Moleculin Biotech Q1 2024 Earnings Call Transcript

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May 13, 2024

There are 8 speakers on the call.

Operator

Hello and welcome to the Molecular and Biotech First Quarter 20 24 Quarterly Update Conference Call and Webcast. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to your host, Janine Thomas, Investor Relations. Please go ahead, Janine.

Speaker 1

Thank you, Daryl. Good morning, and welcome, everyone. At this time, I would like to remind our listeners that remarks made during this webcast may state management's intentions, beliefs, expectations or future projections. These are forward looking statements and involve risks and uncertainties. Forward looking statements on this call are made pursuant to the Safe Harbor provisions of the federal securities laws and are based on Molecular's current expectations and actual results could differ materially.

Speaker 1

As a result, you should not place undue reliance on any 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 Molecular and Files with the Securities and Exchange Commission. These documents are available in the Investors section of the company's website and on the Securities and Exchange Commission's website. We encourage you to review these documents carefully. Additionally, certain information contained in this webcast relates to or is based on studies, publications, surveys and other data obtained from third party sources and the company's own estimates and research.

Speaker 1

While the company believes these 3rd party sources to be reliable as of the date of this presentation, it does not independently verify and makes no representation as to the verified any information obtained from 3rd party source. Any data discussed regarding clinical trials and progress are considered preliminary and subject to change. Joining us on today's call from Molecular Lens leadership team are Walter Klimt, Chairman and Chief Executive Officer Doctor. John Paul Womack, Senior Chief Medical Officer and Jonathan Foster, Executive Vice President and Chief Financial Officer. I would now like to turn the call over to Walter Klimt, Chairman and CEO.

Speaker 1

Wally, please proceed.

Speaker 2

Thanks, Jeanine. Well, calling 2024 transformational for Molekulin would be a massive understatement. We've now been able to lock in composition of matter patent protection for anamycin, giving us market exclusivity at least through 2,040. This is the gold standard for intellectual property and it's also underpinned by orphan drug designation in both the U. S.

Speaker 2

And the EU. Of course, all of this proprietary protection would be meaningless if we didn't have the safety and efficacy we need to be approved and to be useful for patients. Well, now we've treated over 80 patients and counting with 0 cardiotoxicity, something that no currently approved anthracycline can claim. But most importantly, we've now shown a 60% CRC rate in second line patients. And key opinion leaders are beginning to weigh in on what they think of this level of performance.

Speaker 2

In fact, you can hear what they're saying by checking out the clinical day video by clicking on the banner on the homepage of our website at molecularin.com. Simply put, our efficacy results in our clinical trials to date are better than any drug ever approved for use in AML period and with a game changing safety profile. Look, it's impossible for me to overstate the importance of our latest data. The greatest unmet need in AML is for an effective second line therapy. Accordingly, we prioritize recruitment of second line patients in our latest AML clinical trial.

Speaker 2

And as you can see, we had a 60% CRC rate. Not only that, but we had a 50% CR rate. Nobody does that in second line, nobody. Again, we've never seen a performance this high from any approved AML therapy and that's why the leading experts in leukemia are beginning to take notice. Since we closed the clinical trial to additional second line patients, we've now added a few more first patients in first line and third line and we've seen more complete remissions driving the overall performance up for the trial in total and putting us now at a total of 20 patients.

Speaker 2

We'll continue this type of recruitment, especially in first line, so that we can learn as much as possible before kicking off our registration trial. But let's be clear, we don't believe we need any more data before proceeding with the registration enabling trial in second line. And that's why we're about to have our end of Phase 2 meeting with the FDA. And clearly, the most important next point of information is determining how the FDA views all this. As a point of reference, our Senior Chief Medical Officer, Paul Womack worked for the FDA and he has a pretty well informed point of view on this.

Speaker 2

On that basis, we're requesting the FDA agree to an open label single arm trial of around 100 to 150 patients as our pivotal approval trial. This trial will be in second line patients where there is a clear unmet medical need as confirmed by the key opinion leaders on last week's conference call and where we are confident that our most recent results if repeated in this larger population would be more than sufficient to achieve approval. In fact, we estimate we should be able to achieve approval with a performance level much lower than the one we've recently reported. So what does this mean for shareholders? In recent discussions, I've made no secret about the fact that we believe Molekulin is significantly undervalued.

