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

[Presentation]

Welcome back, everyone, for another virtual investor what this means segment. My name is Jenene Thomas. I am CEO of JTC IR, and I will be today's moderator. So we are featuring molecular in biotech and the Annamycin opportunity, and I am pleased to be joined by Wally Klemp, Chairman and Chief Executive Officer of the company. Welcome back, Wally.

Jenene, great to be here.

So before we get started, I just want to inform our audience that Moleculin Bio is listed on NASDAQ and trades under the ticker MBRX. And during today's discussion, the company will be making forward-looking statements and actual results could differ materially from these forward-looking statements. Some of the factors that could cause actual results to differ materially from these contemplated by such forward-looking statements are discussed in the periodic reports Moleculin files with the Securities and Exchange Commission. These documents are available in the Investors section of the website and on the Securities and Exchange Commission's website, and we encourage you to review these documents carefully.

Okay. We're ready to get started, Wally. I know that you and your management team have been buying stock recently. And given the current trading range, you must see a significant opportunity. Could you explain what you and your team are seeing?

Well, Jenene, I consider our stock to be one of the best opportunities in the market right now. I mean, covering analysts have our target price at around $30 a share, which would be a 6x return or more on today's trading range. Now I know that sounds decent. But I believe it's a massive understatement of the opportunity. My personal expectation is closer to 100x.

Okay. Wally, that is a huge disconnect from where the stock is trading now. How are you justifying this outlook?

Well, let's start with the data that we just announced. The inflection point for most small drug development companies is clinical data. And specifically, clarity on whether or not the drug is likely to be approved, given the performance indicated by the data. We believe the benchmark for approval in AML as set by the last 5 new drug approvals is a CR rate of around 21%. What we just announced is a CR rate of 50%.

So can you talk about the difference between CRc and CR and how those tend to correlate with patient outcomes on relapse-free and overall survival? And with Annamycin, you have generated 50% CR and 60% CRc, the highest compared to others in AML.

Sure. For people that don't follow this all the time, CR stands for complete response, which is accomplished by reducing the cancer cells in the patient's bone marrow to below 5%. CRI stands for complete response with incomplete recovery of peripheral blood counts. But it's important to understand that CR is considered the gold standard for measuring success. Now CRIs are significant, but they're more situational. In some cases, with a bit more time in what we call consolidation therapy. We can see a CRI become a CR or be strong enough in its own right to support a curative bone marrow transplant. But since that isn't always the case and because CRs represent patients who generally have a better prognosis, we believe and so the most key opinion leaders that it's really CRs that indicate the strongest drug performance in AML. And we believe our CR rate accounts for a lot more than the other second-line drugs because we're treating all comers, not just the minority of folks who happen to have the right gene mutation. In fact, at our level of performance, Annamycin has the potential to help more than twice as many AML patients as all of the approved targeted therapies combined.

50% CR compares very well with the other therapies you've listed here on this slide. Now I know the drugs you are comparing to here is targeting specific mutations and Annamycin is a bit more like Vyxeos or Ven-Aza, in that, it has broad application regardless of gene mutation. So first question is, how would a physician think about using a broad-acting chemotherapeutic with a well-known mechanism of action like Annamycin versus, say, a targeting therapy for IDH1 or 2 or KMT2A. And is there a desire to use a more broad-acting mechanism earlier or saving it for later?

In the end, physicians want what's best for their patients. Treating AML is really a race against time. Patients usually don't have long enough to live to waste time on a therapy that's second best. If all other things are equal, physicians will choose the therapy that has the best chance to produce a durable CR for their patients. That's why understanding our data is so important. I mean just because you have the IDH1 mutation doesn't mean you should have that therapy. We believe in a situation where the expected CR rate with an IDH1 targeted drug is 19%, but we can give that same patient a 50% chance of a CR with Annamycin, Annamycin wins. Just as long as the potential side effects are manageable and our experience with Annamycin has been just that.

Well, that's super impressive, and it sounds like it should bode well for annamycin's approval in AML, but how does that translate into the kind of value increase you just mentioned?

