Dogwood Therapeutics, Inc. (DWTX) Earnings Call Transcript & Summary

Good morning, and welcome to Virios Therapeutics, Inc. Fourth Quarter and Year-end 2021 Financial Results Conference Call. [Operator Instructions] Please be advised that today's call is being recorded at the company's request. At this time, I'd like to turn the call over to Angela Walsh, Senior Vice President of Finance and Treasurer for Virios Therapeutics. Please proceed, Angela.

Thank you. Good morning, everyone, and thank you for joining us on today's conference call. We are pleased to be with you today to discuss Virios Therapeutics' fourth quarter and year-end 2021 financial results as well as to provide you with an update on the operational progress we have made during 2021. Please note that our financial results press release is now available on our website. We'll start today's call with our CEO, Greg Duncan, providing you with a brief update on our corporate progress during the past quarter, and then I will return to review our fourth quarter financial results. In addition, Ralph Grosswald, our Senior Vice President of Operations, is with us for the question-and-answer portion of the call. Before we begin, I'd like to remind everyone that statements made during this conference call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties that can cause actual results to differ materially from the information expressed or implied by these forward-looking statements. For more information regarding such risks and uncertainties, please see the risk factors outlined in the company's filings with the SEC. Any forward-looking statements are made only as of today, and we disclaim any obligation to update these forward-looking statements other than as required by law. Please see the forward-looking statements section and our financial results press release issued this morning for more information. It is now my pleasure to turn the call over to our CEO, Greg Duncan.

Thank you, Angela, and good morning, everyone. The team and I are pleased to provide you with an update on a substantial operational progress the Virios Therapeutics team has made over the past few months. First off, I'm very pleased to report that under the expert leadership of our Chief Medical Officer, Dr. Mike Gendreau, our research team continues to recruit patients as planned into our landmark Phase IIb fibromyalgia clinical study, also known as FORTRESS. More specifically, we believe that we are well on pace to recruit over 400 patients into our ongoing FORTRESS Phase IIb study within the next 30 days. This will enable us to be fully enrolled in this landmark program by mid-April. Most importantly, this pace will allow us to remain on track to report top line results of our FORTRESS study program by September of this year. As you may recall, the primary endpoint for this landmark study will focus on the therapeutic effectiveness of our lead development candidate, IMC-1, a fixed-dose combination of famciclovir and celecoxib to reduce systemic fibromyalgia related pain. IMC-1 pain reduction effectiveness will be measured using the same endpoint that was used in our successful Phase IIa fibromyalgia study. This pain endpoint was also used to approve the 3 treatments FDA has approved to date to treat patients with fibromyalgia. We will also assess IMC-1's effectiveness on a host of other key secondary outcomes measures related to both patient quality of care as well as safety. In parallel to our FORTRESS Phase IIb study, our chronic toxicology studies and 2 species are progressing as planned under the direction of our Senior Vice President of Operations, Ralph Grosswald. The results of these studies will be required by regulatory authorities before we are committed to dose study participants with IMC-1 for intervals of 1 year or more, which we plan to do in our Phase III program. The chronic toxicology program is time to complete concurrently with our FORTRESS Phase IIb study, so we anticipate being able to propose a final Phase III program to the FDA at the conclusion of the current study. Furthermore, we recently announced that we will be progressing our second development candidate, IMC-2, a combination of valacyclovir and celecoxib into clinical development. This exciting new exploratory trial will assess the potential of IMC-2 to reduce fatigue and other symptoms associated with Long COVID sequala. This program is being supported to our unrestricted investigational grant to the Bateman Horne Center, a non-profit, interdisciplinary Center of Excellence that is advancing the diagnosis and treatment of chronic fatigue disorders, fibromyalgia, post-viral syndromes and related comorbidities. For context, Long COVID can be very debilitating and is estimated to affect up to 30% of patients who were previously infected with a COVID virus. This prevalence rate translates into well over 100 million COVID patients on a global basis and more than 20 million cases right here in the U.S. To put this in perspective, the U.S. Long COVID patient population is estimated to be almost double that of the existing fibromyalgia patient population. Our excitement to support the Bateman Horne Center to progress this new Long COVID program is anchored to several key sentiments. First, this new exploratory research program represents an expansion of our combination antiviral pipeline into a second area of significant unmet need. Secondarily, this new Long COVID focused program to the best of our knowledge represents one of the first Long COVID treatment programs in the U.S. We anticipate full enrollment in this exciting new program by quarter 4 of this year with results projected in the first half of 2023. And finally, we want to reiterate that through prudent management of cash that our current cash position is expected to provide the company with operational runway through quarter 1 of 2023, approximately 6 months following the planned announcements of our top line results from our ongoing FORTRESS Phase IIb study. With that update on our operational progress, let me turn it back over to our Senior Vice President of Finance, Angela Walsh, to discuss our quarter 4 and full year financial results. Angela?

