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

Greetings, and welcome to the Virios Therapeutics Corporate Update Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Greg Duncan, Chief Executive Officer. Sir, you may begin.

Thank you, Ali. Good morning. This is Greg Duncan, and I'm very pleased to be with you today, October 7, the very first day of operations for the newly formed biotechnology company, Dogwood Therapeutics, Inc. I'm joined today by the Executive Committee members of Dogwood Therapeutics, specifically our Chief Medical Officer, Dr. Mike Gendreau; our Chief Financial Officer, Angela Walsh; and our SVP of Operations, Ralph Grosswald. Dogwood is being formed through the integration of Georgia-based Virios Therapeutics and Vancouver-based WEX Pharmaceuticals and will trade under the new NASDAQ ticker DWTX, effective this Wednesday, October 9. Dogwood's ultimate objective remains the same as the mission for Virios, that is to develop new medicines to improve the standard of care for patients suffering from pain and fatigue-related disorders. Over the next 20 minutes or so, our Chief Medical Officer, Mike Gendreau, and I will be sharing you an overview of the assets that comprise Dogwood Therapeutics. Mike and I will be making forward-looking statements based on the current expectations of Dogwood Therapeutics, Inc. These expectations are subject to inherent uncertainties, risks and assumptions. If you have queries at the end of today's presentation, please feel free to participate in our open Q&A. If you have questions moving forward, you can reach out to Dogwood Investor Relations at [email protected]. Let me start by framing the highlights of the transaction we're announcing today. First and central to consideration is expansion of our pipeline to include a potential first-in-class non-opioid Nav1.7 inhibition pain treatment, also known as Halneuron. Halneuron is currently in Phase IIb development for chemotherapy-induced neuropathic pain, or CINP, as I may refer to it. I should mention there are no FDA-approved drugs to treat CINP, and Halneuron has the potential to be that very first approved therapy. Also germane to our consideration was a strategic financing by CK Life Sciences International Holdings, Inc. The financing of $19.5 million when added to our current cash provides Dogwood Therapeutics with working capital of approximately $23 million, which will fund our operations to the end of next year. Importantly, this strategic financing enables Halneuron to achieve interim data readout in the ongoing Phase IIb CINP program, which we expect the second half of next year. Of note, our IMC-2 Long-COVID Phase IIa study will read out in the coming weeks, and this represents a very near-term catalyst for Dogwood Therapeutics, Inc. shareholders. I'm also pleased to tell you that our existing Virios shareholders will be granted a contingent value right or CVI -- CVR, excuse me, tied to potential milestone payments associated with any future corporate partnering transaction for either IMC-1 or IMC-2, effective 10 days post today's close, that is October 17. Stockholders as of the record date of October 17 will be granted a contingent value right tied to development and regulatory milestone payments associated with any future partnering. Specifically, current Virios shareholders who continue to hold their stock through the record date of October 17 will receive approximately 73% of proceeds from any future partnering milestones. We believe this structure is attractive to our pre-transaction Virios shareholders as they will be directly and disproportionately rewarded in the event that IMC-1 and IMC-2 assets are monetized. We're also announcing today a 25-for-1 reverse stock split of our common stock to both facilitate the new business combination and restore our NASDAQ listing compliance effective October 9. And we combine the WEX team with the Virios team, we have a team with extensive development and commercialization experience, having developed or commercialized many blockbuster medicines, including 3 household named medicines in the pain space, including Celebrex, Lyrica and Savella. I'm pleased to tell you that the Dogwood Therapeutics expanded pipeline has very significant value-creation potential. There are really 2 pillars now to this program. First is the Nav1.7 inhibition program. That platform is most notably focused on Halneuron's development -- Phase IIb development in chemo-induced neuropathic pain. We do believe based on preclinical and clinical data that this mechanism also has utility in broader cancer-related pain, acute pain and ocular pain, specifically delivered through a unique contact lens formulation. That's the Nav1.7 platform. The Nav1.7 platform is complemented by our combination antiviral platform, which includes IMC-1, which is poised to progress to Phase III development and the Long-COVID/PASC study where IMC-2 is the focus of the research with data expected in the coming weeks. I should mention there's really been nothing shown to be effective in Long-COVID symptoms, and we hope IMC-2 is the very first drug to show significant benefit in reducing fatigue, orthostatic hypertension and other symptoms associated with a Long-COVID diagnosis. Slide 5 provides a little bit of background on WEX Pharmaceuticals. WEX Pharmaceuticals is headquartered in Vancouver, Canada. And the company has been focused on the development of Halneuron, a non-opioid pain medication to treat moderate to severe pain. WEX is a wholly owned subsidiary of CK Life Sciences International Holdings, Inc., a publicly listed company in Hong Kong. CKLS is WEX's largest shareholder, and they're providing a strategic financing of $19.5 million concurrent with this transaction. We believe this highlights their confidence in both the Halneuron asset and our team's expertise. CKLS, for further context, is an institutional shareholder affiliated with noted Asian investor, Billionaire Li Ka-shing. We believe the addition of a stable institutional shareholder to our shareholder base, one that is committed to Halneuron's success, but also to our existing programs in fibro and Long-COVID, represent unique benefits to this transaction. That being the overview, I'd like to turn the presentation over to Dr. Gendreau. Mike will provide you with an overview of the mechanism, which we're very excited about and both the preclinical and human clinical data, which underpin our enthusiasm for this novel new therapy to treat chemo-induced neuropathic pain. Mike, over to you.

