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

So good afternoon, and thank you for joining us today for our virtual investor lunch break featuring Moleculin Biotech. My name is Jenene Thomas. I am CEO of JTC IR, and I will be the moderator for today's event. I am very pleased to be joined by Walter Klemp. Wally is Chairman and Chief Executive Officer of Molecular Biotech. Welcome, Wally.

Hi, Jenene, How are you?

I'm great, so happy to have you, and we're very excited to showcase Moleculin today on our platform and share your story with our audience. So Moleculin has made a lot of exciting progress with this lead program annamycin having just reported very positive and encouraging interim data in their MB-106 Phase Ib/II trial for the treatment of acute myeloid leukemia or AML. So Wally, congratulations on that data.

Thank you. Thank you.

Yes, absolutely. We'll get to that in a minute. And for today's event, we will start with the corporate overview from Wally followed by some questions from myself as well as the audience. But before I get started, I want to remind our audience that Moleculin Biotech is publicly listed on NASDAQ and trades under the ticker MBRX, and I encourage everyone to view the company's website at moleculin.com. So Wally, again, thanks for joining, and we're getting right to it. I'll turn it over to you.

Sure enough, Jenene. Thanks. Before I get started, I do just need to state that Moleculin is a publicly listed company on NASDAQ. And as part of today's presentation, I will be making some forward-looking statements, and I encourage you to visit our website and view our SEC filings for the latest information. Now to start with, I think it's important to set the framework for today's discussion. Here at Moleculin, we are laser focused on advancing our lead program, annamycin, which is a next-generation non-cardiotoxic anthracycline. Now, anthracyclines are not new to physicians. They have been and continue to be the most important therapy for patients with AML and advanced soft tissue sarcoma, or STS. What's novel about annamycin is that it has proven in clinical trials to date to show no signs of cardiotoxicity. Now that's important because while current anthracyclines are most commonly used as first-line treatments, they're limited to a maximum allowable dose, which has been set by the FDA because of cardiotoxicity that is their propensity to damage the heart. We, at Moleculin, believe the opportunity here is enormous with the ability to potentially provide a meaningful noncardiotoxic treatment option to the 58% of AML patients who are second line and have no other options. I believe that the data I will present here today in just a few minutes, helps to show why annamycin is worth your attention and why we've been turning the heads of the leading key opinion leaders in the field of AML as to the potential for annamycin. Now a company is only as good as the team and I believe we've assembled an impressive team with a proven track record in drug development and successful exits. As an example, I recently sold another company I built called Soliton to AbbVie for approximately $550 million. And I believe we have a much bigger opportunity here with annamycin and Moleculin. Frankly, a lot of small biotechs would give anything to have the data that we just recently announced. Annamycin was able to generate a 60% CRC rate in second-line patients, and that includes a 50% CR rate in combination with another 10% CRi. Now for those of you who aren't familiar with AML lingo, those are way better numbers than any other drug ever approved for AML. A conservative estimate says that annamycin should be able to more than double the number of patients achieving complete remission compared to all of the currently approved anthracycline -- or targeted therapies combined. Now this is possible in part because of annamycin's complete lack of cardiotoxicity. Now we've treated 82 subjects so far across multiple studies and is yet to see any indication of cardiotoxicity. And what's important here is that all of this puts us on course to begin a pivotal registration study this year with the potential for securing an accelerated approval pathway from regulators. And it makes Moleculin a fundamentally different company than most of you on this call invested in, candidly, even compared to just a few short months ago. We are now Phase III ready. We have data that outperforms every asset approval in AML in a space where lesser assets have sold in 2021 for $2 billion. And we've established what we believe is a pathway to approval. So look, annamycin is anything but a me-too product. It's lack of cardiotoxicity combined with its greater potency and lack of cross-resistance with currently prescribed anthracyclines, frankly, puts it in a class by itself. And while this is true for a wide range of potential indications, it's especially meaningful in AML. Now the AML treatment landscape is complicated. And it's easy to lose sight of just how big of an unmet need is still out there. We estimate that currently, in the U.S., almost 60% of AML patients remain without a viable treatment option that could cure their disease or provide lasting remission and that's despite all of the recent advances in targeted therapies. While we don't have time to explore this in detail today, it's very important for investors to understand why and how significant the unmet need still is. This is so important, in fact, that we produced a short video taking you through this analysis. Look, if you are currently an investor or considering investment, you owe it to yourself to