Decoy Therapeutics Inc. (DCOY) Earnings Call Transcript & Summary

Good evening, everyone. Let's go ahead and find a seat. My name is David Arthur, and I am the CEO of Salarius Pharmaceuticals located in Houston, Texas. We are a clinical-stage biotechnology company focused on oncology, and we develop drugs that help correct the misregulation of gene expression. Many times, the body will have healthy genes, but they misread the genes, and that's where we are trying to develop treatments. Now the area of correcting misregulation of gene expression is called epigenetics. And there are a number of companies out there. This is a very hot space that we believe we are in. And many of these drugs, including the area where we are pursuing, LSD1 inhibition has been shown to have a potential for an immunologic effect. Now our lead drug is seclidemstat. We are not a chemotherapy agent. We are not chemo toxic. We are an oral, twice daily, reversible inhibitor of the LSD1 enzyme. We regulate misregulated gene expression. We're in 2 clinical studies. The first one is a Phase I/II study in Ewing sarcoma, which is a rare pediatric bone and soft tissue cancer that is absolutely devastating. The second study is in solid tumors. We believe we have tremendous potential within solid tumors, and this is a basket study to help us understand not only what the dose is, where we want to ultimately treat patients, but also help us understand how best to pursue the study of solid tumors. We're going to talk about that in a minute. Now what's exciting about Salarius is not only that we recently went public in July of last year, but also the fact that since inception, the company has raised about $40 million, and about half of that is non-dilutive funding. So I'll say it again, non-dilutive funding. $18.7 million of that money is from the Cancer Prevention Research Institute of Texas. That's 2-for-1 matching funds for development of this drug in Ewing sarcoma. In addition, we received tremendous financial support from the National Pediatric Cancer Foundation, whose mission is to put less toxic treatments into the hands of children as quickly as possible. So as an example, if I get an invoice for a clinical study, a $3 invoice, I take $1 of investor money. I take $2 of separate non-dilutive matching funds. I put those $3 together and pay the invoice. That's effectively how it works. Now one of the attractive items of pediatric oncology are the programs that the FDA offers to help incentivize companies like Salarius to pursue pediatric indications. We've already received 3 of the designations that you look for in pediatric oncology development. One, we have already been designated a rare pediatric disease. That is the first step in receiving the priority review voucher upon approval of your drug. Two, we already have orphan drug designation. Three, a few weeks ago, we received fast track approval from the FDA. This is a great story and represents our speed-to-market proof-of-concept strategy, 1 of 2 prongs. The second prong being market expansion into solid tumors and potentially immunotherapy. We are going to target cancers, solid tumors with genetic mutations that we believe will make them more sensitive to LSD1 inhibition therapy. So speed-to-market, expand the market. Now I touched on both of the clinical studies, and here is the approach that we're taking. Both studies have a dose escalation phase. That means we begin treating patients. We increase the dose. Once we establish the maximum tolerated dose, we will enroll 14 to 20 additional patients at the maximum tolerated dose where we are then able to treat them for a longer period of time gather greater safety data and also hopefully, get a peek into efficacy. We plan on each study enrolling about 50 patients, 30 in dose escalation and 20 in dose expansion. And as I mentioned, we have a lot of excitement around a potential immunotherapy or combination regimen with checkpoint inhibitors. These are big drugs. And we are currently doing a lot of work to understand how best to consider moving these into the clinic. But the story today is Ewing sarcoma and advanced solid tumors. What is special, I believe, about Salarius in addition to the non-dilutive funding, of which we still have $9.1 million, up to $9.1 million remaining with the state of Texas available for us to use, is that in the first half of this year of 2020, we will begin releasing clinical data from the dose escalation phases. That is our plan. In the second half of this year, we plan to release additional data, not only on dose escalation, but now beginning to look at the early portions of the dose expansion study. So broader patients at a therapeutic -- at has maximum tolerated dose. And then in the first part of 2021, deliver even more robust data from the expansion studies. So over the next 6, 12 and 18 months, we're going to be delivering the clinical data that we believe represents significant value inflection points. Now let's talk a little bit about the overview of what it is we do. I talked about correcting the -- addressing the misregulation of gene expression, let's call it, modulation of gene expression. In a healthy cell, the body reads the DNA correctly, and the body produces the correct balance of proteins. Now sometimes you have incorrect gene expression as is the case in Ewing sarcoma. And what happens is the body misreads these genes and you get an incorrect balance of proteins. For example, genes that suppress tumors are turned off incorrectly. Genes that grow tumors are incorrectly turned on. That's the problem. Now what we believe we are able to do is with seclidemstat and LSD1 inhibition is address that misregulation, correct the balance so that genes that suppress tumors are correctly turned on and genes that drive tumor growth are correctly turned off. And we're going to look at some really interesting data here in a minute. This is the area of epigenetics. Now there are a number of targets in the field of epigenetics. We're pursuing LSD1. It is a well-validated target. There are some very well-known names pursuing LSD1 inhibition. I will tell you that we are a differentiated product. There are only -- of the 5 companies in the clinic, 3 of them have an irreversible inhibitor, 2 of them have a reversible inhibitor. Seclidemstat, our drug, is reversible. We feel that gives us a significant advantage by both addressing the enzymatic activity and the scaffolding properties of the LSD1 enzyme. You need LSD1 for healthy cells. It's important for cell maintenance. But in cancer cells, LSD1 is overexpressed. It acts incorrectly. And we feel good that it's a target because when you CRISPR out LSD1, you often get death to the cancer cells. So we are targeting the ability to reverse incorrect gene expression. We inhibit both the enzymatic and scaffolding properties. We'll talk about that in a moment. We're an oral tablet. We have a very strong