Thank you, Greg. So on Slide 6, I'd like to take the opportunity to explain Halneuron's mechanism of action, why we're excited to develop this differentiated non-opioid medicine. So as we mentioned, Halneuron is a voltage-gated sodium channel modulator. Sodium channels are present in the cell membrane of nerves, and they're the primary mechanism by which the body regulates nerve transmission. So a sodium channel or channel is one that allows sodium ions to travel into the cell. And when sodium ions travel into the cell body, it causes the membrane to depolarize and transmit the pain signal. So by inhibiting the sodium channel, such as with Halneuron, we reduce the inflow of sodium ions and we, therefore, reduce the transmission of pain. So it's a differentiated mechanism to reduce pain transmission and thus reduce the pain a patient would feel. The sodium channel 1.7 is 1 of 9 known sodium channels, but it's the primary one involved in pain transmission in humans. Next slide, please. On Slide 7 is one of multiple preclinical studies that have been shown to work with Halneuron reducing pain. This is one example we picked to show. This is our model in rats where they are treated with something called oxaliplatin, which causes nerve damage and causes neuropathic pain. In this model, initially, the rats are measured for their pain sensitivity, which is this line on the left. And then they're treated with the oxaliplatin and cause the nerve damage. As you can see, they become more sensitive to pain as the curve comes down. And at the bottom of the pain curve, they're treated with either duloxetine, which is a known positive control in this model or with Halneuron. And as you can see the pink curve, which is Halneuron, they very rapidly have pain reduction as the curve comes back to what it was before the nerve damage and it's sustained throughout the treatment course, whereas the duloxetine takes longer and has less area under the curve of pain reduction. Then when treatment is finished in this model, the pain pretty rapidly comes back. But this shows that we have activity in this pain model, and it's superior to a known positive control such as duloxetine. Now let me dive into study results on the next slide from our human clinical trials. So there's 2 previous human studies I'd like to discuss. One is a cancer-related pain study, Phase II that was conducted in 165 patients with cancer who had severe inadequately controlled pain to their cancer. They were treated with Halneuron. Initially, the treatment here was 4 days of treatment with Halneuron and then treatment was stopped. And what we saw was there was a statistically significant reduction in pain in this patient population treated with Halneuron, 2 weeks after treatment was stopped. And then some patients did demonstrate pain reduction for more than 30 days after the treatment was stopped. And we saw an acceptable safety profile in the cancer patients treated with Halneuron. The other study we're going to present is the cancer-induced neuropathic pain study. This was a Phase IIa signal-seeking study where the primary goal of this study was to determine what dose we should taking into a future Phase IIb study and whether we should be dosing once a day or twice a day. And the conclusion of that study was we were able to identify a dose that worked the best and a dosing regimen that seemed to be appropriate for these patients. And again, in this study, we saw about 40% of patients who were treated with Halneuron had a clinically meaningful pain reduction. And again, we saw an acceptable safety profile in this patient population as well. Next slide. This slide presents the results of the cancer-related pain study. And here, we were looking for pain reduction -- clinically significant pain reduction of 30% or more from their baseline pain. And what we saw was 51% of patients who were treated with Halneuron for 4 days had a 30% or better reduction in pain at 2 weeks. And that was compared to 35% of patients who are treated with placebo also had that 30% reduction in pain. That difference was statistically significant at 0.046. Next slide. But perhaps the most exciting part of the cancer-related pain study was the fact that patients had a global impression of pain change showing that when you ask them how has your pain changed over the 2 weeks since you were treated, we saw that 55% of the patients treated with Halneuron reported in a real improvement in their pain and overall condition versus 24% on placebo. And again, this graphically shows the difference in response between these patients where over 70% of the patients on placebo did not show. Next slide. And on Slide 11, this shows what we really were most excited about was the durability of response. So what we see here is after this 4 days of treatment with Halneuron, as we pointed out in the previous slide, approximately 50% of patients had a meaningful reduction in pain as compared to placebo. And then we look to see -- this study was designed to look to see how long that improvement lasted. And the way that was done was after the 2 weeks, we determined if they were responders or not. And then every week after that, patients were then reassessed to see if they were still having improvement in pain from their baseline score. And as you can see in these 2 curves, there was quite a difference between Halneuron's durability of response and placebo. The blue curves here show how long the patient reported an improvement in pain from their baseline score over time. And there were several Halneuron patients that went out past a year of pain improvement from their initial score versus longest response in the placebo group was about 35 days. And when we compare the mean response among all the patients who were initial responders, the mean was 57 days for Halneuron, about 10.5 days for placebo. So a dramatic difference in how long the pain reduction lasted when we compare Halneuron to placebo. Let's go to Slide 12, like to summarize the conclusions from the signal-seeking study conducted in chemotherapy-induced neuropathic pain. What we concluded from that was the high-dose study, which was 30 micrograms, delivered the greatest pain reduction in our study as compared to lower doses. And we found that once-a-day dosing, that is with half the amount of drug as compared to twice-a-day dosing, gave roughly the same degree of pain reduction, but with a better tolerability profile. So that led us to select once-a-day dosing as the dose we're going to carry forward into the IIb study. As we saw with the cancer-related pain study, we did see pain relief 4 weeks after treatment in a number of patients. And this high dose delivered clinically meaningful pain reduction, again, in 35% to 40% of patients in this neuropathic pain model, which is arguably harder to control cancer-related pain model. Next slide. Now with this, I'm going to turn it over to Greg, and he's going to discuss the market potential for Halneuron. Greg?