Speaker 2

This chart on Slide 7 helps explain why we believe that. If you've been following the AML space, you have undoubtedly heard about Jazz Pharma paying $1,500,000,000 in 2016 for Vyxeos. And that's a drug that is really only relevant to the AML space and has a relatively limited share market. And that deal was cut pre approval. And now you have AbbVie's venetoclax, which is generating $2,000,000,000 a year in revenue, which at typical revenue multiples implies that venetoclax could be valued at over $10,000,000,000 as a standalone drug.

Speaker 2

What's even more illuminating though is how some of the gene targeted therapies are being valued. For example, you've got Servier, a French mid pharma company paying nearly $2,000,000,000 for 2 niche focused AML drugs, IDHIFA and TIBSOVO. We estimate their combined impact on the AML population is to potentially produce complete remission in about 6 percent of the overall AML population. Then you have companies like Cura and Syndax, whose drugs are relevant to a fraction of the AML population and who are being valued in the 1,000,000,000. In fact, let's drill down on Cura for a moment.

Speaker 2

They're roughly at the same stage as we are, Phase II results and looking to start a pivotal trial. But by the way, their reported performance is significantly lower than ours and yet, CURA has a 1.5 $1,000,000,000 market cap. To show you how ridiculous this disparity is, if we had their market cap, our stock would be trading above $600 per share. And I firmly believe we have a better drug candidate that will save many more lives. This kind of disparity simply cannot continue and we believe it's only a matter of time before the market wakes up to this.

Speaker 2

In the meantime, this is an earnings call, so I need to give our EVP CFO, John Foster, a chance to weigh in. John?

Speaker 3

Thanks, Wally. For the quarter, R and D expense was $4,300,000 for the quarter versus $5,700,000 same period a year ago. The decrease of $1,400,000 is mainly related to the clinical trial activity decreasing as we're winding down MB-one hundred and six and MB-one hundred and seven trials as compared to a year ago.

Speaker 4

G and A expense

Speaker 3

was $2,400,000 for the quarter,

Speaker 5

less than the $2,600,000

Speaker 3

in the same period last year. The use of cash was higher in this period as we made some expenditures on drug supply previously accrued leaving us with roughly $17,000,000 in cash on hand for the quarter. Our market cap is at roughly $13,000,000 taken into account the 2,500,000 shares outstanding, which includes pre funded warrants. Our average daily trading volume is at 30,000 shares per day. And we have moved some planned expenditures from 2024 into 2025, and our cash runway now runs deeper into Q4 2024 than previously planned.

Speaker 3

Wally?

Speaker 2

Thanks, John. Well, if there's one takeaway from this call, I hope it's that we believe our clinical data is strong enough to warrant approval if repeated in the context of a pivotal trial. And that's exactly where we're heading. Assuming we receive a supportive response from the FDA, we should be kicking off that pivotal trial by the end of this year. And in our view, that means we are now entering the window that is typical for exits in our industry.

Speaker 2

Obviously, our stock price is not yet tracking with this possibility, but we believe it eventually will. And if we're right about that, we believe shareholders will finally have an opportunity to see the kind of valuation that they deserve. I challenge anyone considering an investment in Molecular to just look at the data, compare us with any other asset in the AML space, listen to what key opinion leaders are saying about anamycin. And I promise you, when you do, you will ask yourself how can NBRx be valued so low? My answer is we shouldn't be and we won't be for much longer.

Speaker 2

Now clearly that's only my opinion, but this isn't just talk on management's part. We've been investing our own after tax dollars in Molecular stock because of our confidence in this opportunity. So thanks for joining us today and we look forward to the upcoming critical news flow on our progress.

Operator

Thank you. We will now be conducting a question and answer session. Our first questions come from the line of Jonathan Aschoff with ROTH MKM. Please proceed with your questions.

Speaker 6

Thank you, guys, and good morning. I was curious, has there been anything else even remotely akin to allergic reactions or is it just as was reported several weeks ago for the, I think, one patient?

Speaker 2

Well, there's no new information, Jonathan, but I want to give Paul a chance to sort of weigh in. That's an important point as it as you know, it actually we think has mathematically the potential to cause our numbers to be currently actually slightly understated. But Paul, do you want to explain why that is?