Thank you, Greg. As of December 31, 2021, we had $14 million in cash as compared to $29.8 million as of December 31, 2020. As Greg just mentioned, we expect our current cash to be sufficient to fund the company's operations through the end of the first quarter of 2023. With respect to our income statement, as a development stage company, we did not generate revenue in 2021 or 2020. We reported research and development expenses of $2.9 million and $10.8 million for the fourth quarter and full year 2021, respectively, as compared to $0.3 million and $0.2 million for the fourth quarter and full year 2020, respectively. This increase in research and development expenses for the fourth quarter and full year was primarily due to expenses for our FORTRESS clinical study, our chronic toxicology program and drug development and manufacturing costs. We reported general and administrative expenses of $1.3 million and $4.8 million for the fourth quarter and full year 2021, respectively, as compared to $6.4 million and $9.8 million for the fourth quarter and full year 2020, respectively. This significant decrease in general and administrative expenses for the fourth quarter and full year was primarily due to equity-based compensation expense that was recognized in 2020 for the issuance of membership interests to the company's founder and share-based compensation expense recognized in 2020 for the issuance of stock options pursuant to executive employment agreements upon our initial public offering, offset by an increase in costs associated with being a public company. We reported a net loss of $4.5 million for the fourth quarter of 2021 compared to a net loss of $6.5 million for the fourth quarter of 2020. For the full year 2021, we reported a net loss of $16 million compared to a net loss of $10.3 million for 2020. The higher net loss was primarily due to the higher research and development costs that I just mentioned. I'll now turn the call back over to Greg to moderate the question-and-answer portion of today's call. Greg?

Thank you, once again, Angela. In closing, we believe the role of activated herpes virus as a potential catalyst in triggering diseases like fibromyalgia as well as fatigue-related disorders and chronic GI disorders represents an exciting new innovation paradigm. We believe that Virios combination antiviral development programs are supported by both mechanistic as well as clinical data. The novelty of our approach is further validated by the Fast Track designation granted by FDA to IMC-1 for the treatment of fibromyalgia, which, to the best of our knowledge represents the first time a new drug candidate has been granted this designation. We expect to reach important milestones in the year ahead. As the forthcoming IMC-1 fibromyalgia Phase IIb data due by September are concordant with the data that emerged from our successful Phase IIa trial, we believe IMC-1 could be a true game changer for the millions of patients in the fibromyalgia community. In addition, and encouragingly, there is increasing recognition in the scientific community of the potential role of activated viruses triggering the sequelae associated with Long COVID, which is, in our view, an emerging epidemic of its own. Exploring the potential of our second development candidate, IMC-2, to treat Long COVID will help us better understand this exciting opportunity. I hope you'll agree. It's shaping up to be an exciting year of Virios Therapeutics. As always, we remain committed to frequent and proactive outreach to the investment community as well as the medical community as we progress our journey to improve treatment standard for patients around the globe. Operator, we are ready for questions.

[Operator Instructions] Your first question for today is coming from David Bautz. Please announce your affiliation, then pose your question.

This is David Bautz from Zacks Small-Cap Research. I was wondering if you could provide any more details about the proposed Long COVID study. Is it number of patients? How long the study is going to be? Those type of things.

