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

Good day, and welcome to the Virios Therapeutics, Inc. Third Quarter 2023 Earnings Update. 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, 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' third-quarter financial results and to give you a corporate update. Please note that our financial results press release is now available on our website. 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 could 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 in our financial results press release issued this morning for more information. Now, it is my pleasure to turn the call over to our CEO, Greg Duncan. Greg?

Thank you very much, Angela, and good morning, everybody, and thank you for joining today's quarter 3 2023 earnings update. We'll be going through several slides over the course of the next 15 or 20 minutes, and then we'll open it up to questions and answers. If we could go to Slide 2, please. You'll note during the course of today's presentation, we'll be making several forward-looking statements that are subject to risks and uncertainties. You should read the documents that we have filed with the SEC for more complete information about Virios. Next slide, please. The first thing I'd like to mention relative to the past quarter is one of our absolutely key achievements, and that is securing FDA guidance, an agreement on our plan to progress IMC-1 to Phase III development as a potential treatment for patients with fibromyalgia. As you may recall, the Phase IIb study clearly identified the patients that are most likely to respond to IMC-1 therapy, and as such, we'll be enriching the Phase III program to target new to fibromyalgia research patients only. That said, these patients represent the vast majority of the opportunity in the U.S. territory. The proposed Phase III program is comprised of 4 parts. We will start off with the pharmacokinetic and food effect study as a precursor to the 301, 302, and 309 studies. This pharmacokinetic and food effect study will be focused on the dose formulation we'll be using to commercialize IMC-1, presuming success in Phase III. The second key component of the program is the 301 study. This is a head-to-head study comparing IMC-1 to placebo with patients randomized 1:1 in groups of 160 for a total of 320 patients treated over 12 weeks. The primary endpoint for this study will be the same endpoint we used in the Phase IIa, the Phase IIb, and is consistent with the endpoint required by FDA to gain approval for a new fibromyalgia treatment. The second program will be affecting will be the 302 study. This is a multifactorial trial. This is comparing IMC-1 and placebo again, but in this study will be adding an independent components of Famciclovir reference drug and Celecoxib reference drug. These patients will be randomized into 1 of the 4 groups, again, targeting 160 per group for a total of 640 patients in this multifactorial trial. Very consistent with the 301 study, the primary endpoint in this trial is reduction in pain, again, using the key endpoint required for approval. Patients will be assessed at 12 weeks of therapy. Patients in both the 301 and 302 study have the opportunity to be enrolled in our long-term extension. This is a requirement of the Phase III program. Patients completing 301 or 302 have the opportunity to roll into this long-term safety extension. These will be patients treated for up to 1 year. Effectively, the requirements we've agreed with FDA our 300 patients will be treated in the 309 study for 6 months and a total of 100 or more will be treated at 1 year. Data from the 301, 302 and 309 study will be rolled into the NDA, or new drug application that will be submitted to the FDA at the end of the Phase III program. We'll be happy to discuss this proposal in further detail during the question and answer. Next slide, please. As you can see on Slide 4, the various research team has worked diligently over the third quarter to submit the briefing materials to the Food and Drug Administration for our proposed investigation on new drug application, or IND, as it's called, for IMC-2 as a treatment for Long-COVID. IMC-2 is a little different than IMC-1. It contains valacyclovir and celecoxib, whereas IMC 1 is famciclovir and celecoxib. This is a very exciting program. Recent Center for Disease Control prevalence estimates suggest somewhere between 7.5% and upwards of 41% of patients non-hospitalized adults who have COVID go on to develop long term sequelae or symptoms. There is a very significant disability associated with Long-COVID. In fact, a study in Australia in 2021 and '22 found that 74% of total disability associated with SARS-COV2 or the COVID virus is actually attributed to Long-COVID. So effectively, 3/4 of all of the disability in this patient cohort is due to Long-COVID, whereas only 1/4 of it was due to the acute infection, highlighting the very significant morbidity associated with this particular illness. I will tell you there are no treatments presently approved by the FDA to treat long-term COVID sequelae. Our goal for this IND submission is to identify with the FDA's alignment, the regulatory requirements for this potential first-in-class medicine. We have filed new provisional method of use intellectual property protection associated with this particular combination, which have granted provides coverage to at least 2043 before extensions. We'll provide feedback on this potential first-in-class research opportunity in what we project as the next 4 to 8 weeks. What makes this program so exciting? We can transition to the next slide, to Slide #5, you'll note that the RECOVER Mechanistic Pathways Task Force has identified activation of secondary viruses as a potential cause for long-term COVID sequelae. Just to back up a second, you may know that the RECOVER initiative was created to address a widespread and very diverse impacts of both COVID and Long-COVID. This work is done under the umbrella of the National Institute of Health and one of the working groups within this broader recovery initiative is to RECOVER mechanistic pathways task force, they are really looking for what is the etiology or the catalyst