Moleculin Biotech, Inc. (MBRX) Earnings Call Transcript & Summary

Joining us next is a Houston-based pharmaceutical company focused on the development of a broad portfolio of oncology drug candidates for the treatment of highly resistant tumors and viruses with 2 clinical-stage assets. It's my pleasure to introduce Moleculin Biotech.

Good afternoon, everyone. Welcome to the Moleculin Biotech presentation. As always, this presentation contains forward-looking statements. So please check out our safe harbor disclaimer on Slide 2 at your convenience, and you can also see this entire presentation on our website. I'm Wally Klemp. Chairman and CEO of Moleculin, and I'm joined today by our EVP and CFO, Jonathan Foster. In addition to a highly experienced management team, it's worth noting the breadth and depth of our Science Advisory Board. Jim Abbruzzese at Duke University is considered one of the nation's experts in pancreatic cancer, and our hematology experts are considered the best in the business. With the advent of COVID-19 and the discovery that our compounds could have a profound impact in infectious diseases, we've now established a Virology division led by Dr. Rich Whitley, who is the Head of the New Drug Development for the NIAID. We think one of the things that really sets Moleculin apart from other small biotechs is the breadth of our portfolio. We like to say that we have multiple shots on goal so that investors don't have to be quite as concerned about the sometimes binary risk associated with drug development. In fact, we have 3 core technologies, each of which we think has blockbuster potential. Annamycin, if approved, would become the world's first non-cardiotoxic anthracycline. WP1066, our STAT3 inhibitor, could become the first-ever STAT3 inhibitor to show activity in humans. And we may also have the first antimetabolites to show activity in both a cancer and a virology setting. So far, they've represented 5 Phase I clinical trials, and already 2 drugs are showing enough human activity to support Phase II trials late this year and early next. Part of what's so unusual about Moleculin is just how different our 3 core technologies are. Anthracyclines have been a cornerstone of first-line chemotherapy for decades, yet almost nothing has been done to address the significant cardiotoxic side effects that limit the use of anthracyclines. Well, not only does Annamycin remove the cardiotoxicity problem, it's been shown to avoid the multidrug resistance that has limited the effectiveness of existing anthracycline. And a very recent discovery at MD Anderson Cancer Center has shown that Annamycin is capable of accumulating at up to 7x greater concentrations in the lungs, where the standard of care doxorubicin is virtually useless. But where Annamycin is a next-generation chemotherapy, WP1066 represents an entirely new class of small molecules capable of inhibiting the activated form of STAT3 as well as several other cancer-related transcription factors. STAT3 is considered a master regulator of cancer-related cell signaling. At the same time, WP1066 has also been shown to stimulate a natural immune response and to create immune memory in animal models that can actually prevent the return of cancer. But just as different as STAT3 inhibitors are from anthracyclines like Annamycin, our portfolio of antimetabolites, led by WP1122, even further diversifies our portfolio. The pandemic has shown a spotlight on WP1122 because it represents a radically new and different approach to creating a potential COVID-19 therapy. And because this is a therapeutic approach and not a vaccine, recent discoveries have the potential to open up a wide array of infectious disease targets well beyond COVID-19. Now having this many shots on goal is not easy to accomplish, especially with a small and lean organization like Moleculin. In fact, the only way we can accomplish this is through a global network of collaborators and partners. Our drugs weren't just discovered at MD Anderson, but we also sponsor ongoing research there that has continued to pay dividends. At the same time, we rely on partners in Europe who have access to EU and local grant funding to help cover our development costs. As well, investigator-initiated research on our technologies at Emory University, the Mayo Clinic and others help us carry the clinical development load that comes from having so many opportunities. As you can imagine, the COVID-19 crisis has put a tremendous strain on existing antiviral research capabilities. So we're very lucky to have built a virology network, including the famous Rega Institute in Belgium, to further leverage our resources. So with that in mind, I'm going to show you 2 different pipeline charts. They both address the same 3 core technologies, but this first one reflects only the activity that we are internally funding. Annamycin has already begun to show activity in humans even at subtherapeutic doses in our Phase I clinical trials. We expect the final Phase I trial in Europe to begin reaching therapeutic dose levels by late this year or early next year, which should position us for a Phase II clinical trial to begin in 2021. And if history is any indicator, we expect the activity we will see toward the end of this Phase I trial may be enough to attract potential development partners. And the recent discovery at MD Anderson regarding lung metastases has us on an accelerated path to begin a Phase I trial for that indication in 2021 as well. Although WP1066 is the star of our STAT3 inhibitor portfolio, one of its analogs called WP1220 has already shown activity in humans as a topical treatment for cutaneous T-cell lymphoma, a deadly form of skin cancer. Now in this instance, we were planning to go straight to a larger Phase II trial on our own. But given the activity that has been ramping up on the COVID-19 side, we're beginning to think that this may be better approached with a development partner. The clinical activity we expect with WP1122 could be explosive in terms of a value inflection