Kane Biotech Inc. (KNE) Earnings Call Transcript & Summary

Hello, and welcome to our investor update. My name is Marc Edwards. I'm the President and CEO of Kane Biotech and thought following the sale of our STEM Animal Health business, it was very pertinent to give you an investor update on what investors should expect going forward. Before I begin, I want to thank the fine folks at Research Capital for letting us use their office space in Toronto today. Before I dive in to today's presentation, It'd be very important that you're familiar with forward-looking statements. There are forward-looking statements in today's presentation, and you should be familiar with the concept before making any investment decisions. So Kane Biotech, we're the biofilm company. We've been leading the advancement of technologies and products that break up biofilms and destroy bacteria where we're going to refine that going forward is we're going to do that on skin, whether it's abraded or non-abraded skin, we think there's a real opportunity to target infections, both in abraded skin. Such as chronic wounds and non-healing wounds and non-abraded skin such as atopic dermatitis and acne. These are markets that have become much higher margin markets in the past few years and think that our 20-plus years of research in microbial biofilm really gives us a very, very interesting first-mover advantage. A quick introduction to the team, Robert Huizinga, our new Executive Chair. Robert doesn't have anything to prove. He's done some fantastic work with Aurinia, really the only member there taking the technology from test tube to bedside, a great Canadian success. Myself, Marc Edwards, the President and CEO; Ray Dupuis, our Chief Financial Officer and my close ally for the past 5.5 years since I've been here. Same for Wendy Nachtigall, our Marketing Director; and Lori Christofalos who's our VP of Quality and Compliance, and has done a fantastic job in bringing in our quality system, which I'll tell you a little bit more going forward. So what are microbial biofilms? So biofilms are glue-like substance that allow bacteria to do 2 things. They allow bacteria to attach to a surface and they make bacteria and fungus for that matter, highly resistant to antibiotics and antibacterials. Anywhere you have bacteria trying to attach to a surface, you will have microbial biofilm, even oil and gas pipelines, microbial biofilm cause those pipelines to rust. Even considering that there is less than 0.1% water in that -- in those pipelines. We're looking at markets where our technologies can have a real impact on the biofilm without -- but really without destroying everything else that's alive around it. So that's why we think that topical infections are really an area where we can win. So it is very well known in wound care for chronic non-healing wounds that biofilm is a huge problem. There's a ton of research, everybody is pretty familiar with this in the industry, and it is really a given micro -- wound care is a huge market. In dermatology, the evidence base is growing. So topical infections, atopic dermatitis, seborrheic dermatitis, even acne, we believe, and there's growing evidence that our biofilm driven, and our technologies fit very, very well there, where they break up that biofilm and allow that bacteria to be killed easily without damaging the skin and doing more harm to the host than to the infection. We have 2 technologies that are -- have great synergistic activity. Let me start by DispersinB. It's an enzyme that we in-license from Rutgers. DispersinB is the benchmark in breaking up biofilm. And really, it is extremely fast acting and what's interesting about DispersinB is it has no effect on the bacteria itself, really only breaks up the [ XO polymeric ] structure that composes microbial biofilm. It works very, very fast, so very good for -- as a cleanser. Coactiv+ works best with prolonged activity. So it really has the best opportunity to be effective in [ Livon ] products and products that you're putting on for longer resonance time. So really you could use to clean the skin with DispersinB, and then [ Livon ] products would be with coactiv+ following that. So the point -- the reason why we're here today is that we announced on Monday that we had finalized the sale of our STEM Animal Health business. Dechra made a great acquisition. They ended up buying the entire business. Not only Kane's 2/3. So they also bought Animalcare's 1/3 of the business. They paid USD 12.5 million. So we're very, very pleased with the price that was paid. And I think it was -- it really demonstrates the high value of Kane's technology portfolio because not only were they acquiring the current portfolio of products that exists, but really the opportunity to develop more technologies. What -- what we had to date was a water additive. Basically, you put in your dogs drinking water. And we showed -- we've proven clinically that it reduces the accumulation of tartar on your dog's teeth, which was a big problem because the dogs don't have thumbs and can't brush their own teeth and brushing your dog's teeth