations on the Cortice transaction, by the way. So I have one more question. You've had an action packed several weeks on so many levels. Could you discuss where CNSP stands today related to your thoughts on the company's valuation and recent share price performance?

Sure. I mean, look, it's nothing new to hear me say that I think the company is deeply undervalued. We're trading below cash. We have 2 incredible programs: one, very late stage that's going to read next year on top line data for a trial that is powered, not just designed to be pivotal, but powered to be pivotal. So we believe that there's a path to approval from this trial. We'll find out, of course, next year, how FDA thinks about that. But to be trading where we are today at discounting all of this work to zero really seems like a significant miscalculation on the part of the market. We think that the company is worth many times what it's worth today. But the share price, I think, in recent weeks is probably a response to a period of time that it looked like based on our earlier cash report that we might run out of cash. That was never going to be the case. This company was never going to run out of cash on my watch and on Chris' watch. We're nowhere near that. We're in an actually very strong cash position today. We feel like we're in a very strong position with having TPI in our portfolio. So we're feeling like the company is positioned as well as it's really ever been. It's unfortunate that once again, the market disagrees with that. But I think that as confidence in what we've done filters through the market, we'll continue to see the share price recover is our hope and expectation.

Excellent. And John, I know you've been looking forward to this segment. So we are going to now get to the questions from investors and our audience. So the first one that was pre-submitted is, can you provide an update on the current clinical trial in the pipeline? And any significant progress recently made?

Sure. So we're at the late stage of CNS-201. That's our design to be pivotal study for Berubicin. So really, at this stage, we are watching and waiting. We have a number of patients, a lot of patients still on the study. And so we are following those patients, continuing to treat those patients and counting their information in our database on the trial. And as we do that, eventually, we will reach the number of terminal events that we need to do our statistical analysis on the study to determine which arm of the study Berubicin or Lomustine performed better. But we are approaching that time. So we're still in the third quarter. We've guided that we will release results for that study in the first half of next year or so. And we're definitely on track to do that without question. So I would say that investors should feel comfortable with our guidance on the timing of the trial. In terms of what we can see, nothing has changed. Everything is going along beautifully. Patients are being treated. Data is being submitted and analyzed. And so that's basically where we are.

Our next question, how is the feedback from trial participants being incorporated into the development of new treatments or products?

Yes. So we have a whole host of secondary end points to this trial. Again, the primary endpoint is overall survival, very simple, who was living longer, are those patients on Berubicin or are those patients on Lomustine. There are many secondary endpoints, including a number of quality-of-life measurement and tolerability of this drug, as well as elements that go toward the design of the trial itself. So we have made modifications at times to the trial to make it easier for patients, to make it easier for investigators. We've also done things to emphasize elements of the study to make sure that we're getting the absolute highest quality data. I think that one thing that may be lost on folks outside this business is that this is really a craft in a way. We're not just collecting data from silicon sources, right? These are human beings that are interacting with nurses and their oncologists and their physicians' assistants and their radiologists and their pharmacist, and all of that. We collect all of that information. And we look for places that we can do a better job by the patient and/or make sure that we are getting the highest quality data, the cleanest data, the most uniform data for our study because what we've said from the beginning is when you say something is designed to be pivotal as this study is, this is designed to be the pivotal and absolute definitive analysis of Berubicin in this condition. So in order to do that, you want to be looking at like versus like as much as possible. And that always gets a little crafty when you're dealing with human beings because it's not just -- no one patient looks identical to the next one. But we have taken care to collect all of that data and make sure that it's as clean as possible and that we get the best result at the end, not just a positive result, but the most definitive result because the heartbreaker in clinical trials is, of course, when you have something that looks really good, but the data isn't clean. And so you can't give a definitive answer. We believe this trial will give a definitive answer on Berubicin.

Great. So I do see several people have joined since the start of this segment. [Operator Instructions] So for our next question is, can you provide insights on whether the recent dilutive measures will continue in the near future?