watch this short 6-minute video. And because the unmet need is so great, a lot of recent new drug approvals have been allowed on the basis of some pretty low performance numbers. As you see here, of the 5 targeted therapies that have been approved, they've done so on the basis of an average 21% CR rate. Now look, what we just announced is more than double that number. And greater than -- but the difference here is even greater than that. The average 21% CR rate only applies to the few patients that happen to have their acquired targeted gene mutation, and that leaves 53% of AML patients out in the cold. In comparison, we've been treating all comers with annamycin regardless of gene mutation or prior therapy. And this is where annamycin really shines compared with all of the currently approved second-line therapies. The orange bars on this chart show the CR rates documented for each existing therapy. The blue bars wait those CR rates for the actual percentage of AML patients that can benefit because they happen to have the required gene mutation. And when you add them all together, it reveals that only 13% of all second-line patients will achieve a CR with current targeted therapies. But since annamycin is an all-comers drug, there's no reduction from waiting. Instead, 100% of the CR rate should be expected from all second-line patients. That means our 50% CR rate is multiple times greater than the expected benefit from all targeted therapies combined. Now if you're thinking that the relatively low performance bar set by targeted therapies means they don't have much market value, well, think again. In 2021, Servier, that's a French mid-pharma company, paid nearly $2 billion for the combination of IDHIFA and TIBSOVO. Those are 2 drugs that together are expected to produce complete responses in just 4% of all second-line patients. We're currently showing a performance from annamycin that's 10x that number. And if you think that's an outlier, consider that our performance numbers in second line are better than the numbers for venetoclax in first-line patients. And yet you would expect higher performance in first-line patients. Yet venetoclax generates $2 billion a year in revenue for AbbVie. And let's not forget that Jazz Pharma paid $1.5 billion for Vyxeos, where, again, we believe our performance numbers are much greater. Any way you look at it, we believe the efficacy numbers we're sharing with you today support an eventual exit value for Moleculin shareholders that will be measured in the billions. And again, this is just AML. As we've said before, our preclinical data suggests annamycin should also be beneficial in a wide range of other indications, potentially addressing 10x as many patients as both AML and STS combined. Now here's a summary of the 3 clinical trials we've conducted in patients with AML. I want to keep this brief. So let's characterize the first 2 AML trials as establishing safety and efficacy for annamycin as a single agent. And even though the efficacy numbers were encouraging, the preclinical research we sponsored at MD Anderson made it clear we could expect even better results by combining annamycin with cytarabine. That's a common drug used in combination with other anthracyclines in AML. Our latest trial called MB-106 did just that. We combined annamycin with cytarabine and that trial has now enrolled 20 patients. This includes 3 patients for whom this therapy is first line, 10 patients for whom it's second line and 7 patients for whom it's third line or beyond. Now among all patients enrolled in this study, the rate of CRC, that's the combination of both CRs and CRis, is 39%. That's a very impressive number. And we also have an 11% partial response or PR rate in the same population. But when you distill it down to second-line patients, and that's the ultimate target here, among those patients for whom this combination was second line, the CRC rate is 60%, and the PR rate is another 10%. And if we look at all the patients who achieved a CR or CRi to date in the study, you can see that 6 of the 7 patients were those who received annamycin as a second-line therapy since we don't count, by the way, maintenance therapy as a second line. You'll also note that we have 1 death from pneumonia, which occurred in a CRi patient. Now, while it's true that most AML patients who are looking for second-line therapy are very sick and vulnerable, and this outcome by the way, wasn't related to annamycin, it's still unfortunate. And it's especially unfortunate because in this case, it occurred at a site where they didn't follow the accepted standard of care for antimicrobial prophylactic therapy in leukemia patients. Now as soon as we were made aware of this problem, the site was informed and they're now utilizing the standard of care set by leukemia medical societies. As I mentioned at the outset, currently prescribed anthracyclines are significantly cardiotoxic. So much so that the FDA has set limits for the total amount of anthracyclines that a patient may receive over their lifetime. Now this range from 450 to 550 milligrams per square meter, depending on the anthracycline utilized. And as you can see from the slide on the left, among patients who reach this level, the risk of any cardiac event is 65% and the risk of developing heart failure is 3.8%, but if we take that patient up to 600 to 850 milligrams per square meter or more, the risk of any cardiac event rises to 100%. And the risk of developing heart failure is now 8.3%. We've now taken patients as high as 3,000 milligrams per square meter without any evidence of cardiotoxicity. Now