can be challenging sometimes. So the -- we had a whole portfolio of products, but really the flagship is this water additive and we'll make the tools that pet owners will use to remove plaque and tartar on the teeth, a lot more effective. So what's Kane going to get out of this transaction. So about -- not exactly USD 8 million, so close to CAD 11 million there depending on the exchange rate for the day. Plus this was a cash-free, debt-free transaction, so we got an extra $1 million in working capital. Also, there's a onetime milestone payment that I'm expecting should be received in 2026 of USD 750,000, a little over CAD 1 million product development agreement. So Kane is really the ones that know best their technology and we'll be able to continue to develop those technologies for Dechra and then a transitional manufacturing agreement to a lot of our products currently are manufactured at the Winnipeg and as we transit -- transition that into Dechra's manufacturing facility -- facilities will bridge that gap for them. So ultimately, this transaction will net Kane well over $13 million and puts us in a much, much stronger position going forward to execute on our wound care and dermatology strategic plan. So what is that wound care and dermatology strategic plan. First of all, we've got our revived antimicrobial wound gel. It is FDA cleared since Q2 [ 2023 ]. We've got U.S. distribution agreement with ProgenaCare Global, which we also signed in Q2 2023. We've got Salud Pharma in Colombia, Panama and Costa Rica and I'll tell you more about what our plans are going forward to expand that reach. And I'll tell you more about revyve obviously. Our DispersinB wound gel, this is a project that is completely funded by the U.S. Department of Defense. We initially got a USD 2.7 million grant from the U.S. Department of Defense through MTech. And that funding was increased by USD 425,000 in the fall of 2022. We're expecting the clinical trial to begin right at the first half of 2024. But really to be conservative, that will be -- that might be a little bit tight. We've got ongoing discussions with the FDA. We -- I feel they're positive, but you never know. Then the other 2 -- so these 2 are the real 2 main areas of focus in wound care. In dermatology, we've got our DermaKB scalp care line. We did a massive consumer trial and the results there were fantastic. The sale of STEM will free up a little bit of capital to try and grow those sales to really bring in a nice strategic partner, a great strategic partner. And then the -- one of the things I'm most excited about is DispersinB for -- as a skin cleanser. We think that by using DispersinB as a skin cleanser, you could really reduce the prevalence of acne. And we've got a clinical trial that should be getting underway, we hope very shortly. We're working with the University of Miami on that clinical trial. So revyve antimicrobial wound gel, a great combination of efficacy. The efficacy comes from 3 main things: our coactiv+ technology, which breaks up the biofilm, our nonionic pluronic surfactant, which has been used pretty widely in the industry and has been shown to be highly effective. And then our PHMB antimicrobial, which has a great therapeutic index. The ease of use, the concentration of the surfactant that we have is -- which is also our gellant, the concentration of gel that we have allows the product to do 2 things. It allows 2 things. First of all, it becomes liquid when you cool a gel, so 16 degrees Fahrenheit or 60-degree -- sorry, 16 degrees Celsius or 60 degrees Fahrenheit. Below that, the gel will liquefy and will thicken above that. It becomes a nice thick clear gel. So what that allows is that when you put the gel on a chronic wound, it will stay on, and it will really give the coactiv+ that resonance time it needs and allows the antimicrobial to really do its job and kill a bacteria as coactiv+ ideally breaks down the bacteria. These results are all -- what I'm talking you about today are all in vitro results, of course. And then finally, from an accessibility standpoint, revyve is the first ultra-premium hydrogel. And from an accessibility standpoint, we're the first ultra-premium hydrogel that fits within reimbursement. So reimbursement in the U.S. is a little over $65 per month for 3 ounces and we fit into there nicely. There are a number of gels that are significantly more expensive, but the fact that we're able to fit in within that reimbursement really puts us in a very, very enviable strategic position. And I think we'll do very well there. So as I mentioned, a great combination of efficacy ease of use and accessibility. I'll let you go through that on your own time, the presentation will be available on Kane's website if you want to review this further. Let me give you a quick example here of how the gel will liquefy at colder temperatures. So we've got a petri dish here that we're going to be placing. We're going to be adding some revyve antimicrobial wound gel too and we will speed up the [indiscernible] a little bit, it's about 1.5 minutes, but the gel, as you'll see, becomes