Thank you, Mike. Hopefully, you can see why we're so excited about adding Halneuron to our R&D stable. And as excited as we are about Halneuron's clinical data, I'm very pleased to tell you that Halneuron has very significant commercial potential. If we look at the broader cancer-related pain market, sales in the last few years totaled about $5 billion. Specifically, the chemo-induced neuropathic pain slice of that overall pie is quite robust at $1.5 billion. As I mentioned earlier in our presentation, there are no FDA-approved treatments for CINP. In fact, syndicated market research data suggests somewhere between 50% and 60% of the drugs used that comprise these cells are actually opioid use. I think we all know the drawbacks of opioids, be it side effects, tolerability, withdrawal issues and addiction potential. I think we'd all also agree a non-opioid effective pain treatment for any form of pain, specifically one for chemo-induced neuropathic pain, could be a real winner from a commercial perspective. Many patients exhibit their chemo-induced neuropathic pain as a result of their chemotherapy and concurrent with their chemotherapy. In fact, we have talked to patients who are packed in ice as they get their chemotherapy infusion. What was notable to the Virios team, now the Dogwood Therapeutics executive team and known to WEX for quite some time, is that approximately 1 in 3 chemo-induced neuropathic pain patients exhibit neuropathic pain 6 months post their chemotherapy treatment, a full 6 months after they stop their chemotherapy. That represents a very significant unmet medical need. And just to quantify that need, in the 7 major markets alone, defined here as U.S., Japan and EU5, we estimate there are 1.7 million CINP patients today. If you add in other developing markets and regions, you're well over 2.5 million CINP patients as a target for an effective and safe new drug for chemo-induced neuropathic pain. So good clinical data, very significant commercial opportunity. Let me summarize why we're so excited about the Halneuron program as an addition to the Dogwood Therapeutics R&D stable. Halneuron represents a novel non-opioid pain development candidate, a novel differentiated mechanism from opioids, which is absolutely key given the vast majority of therapies used to treat these patients are opioids as of today. This is a validated mechanism supported by decades of scientific research. And as Mike just shared with you, we have preclinical data supporting this mechanism, which adds to a large body of preclinical data for the Nav pathway. Mike has shared with you a reduction in pain in both cancer-related pain and chemo-induced neuropathic pain in human clinical trials and an acceptable safety profile in both of those clinical trials. I believe, as we just shared, that CINP represents a very large market opportunity as there are no presently approved treatments, and replacing opioids with an effective new medication seems like a winner in this particular marketplace. And when we combine the WEX team with the Virios team, we have a team with a track record of developing and/or commercializing pain medications. I would point out Celebrex and Lyrica, which are household names, have been under our management. And we hope with successful management of the Halneuron program, we can get Halneuron into the hands of patients who desperately need a new therapy. So that concludes the Halneuron portion of the program. We spent the vast majority of time there because it's newest to most of you. But I also want to highlight the novel combination antiviral program, the second pillar of the Dogwood Therapeutics R&D platform. There are 2 late-stage clinical development assets in this combination antiviral platform. The first is IMC-1, which is a combination of famciclovir and celecoxib. This is poised to progress into Phase III development for fibromyalgia. As some of you may know, we met with the FDA a while back, and they have given us their clarity on what's required for the Phase III program. And we are presently exploring partnership both to execute the program and to develop an extended-release dosage formulation to extend the IP of this unique combination. The second combination antiviral therapy is IMC-2, which is a combination of valacyclovir and celecoxib, which is the focus of an ongoing Phase IIb Long-COVID study. We announced proof-of-concept data last year. That led us to file a new IP, which, if granted, provide us protection for this combination to 2044. We use those data in the meeting with FDA to align on development criteria for IMC-2 as a treatment for Long-COVID symptoms. And to the best of our knowledge, this is the first time the FDA has agreed to use fatigue as the primary endpoint for development of a new asset. That's important because fatigue is by far the dominant symptom patients complain about when they have a Long-COVID diagnosis. And as Mike will share with you in a few minutes, there is an ongoing three-arm Phase II investigator-initiated study of IMC-2, fully enrolled at the Bateman Horne Center with top line data expected sometime in the next few weeks. Let me share just a little bit about the Phase III program that we've agreed with FDA on IMC-1. This program is comprised of 4 components. A pharmacokinetic food effect study as a precedent to 2 acute 12-week studies, study number one is a head-to-head study of IMC-1 versus placebo, approximately 160 patients in each group with the primary endpoint of pain reduction, consistent with our Phase IIa, our Phase IIb and approval requirements for a new indication in fibromyalgia. The second study would be a multifactorial study of IMC-1 versus placebo versus the individual components of famciclovir and celecoxib as part of this secondary study. This is a 1:1:1:1 randomization basically 4-arm study, again, with the primary endpoint at 12 weeks of pain reduction. Patients who are interested in the Study 1 and Study 2 components of this program can enroll into the long-term safety extension, which will provide us with the safety data we need to file a new drug application on behalf of IMC-1 to get to this drug across the goal line and into the hands of doctors and patients who need new therapeutic choices. I will remind you that there's been nothing approved to treat fibromyalgia over the past several decades. So with that background on the Phase III program, let me turn it back over to Mike just to provide a refresher on the proof-of-concept data we announced last year as well as a summary of the ongoing Bateman Horne Center 202 study. Mike?