Speaker 5

Yes. First to your question, that case was a typical allergic reaction where when the drug infusion began, the patient began to have a little wheezing and cutting back on the rate did not stop it. It's been the only patient in whom this has happened and over 80 patients whom we have treated. So it appears to be a relatively rare event. We say unfortunate because that patient was one of the 10 patients who received second line therapy.

Speaker 5

And of course, in an intent to treat analysis, he counts even though he never was going to get a response since he never received more than a micro amount of the drug. So of the 10 patients, we had the 6 CRs, 1 PR. Of the 3 people who had no response, he was one of the 3 where that was because he never got the drug.

Speaker 6

Okay. Thanks.

Speaker 5

But then we also

Speaker 7

had another one that was

Speaker 3

allergic to Cytterabine, correct, Paul? Right.

Speaker 5

Yes, that was not a second line one though. But yes, we had one allergic reaction to Cytarabine.

Speaker 6

Okay. And I was thinking about the what should be this quarter, the end of Phase 2 meeting. When you say 1 half 25 to start the trial, are you just being conservative and maybe it's more like the beginning of the first half? Or do you really need a year with that decent CRC rate to start a trial after that meeting?

Speaker 2

We are trying to I mean, Jonathan, we've interacted with you for a long time. I think you know we're fairly conservative and we always like to leave room for the unforeseen. Technically speaking, we should be in a position to start the trial even before the end of the year. But inevitably in clinical trials, there's always one last thing that has to be ironed out. So we're describing it as 1 half 25 to give ourselves a bit of leeway.

Speaker 2

But I agree with you, it should be right at the beginning of 2025.

Speaker 6

Okay. And then not to nitpick, but in that same little list of future events, there is this quarter, there should be the meeting, like I said, the EOPT, but then there's another line item, second half of twenty twenty six for feedback from the EOPT meeting. I don't really get that. That's supposed to be something that happens after your single arm trial?

Speaker 2

No, that sounds like a typo. Yes. No, I'm

Speaker 3

looking at the slide right now. It's in the Phase 1 meeting first half of twenty twenty four, initiate pivot for 2020 5. What was the feedback in the Q3 of this year?

Speaker 6

It says H22026 in the press release.

Speaker 3

That's include the pivotal trial.

Speaker 6

Okay. And I think We'll check that. Thank you, Sean. Yes. Have you seen enrollment recruitment ease, I guess, let's call it, go become more easy, commensurate with the additional responses you've been showing over time?

Speaker 6

How is how are you faring against the other clinical stage AML competition because there is a decent amount of that? And how's your data?

Speaker 2

Well, there's no yes, there's no question that once we started to see complete remissions in second line patients, there's a regular conference call where all the investigators have a chance to participate and share in the information that's going on with the clinical trial. Once that and so that information gets out pretty quickly. And once that started to happen, it was you can just see it. All of a sudden, more and more people started recruiting and recruiting picked up. I mean, we saw recruitment probably triple in pace when that started to happen.

Speaker 2

I can't really comment relative to other competitive trials other than to say clinicians all every one of these clinicians when you sit down with them and really talk about the reality of clinical trial, it becomes glaringly apparent that what they care most about is the welfare of their patients as they should. And so even though there are clinical trials out there for targeted therapies, I mean, let's face it, the performance of targeted therapies has been kind of dismal. I mean, it's just enough to get them approved, but it really sets a low bar, 20% CR rates, that kind of thing. And clinicians are not blind to that. And so if they see that they've got let's say their patient might line up for FLT3 or might line up for another mutation that is for which there are current clinical trials.

Speaker 2

But now that they realize they can achieve a 60% CR rate with anamycin, it puts a lot of pressure on them to take our trial over somebody else. At least that's been based on our the 9 clinical sites that we have right now. We're going to obviously have more clinical sites for the pivotal trial. And I think one of the most important jobs we're going to have is making sure all of those sites really understand the data. So they have the same level of enthusiasm that our current sites do.

Speaker 6

Great. That sounds like it bodes well for Phase 3. Thank you.

Speaker 2

Yeah. Yes. Thanks, Jonathan.

Operator

Thank you. Our next questions come from the line of Jason McCarthy with Maxim Group. Please proceed with your questions.