Sure. Thank you, David, for joining us this morning. And we are really excited about this program. I think there's increasing recognition of the potential for co-infection for these patients as a potential etiology for the Long COVID sequalae that are quite debilitating for patients, including, as you may know about 30% of those patients who were previously asymptomatic. So we believe this is a key thing to get right and emerging epidemic of its own. The program is being run out of the Bateman Horne Center through an investigational grant. So this is a hands-off program with Dr. Bateman in Bateman Horne Center out of Salt Lake City, Utah. They are part of a broader program supported by an NIH grant, where they're actually monitoring evolution of patients who are diagnosed with Long COVID sequalae. And the goal will be to take somewhere between, call it, 25 and 30 patients and begin treatment with IMC-2 and compare them to the existing cohort that they're assessing over time. And the trial will run for 14 weeks thereabouts, and we will assess IMC-2's ability. This is a combination of valacyclovir and celecoxib, IMC-2's ability to improve the fatigue, the brain fog and the other sequalae that are associated with Long COVID disease. This is a classic exploratory trial, Dave. So effectively, we're looking for effects on the number of parameters. We do recognize that single monotherapy may not be the only way to treat these patients over time. So IMC-2 could be part of a cocktail that's used or for a subset of patients. And as a consequence, we'll be assessing all these different parameters as a way to glean more knowledge and then presuming success to progress into what I'd describe as a more traditional Phase II program. The results from this trial should be available in the first half of next year. We can't get any more precise than that because this is a true hands-off program supported through this investigational grant. But we are excited because we do believe these patients are desperate for therapies. And we've already seen IMC-1, obviously, a different combination of antiviral therapy, but similar mechanistically, IMC-1, which combines famciclovir and celecoxib's ability to improve fatigue related symptoms to increase energy and concentration and other specific symptoms in the fibromyalgia community, I'm hoping to see those same effects within the Long COVID community. So that's the long and the short of it. And hopefully, that answers your question, David.

Yes. So I'm curious why the Bateman Horne Center is interested in using IMC-2 as opposed to IMC-1. Are there any specific reasons for that?

So there is definitely evidence of valacyclovir, acyclovir having effects on a whole host of herpes viruses. Specifically, valacyclovir has probably more published data on the ability to inhibit Epstein-Barr, which we think is a likely bad actor or certainly one of the bad actors. And so as a consequence, given the request from the center, and I think that -- I'd say I think, we believe their focus on valacyclovir is really predicated on that prior established data for valacyclovir's effectiveness, specifically on Epstein-Barr and the published literature. That was the reason for the request to combine valacyclovir with celecoxib. And we're obviously delighted because it allows us to move a second compound forward into development.

Okay. And then lastly, so the NIH is obviously really interested in figuring out what's going on with Long COVID. Do you think there's a pretty good potential for some nondilutive funding to do additional studies, if this one is successful?

We will certainly explore all sources of funding. NIH, traditionally, focuses more on epidemiologic studies and things of that nature. But certainly, we would explore other venues. Nondilutive funding is obviously attractive for a whole host of reasons, and that will be one of the things we would look at. But I think, ultimately, if we do show successful results here, we would like to progress this fairly quickly. And so I think speed is an equally important parameter, if you will, on how we assess progressing, presently success.

Your next question is coming from Sean Lee. Please announce your affiliation, then pose your question.

This is Sean Lee from H.C. Wainwright. So I just have a couple of questions on the FM program. Assuming the readout goes well later this year and as well as the long-term safety study. So do you have any idea what the potential Phase III will look like at this time?

