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

All right. Good morning, everyone. Thank you for joining us. We're kicking off the third day of Oppenheimer's spring health care conference. We're fortunate to have the management team from Moleculin Biotech to speak with us. We are presenting with several members of the management team. I think we'll start off with CEO, Wally Klemp. Wally, over to you.

Thanks, Kevin. Hello. Again, I'm Wally Klemp, Chairman and CEO of Moleculin Biotech, Inc. And I'm joined by our EVP and CFO, Jonathan Foster. Thanks for giving us the opportunity to share some insights on our company. We are publicly traded on Nasdaq under the ticker symbol MBRX. And everything we say here is subject to the more detailed disclosures we provide on our website and of course, in our public filings. Our disclaimers regarding forward-looking statements can be reviewed at your convenience, along with the rest of this entire presentation, by visiting the Investor tab at moleculin.com. Given the abbreviated time we have today, we'll cover only a few slides in this deck, but we encourage you to download the entire presentation to gain a more detailed understanding of Moleculin and the breadth of activity in our pipeline. As a quick overview, let us introduce you to Moleculin with some key benchmark numbers. We have 3 core technologies spanning a wide range of mechanisms that provide both diversity and the potential for synergistic combination. Annamycin is a next-generation anthracycline that, if approved, would become the first ever non-cardiotoxic form of this cornerstone chemotherapy. Our first-in-class STAT3 inhibitors are highly regarded with over 50 peer-reviewed journal articles because of their potential to reach what has, until now, been considered an undruggable target. And a great deal of investor attention has been focused on our antimetabolites, especially WP1122, which has the ability to both inhibit glycolysis and alter glycosylation, 2 things that represent unique new approaches to addressing certain hard-to-treat cancers as well as viruses, including the current coronavirus. As of the end of 2020, our pipeline accounted for 5 clinical trials either completed or underway. This includes internally funded trials in acute myeloid leukemia and cutaneous T-cell lymphoma as well as externally funded trials in both adult and pediatric brain tumors. We believe the external funding of trials is critical for several reasons. For one, it constitutes important independent peer validation of the merits of our technologies. And perhaps most importantly, it allows us to create leverage against the breadth of our pipeline while minimizing dilution to shareholders. Nothing is quite so critical to small biotech companies as human data. And we now have 3 drugs showing human activity. In the case of Annamycin in AML and WP1066 in DIPG, a rare form of pediatric brain tumor, this activity is happening early in the Phase I dose escalation portion of their respective trials, where we haven't even reached therapeutic dose levels yet. In the case of CTCL, this proof-of-concept trial showed what we believe is approvable efficacy if we can repeat these results in a larger patient population. And now it appears that we may be able to improve on those results by simply extending the treatment period. All of this helps inform why we believe 2021 is going to be a pivotal year for Moleculin. We expect to see up to 8 clinical trials during the year. In addition to the ongoing AML and brain tumor trials, we just received an IND from the FDA for Annamycin in sarcoma lung metastases. And we're looking to start a Phase I/II trial in both the U.S. and the EU, the latter of which, as we recently announced, will be grant funded. In addition, we're actively seeking a collaborative partner to work with on a Phase II CTCL trial for WP1220. Finally, there is the potential for even an eighth clinical trial in 2021, and that's either a cancer or a COVID-19 trial with WP1122. This, of course, hinges on receiving an IND in the U.S. or the equivalent outside the U.S. for either indication. In the U.S., this will depend on demonstrating activity in an appropriate COVID-19 animal model, which requires gaining access in a highly competitive environment where such validated models are in extremely high demand. That said, we may not need to demonstrate animal model activity outside the U.S., and we're just now preparing to seek approvals outside of the U.S. without animal trials. Now if we're unsuccessful in that effort, we can pivot to focus on the cancer indications for which 1122 was originally intended. If there's one thing we want investors to remember about Moleculin, and that is that we have diligently curated a diverse portfolio that gives us what we call multiple shots on goal. We believe strongly that this reduces the risk of investing in Moleculin when compared to single technology biotechs and gives our investors more than one way to win. We're doing all of this with only 15 employees, so we maintain a very lean operating structure. Nevertheless, all of our key operations employees are veterans of drug development. And this core team is supported by over 150 contractors worldwide and guided by industry-leading science advisory board members from the likes of MD Anderson Cancer Center, Dana-Farber and Memorial Sloan Kettering as well as the FDA and the NIAID. There are a few more numbers that every investor wants to know, and I'll let our EVP, CFO, Jon Foster, cover those for you. Jon?