I've been focusing almost solely on AML. But we also have active clinical trials in soft tissue sarcoma, and the data are showing that annamycin is effective in these patients as well. We finished enrollment in this study some time ago. However, we're continuing to follow these patients since most of them are still alive. We continue to follow these patients until we reach our median -- what we call our median overall survival time. But until then, the data are -- they're frankly already strong enough to have attracted interest from one of the most prestigious sarcoma centers in Europe who have indicated that they wish to conduct a pivotal clinical trial in this indication. We have achieved a lot over this past year, particularly with the generation of this extremely compelling data in AML. Now we would not be able to do this alone. And we've established a global network of partners, university and support teams to make it all possible. Of note, MD Anderson, that's the leading cancer institute in the world where annamycin was licensed from. They've been instrumental in supporting our continued preclinical research. We've also had trials that were funded by Emory University, Children's Hospital of Atlanta, Madame Curie Institute in Europe, just to name a few. Now, look from a financial perspective, we ended 2023 with roughly $24 million in cash on hand. That's enough to fund us into the fourth quarter of 2024. I would be remiss if I didn't acknowledge the gap that's demonstrated performance of our lead drug and where the market cap is today. I mean frankly, there's a total disconnect there. How can our numbers be so good and our market cap be so low? And frankly, in my opinion, this is completely unjustifiable. We believe that once the market awakens to the new reality of Moleculin and the reality that the numbers we've just produced are so impressive that a more appropriate trading range will be established. And look, this isn't just talk. I've been investing my own after-tax dollars in Moleculin stock because of my belief in what I'm saying. In fact, I've personally invested over $300,000 over the last 16 months, and the rest of our management team has been investing alongside me. Look, we're believers, and we are committed to making this a success. We have more important clinical milestones to be expected with annamycin in 2024. We do expect to complete the additional cohorts of first and third-line subjects in our MB-106 trial soon, and that will conclude the trial. But in the meantime, we're taking the second line data that I shared with you. We're taking that that's already complete to the FDA and the EMA to hold end of Phase II meetings. The feedback from those meetings is likely to be among the most important in the history of the company as it will allow us to initiate a pivotal study with annamycin on AML. With STS, we're looking to close out the current trial that I mentioned and then moving forward with an investigator-led and funded clinical trial, probably a pivotal trial. Well, look, I'd like to close with where I began today's presentation, and that's with the observation that the most important cancer therapy for both AML and STS continues to be an anthracycline. And we are now providing the data showing that annamycin has the potential to finally bring the benefit of anthracyclines to a majority of these patients. As a bottom line summary, look, we're now Phase III ready. We have data that outperforms every asset approved in AML and in a space where lesser assets sold in 2021 for $2 billion. And we have what we believe is an established pathway to approval. And just yesterday, we announced the news that the Patent Trademark Office has agreed to issue a composition of matter patent for annamycin. Now I think most investors don't realize how important this was. Composition of matter patents are the gold standard of IP protection, and this gives us coverage at a minimum through 2040 and that term could be extended depending on the time required for our new drug approval. I can tell you from experience, it is rare to have 16 or more years of patent coverage still available by the time a new cancer drug reaches its pivotal registration trial. And we expect this to have a major impact on our negotiations with an eventual acquirer. From here, you can expect several things from us in the near term. One is the formation of a larger and more focused science advisory board to help guide our pathway to NDA. We've now shared this data with some of the most recognized and respected key opinion leaders in the global AML community. In every case, they have agreed with our assessment that there is a significant unmet need, that our efficacy numbers, if reproduced in our pivotal trial, should support new drug approval and that they would use annamycin in their practice once proved. We'll be announcing SAB appointments in the coming weeks, and I am confident that you'll be impressed with their world-class credentials. Another is a formal presentation of the final data from the MB-106 trial at a prestigious conference, which we expect to be announcing soon. And finally, as I mentioned earlier, we are preparing to meet with the FDA to discuss this data and establish a concrete approval pathway for annamycin that we hope to announce this summer. Until then, I encourage everyone to dig into our data. Until now, there's been far too much speculation and not enough facts. That changed with our most recent data. We couldn't be more proud of what we've accomplished here, and we couldn't be more excited about what's about to unfold. So back to you, Jenene.