Well, I think that's where investors may really be surprised by looking at the [ compares. ] And I'll make this clear for folks, we just put together this new slide. And what this does is put side by side the major transactions and players in the AML space that are relevant to our positioning. Let's start with Vyxeos on the left. It was back in 2016 when Jazz bought Celator the maker of Vyxeos for $1.5 billion. Now just a few quarters before that offer was announced, Celator's stock was trading for around $1. And this deal was cut pre-approval and was driven by positive preliminary data from their pivotal trial. Importantly, look at their CR rate, just 38%. And that was in first-line patients where you would expect a higher response rate. Now next to Vyxeos, we've got venetoclax. This drug delivers $2 billion a year in revenue to AbbVie, and it was approved in AML on the basis of a 37% CR rate, again, in first-line patients. Now there's no stated value for this drug since AbbVie doesn't disclose it. But if you apply their consensus revenue multiple, which is greater than 6x, that implies venetoclax is greater than a $10 billion asset. Then there is the 2021 acquisition of Idhifa and Tibsovo by Servier. They pay close to $2 billion for these drugs that are only relevant to an aggregate of about 20% of AML patients. And given their low CR rates, they should only generate CRs in about 4% of the AML population. Even so, we estimate that they're generating around $150 million in annual revenue. And we talked about these first 3 several times before, and they provide an important baseline for exit values in the space. But now let's look at the ones that we believe are right alongside us in terms of development progress. Kura, Syndax and JNJ's drugs 617, they're all competing neck and neck with each other using what are called menin inhibitors. These are targeted therapies that in a best case scenario could be relevant to 24% to 30% of AML patients. Now their CR performance is running about half that of Annamycin and on a smaller relevant patient population, yet both Kura and Syndax are currently trading in the billions. Syndax is farther along. They filed their NDA last December, but the drug performance is so low that Biomet Tracker has cut their approval chances by more than half. What's even more relevant to this discussion, though, is Kura. We believe that they are right where we are in the progress toward approval. They've completed their Phase IIa and are ready to begin a pivotal trial, just like we are. So let me be clear. We see Kura and Moleculin as being in roughly the same place along the development timeline at the same time. Annamycin is delivering CR numbers that are almost double that of Kura's drug, and we should be relevant to nearly twice as many AML patients. Yet Kura is trading at a market cap of $1.5 billion. And we are trading at less than 1100th of that value.

I'd say is, wow. It's just incredible that this kind of disparity exists right now, and it truly does seem like a rare situation and opportunity.

I know, Jenene. Look, this disparity can't last. And it's why I've been buying our stock recently and I intend to buy more. When none of the right investors finally pay attention to what's happening here, I suspect the run-up could be very quick, much like it was for Celator, when folks finally realize that Vyxeos was headed for an approval. When that happens for us, a lot of people are going to be asking themselves, how did I miss this?

Well, all I can say is I hope people don't say how did I miss this? While I really appreciate you joining us today, this is extremely helpful for our audience. And this does conclude the virtual investor what this means segment with Moleculin. I want to thank Wally Klemp, CEO of Moleculin for joining us today. And as a reminder, Moleculin trades on NASDAQ under the ticker MBRX, and if you like what you saw today, I encourage you to visit moleculin.com for more information on the company and then sign up to follow the company to receive their alerts as well as follow their social channels to stay current on the latest information. And you can also visit virtualinvestorco.com for a replay of today's event as well as our latest segment and our event calendar.

Well, look, thanks again for hosting this, Jenene. As I hope you can tell, the passion here is real. I mean this is an opportunity that rarely ever comes along, and I'm putting my own money where my mouth is. More than ever, we just need the investing public to filter out the noise and look at the hard data. As always, we're here to answer questions and want to ensure that everyone has a chance to get on this train. So if you have follow-on questions, please e-mail us.

While you did a great job outlining the opportunity and can't wait to have you back, definitely an exciting time for Moleculin.

Great. Thanks.