Thanks, Wally. We ended the year with $15.2 million of cash on hand. Those are preliminary numbers. We'll issue our 10-K next week. And we subsequently received over $80 million in gross proceeds from our Q1 '21 equity transactions. Now that's a total of over $95 million. So to support all of that technology that Wally just mentioned, we have a cash runway until at least the end of 2023. This includes increased spending over our current levels in preclinical and clinical activities. If you take our current levels of spending, that would take us into 2025. Now as I just mentioned, that runway extends beyond 2023, and you're saying, well, what's the difference? How far depends on clinical activity and preclinical activity and most importantly, opportunity. While we have a good runway, we're constantly in discussions on how to leverage our balance sheet by expanding our existing collaborations and creating new ones. We recently announced grant funding in Europe for over $1 million to support a physician-initiated trial there, and we hope for more of the same for our other clinical programs. Combine this activity and this cash runway and we have the potential, and most importantly, the time for additional signs of significant human activity in our trials. Wally?

Thanks, Jon. With the time we have left, I want to draw your attention to some key slides in the more detailed corporate presentation deck that you may find useful to reference if you decide to dig deeper into Moleculin. We've taken the extra step to break our pipeline chart into 2 sections. This first one shows the programs we are funding or intend to fund directly, which forms the basis for the cash planning that Jon just talked about. The key takeaways from this chart are that we expect to reach an MTD in our single agent Annamycin AML trial this year and progress to an expansion Phase II. However, we're also expecting to begin a Phase I/II AML trial for the combination of Annamycin with Ara-C, which recently published data suggest should be significantly more effective for relapsed or refractory AML patients. Annamycin is clearly the most robust of our internally funded programs as we also expect to begin a Phase I clinical trial in the U.S. for sarcoma lung metastases. Now the lung mets opportunity is particularly exciting since an independent animal study just demonstrated that Annamycin is capable of accumulating in the lungs at 34x the level of doxorubicin. Doxorubicin is the current standard of care chemotherapy for sarcoma lung metastases. And yet it has limited efficacy for these patients. Since all currently approved anthracyclines are significantly cardiotoxic, we believe that the absence of cardiotoxicity with Annamycin should make it a preferred alternative even with equivalent efficacy, but the fact that Annamycin avoids cross-resistance with doxorubicin, coupled with this latest animal data, suggests that Annamycin may actually outperform doxorubicin in relapsed or refractory patients. This second pipeline chart shows the trial activity that we have and intend to fund externally through investigator-initiated trials that are largely supported by grants. A great example of this is our recent announcement that the grant funding has now been approved in the EU for a Phase I clinical trial with Annamycin in sarcoma lung metastases. We see our STAT3 inhibitor trials continuing to move forward in 2021, all with the benefit of external funding. The principal investigator in the MD Anderson Phase I/II single agent GBM trial is relocating to Northwestern University. So we now see an opportunity to expand the effort initiated by MD Anderson to additional institutions. In addition, new grant funding has been awarded for a follow-on Phase I/II trial testing the combination of 1066 with radiation. In parallel, the Emory University study of WP1066 for pediatric brain tumors has been especially encouraging. In addition to recruiting rapidly, we saw a significant efficacy in a patient with DIPG or diffuse intrinsic pontine glioma. This is a particularly rare form of childhood brain tumor for which existing treatments are simply not effective. In fact, no drug has shown activity against DIPG in the last 200 clinical trial attempts. WP1220 is another of our STAT3 inhibitors built on the same molecular backbone as WP1066 and formulated as a topical drug. A proof-of-concept clinical trial in CTCL was completed last year and shows the kind of efficacy that we believe could enable new drug approval on an accelerated basis if demonstrated in a larger patient population. So now we're seeking potential collaborative partners who specialize in the dermatology space to continue the development of 1220 into a Phase II pivotal trial in 2021. With significant activity in all 3 of our core technologies, it's difficult to cover it all in an introductory presentation like this. So we encourage you to review this more detailed corporate presentation via our website. Here, we set forth the clinical and regulatory accomplishments to date, including orphan drug, fast track and rare pediatric disease designations as well