for our shareholders. So we want to be clear that our priorities have shifted to ensure we exploit this potential. If continued animal testing supports it, we see an IND possible before year-end for a Phase I COVID-19 clinical trial. But now here's a look at the same development pipeline from the perspective of what we expect to be externally funded. Our partners in Europe are working with investigators who have access to EU funding that could be brought to bear on testing Annamycin against lung metastases, and that could still happen before the end of the year. And we continue to have 2 investigator-sponsored clinical trials of WP1066 in brain tumors underway as we speak. One of those is for adults at MD Anderson Cancer Center, and the other is for pediatric brain tumors at Emory University. Now these are patients for whom options are extremely limited. So even a small amount of activity in either of these trials could be very big news for Moleculin. I should also remind folks that independent research at MD Anderson recently uncovered that WP1066 used in combination with whole brain radiation was capable of creating long-term survivors in an aggressive GBM mouse model. That discovery has led to additional access to outside grant funding for yet another investigator-sponsored clinical trial. And finally, the focus continues to be intense on developing tools for dealing with COVID-19. And so if we show activity in animal models, it's very likely that government funding may be available for continued development of 1122 into Phase I and beyond during 2021. We want to be clear that some key developments are on the horizon. For Annamycin, we've already had encouraging activity. Even at what are clearly subtherapeutic levels, we've seen 45% efficacy in 11 relapsed patients treated at or above 120 milligrams per square meter. And after exhaustive review of the data by both Duke University and the Cleveland Clinic, we can say absolutely, there has been no cardiotoxicity. Once we complete the current subtherapeutic cohort of 240 milligrams per square meter, we advance to 300 milligrams, which we believe is the beginning of the therapeutic window for Annamycin. So the potential for important news flow here in the next 3 to 6 months is very real. Remember, Annamycin has both orphan drug and fast track designation from the FDA, so the opportunity exists for accelerated approval. And with an upcoming IND for lung metastases, Annamycin will soon be pursuing additional indications. As I mentioned before, we've already seen some human activity from WP1220 applied topically to treat CTCL. So there is always a potential to now see activity in the brain tumor trials that are underway with WP1066. Again, these are indications for which any human activity could be considered significant. Now this next slide is a bit of a road map, and it has a lot of detail, but we understand that a lot of investors are laser-focused on potential activity relating to COVID-19. Because of this, we wanted to provide a bit more detail on this subject. We really found ourselves being pushed into the COVID-19 fray by the independent research that showed the remarkable activity of an antimetabolite to affect SARS-CoV-2. Two independent universities have published research showing the ability of a compound called 2-Deoxy-D-glucose or 2-DG to protect cells from the coronavirus in vitro. This led us to test WP1122, which is a prodrug of 2-DG, to see if it could outperform 2-DG alone. You see, the problem with 2-DG is that it's not considered druggable. 2-DG is metabolized so rapidly in animals that it can't accumulate to therapeutic levels. But WP1122 solves that problem, and our in vitro testing showed it was much more effective than 2-DG alone against SARS-CoV-2. This is why we're moving as quickly as possible to test WP1122 in animal models to support an IND application yet this year. But what happens if it doesn't do well in COVID-19 animal models? Well, we really haven't lost anything because we simply take all the work done to date and support an IND for a cancer indication, which was the original plan anyway. The pandemic will simply have accelerated our development plan. Now if it does show activity, you can bet we'll be racing to file an IND for a Phase I COVID trial before year-end. But something else has happened through all of this. We're beginning to recognize that we may have other compounds in the 1122 portfolio that may be even more effective against viruses. And not just the coronavirus but possibly other viruses like HIV where there is already a $20 billion a year market in the U.S. and where resistance to existing drugs is beginning to become a concern. All of this begins to take on a greater meaning when we begin to consider that as vaccines are approved and infection rates decline, there will eventually be an erosion of investor interest in the next COVID-19 drug. That's why we think it's critical that our virology platform has the potential to extend far beyond COVID-19. The importance of this slide is to communicate just how much information flow may be possible over the next 3 to 6 months surrounding our virology opportunities. And let's not forget that this is only 1 of our 3 technologies. As I mentioned before, Annamycin has the potential to deliver near-term value inflection by continued progress in the Phase I AML trial by reaching an MTD and progressing to a Phase II trial and by successfully filing an IND or CTA for lung met and then launching that trial as well. And finally, WP1066 could be delivering game-changing news flow by year-end both in terms of any activity in the current brain tumor trials as well as an additional IND for the combination of WP1066 with whole brain radiation. If there was ever a time to be paying attention to Moleculin, this next 3 to 6 months is likely to be it. With all that said, let me ask our EVP, CFO, Jon Foster, to give you some insight regarding our balance sheet and cash flow dynamics during this exciting period of Moleculin's development. Jon?