completely liquid here. The structure that -- the structure of the gel basically collapses makes a gel liquid. And then I'm in my second career. I'm a hand model, you will see my -- me having this gel in my -- so you can see the gel is liquid here. And then I mean it's been cooled to 32 degrees Fahrenheit or 0 Celsius. You wouldn't apply at those temperatures on to wound but as you can see here, the gel is a gelling up pretty nicely. And so that means that when you apply it to wound, it's not going to run at all. Moving on. The other thing that we've done for revyve, that's really going to put us in a very, very interesting strategic position is our revyve antimicrobial wound gel in a bag on valve spray. So we believe that this leverages the existing FDA clearance for our revyve antimicrobial wound gel and the new propel and free bag on valve application allows the revived antimicrobial wound gel to easily be spread on, on the burn and on sensitive wounds. The thermal reversible properties make it the revyve will stay on, but can easily be rinsed off. And especially for burns, the skin can be very sensitive. So you really don't want -- you want to limit the physical contact with the skin and the spray allows us to sprayed on, the thermal reversible properties allow us to rinse it off. And a lot of work went into developing this spray mechanism, and we've actually filed some IP there. Our patent lawyers felt that this was -- we felt and our patent lawyers felt that this was novel, and we filed some patents on these -- some provisional patents on this spray. As you can see here, it's a nice controlled directed spray. It's a thin blade. So really, the practitioner who's applying the gel can do so in a very targeted and controlled fashion. So let me show you here another little video that we've got quickly of our revyve spray. So spraying on this gel to the patient. There's -- it's a clear gel so you can't tell perfectly, but you get a nice clear gel. And then cool water, as I mentioned, 16 degrees or below, the gel can be rinsed off easily. So it will stay on, in vitro, again, we've shown that the gel has efficacy for over 7 days and will prevent the contamination of the gel there for over 7 days, which is really the time between -- the potential time between applications. I apologize. So in terms of commercializing our revyve antimicrobial wound gel. So we've got ProgenaCare in the U.S. Howard and his team have been doing a really fantastic job. We are ramping up our manufacturing and expect to have product -- large quantities of products available in early June at the latest. And ProgenaCare have been asking us every week, how -- when they can get more, the -- there is a little bit of pent-up demand there and really can't get this gel out fast enough for ProgenaCare. Salud Pharma have all the information they need we expect that before the end of the year, they should get approval from the Colombian FDA to commercialize the product. Salud have done a fantastic job with other products and expect that we'll be getting some high volume, high margin out of Colombia, Panama and Costa Rica through Salud as well. Now for Canada, where we've got -- we had our MDSAP ISO 1345 audit last week. I believe the recommendation is that we'd be -- we obtain our certification, and that will open up the Canadian market. The plan so far in Canada is for Kane to commercialize that. In North America, Canada has a very, very poor track record in terms of wound care. The Ontario, for example, is the North American state or province that has the highest amputation -- highest number of amputations and Manitoba is the province that has the highest rate of amputations. A lot of that is caused by diabetic foot ulcers. If you have diabetes, there is a 1 in 3 to 1 in 4 chance you will develop what is called a diabetic foot ulcer. And if you do develop a diabetic foot ulcer, there's again, 1 in 3 to 1 in 4 that will lead to an amputation. So we do a very poor job in Canada, unfortunately, at treating those diabetic foot ulcers and these chronic wounds. But our universal health care system allows for amputation anyway. So the amputee rates in Canada are terrible, and we really think that creates some very, very interesting, not only market opportunity, but opportunity to really improve care. We're in ongoing discussions with potential partners in Saudi Arabia and all the GCC countries, South Africa, various Asia Pacific markets. And for Europe, we've got -- I'll be attending the [ UMA ] conference in 10 days and we've got a number of potential meetings with some potential strategic partners. So I feel really good about our opportunities for our revyve antimicrobial wound gel and I think we'll do very, very well in the coming months and year with this what will soon be our flagship product for now. The other product that leverages our coactiv+ technology is our DermaKB shampoo. We've talked about it quite a bit. The sale of our STEM Animal Health business will allow us to free up some capital and make some investments there to really try and ramp up those sales. But it is