as key points of differentiation for each technology. Given the intense interest in our COVID-19 drug candidate, WP1122, I will point out, in particular, that recently announced Phase II data from a trial in India, conducted by an unrelated company, showed efficacy in moderate to severe COVID-19 patients with orally administered 2-deoxyglucose or 2-DG. Now this is extremely important since 2-DG is the active moiety or active ingredient in WP1122. Animal studies have shown the WP1122 is capable of substantially outperforming 2-DG alone because of significantly improved pharmacokinetics. In order to provide investors with a clear understanding of the COVID-19 opportunity for Moleculin, we also provide this road map of how we see the development of 1122 and its analogs unfolding. Based on feedback from the FDA, we need to test 1122 in a COVID-19 animal model before submitting our U.S. IND. Although we had previously contracted for testing in a hamster model, subsequent scientific review has revealed that this model is unsuitable for 1122. For this reason, we're now focused on gaining access to one of the rare recognized and validated mouse models for this purpose, but we remind investors that this could take time since such models are in very high demand. In the meantime, however, we're also preparing to request clinical trial authorization outside the U.S. where a COVID animal model may not be required. And in light of the recent 2-DG clinical trial results from India, there's an argument to be made that this step is no longer necessary since it's hard to find an animal model that is better than human patients with COVID-19. We believe all of the required preclinical toxicology and CMC work is now successfully completed for 1122 so we should be able to move quickly once a clinical trial is authorized. Regardless, all of the preclinical work we've done to date puts us in a strong position to move 1122 forward in a cancer setting in the event that the COVID-19 path proves to be unfeasible. Finally, we've also added a new way to look at how we expect information to flow to investors as a result of all the activity we have going on. In addition to the ongoing clinical updates from our AML, GBM and pediatric brain tumor trials, we expect to be announcing as many as 4 different new clinical trial authorizations in the first half of the year. As well, significant clinical development milestones should be achieved for both Annamycin and WP1122. We'll be updating this slide for investors on a regular basis. In fact, if you compare this slide to the version we published in January, you can already see that we've accomplished 2 of the milestones we set forth: one is gaining grant funding for the European sarcoma trial; and the other is contracting with a CRO to begin recruiting sites for the U.S. sarcoma trial. I'll also note that we moved back the filing of our Annamycin combination trial in Europe because it now appears that we may qualify for grant funding for this trial as well and we should have a reading on that yet in the first half of this year. And as you can see, activity is expected to ramp up dramatically in the second half of this year, with as many as 8 different clinical trials potentially kicking into gear and data readouts from as many as 4 different trials. 2021 is looking like the most critical year ever for Moleculin investors, so we're truly excited to get this year started. One last thing, we've also provided an appendix in the more detailed corporate presentation with insightful information about the development landscape for each of our major indications. So if you'd like to learn more about our programs, please do visit our website for the full presentation. We look forward to providing you important updates as the year unfolds. As always, please reach out to us through our Investor Relations team with any questions you may have. Thanks, again, for joining us. And Kevin, I'll turn it back to you.

Great, Wally. Thanks for the presentation. Let's start with the balance sheet. Jon highlighted the financial strength, which it's the company's strongest balance sheet its probably ever had as a public company, and that does provide some flexibility. Can you just walk through a little more granular detail in terms of the implied step-up in spending over the next 2 to 3 years. Should we think about that as focused largely on expanding clinical trials around Annamycin, other elements of the pipeline, new programs, just how do you bucket the opportunities for increased investment in R&D?

First, let me take it from the standpoint of the numbers. Our burn rate over the last 2 years has been somewhere between $17 million and $18 million. That's how you get to the 2025 number. Right now, as Wally just mentioned, most of our clinical trials are in Phase I. So you're in dose escalation. So we really don't know how long those trials are going to go. Once we get to Phase II trials, we'll have a little more insight into the speed and the length of those trials. Wally, do you want to talk about the difference between the speed of AML trials and lung trials?