Thank you, Greg. So this is our proof-of-concept study in Long COVID. This was, as we mentioned, an investigator-initiated study that we did partnered with Bateman Horne Center to conduct at their Long-COVID population that they managed there. And this was an open-label exploratory study, just trying to evaluate if an antiviral approach would have efficacy in a Long-COVID population. Primary endpoint for this was fatigue reduction. This was -- the way the study was conducted, they recruited 22 all-female patients. The mean age was 43. They had long-standing COVID. The mean time since their initial acute COVID infection was over 2 years. And they had a high rate of vaccination of approximately 86% had vaccinated for -- been vaccinated for COVID anyway. And that was compared to a match control group that were selected from the same Long-COVID cohort and 17 match controls are selected. They were matched for gender, for age, duration of Long COVID, again, over 2 years and, again, a high vaccination rate. So when we did that comparison or just say when BHC did that comparison, they found highly statistically significant results on fatigue as measured both by the NIH PROMIS fatigue scale and by a 0-to-10 fatigue scale that patients completed. We saw improvements in pain, saw improvements in patient global ratings where you ask them, have your symptoms improved since you began treatment. And notably, we saw improvements in orthostatic symptoms. This is something that BHC thought might be important that they see a lot of orthostatic intolerance. This is where you go from sitting to standing and you feel like you're going to faint. That's common in Long-COVID patients, and we saw notable improvements in orthostatic symptoms in this population as well who are treated with the antiviral approach. We even saw some improvement in depression and anxiety ratings probably related to improvement in all these other symptoms. So that was very intriguing, so that we decided we needed to do the next study, which would be a double-blind placebo-controlled study, and that's presented on Slide 18. This again was conducted with the Bateman Horne Center, another investigator-initiated study. But this time, it is placebo-controlled and fully double-blind. And again, they recruited 44 patients for this study. It began in December of 2023. It's 1:1:1 randomization where we're looking at 2 different doses of the antiviral combination of valacyclovir and celecoxib dosed twice a day compared to placebo this time. The primary endpoint of the study is fatigue reduction, and we're also for secondary endpoints looking at orthostatic symptoms, anxiety, depression, sleep quality, overall health and so on. That study is fully recruited. The last patients are currently finishing right now, and we should expect to have results in the next few weeks to maybe a month where we'll be unblinded and we'll know the results of this very important study. So with that, I'm going to turn it back to Greg to wrap up the call.