Sure. So I understand the shareholders' feelings about some of this. I mean, of course, I'm a shareholder myself, one of the original shareholders, I've put plenty of my own money into this project. So it's painful for me as well. It's painful for everyone from the Board to the management team, for all the shareholders and friends and family that have supported this project. So we are conscious of that. Believe me, we understand it. I can't really speak to our future financing efforts at this point. But what I can say is that, as always, we will be acting in the best interest of the shareholders and all constituents to continue to finance the company to protect our NASDAQ listing and to further the study. This means that from time to time, we do, of course, have to raise capital because we are not a revenue-generating company as of yet and continuing this trial and delivering data from this trial again and keeping what I've been saying for years is really the only way that we deliver lasting and true shareholder value. The stock may ride up and down. But at the end of the day, whether or not this project is worth, what we believe it is worth will be a direct function of our success in continuing the trial to its completion, which, of course, requires cash. We're basically in keeping with what we've guided for in terms of the overall cost of this trial. We're getting toward the end, costs are beginning to come down as patients come off the study. And so we look to finance the company in the least dilutive manner possible. So it's been a very big challenge in the last few years. Investors have gotten very aggressive in this space in terms of adding warrant coverage on to deals and other anti-dilutive protective measures. We've done deals that have included those features, of course, in the past when we needed to raise capital. Now recently, we've been in, I think, a very strong position to do at the market transactions that are the least painful to shareholders even when the share price is down. And that's really always what we're looking to do is take advantage of the least painful, least dilutive capital measures that we can while securing a sufficient amount of cash to finish this trial, which is what we have on hand right now. So that's -- I know it's been painful. At the same time, we're very happy because on behalf of the shareholders, we have secured sufficient financing to complete this study, which again is the primary value driver that the company has been moving to complete for years.

Excellent. So you already answered part of this question in your response to the prior question. But I thought we would tie it in now. So do you personally invest your own money into the company's stock? And if so, what gives you confidence in its future performance?

So I do and I have, and I will continue to do so. Of course, there's a lot of times that we can't because we're in receipt of material, nonpublic information, so we can't trade. So shareholders shouldn't necessarily look at the timing of any insider investments as anything other than just being in response to those rules when we can and can't do things. But look, what gives me the confidence to do this is exactly the same information that the public knows. We have talked Abeotaxane, Berubicin and why we're so excited about this drug. Again, to me, it just all comes down to how logical and how well this program holds together from inception to where we are today. The initial hypothesis was so simple that I think really anyone could understand and that is to say, we have a very difficult tumor to treat. It's inside this very hard-to-penetrate barrier. We have a class of drugs that destroys these type of tumor cells in the test tube, but historically can't do it inside the blood-brain barrier. Well, what if we had a member of that class that could cross the blood-brain barrier. Well, now we have 2. We have Berubicin and anthracycline that crosses the blood-brain barrier, and we have TPI-287 and Abeotaxane that crosses the blood-brain barrier. Exact same philosophy, exact same idea. Start with something you know works definitively, get it across the blood-brain barrier and then design a pivotal trial that will conclusively and definitively prove that, that drug not only crossed the blood-brain barrier but treated those tumor cells. I believe both compounds that we have can do that and do that very effectively. I think we used together over time, they will absolutely materially change the way this cancer is treated. That's what gives me confidence. And probably more to the point, that's what gets me up every day and charging to do this work for the last 7 years because I think that we have an awesome opportunity that, in many ways, I would say, remain hidden in plain sight. These 2 classes of drugs have been somewhat dismissed for their opportunity to treat this cancer. And yet when you could successfully modify each of them to be highly lipophilic and cross the blood-brain barrier, I think you open up a whole world of opportunities but they're always based on the tried and true nature of these molecules. That's what does it for me.

Great. Our next question has full compliance with NASDAQ listing requirement been satisfied? And if not, could you elaborate on what is the issue?

Yes. So we have satisfied the shareholder equity component quite comfortably through our financing transactions, which again was another piece to why we did what we did. Our listing is critical to us. We needed to preserve it. We needed to satisfy that. And really, the only way to do that was to raise capital in the short order. So we have notified NASDAQ that we've satisfied that requirement. Of course, the bid price issue remains out there right now because we're below $1. Having said that, that particular deficiency has a fairly long runway for correction. So we feel like we've got plenty of time ahead of us to do that and hopefully news coming later this year or early next year will have a positive impact on the stock from our trial.

Our next question, has the NIH grant been awarded?

No. It has not been awarded. It has not been awarded yet. So we don't have that grant right now.

Our next question, is CNS the sole proprietor of TPI and Berubicin, and to clarify, you're saying that so far, this drug during its Class II trial is so far performing successfully?

Yes. If I read the question correctly, yes, on both counts for these 2 drugs. Our TPI license, it's a territorial license. So there are some areas of the world that we don't have rights to, but we didn't feel they were as important as the areas that we do have rights to. And in terms of clarifying on the study, I should say, remind everyone, we are blinded to the results of the study. So we do not have direct insight into the performance of Berubicin at this time, and we won't until the end of the study. Having said that, I think we have 2 important indicators that we can look at for verification of how the drug is performing. The first is, of course, back in December, we announced that the Data Safety Monitoring Board, which is an independent group of physicians that reviewed both safety and efficacy data from the study at that point recommended that the trial continue without modification. Our position on that is that had this drug been lacking on either front, that is to say that it appeared, it was not well tolerated or unsafe or that it was lacking in any efficacy signal, they would have recommended that we stop the study for ethical reasons or potentially modify the study. What they said instead was continue to study as planned, which was an excellent indicator that the drug is safe -- so far appears safe and must be generating some efficacy signal. On a sort of secondary basis, and again, this is not primary data from the study, this is just us observing the number of patients that still remain on the study is very significant. And the length of time that they have been on the study is very significant. This is a cancer that kills patients on average in 4 to 6 months when they relapse. So very, very short, very, very tragic and all but unchangeable for these folks, frankly, absent -- some new intervention. And we're seeing patients remain on this study well in excess of those dates. So all of that combined gives us, I think, a very positive feeling that things are going along well. Now of course, that's no substitute for final data and final statistical analysis, which will be coming at the end of the study. But as I said, from the limited amount that we can glean at this point being blinded to the study, we're very pleased with what we see.