for developing both COVID or Long-COVID. COVID acute infection, they have determined, activates a very significant immune response, which I think we all know. Importantly, severe COVID infections can lead to an exhaustion of the immune response, which in turn, because of the debilitated nature of the immune response can lead to reactivation of latent herpes viruses. Recall latent herpes viruses and the activation of those viruses are the target of both IMC-1 and IMC-2. Latent viral reactivation can lead to further dysregulation of the immune system, very significant inflammation, and the development of long-term COVID. Importantly, for our purposes, COVID patients exhibit significant Epstein-Barr reactivation as compared to non-COVID patients. Why is that important? -- not everybody knows, but we're here to tell you, Epstein-Barr is actually a herpes virus and is a target specifically of valacyclovir and that is very important because data generated by the Bateman Horne Center actually identify this as a potential cause of long-term COVID sequelae. If we can go to the next slide, please, slide #6, you'll see data that were generated by an unrestricted investigational grant to the Bateman Horne Center. Dr. Bateman requested a grant to assess the potential combination of valacyclovir and celecoxib as a treatment for long-COVID sequelae. In this open-label exploratory Long-COVID trial, we compared patients that were treated with valacyclovir and those who were controlled patients. These were patients matched for gender, age, and in particular, their level of fatigue that they were exhibiting as a result of their Long-COVID and assess those patients after 14 weeks of treatment. As you can see, each one of the rows demonstrated on the table on Page 6, the val/celecoxib treatment group delivered very statistically significant improvements in a whole host of different disease sequelae. Specifically, the primary endpoint, the NIH PROMIS fatigue score, this is a validated instrument generated through NIH showed statistically significant reductions in fatigue at a p value of 0.008, highly statistically and clinically relevant. The several other assessments in the study, pain, patient's global impression of change, which is an overall health status, and then measures of orthostatic intolerance, and both depression and anxiety were also assessed. And, if you take a look at the P values for virtually every one of those particular disease sequelae, we see highly statistically and clinically relevant improvement for those patients treated with val/celecoxib combination versus those match controls. In fact, every one of these measures is statistically significant, including anxiety, including orthostatic intolerance with the exception of depression. This particular assessment was only statistically significant in the 0.059 level. So, we think this was moving in the direction of significance and a larger sample size may be able to ferret out a very statistically significant impact with a larger sample size. These data are particularly compelling because first, valacyclovir and celecoxib in combination were generally very well tolerated. There were no serious adverse events in this particular trial, and the most common adverse events in both the routine care group and in the valacyclovir/celecoxib group for headaches and muscle pain. We're particularly encouraged by these data because these patients on average in both the treatment and match control group had Long-COVID for a period of w years. This is particularly important because this is not something that just popped up and then was treated with this particular combination. These patients were suffering the morbidity, the mortality, not going to work, not getting out of bed for a 2-year period. So, this is a very significant illness that's responding quite well in this open-label exploratory trial. We're really excited because moving forward, we're going to test this thesis again. In fact, Dr. Bateman requested a second investigational grant and investigator-initiated unrestricted grant to expand the research program in this particular area. And in the second trial, we are funding through this investigator-initiated grant. Dr. Bateman and her team will be targeting 60 patients in 3 cohorts, 2 doses of the val/celecoxib combination and placebo. These patients will be assessed over the course of 12 weeks with consistent measures for assessing both fatigue, orthostatic intolerance, et cetera, and we believe the results from this trial will help guide our planning assumptions, things like the IMC treatment effect size, what's the overall sample size required next stage of development for our planned Phase IIb trial, assuming each alignment with FDA on the requirements for the investigation on new drug application. We're very excited about this potential opportunity and look forward to those results sometime in the middle of 2024. And the final key topic I'd like to update you on before we turn to financial highlights for the quarter is the idea of partnerships. Next slide, please. As you can see on Slide #8, we are actively exploring as we've communicated, partnership for both IMC-1 for Fibromyalgia as well as IMC-2 for Long-COVID. Updates on Long-COVID will likely follow feedback from the FDA. In addition, we wanted to make it clear that we're also assessing complementary therapeutic interventions to build Virios shareholder value. Specifically, we're looking at opportunities in the pain and anti-infective space and/or unique opportunities that can create value under various expert research and development leadership as complements to IMC-1 and IMC-2. As you probably know, but just for the sake of reiterating, partnership discussions include a very thorough review of a fibromyalgia Phase IIb data, timing and details for the proposed Phase III program, and deep analysis of the commercial opportunity. All of these things take time. We will report material progress on any proposed partnership in a very timely manner. With that background relative to operational highlights, let me turn it over to our Senior Vice President of Finance, Angela Walsh, once again, to summarize our quarter 3 financial highlights. Angela?