dandruff, irritation, redness, itchiness is a real problem for an impressive number of people and our DermaKB shampoo has had a real, real impact on so many of them, we really feel that there's a real nice commercial opportunity here. Now on to our other technology, our DispersinB technology platform. So all DispersinB does, and I don't want to diminish it is really break up microbial biofilm. It has no impact on fungus. It has no impact on bacteria. It really takes the bacteria from being in a biofilm and makes it planktonic. So I've got another little video here on a confocal microscope. These are little colonies of biofilm. And as I press play here, you can see those bacteria leaving the biofilm and becoming -- becoming planktonic. Planktonic bacteria are very easy to kill and really not an issue there. So really within 7 minutes, it completely breaks down a biofilm. Now we've got our DispersinB wound gel. We've got this -- as I mentioned earlier, we've got funding from the U.S. Department of Defense through MTech for this project. We've done the preclinical work, and we're very, very proud of the preclinical work we've done and the results there and really think that this is the missing link in wound care. The DispersinB could really help clean up the wound and you follow that up, you clean up the wound, and then you would apply our revyve antimicrobial wound gel, bandage up the wound and see the patient a week later. And we really think that, that will be the missing link in the sense that really removes the infection from the wound and really help get the patients on the way to healing. Now we've got our -- we've been in regular contact with the FDA and waiting on our IDE. That should -- once that's approved, we'll get going with our clinical trial should take us 9 months. We'll have 75 patients to test arms and 1 control there and expect that we'll need 2 clinical trials to lead to approval. So following our preclinical work, there's also, I would say, growing interest from some real big players in the industry, and we're excited about the growing -- that growing interest. Now the other interesting thing is that DispersinB and some is coactiv+ work on a broad range of bacterial and fungal biofilms and Jeff Kaplan, who characterized DispersinB feels very strongly that acne is really the -- should be one of our areas of focus. So we filed some new patents on DispersinB. Jeff has been doing a lot of work there. He's publishing a number of papers. And really, the idea is that C. acnes, which is the bacteria that cause the acne lesion that C. acnes is -- which is an anaerobic bacteria. It doesn't grow in the presence of oxygen, really -- sorry, it doesn't grow in the -- so it's pretty prominent on our skin. And the reason why not everybody has a whole bunch of acne lesions is that it's in the contact of oxygen. So it is -- it doesn't grow into an acne lesion. Now our hypothesis is that staph epidermidis plugs up the hair follicle, creating that anaerobic environment, which C. acnes needs to grow. So and staph epidermidis just happened to be the positive control for DispersinB. So when we want to test if the DispersinB is still active in a product, we'll test it on staph epidermis and a little video I showed you earlier with the bacteria becoming planktonic was on staph epidermis as well. So I really think that there is quite a strong hypothesis here. And because of that, and again, with the sale of STEM, that allow us to fund a small proof-of-concept clinical trial at the University of Miami. I don't expect that the cost there will be too far above about $100,000 to get that underway. And really, we'll be testing wound gel as a skin cleanser in combination with benzoyl peroxide where DispersinB will break up the biofilm and benzoyl peroxide will kill the bacteria. So the plan is to do 20 patients, half face with DispersinB wound gel. And following that, make a decision as to the best route to bring this great potential product to market. There hasn't been any significant inroads in the last 50 years in acne. We're still using very, very old treatments and really believe that DispersinB could be the missing link there as well. But it's really our understanding of microbial biofilm that has prevented us or prevented the industry from having a significant impact on acne and that DispersinB is again the missing link in that area. So all in all, we've got our coactiv+, our revyve antimicrobial wound gel, which is based on our coactiv+ technology, it's FDA cleared. We're scaling up manufacturing and expect that, that will be a huge market success going forward, both in our tubes and our aerosol spray. Our DispersinB wound gel, clinical trial should get underway hopefully this summer. DispersinB as a skin cleanser, we're in active discussions with the University of Miami and expect that to get underway almost at the same time. And DermaKB, I mean we've proven that technology with over 4,000 user clinical trial -- consumer trial and feel that we'll be doing extremely well. So I want to thank you for your attention. And I'll now open it up for questions. Thank you very much.