Lots of questions keep coming in, so we're going to keep going here. Okay. So our next question, will you have to complete another reverse split if the stock price doesn't meet listing requirements prior to reporting Berubicin top line data next year?

Yes. Sure. Good question. I guess I would say, I certainly hope not. I certainly hope that the market responds to the news and the efforts that we're putting out and realizes that we are just trading at a ridiculous discount. I mean, let's put it this way. Everything that we talk about today substantively in terms of Berubicin and TPI-287 and the work that we've been doing for 7 years, the market is discounted to 0, as if it doesn't exist. Now that just doesn't make any sense to me. I think that the market is further discounted us at this point even below the cash that we've indicated that we're holding, which also doesn't make sense. So it stands to reason that at some point, we are going to see the stock recover. Again, I can't comment as to our future financing activities. However, I can say that we think the NASDAQ listing is very important and we will respond to protect it at the time given the tools that we have at our disposal if that's required. Certainly, our hope is that well in advance of that, the market will recognize that this is a deeply undervalued stock.

Great. Our next question, is there any really good news for CNSP?

Yes, we've got good news for CNSP. I mean, look, let me put it this way, I think we've got the only drug in a late-stage trial that can really make a difference for these patients. I think that if we bring a blood-brain barrier penetrant, anthracycline with good, solid results and excellent safety profile and lack of cardiotoxicity to FDA, we will have a drug approval. I can't imagine for these patients that if our data is strong, I know our trial is absolutely state-of-the-art and top line just beautifully conducted over all these years. If we bring that to FDA, I think we have a very good argument to get this drug registered. That's incredible. It's groundbreaking news. There hasn't been a drug approval in this space for decades. There's nothing like this. And if you understand what it means to say you have an anthracycline that's noncardiotoxic, you can forget about GBM. And you can say that you may have a drug that could globally supplant doxorubicin, which is one of the fundamental cornerstones of chemotherapy for a couple of dozen different kinds of cancers and we all accept its use subject to a black box limitation on its cardiotoxicity. We just can't give more than a lifetime maximum of that drug because you create the tragedy of, oh, we've cured the cancer, but now 10 years later, we have patients dying of heart failure. We don't want to see that ever. Well, Berubicin may be the only non-cardiotoxic anthracycline out there. If it also crosses the blood-brain barrier and treats GBM, to me, this is a grand slam chemotherapy drug. You can look at exactly the same story in TPI 287. Abeotaxane, taxanes do not cross the blood-brain barrier. So they're awesome for all kinds of other cancers. They don't cross the blood-brain barrier, so you can't use them in neuro-oncology problems. Well, TPI 287 can, it was designed to cross the blood-brain barrier in the same way that Berubicin was designed to cross the blood-brain barrier. We spent years looking for another program. We rejected over 250 other compounds. And I mean, we did more than just glance and kicked the tires. We did deep-dive diligence on hundreds of compounds. We rejected them all on the basis of safety, efficacy, clinical data or lack there of all of these things. TPI came to us having been tested in over 300 patients in mono and combination therapy, incredible safety profile, clear ability to cross the blood-brain barrier and knock out clinical results in GBM. So I am super excited about both of these things because they work together so beautifully and they are exactly what we have been saying we want to do with our expertise for years. We didn't just pop out of -- we didn't just suddenly appear on the scene with 45 leading clinical investigators and partnerships with institutions around the world to create a clinical network that enables us in 2.5 years to enroll 252 patients to study Berubicin when other studies are struggling with GBM patients to recruit a dozen of them. We recruited them because we have these relationships. We've built this network. We've put this machine together, and now we want to push more content through it to try to get as many helpful drugs approved via our efforts as possible. So I am incredibly excited about where we are and what we're doing. We're on the cusp of delivering results on Berubicin, which we've been working on for more than half a decade, and we're ramping up and using everything that we've learned to study Berubicin to start an entirely new program but the one that fits just hand in glove with what we've done with Berubicin. So to me, this is just about the most exciting time since we took the company public in '19.