Perfect. Wally, great presentation. Again, congratulations on all your progress. And in this case, what a difference a year makes, my goodness, for sure. And this is a great way for me anyway, for sure, to spend my lunch break. I do have some questions before we open it up for Q&A. But just I'm sure our audience who lately has had some amazing questions would like to think of some questions and type them in. So if you do have a question for Wally, put the Q&A button at the bottom of the screen, type in your question and we will get to as many as time allows. And so while people are thinking of their questions, I'm going to ask a question. So can you talk about your recent data and your focus on second line and further describe your view on this related to the competitive landscape?

Yes. I think that's a really important point of clarification, Jenene. In fact, we've had a couple of analysts say, I don't quite understand why you're not going after first line. The drug is obviously effective. And with such great numbers, there's a natural assumption that we really should be the first-line therapy. And there's a great argument there. The problem is we're not Pfizer and -- or AbbVie, right? We don't have their budget. And so for us, the imperative is getting to approval as quickly and cost effectively as we can. Well, unquestionably, there is a faster pathway to approval if we just, for now, focus on second line. Why? Because there's a massive unmet need. There are actually quite a few first-line therapies in addition to those that are approved, other first-line therapies that are dotted around. So there's a lot going on in that space. But once you get to second line, frankly, the medical community almost kind of has to throw up their hands and say, unless you've got a target for gene mutated targeted therapy then we really don't have anything for you. And even if you do have -- happen to have that gene mutation, the response rates are pretty low. So there's a -- like we said, there's roughly 60% of the entire AML population fits into that second-line category. And I think another thing that people may assume is that the economic opportunity isn't as big. That's why we direct people back to like the Servier transaction on IDHIFA and TIBSOVO. They paid $2 billion for a couple of targeted therapies that when you combine them can only help 4% of the AML population. The data we generated today says we're more than 10x better than what Servier just paid $2 billion for, if you measure better in terms of how many patients you can help, right, okay?

Great. And then just one more question, just I have to because you talked Pfizer, you talked AbbVie, you talked Servier. How do you believe this data will be received by a potential partner? And what more do you think that they are looking for from Moleculin?