So we're about 6 months away from what we would consider a pretty landmark result for these patients. I think you're quite well aware, Sean, of the dissatisfaction in the market both amongst the patients as well as, frankly, the prescribers as well as payers given these patients cycle through their health care systems on a regular basis and that could cost pretty substantially. So presuming good results in September, the goal would be to get down to FDA in quarter 4 of this year and scope out what exactly the Phase III program looks like. As Angela referenced, we have cash to get us through quarter 1 2023. So we have time to figure out exactly what the Phase III program will entail. We will make the case, albeit we could never guarantee, Sean, that this particular trial that we're unblinding in September has really been designed in concordance with many of the requirements of a Phase III: the size of the trial, the endpoint, the duration of the trial, all are consistent, if you look back through the NDAs for the 3 approved drugs, with the size, scope endpoints, et cetera. So we frankly designed this program to potentially be part of our registration package. And so while I can't tell you whether it's 1 or 2 studies, we will certainly make the case that only 1 study is required to move forward from a clinical perspective, obviously, subject to FDA alignment. We do believe, given this is a combination therapy that the remaining trial or potentially the remaining trials would include a multifactorial trial, where we'll assess IMC-1 versus stand-alone celecoxib, stand-alone famciclovir and placebo. And the goal here will be again to show statistical significance of IMC-1 versus placebo. And as part of the multifactorial trial characterize, if you will, the relative contribution of the 2 independent components. Just kind of fast forwarding to our thoughts on that the likely requirement. This doesn't scare us. As you probably are well aware, NSAIDs and COX-2 inhibitors have been studied independently to treat fibromyalgia and failed. There's a [Kaplan] review which is actually published on our website that shows that. And antiviral therapy as monotherapy has been studied in fibromyalgia and that performed well. It's only when you put these 2 things together and our opinion that you get the profound results that we saw in the Phase III and hope to see in a Phase IIb trial. So we're not worried about doing that trial. And frankly, hoping to do only 1 trial as part of the Phase III, but ultimately did data from this trial. And the FDA's feedback will determine that, and then we can decide what capital we want to raise, do we want to bring in a partner and explore the best path forward for Virios and shareholders.

And my second question is also on the potential for another study. So before we have to do it, are there any CMC issues that you have to take care of before you can launch a Phase III.

So we are quite comfortable on the process that we use to manufacture IMC-1. And obviously, we're also manufacturing placebo right now at present for the Phase IIb trial. The process we are thinking about scoping out and putting a little bit more scholarship into would relate to manufacturing the independent components of celecoxib and famciclovir in that multifactorial scenario. So we're kind of thinking through that at present and because we want to be prepared. And I think as you probably well know, Sean, given you focus on many companies, getting ahead of any potential supply related issues is always a good thing. We don't forecast any supply issues, haven't experienced any. And frankly, the API for the components here is pretty readily available from multiple markets, but we might consider starting on that process and getting that squared away so that there's absolutely no delay between agreement with FDA and actually executing the Phase III program. So those are the thought process we're considering and Ralph Grosswald, in particular, is working through that process, and then we'll be ready to go as soon as possible for the Phase III once we get that time sorted. Yes. That's our goal.

[Operator Instructions] There are no further questions in queue. I would like to turn the floor back over to Greg for any closing comments.

Yes. Thank you, Holly. I appreciate it. And thank you all for joining this morning, be it on the webcast or on the actual line here. Hopefully, you can see that this is a pretty exciting time for Virios Therapeutics. We're pursuing 2 very significant commercial opportunities. One is in the established, but frankly, to satisfy fibromyalgia patient community. The other is in what we believe is an emerging epidemic of its own, that being the Long COVID sequalae that are quite debilitating to patients, including those that were previously asymptomatic. We are pretty excited about our approach, and I think the external scientific community is increasingly recognizing the role of activated herpes viruses as a potential trigger for many chronic diseases. And as evidence of the novelty of that approach, we have a fast track review designation granted by FDA for our lead compound IMC-1 to treat fibromyalgia. So we're pretty excited that the external world is now both recognizing this potential mechanism and recognition exists with regulators as well. We have excellent IP into 2033, and we've got a team that's really got great development and commercialization experience, including having had actual hands-on leadership roles in developing and commercializing 2 of the previously approved drugs from FDA here in the U.S. to treat fibromyalgia. And I want to thank the team, specifically, as those of you who follow the biotech industry know many companies have consistently guided based on slower enrollments, problems getting drug supply, et cetera. And Mike and Ralph have done a superb job. On the research side, Ralph, on the supplier side. And Angela in managing our cash such that we have continued to reiterate our guidance that we have cash through quarter 1 of 2023, which is a full 6 months beyond the data readout we're projecting for our landmark fibromyalgia program. So stay tuned. We're about 6 months away from hopefully changing the world from hundreds -- for hundreds of millions of fibromyalgia patients worldwide. And then we'd love to see the effects of IMC-2 in the Long COVID patient community, roughly 6 months after that, plus or minus. So thank you for your time and attention. Stay tuned. And we look forward to connecting with you for our quarter 1 results in about 2 months. Thank you, and goodbye.

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.