Thanks, Wally. As you can see, we take a capital-efficient approach to managing our balance sheet. We leverage our low employee count with about 200 vendors worldwide and managing all of our preclinical work, clinical trials and supporting the key collaborations that Wally just mentioned. Keep in mind that physician-sponsored trials cover most of the cost of those trials. So those expenses are not shown in our financial statements here. So we've run about 5 -- we run 5 clinical trials on about $12 million run rate R&D budget, which also includes nearly $1 million of sponsored research at MD Anderson. Our R&D increased in the second quarter as we ramped up supplies of Annamycin for the trials Wally just mentioned and incurred additional costs as we explore and continue to explore the antiviral capabilities of our WP1122 portfolio. We had almost $17 million in cash on hand at the end of Q2. Plus, we tapped our ATM for close to $2 million in Q3. This $19 million would extend the cash runway towards the end of Q1 '21. Now we take an opportunistic approach to raising capital to benefit our shareholders. We raised $17 million this year, with most of that coming from using our ATM with Oppenheimer, which is a low-cost method, roughly 3% commission and uses no warrant, so limited dilution. And we've done those at a fairly good price. We have 3 analysts reporting on us right now. We couldn't be any happier with them. We have at ROTH, Jonathan Aschoff. At Maxim, we have Jason McCarthy. And at Oppenheimer, we have Kevin DeGeeter. Along with the $15 million untapped ATM with Oppenheimer, we also have an equity line with Lincoln Park. We're also focused on out-license of our technology in low-priority areas. An example of that is our recent out-licensing into Poland for some areas east of Poland. We will continue to look for other opportunities like that, so we can continue to work for a capital-efficient approach to raising money for our shareholders. With that, I'll turn it back over to Wally.

Thanks, Jon. Actually, operator, I think we're ready to take some Q&A if there's time for that.

Yes, absolutely. The first question is, what do you plan to use the ATM with Oppenheimer for?

Jon, do you want to tackle that one?

Sure, sure. So as Wally just mentioned, the exploration of WP1122 and also Annamycin is on our internally funded pipeline chart. So the money that we'd raised with the ATM would be to continue the runway for those trials. And we would keep the other trials on the externally focused -- externally funded path. As Wally mentioned that the Annamycin AML track, the Annamycin lung track and the antiviral capabilities of 1122 is something that we need to continue to explore.

Our next question is, does the company intend to do a reverse split to maintain listing standards?

I'll take that one as well, Wally. We always -- this is a matter of being efficient with capital with our shareholders as we have a reverse split on our annual proxy. We have been below $1 before, and we have not had to do a reverse split. You have to trade below $1 for 30 days, and to get out of that, you trade above $1 for 10 days, and you're back in good stead with NASDAQ. And if you don't, you have 180 days to get back above $1. So there's a lot of time to get above that. And so right now, we currently have no plans for a reverse split.

How much runway does the company current cash provide them?

I think you've already answered that from the standpoint of the cash that we have will get us towards the end of Q1 of 2021, and we have the capability of extending our runway deep into 2021 with our ATM and our equity line.

How does the SEC halt of trading in your stock for a few weeks earlier this year impact your company?

So...

From the standpoint of the -- go ahead, Wally.

So just to give you a break, Jon, so look, the trading halt, I think, unfortunately, reflected an unfortunate period of time for a lot of small biotech companies that were scrambling to try to grab on to the COVID-19 brass ring, if you will. And we know that the SEC took similar actions with more than 30 companies. Unfortunately, most of them had reason for concern. We were one of the rare, if not the only exception where everything that was brought up by the SEC essentially was answered to their satisfaction. And in fact, we did not have to make any corrective or clarifying statements after the end of the trading halt. So it was an unusual situation. As Jon likes to say, we were kind of like the dolphin caught in the tuna net, but once it was over, it was over, and we're back to business as usual.

Okay. Next question, does any of the research preps for different SARS outbreak in the future?

I'm not quite sure. It sounds like maybe that question is asking it, does our research potentially apply to the possibility of viruses beyond SARS-CoV-2? If that's the case, the answer is absolutely. In fact, one of the reasons we're so excited about this mechanism of action is that it's not specific just to SARS -CoV-2 but to a pretty wide range, we think, of viruses, and there's a lot of in vitro data to support that presumption. Now you never know until you test in animals and then ultimately in humans. But we're very optimistic that our compounds have applications far beyond COVID-19.

That's all the time we have for questions. Thank you. This concludes today's event.

Thanks, operator. Thanks again for taking time to learn more about Moleculin. If we can help you in the future, don't hesitate to reach out to us. We'd be glad to speak with you. Have a great day.

Thank you.