Well, the easy answer is we think they're going to be mightily impressed. But let me put some meat on that, right? For the most part, if you want to know what AbbVie or Pfizer or one of the other big pharmas thinks about a drug performance in an indication like AML, one of the first things they're going to do is go to the key opinion leaders in that space and say, what do you think of these numbers? Would you use this drug? Is this a new useful tool for you that we could sell to you, right, because that's their customer. And we just finished a massive tour. It was important to me, I wanted to personally meet face-to-face with every one of these key opinion leaders as we went through the data. And that's why I say in the prepared presentation, in every single instance, we got a wow kind of response. In fact, at first, it's a -- we quite can't believe that response. It's so good, right? And that's why it's important to remind people, this was not just 1 site in 1 obscure location where we lucked out, we had multiple sites in 2 countries to generate this data. So it is diverse, which makes it much more credible and believable. But the clear consistent response was, yes, we need something like this, even though everybody wants to talk about targeted therapies. I'll tell you this. If you ask a key opinion leader in AML, what's the biggest hope and promise for AML patients, guarantee you, their answer will be targeted therapies. Why? Because that's what's hot right now. That's where all the brand funding is coming from. That's where all the academic focus and activity is. But in the end, they still have to treat patients. And the total of all the targeted therapies approved in the U.S., all of which are not approved in Europe, but in the U.S., in combination can only help about 13% of the AML population. We're offering a drug that is multiple times more important and potentially useful. So yes.

Awesome. Okay. We do have a few questions that have come in, and we do have time for them, which is great. So the first question that came in, Wally, the reverse split was frustrating, but it seems the stock has stabilized over the past few days, which is good to see. Do you think this momentum will continue as you work to get the data out?

I feel your pain. And I really think I have the credibility to say I feel your pain because I'm investing alongside all of you out there, right? We're all investing in the same stock. I took the same hit you took. But the reality is we could never allow ourselves to get out of compliance with NASDAQ. And we -- look, the opportunity here is not about the next $0.50 a share. We're talking -- I mean, our market cap today is in -- measured in the tens of millions, which is absolutely ridiculous. We're looking -- we're aiming for an exit that will be measured in the billions, so this was really housekeeping. This -- I know it's frustrating and it's painful to watch your line go down instead of up. But that's not what we're focused on here. We're focused on the exit opportunity. And the exit opportunity will be measured in the billions, in my opinion. I'm betting my own money on that statement, okay? So it's not about the reverse split. That's just a housekeeping matter to make sure we stay in good stead with NASDAQ. When we get down to the negotiating table with big pharma on exiting this asset, nobody is going to care about this reverse split. It won't matter. So I know it's frustrating, I feel your pain, but that's just part of the process that small biotechs have to go through to make sure that they're taking care of business and we will always take care of business, because this asset is far too potentially valuable to ever make a stupid mistake or get greedy or fail to do -- to rip off the Band-Aid once in a while to make sure we're doing all the right things to position ourselves for approval and exit.

Absolutely. And you -- for sure, as you had talked about when you showed the milestone side, you definitely have a lot of opportunities for good news flow and value-driving opportunities. So okay. Our next question, can you talk about what an SPA is and a strategy that could work for your pivotal study?

Sure. SPA stands for special protocol assessment. And it's literally a contract between a development company like Moleculin and the FDA and what that contract says is if you run this study -- exactly this study, you can't change it. If you run this study and you get this outcome or better, you are approved. No question -- I mean that's just the fact. Now the exceptions would be if you had some kind of safety disaster or something like that. There are always exceptions to this. But fundamentally, it's a contract for new drug approval that adds concrete certainty to what it takes to win, right? Now you don't have to have an SPA to be successful, because most drugs never get an SPA before they make their new drug application. But we think it's beneficial if we can get that. We think it helps signal to a potential big pharma partner that there's additional certainty here. So it's something that is great to have if you can get it, what you don't want to do is agree to performance terms in that SPA that you think you might not be able to hit. So that's the reason a company might not enter into an SPA because they want -- they don't want to lock themselves into only 1 way to win. Having said that, our performance is so strong that we can afford to hit a lower bar and still know that we're going to be approved. Said another way, we think there's a pretty good chance we can negotiate an SPA with the FDA and have that bar be a number that we're very confident we can clear. So it's an objective of ours. I want to stop short of promising it because there are many reasons why it might not be the best thing to do once you get down to the actual negotiation, right? So we'll -- that remains to be seen, but it is something that we're going to push for.