Great. Well, I'll begin -- I'll end where we began, which is just summarizing the deal highlights, and then we'll open it up to questions. We're delighted to expand the pipeline to include a first-in-class Nav1.7 modulator, a pain treatment being studied in Phase IIb assessment as a treatment for chemo-induced neuropathic pain. Concurrent with the deal, we have a strategic financing by CK Life Sciences International Holdings. And existing cash of the 2 companies combined with this $19.5 million investment provides us with working capital of $23 million, which funds Dogwood Therapeutics operations to the end of next year. That includes an interim readout on the ongoing Phase IIb CINP study, which we expect in the second half of next year. As Mike just referenced, in the coming weeks, we expect to report out on our IMC-2 Long-COVID Phase IIa study. And the nice thing about the strategic financing is we now have extra time to figure out what's the best way to progress IMC-2 moving forward, either through some form of investment, partnership or non-dilutive financing through some of the available funds that have been allocated by the U.S. Congress to assess on COVID illness moving forward. We have a CVR for all shareholders as of the record date of October 17, 10 days from today. And we believe that this is a just and a deserved reward for our existing Virios shareholders, who will accrue 73% of the benefit of any partnering transaction development or regulatory milestones. The effective 25-for-1 reverse stock split to facilitate the business combination is effective this Wednesday, October 9. And hopefully, you get a sense with your interest in Virios Therapeutics to date and moving forward, this is the team that understands pain research, fatigue research and will bring that expertise to bear on creating value through the newly formed Dogwood Therapeutics pipeline. With that background, I'm going to turn it back over to Ali for questions and answer. Ali?

[Operator Instructions] We have a question from David Bautz with Zacks Small-Cap Research.

Congrats on the announcement this morning. So Greg, I think you kind of touched on this, but I just want to clarify, is there a potential do you see to move IMC-1 or and/or IMC-2 forward in development yourself? Or do you only see them moving forward with a partnership?