Thank you, Greg. Please proceed to the next slide. First of all, we would like to express that due to our prudent management of cash, we have the capital to fund operations into the third quarter of 2024. We operate a virtual model with less than 4 full-time equivalents. This streamlined approach allows us to maximize the use of our capital for value-creating research. With that said, let's turn our attention to the third quarter financial results. As you can see on Slide 8, there were no sales for the 3-months ended September 30, 2023, or during the year-ago quarter. We reported research and development expenses of $0.4 million for the third quarter of 2023 as compared to $1.6 million for the third quarter of 2022. The $1.2 million decrease was primarily due to a decrease in clinical trial expenses of $1.1 million associated with our FORTRESS study in Q3 of 2022 and a decrease in drug development and manufacturing costs of $0.1 million. In addition, we reported general and administrative expenses of $0.9 million for the third quarter of 2023 as compared to $1 million for the third quarter of 2022. The $0.1 million decrease quarter-over-quarter was attributable to a decrease in expenses associated with being a public company. Finally, we reported a net loss of $1.2 million for the third quarter of 2023 as compared to a net loss of $2.6 million for the year-ago quarter. But lower net loss was primarily due to the decreases in R&D and operating costs that I just discussed. As of September 30, 2023, we had $4.8 million in cash as compared to $7 million as of December 31, 2022. As I just mentioned, we expect this cash to fund operations into the third quarter of 2024. At this time, I will turn the call back over to Greg, who will moderate the Q&A session of the call. Greg?

Thank you very much, Angela. And maybe just to progress to Slide #9. To summarize the key highlights from quarter 3 before we open it up to questions and answers. As we mentioned, we have secured FDA guidance and agreement to our proposed plan for IMC-1 in Phase III development, where we're enriching for patients new to fibromyalgia research. We have submitted briefing materials to the Food and Drug Administration for our submission of a potential new drug application or IND for IMC-2 as a treatment for Long-COVID and look forward to the results from the second study at the Bateman Horne Center, which are due out in the early part of 2024 or latest mid-2024. We're actively exploring partnership opportunities on 3 levels: IMC-1 for fibromyalgia, IMC-2 for Long-COVID, and then any complementary therapeutic interventions to continue to build shareholder value as complements to both IMC-1 and IMC-2. And as Angela just reviewed, through continued prudent expense management running a virtual model, the company expects to have capital to support operations into Q3 of 2024. With that background, let's move towards a question-and-answer session. I will turn it back to the operator, Matthew, to host that particular Q&A. Matthew, back to you.

[Operator Instructions] Your first question is coming from David Bautz from Zacks Small-Cap Research.

So Greg, first about the Phase III program in Fibro. I'm curious if you could comment why the FDA wanted a famciclovir and the celecoxib-only arm in that study?

So it's a pretty standard protocol to do a combination study from FDA guidelines to secure regulatory approval under the 505(b)(2) pathway. What is unique here is that we will be doing 1 multifactorial study, but we were able to negotiate a second study, which is just the head-to-head study of IMC-1 versus placebo. So, we thought that was a very good outcome because it wasn't 2 multifactorial studies but specifically, this was 1 multifactorial plus the head-to-head. So, a little bit more efficient way to get to potential approval, presuming success currently.