Excellent. Okay. So we do have time for another question, Wally. Okay. So look, I apologize if my screen moves. So can you talk more about your partnering strategy? And are you talking with any big pharma?

Sure. I think it's helpful to remind people that several years ago now, we brought a new Board member on to the Board, Liz Cermak, whose entire big pharma and small biotech background was in business development, meaning her career was built around engineering exits and M&A with big pharma, so to speak, both from the buying end and the selling end. So now I've got experience there, too, but we felt like, hey, we can't over-index on bringing this talent in and having good advisers, right? Since then, we've added a head of business development to our group, to our team. And we have begun cultivating the contacts and discussions that are the formation of how this goes. Now from personal experience, I mean, I remember this well how I eventually exited to AbbVie with the prior company that I had Soliton. That was a fantastic exit for people. And yet, it takes time. Most exits to larger pharma don't happen instantaneously. They take time to cultivate. And the partners always have one more thing they want to see. There are always risks, right? There's always 1 more risk they want to try to eliminate before they pull the trigger or actually begin negotiating for a deal. In our case, what I would say -- and this is actually based on feedback from other pharma companies. We're pretty comfortable that a very important milestone for those discussions and for advancing to more serious discussions will be that feedback from the FDA. And so that's why we're trying to get people focused on the notion that there is a massive milestone here coming, and that's the feedback that we get from FDA. And by the way, let's not forget EMA, right? There are 2 ways to win here. We can go for approval in the U.S., we can go for approval in Europe, we can go for both. But sequentially, we start with the FDA. If it doesn't go well there, then you go to the EMA and you negotiate there a different approach, if you will. But we're optimistic that we're going to get there with the FDA. That news, the results of that discussion with the FDA should be available this summer. And I believe that the market will consider them an important milestone, they should because I can tell you from experience that big pharma will consider that a major gating item to then talking about a potential exit strategy.

Great. And just to kind of clarify to you, the discussion with the FDA you're talking about is the end of Phase II meeting you're expecting that?

Yes, end of Phase II, that's right.

Perfect. Okay. Wally, it looks like our time for our quick lunch break is slowly -- or quickly running out. I loved hearing the story, thanks to our audience for some great questions. Before closing, I have to ask you, why do you think an investor should consider investing in Moleculin right now?

Well, I mean, let's start with the fact that the biotech market is just so ravaged right now that virtually all small biotechs are beaten down in value, including the good ones. Now in the meantime, we've been steadily eliminating the major risk items with our drug. And I frankly believe the market just hasn't caught up with it. All you have to do is look at the data we've just announced. I mean, look at who has recently exited for billions in valuation, and it becomes really clear that there's a complete disconnect here. People could spend a lifetime trying to find an opportunity like this. I know, because I had. My last company sold AbbVie for nearly $0.6 billion and in a much tougher space for M&A. But I believe this opportunity is a lot bigger. And that's why I continue to invest my own money into it. When the market does finally catch on, I also believe it will happen quickly. So I think a lot of investors are going to be looking back saying, "How did I miss this?"

Well, a great way to end our virtual investor lunch break. So Wally, thank you so much. This does conclude our virtual investor lunch break featuring Moleculin Biotech. Again, thank you, Wally, for joining us. I'd also like to thank our audience for your participation and great questions as always. As a reminder, Moleculin trades on NASDAQ under the ticker, MBRX, and if you like what you saw today, I encourage everyone to visit moleculin.com for more information on the company and to sign up to follow the company, to receive their alerts as well as follow their social channels to stay current on the latest information. Also, I know on the homepage is a video, you talked about that on your earnings call. I think that, that is another great resource for investors to take a look at and also visit virtualinvestorco.com for a replay of today's event as well as our latest segment and a calendar of events. So Wally, thank you, and thanks to our audience and everyone, have a great day.

Thank you, Jenene. Take care.