Good question, David, and thank you for joining this morning. I think we've been pretty clear that IMC-1, given the heft of the program, is probably best suited to partnership. And IMC-2, we're very flexible on. We're looking forward to the data. We're very encouraged by the prior proof-of-concept data. This is something we could certainly manage ourselves. But one of the nice things about this transaction is we now have operational runway to get us basically 15 months from today to figure out what's the best option that creates the most value for shareholders, be that developing it ourselves or in some form of partnership. I would mention the RECOVER task force has allocated and requested new topics for future research to be funded by U.S. government funds under the broader RECOVER umbrella. And we would certainly avail ourselves of such resources if we're fortunate enough to get such proceeds. And we have submitted this particular topic using combination antiviral therapy to treat Long COVID into their portal for future consideration.

Okay. Sounds good. And a couple of questions on Halneuron. I'm sorry if I missed this if you went over it in the presentation, but how is the drug dosed? How quickly does pain reduction occur? And I guess, what is the target length of treatment time that you guys are looking at?

I think it's -- you can hear from me, but Mike is probably best placed to answer the question on dose rapidity of effectiveness and the dose in the Phase IIb study. Mike, do you want to comment on those 3 things for David?

Sure. The dose route is subcutaneous injection. But it's a small volume that's injected into usually the abdomen, obviously, with a syringe. The patients report pain reduction within a day, although it's cumulative, and we see maximal pain reduction about a week afterwards. As I showed on durability of response, at least with the cancer-related pain, we saw some very long responses in that patient population. We expect with CINP, it will be similar. But to answer your question directly, we're expecting the durability response to be 2 to 4 weeks. So we probably would, for a registration study, probably be dosing monthly with the expectation that, that would maintain a response in the patient population.

Okay. And then one more question, if I could, on Halneuron. I was looking at some of the other data on the Phase II study, the adverse events, it seems to be that a numb mouth was reported by patients taking the drug. And I'm curious, is it subcu, if you have any insight into the mechanism on that? It's just surprising this is not an orally administered drug.

No, it's not that surprising actually. Yes. So the oral hypoesthesia is a technical term for that. That is a result of sodium channel inhibition. And it turns out the tongue and the lips are the most sensitive part of the body to change their responses when they get inhibition. So a subcu injection is systematic. It goes through the entire body. And that is the most sensitive sensory tissue in the body to sodium channel inhibition. Because it's really not a pain state, so you're not seeing pain reduction. What you're seeing is that tingling or altered feeling in the tongue and lips. And we see that with other drugs that have sodium channel inhibition as well, but it just turns out that Halneuron is so potent that you see it in the lips even though it's given systemically.

Yes, Dave, I might add, as you are well aware because I know you cover many different programs, acceptable tolerability varies based on indication. And CINP is obviously particularly serious. In fact, it's so serious that some patients actually roll off their chemotherapy, recognizing this is their lifeline because the CINP is so severe that their quality of life deteriorates rapidly. And as you can imagine, if you're dealing with a cancer diagnosis, being packed with ice where you get your infusion and then still dealing with this 6 months later is a very significant issue. And so the research done to date would suggest the tolerability of Halneuron is acceptable from a professional and a patient perspective, obviously, subject to further research. This is obviously very different if we were developing an antihypertensive or some daily therapy, that would become a bigger issue. But I think the severity of this particular disorder is -- suggests the Halneuron safety profile, at least to date, has been acceptable.

[Operator Instructions] Okay. As we have no further questions on the lines at this time, I would like to hand it back to Mr. Duncan for any closing remarks.

Thank you, Ali. We've provided a framework of the highlights of this transaction. We are very excited to add Halneuron to our stable of assets alongside IMC-1 and IMC-2. We now have 3 shots on goal. The strategic financing provides us with runway to the end of next year. That will get us to the interim readout for Halneuron in the Phase IIb program, gives us more time to figure out what's the right strategy to progress IMC-2 development, presuming good success on the data forthcoming in the next couple of weeks and also provides us additional time to work through partnership discussions for IMC-1 and fibromyalgia. We appreciate your time and attention today and look forward to communicating on our progress immediately as we advance operations starting today for Dogwood Therapeutics, Inc. Thank you very much.

Thank you, ladies and gentlemen. This does conclude today's conference, and you may disconnect your lines at this time, and we thank you for your participation.