Okay. Now if IMC-1 does not beat either arm in that study, does the FDA view that as a failed trial then?

So, we don't believe we need to show statistical significance versus famciclovir or celecoxib as independent components. What this regulatory requirement is focused on is effectively showing the contribution of both components. As you are well aware, I'm sure, David, celecoxib actually is used for pain in things like osteoarthritis and so what they're looking to assess is what is the relative contribution of both components as we roll up to a combination therapy versus placebo as the primary endpoint. So, the data will dictate that, obviously, over time, if there's not a lot of separation between IMC-1 and the independent components, I don't think that would be viewed favorably. But we do believe if we show statistical significance versus placebo. And, we see replication of data that has been generated prior to our research showing NSAIDs don't really move the needle on fibromyalgia. Antivirals independently don't really move the needle on fibromyalgia. We have a very good chance of success moving forward.

Okay. So you talked about partnership opportunities this morning. And I guess, is the company prepared to move ahead with the Phase III program in fibro on their own? Or are you going to have to partner that to initiate that program?

We're looking at both options, but we do think partnership offers us the opportunity to scale less capital and then probably needless to say, but I'll articulate it, if you can find the right partner with an interest that already has commercial operations, you obviate the need for scaling capital in the future to fund the commercialization of the asset. So, we think that's probably the most efficient way to progress. And that is the primary way we think is the best way, if you will, to move forward. But obviously, if we do not secure a partnership, then we will consider scaling the capital to do this as an independent entity but that is a secondary objective.

All right. And then lastly about the long COVID program. So I missed the size of the study that the Bateman Center is going to be running for the second study. Could you go over that again?

Sure. The Bateman Horne Center in the second investigator-initiated grant ran by the Bateman Horne Center, so they're in control and conducting the study, recruiting, et cetera -- is targeting roughly 60 patients, 20 per arm, 2 doses of valacyclovir and celecoxib combination, and a placebo one. That is the rough draft of the study.

Your next question is coming from Sean Lee from H.C. Wainwright.

I just had a question on the Long-COVID plan. Would you be initiating a company-sponsored study anytime soon on that? And would you be testing additional doses and regimens in that study?

Sure. Thank you for joining. The plan will be to secure FDA guidance. As I mentioned during the course of today's presentation, we have developed the briefing book, as you probably know, Sean, but just for the notification of others; when you're opening up an IND, you submit questions to the FDA, you get their feedback about things like what's the primary endpoint. We think fatigue, for example, should be the primary endpoint. It's the most dominant symptom in Long-COVID -- what are the sample sizes, et cetera, required to advance development. And, we should get feedback sometime in the next 4 to 8 weeks. We hope to have it in 2023, but there's not a timeline per se on getting specific alignment with FDA here so that could lead into the early part of 2024. Once we have those requirements in hand, we will do 2 things. One is begin planning the proposed Phase IIb study. And secondarily, we will open up the partnership discussions on a more fulsome basis because now we know what the target is moving forward, presuming again, alignment with FDA on the next steps of regulatory pathways, shall we speak; endpoints, duration, et cetera. And then, we will likely use the outputs; the treatment effect size, the sample size, et cetera, that will be generated by the BHC study that is ongoing, which we expect to read out sometime in early 2024 as the basis for finalizing the study design for the next phase, the IIb study in Long-COVID. Does that answer your question, Sean?

Yes, that's very helpful.

[Operator Instructions] That concludes our Q&A session. I will now hand the conference back to Greg Duncan for closing remarks. Please go ahead.

Thank you very much, Matthew. Hopefully, you get a sense that these are very exciting times for Virios therapeutics. We're on the cusp of progressing 2 very novel programs, IMC-1 for fibromyalgia and IMC-2 for Long-COVID. These are 2 very novel potentially game-changing new therapies to advance care for patients suffering the debilitating effects of both fibromyalgia and Long-COVID. And we really think with continued success, we have some very exciting value appreciation for the stockholders. We, as we always do, we'll commit to very timely update on progress on both research, regulatory and the partnership front as we progress through the balance of 2023 and into early 2024. We thank you for attending today's call.

Thank you, everyone. This concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.