So thank you very much for tuning in. Really appreciate that. We seem to have 1 question, regarding the approximate time frame on the availability of revyve in Canada. To commercialize our revyve wound gel in Canada, we need to have our ISO 1345 MDSAP certification. We had our audit for that certification last Friday. Following the certification, the auditors indicated that they would require -- we're expecting it will take between 75 and 105 days to get that certification. Once that's done, we can file with Health Canada and approval with Health Canada should take approximately 30 days. So to be conservative, I would say, late this year, potentially early next year, but we're certainly making that a top priority as we feel that's going to be a real very interesting market opportunity for Kane as well. So that appears to be the last question. I really want to thank everybody for tuning in. Really pleased with the turnout. I appreciate everybody taking the time. And please don't hesitate here -- sorry about that. Here's one more question. What's the -- what would the burn rate look like with the sale of STEM? We'd expect it to be about $300,000 per month -- about $300,000 a month will be our ongoing burn rates. And then we're -- sorry, we've got another question here. Has there been any reorders of revyve and are they paid for? So we've provided -- we've made some revyve product in-house for now. And we've provided that to ProgenaCare. Our first full industrial size -- first full manufacturing run of our revyve gel should be shipped in June. We're getting a lot of pressure from ProgenaCare to get that out to them faster. There is a lot of pent-up demand for our product. They've done a great job in getting that out there. But that will that will happen very shortly. Is it possible to clinical trials in other countries, especially in Central American countries? We -- our partner, Salud Pharma, are looking to do some commercial -- some clinical trials to demonstrate the efficacy with their local population as we move forward. And we will certainly look into that. But right now, our focus has really been on getting FDA approval for -- especially with regards to DispersinB, where we've done most of our clinical trials. And I believe there's a strong preference from the FDA to have done those trials in the U.S. That being said, we're also looking at doing some clinical trials in Canada. As I mentioned, Canada has a pretty bad track record with regards to amputations. We -- Kane was recently nominated as the biotech company of the year by the Bioscience Association of Manitoba. And we're working with the Manitoba government to see how we can run those clinical trials in Manitoba, and we're hoping elsewhere in Canada in a way that is -- that is as cost affordable for Kane and really brings these new technologies to patients at relatively little additional cost to the health care system. So lots of opportunities there and a great fit for Kane. So I don't want to cut it off too quickly. I believe that is the last question. Here is one. Can I clarify if the Department of Defense pays for the clinical trials for DispersinB? So our -- the Department of Defense through MTech has awarded us USD 3.25 million, that we have $1 million in our budget remaining that will cover our first clinical trial or 75 patient clinical trial. And that will take about a year. And following that, for our Phase II clinical trial, we fully intend to submit for additional funding applications. But so far, they've increased the amount of funding they've awarded based on the results of our preclinical. So we're very, very hopeful that there are some opportunities to get some additional funding from the U.S. Department of Defense for the Phase II clinical trial, the -- of 2 clinical trial. So I believe that was the last question. I want to thank you for your time and interest, and please don't hesitate to reach out. We're very excited about everything we've got going on and look forward to the -- turnover was good, we're looking forward to doing these more often. Thank you very much, and have a great evening.