Sure. The challenge, Kevin, as you know, is that AML is a pretty crowded space. There's a lot of competition, a lot of different clinical approaches right now, which puts a lot of pressure on recruitment. I mean, there are over 1,200 AML trials going on in the U.S. right now. So recruitment is a real factor, which is, of course, why we focused on Europe versus the U.S. And there, unfortunately, COVID-19 threw a real wrench in the works. Essentially, recruitment came to a standstill for over 6 months. I'm happy to report that recruitment is picking back up there. That's great to see. But to Jon's point, in lung mets, there is almost no competition for these patients. I mean, you can count the number of trials on one hand that are relevant to the space. And especially in Europe, there are virtually no alternatives. And we've witnessed that as soon as we announced the lung metastases trials in both U.S. and Europe, clinicians were scrambling to ask to be included in this trial, which is a huge change from, for example, the AML space. So look, it is a Phase I dose escalation. And as Jon said, you can't ever dial in where the MTD will be. So we can't know for sure where recruitment will come in. But we're expecting that this trial, even though STS lung mets are rare, we're expecting this trial will recruit pretty aggressively. And what I can preview for you, Kevin, is we say in our milestone chart that we think that trial in the U.S. will start in the second half. We think we're going to beat that milestone. There's just been tremendous reception and people are jumping through hoops to get this trial going.

So if I could expand on that. So Kevin, as I mentioned, opportunity, with STS lung mets, I think it's going to be a question of how fast we want the trial to run. And if we have an increased spend in R&D, we are leveraging our G&A more. And so we're getting more clinical activity on our G&A dollars because that's not going to change. So we're not going to do it foolishly, but if we have an opportunity to spend R&D money faster and more effectively, we will.

And I do think it's valuable, though, perhaps to take a couple of minutes to revisit the MOA data around the lung mets. It's not necessarily intuitive, but from an investor perspective, it really is sort of what's changed the investment profile of Moleculin as a stock. So maybe, Wally, can you take 60 seconds to sort of review what you've seen that is unexpected for an anthracycline in the context of activity in the lung.

Sure. You're right. It was a surprise, a welcome surprise. But our Chief Science Officer has said it several times. He said, it's the best preclinical data this company has. And we have a lot of preclinical data across a lot of things. But unquestionably, it's a beacon right now of probably the bigger opportunity with Annamycin. And what I mean by that is, we sponsor about $1 million a year of research at MD Anderson. And in the last 12 months, what they've discovered is that Annamycin hyperaccumulates in what they like to call certain sanctuary sites. And we focused on the lungs because it's pretty exciting and the data is amazing. We're seeing 34x the concentration levels of Annamycin versus doxorubicin in the lungs, which does several things. One, it helps explain why, even though it's the standard of care right now, doxorubicin is not very effective in lung metastases. We think we now know why, and it's just not accumulating at therapeutic levels. Annamycin appears to be. And in the animal models to validate that, we're seeing long-term survivors in models where that's unheard of. So that's why there's so much excitement. Now I'll just add to that, we've been focused on the lungs, but we see similar hyperaccumulation as compared to doxorubicin in the liver, the spleen and the pancreas. So you can sort of take that and run with it in terms of, if we show activity here in lung mets, it's going to be a short trip for us to expand that into other sanctuary sites.

And can you just clarify for us the operational impact of the U.S. versus the European lung mets studies you're kicking off. Are the studies going to answer distinct and separate questions or they're both going to be dose escalation studies but with different investigator focus and perhaps slightly different endpoints?