patent position. Composition of matter patent, good till 2032 in the U.S. with the patent being allowed in many, many countries outside the U.S. and is continuing to be reviewed. Now let's talk a little bit about Ewing sarcoma. I talked about misregulation or misreading the genes. And what happens is, if you look at that cartoon on the left, you see that blue EWS, that is the characteristic of viewing sarcoma, very easily identified through a simple FISH test. Very difficult to target that translocation, that EWS/FLI translocation. But what we can do is target the LSD1 enzyme that is critical for its communication pathway. So what happens when you begin to address you Ewing sarcoma. On the left-hand side of this middle cartoon, what you see are Ewing sarcoma's cell lines and vehicle. And you can see all of that red are tumor growth genes. Each of those little rose is a gene. You see tumor growth genes incorrectly turned on and tumor suppressor genes incorrectly turned off. The right-hand side of that cartoon, you see the same cell lines treated with drug and you see control. And what you can observe is almost a complete correction or reversal of the transcriptional profile. So we understand Ewing sarcoma. We see what it does at a gene expression level. And when we take this drug, and we treat animals that have been -- that have Ewing sarcoma, what we see in this top graph is that the tumor cells begin to grow at a much more slow rate. They plateau and they melt away. After 6 months of drug-free life, the tumors had not come back. On the bottom, you see another Ewing sarcoma animal study, where you can see significant tumor growth inhibition. This is the data. This package right here is the data that's gotten our clinical investigators very, very excited because Ewing sarcoma is a devastating disease where the only available treatment is adult cancer, radiation and surgical resection. We're incredibly fortunate to be supported by a top-notch group of investigators located at organizations like the Dana-Farber Institute, Memorial Sloan Kettering, MD Anderson, Moffitt Cancer Center, John Hopkins All Children's Nationwide Children's Hospital, L.A. County Children's and the Sarcoma Oncology Center. I mentioned dose escalation. We are in dosing cohort 6 of 7, which means we are able to continue to increase the dose exactly as we expected. And we plan to not only update the clinical status at ASCO this year. But later in the year, as I mentioned, we will begin to release data and begin to present at other scientific congresses. So as an investor, what are we looking at? Well, speed to market, Ewing sarcoma, rare pediatric cancer with a huge unmet need, the priority review voucher program for which we have already received priority pediatric disease designation, these vouchers are currently selling from $80 million to $150 million. And we believe the market for a drug that can have any impact on this devastating disease is north of $200 million globally. But remember, this is speed to market proof-of-concept. Market expansion into solid tumors by targeting these specific mutations, we believe sets up a $1 billion market. I mean these are the cancers that we've all heard of: lung, ovarian, colorectal, prostate. These are the solid tumors where we want to move next. Wave 2 of value creation, as I mentioned earlier, is us understanding the immuno-oncology aspect of this drug and developing that as the second wave of value. Now I touched upon how we are going to pursue solid tumors. Well, this is a great example. If you go out and randomly select patients for your clinical study, you are going to get of range, a random mix of patients. But using readily available genetic panel testing that is already in existence, we can pull out and identify the approximate 20% of the patients that we believe have tumors that are more sensitive to LSD1 inhibition therapy. And that's what we plan to do. We plan to pull out those patients and enrich our clinical study. We also believe this approach is very scalable into the commercial setting. I touched upon the next wave of value and that being immuno-oncology. What has been shown in third-party data is that LSD1 therapy can take a cold tumor. And by cold, I mean the body doesn't recognize it. And we can make that tumor hot. And when the body recognizes it, checkpoint inhibitors, which represent a $15 billion marketplace, where only about 30% of the patients respond, we can begin increasing that number. So instead of 70% of the patients not responding, maybe 65% or 60% of the patients won't respond, and we have been able to help companies take patients who are currently not available for treatment take their tumors from cold to hot and make them treatable with checkpoint inhibitors. So let's talk about the opportunity for Salarius. We have recently completed a public financing. We have put money on our balance sheet. We believe we are funded into the second half of next year. We plan on delivering clinical data in the next 6, 12 and 18 months, all of which we believe represent value inflection points that are important to potential investors. Our lead compound, seclidemstat, targets an enzyme in a hot space, epigenetics. It is a target that is validated by some very well-known names in pharma. We are a differentiated product within that space. We have not only had tremendous non-dilutive funding, but I still have up the $9.1 million available to me from the State of Texas in addition to the over $10 million that we just put on our balance sheet from our S-1 raise. And then finally, we've received all the designations we have requested from the FDA. We believe we have set the company up for success. And as investors, I would encourage you to learn as much as you can about Salarius. I think you will like the story. And I think that this could be a great addition to anyone who is building a biotechnology portfolio. Thank you very much.

Are there any questions? Yes.

The speed to market, which I think is biotech -- this clinical stage biotech -- the revenue biotech appreciates and thus depreciates. When you move over into the oncology space, right? So we see Ewing sarcoma, the speed to market, is there a plan on the IO space where you can take a similar -- identify similar speed to market as on the IO side?

We are currently spending time, understanding exactly how to best answer that question. And when we -- and so when we look at the slide that I showed representing the clinical plan, Ewing sarcoma, solid tumors and then immunotherapy, we are trying to answer that question, understand how best to move forward. We think it's tremendous opportunity. And we want to make sure when we pursue it in the clinic, we're doing it correctly.

And I promise [indiscernible] asking silly questions.

It wasn't a silly question at all. Thank you for asking it. Everyone, thank you for attending, and thank you for listening. Have a nice evening.