Speaker 7

Hi, guys. This is Chad on for Jason. Thanks for taking the questions.

Speaker 6

Hi, Chad.

Speaker 7

So, could you give us an idea of the end values in the pivotal trials for the 5 approved second line drugs? And how would that compare to the upcoming potential pivotal design?

Speaker 2

So, I'm going to let Paul comment on the impact on the pivotal design, but just as a point of information, in fact, there's a our corporate deck on the website, it's available on the website, has a slide dedicated to this question about the approval rates for the 5 currently approved drugs. And just for the record, there are 5 drugs that are approved for use in second line AML in the U. S. Not all of them are approved in the EU. And that has a lot to do with frankly, the relatively poor performance levels and the fact that many of these drugs were approved on the basis of a single arm open label trial, which the EU categorically will not utilize for drug approvals for marketing authorizations.

Speaker 2

But that slide in our corporate deck lists out the both the CR and the CRH or CRI, the additional component that makes up CRC, composite CR rate. And what you'll see is the CR rates on average are 21%, some below, some above. And you get a little bit better performance because these drugs tend to produce CRIs or CRHs. But no matter how you look at the data, we're double that performance basically. So that's why we're so frankly bullish about our capability.

Speaker 2

Paul, you want to weigh in here relative to the impact on approval? Sure.

Speaker 5

5 drugs that were approved to second line monotherapy, the number of patients varied from around 100 to 300. Now I think it's important to always recognize who is your audience, what do they want, and the answer is the FDA. And for the FDA, the average response is not as important as the 95% confidence interval. And the CR rates for these drugs was from around 15% to 30%, which does not give you overwhelming confidence in the 95% confidence interval with low numbers of patients. But when you're getting low response rates, you're going to need more patients.

Speaker 5

The reason we proposed only 100 patients is if we're getting anywhere near the 60% response rate, when you do 95% confidence intervals for that, you don't need a lot of patients to show you're getting a big effect because the FDA is going to worry about the lower limit of the 95 percent confidence interval. So although this would be a rather low number of patients from a perspective of other drugs, because our response rates are so unprecedented, we can propose a lower rate. To be full disclosure, the only concern we have is we are combination therapy as opposed to those other 4 drugs and that might cause the FDA to say, well, we generally want a randomized trial for combination therapy. But again, been true in the past, but there has never been a drug with this response rate. This is just unprecedented.

Speaker 5

So we think we therefore have a case to say when it's that high, you have to do a different general plan for the final clinical trial of the drug.

Speaker 7

Got it. Okay, thanks. That was really helpful. And then, while of course second line is the focus now, could you maybe just speak a bit to the plan eventually for first line and sort of the opportunity there?

Speaker 2

Yes. Again, let me maybe kick that off, but then have Paul weigh in. We mentioned in the prepared remarks here that we're continuing to recruit first line patients into the existing MB-one hundred and six trial. And the reason we're doing that is maybe twofold. But in general, we just want additional data.

Speaker 2

We want additional knowledge. As Paul said, the response in second line is unprecedented. You would expect, generally speaking, an even better response in first line patients. And in fact, so far, that's what we're seeing. Now, it's on a small hand.

Speaker 2

We want to have 3 first line patients so far. So you need to be careful with that. But as expected, that we're seeing a slightly better response rate that it becomes important I think on 2 levels. 1 from an approval standpoint, if we're successful in negotiating a single arm trial with the FDA, then it undoubtedly means we will have to eventually run a confirmatory Phase 3 post approval. That's a high class problem because you're at that point you're already generating revenue and running a trial in parallel.

Speaker 2

But when we think about the trial the Phase III trial design we would most prefer, it turns out it's probably a first line trial where you're comparing head to head against, let's say, the existing 7 plus 3 therapy. And so the more we know about our drug's performance in first line before we run that trial, the better we are at structuring that trial. That's let's say one important factor. The other important element here is in terms of exit opportunity for big pharma. They're already looking we know they're already looking at us and watching what we're doing.

Speaker 2

And once you start to understand the drug, you realize it's not just it's not going to be simply a second line treatment for AML. That's our pathway for approval and we love that pathway. But the drug is going to be so much more than that. In our view, it will be become a standard of care, most likely displacing all other anthracyclines, not just in AML, but in many indications, which again goes back to why the comparison to drugs with companies like Cura is so ridiculous, because anamycin is going to be so much more important to the medical community at large. But Paul, do you want to comment at all on the strategy behind first line versus second line?