Great question. A lot of people are saying, why do 2 parallel studies in STS lung mets. And although they are running in parallel, the trial designs are different. So in the U.S., we're following, and by the way, this is being done in very close collaboration with MD Anderson, which, as you know, has the world's largest sarcoma treatment center. But they've really wanted us to emphasize being aligned with traditional solid tumor dosing regimens that you see with doxorubicin, for example, which by the way, is you basically treat once and then essentially you're off-treatment for 3 weeks, so for a total of 28-day cycle and then you're treated again. So one treatment, 28 days, another treatment. The animal data that we've been working with at MD Anderson, however, has also uncovered that weekly administration. If you fractionate that dosing and dole it out weekly, you actually reduce toxicities and increase efficacy, which is the time of the reduced toxicities may be intuitive but the increased efficacy isn't. So it's bringing up the argument, are we looking for a Cmax here or an AUC, right? And so the European trial will be weekly dosing. Now that's subject to local regulatory approval, but we think we're going to get that. And assuming we get that approval, then it will be weekly dosing. And it's really fascinating because we get to see almost in real-time a comparison between these 2 dosing regimens. First, and by the way, it's the first time this has ever been done with any anthracycline in any clinical trial. So it's pretty fascinating data.

And when one thinks about the tolerability profile of anthracyclines in general and Annamycin specifically and the opportunity to go to a fractionated dose, what's the most important metric for investors to be focused on in terms of the improved tolerability for the fractionated dose regimen?

Well, I mean, first of all, we know that the regulatory authorities will be focused on cardiotoxicity as they are with all anthracyclines. And as you know, our data continues to roll in saying, cardiotoxicity just isn't an issue here. But nevertheless, with this fractionated dosing and weekly administration, everyone will be eyes on to say, does the absence of cardiotoxicity hold? From a mechanistic perspective, we have every expectation that it will. So we would be surprised if we see anything contrary to that. In solid tumors, with anthracyclines, unlike, let's say, liquid tumors where myelosuppression is actually the point of the induction exercise in solid tumors, of course, myelosuppression is a potential DLT. So there is some prior solid tumor history for Annamycin that gives us a little bit of a preview of what to expect, but I would say, probably the most scrutinized focus will be on the myelosuppressive aspects of solid tumor treatment.

And then with regard to the U.S. program, is the expectation that, that site, at least for the dose escalation enrolled solely at MD Anderson or should we anticipate additional sites joining the dose escalation function?

It is a multicenter trial, and I know this is going to shock you, but sometimes MD Anderson can be a bit bureaucratic. So the red tape that one has to handle to get the lawyers aligned and the IRBs aligned at MD Anderson, we know from experience takes a bit longer than it does with, let's say, some other smaller institutions, especially those that use commercial IRBs. So we're excited to have MD Anderson sort of leading the charge. And of course, when published data comes out, they'll be featured prominently. But the fact is, when I said we're probably going to start before the first half of the year, it's because we're also including sites that move more quickly and god bless them. So we're glad to be starting more quickly, but MD Anderson eventually will be there, we just have to navigate their process.

And then just lastly in the final minute or 2 we have, can you provide a time line or a framework to think about the go/no go decision for additional clinical or moving into clinical trials for treatment of COVID-19?

Yes. And Jon, I'm going to invite you to sort of reflect on the financial consequences of what I'm going to say. But there's, obviously, the whole COVID thing is such an unusual scenario for biotech companies like Moleculin. And so we're very sensitive to the fact that under the right circumstances, if we see positive indications relative to antiviral and COVID-19, this could spin up very rapidly. And if it does, it could spin up into a very big, very expensive clinical trial. The initial trials, the first-in-human safety trial and then the, let's call it, the Phase Ib in COVID-19 patients, those won't be terribly expensive, and they'll probably be pretty quick. But if they show promise, then we're going to need to pivot quickly to larger, more expensive trials. Jon, you may want to talk about how you think about that financially.

Sure. Well, I think, to backtrack a little bit, it's going to be important. The preclinical work in 1122 has shown efficacy on more than just the COVID-19 coronavirus but other coronaviruses. So this investment could potentially go beyond the current pandemic. From a standpoint of the Phase Ia trial, that's relatively inexpensive. It's the next part, as Wally mentioned, that's expensive. But we think the excitement we would get over the Phase Ia could result in some collaborative efforts. And we do have staff on hand, and we have some continuous outreach to large pharma on collaboration.

Well, great. I want to thank you both for joining us today. We need to wrap, just be on time, but look forward to continue updates on Moleculin.

Always a pleasure, Kevin. Thank you.

Thank you.