Speaker 5

Sure. And I would agree fully, first line therapy is the ultimate indication because everybody at some point has first line, only some patients progress to 2nd line. However, again, focus on your audience, focus on FDA. FDA looks and sees there are lots of drugs that have been approved to treat first line therapy for AML. However, the 5 drugs for treating second line therapy are all for subsets of the population for patients with FLT3 mutations with isocitrate dehydrogenase mutations.

Speaker 5

But that's combined less than half of the population. A majority of patients who get who need second line therapy, there is no FDA drug approved and indicated for that. And that is the FDA definition of an unmet medical need, which lowers the bar dramatically as far as patient numbers, trial design and the like. So recognizing that, that that's the easiest, quickest way to an approvable NDA, that's where we're going first, but we have not given up on first line therapy. Indeed, although we have shut down enrollment in our 106 trial for 2nd line, because we have enough data to power a second line pivotal trial, we are continuing to enroll first line therapy patients so that we will eventually have enough data to power a first line study because that will be our 2nd Phase 3 study.

Speaker 7

Okay, awesome. Thanks for taking the questions and congrats again on all the progress.

Speaker 2

Thanks, Chad.

Operator

Thank you. Our next questions come from the line of Vernon Bernardino with H. C. Wainwright. Please proceed with your questions.

Speaker 4

Hi, everyone. Thanks for taking my question and congrats on the progress as well. So given the date, today's date and the milestones we expect to see first half of this year, Obviously, other than announcing the conclusion and then having conducted EOP meeting with FDA, what can we expect as far as additional results from the MB-one hundred and six trial and as well as the end of Phase 2 meeting? And do you anticipate announcing what you're going to announce with MB-one hundred and 6 before the end of Phase 2 meeting, having conducted the end of Phase 2 meeting, will you just announce the end of Phase 2 meeting and or will you actually also announce perhaps some of the details of the discussion with the FDA? Thanks.

Speaker 2

Sure. John, you're the kind of the keeper of important dates and announcements. Let me hand this off to you so you can kind of navigate this.

Speaker 3

Sure. Hey, Vernon. Hey, we're not going to announce when we're having the meeting. We're staying true with what we've said earlier. We will have it by the end of June.

Speaker 3

We don't want to give the specific date out just because we don't want people calling around that date, if I can be quite honest. And we'll have feedback in early Q3 and we'll share that with the public. And we're very excited about that potential of what that feedback is. And so as we've said before, we think long and hard about our key events and we try to be conservative and be sure we're going to make those and we're going to make those 2 dates.

Speaker 2

I think it's important to add because you did ask about the MD-one hundred and six trial. Yes, it's ongoing. I think it's unlikely given the time span between now and when the FDA meeting will occur. I think it's relatively unlikely that we'll have additional MB-one hundred and six data to release between now and then. It's not impossible, but it's probably not likely.

Speaker 3

Yes. We'll probably announce give an update of MB-one hundred and six on the first line patients in August with our quarterly earnings.

Operator

Thank you. We have reached the end of our question and answer session. And with that, that does conclude today's teleconference. We appreciate your participation. You may disconnect at this time and enjoy the rest of your day.

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Key Takeaways

  • Management secured composition of matter patent protection for anamycin through 2040, backed by orphan drug designation in both the U.S. and EU.
  • In clinical studies with over 80 patients, anamycin showed zero cardiotoxicity and achieved a 60% composite CR rate (50% CR) in second-line AML patients, outpacing all approved therapies.
  • The company plans an end-of-Phase 2 meeting with the FDA by June, aiming for an open-label pivotal trial of ~100–150 second-line patients and expects to initiate that trial in early 2025.
  • First-quarter R&D expense fell to $4.3 million (from $5.7 million last year) and G&A to $2.4 million, leaving ~$17 million in cash and funding operations into Q4 2024.
  • Molecular believes its current valuation is well below peers with inferior data and expects upcoming trial milestones to drive a meaningful re‐rating of its stock.
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Earnings Conference Call
Moleculin Biotech Q1 2024
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