Q1 2020 Earnings Call

[music].

Thank you operator, welcome and thank you for joining US. This afternoon for a review of Iraq Pharmaceuticals, first quarter Twentytwenty financial results and business update.

Joining me this afternoon are Dr., Greg Williams, our Chief Executive Officer, Neil fell off our Chief operating Officer, and General Counsel Dr., Tom Haverty, our Chief Medical Officer.

After Matthew Derisked, our vice President of research and Steven Donald Our Vice President Finance and accounting before we begin I'd like to remind you that any statements made during this call that are not historical are considered to be forward looking statements in the beginning of the private Securities Litigation Reform Act up 1995.

Actual results may differ materially from those indicated by these statements as a result of various important factors, including those discussed in the risk factor section in our most recent annual report on form 10-K filed with the Securities Exchange Commission as well as our other reports filed with the FCC any forward looking statements.

Represent our views as of today may seven 2020.

A replay of this call will be available on the company's website www Dot E. lock pharma dotcom. It's now my great pleasure to turn call over to Dr., Greg Williams, Chief Executive Officer, I'll be locked pharmaceuticals.

Thank you Barbara and welcome to eat <unk> first quarter 2020 earnings webcast and conference call.

We remain committed to advancing or clinical programs for air Youre as chewed library.

Our highest priority is to reach topline proof of concept data for Djelic, so too from our phase two cystic fibrosis clinical trial program.

Which we believe will be a substantial value inflection point for the company.

That said.

We previously announced that these trials have been temporarily paused in response to the cobot 19 global pandemic and in order to protect the health and safety if our employees.

Their families.

Healthcare workers are investigators in cystic fibrosis patients.

[noise] this isn't the unprecedented and fluid situation.

We will continue to update you as we gain clarity on their clinical sites in their plans to reopen.

During the first quarter, we announced a leadership and organizational realignment in order to provide the company with sufficient capital to run through the end of 2021.

This realignment ensures that we have the right resources.

And these strategic flexibility to accomplish are key priority.

Which again is to deliver topline phase two proof of concept data.

Look so too in cystic fibrosis.

We're working closely with our investigators and clinical sites to ensure that we can resume and complete our phase two program as quickly as possible.

We continue to be focused on delivering value to shareholders well fulfilling our mission to provide treatment options to patients with high unmet medical needs in the most safe and expeditious manner.

Beyond ILEC, so two in cystic fibrosis, our R&D teams continuing to develop other compounds from I.E.R.S.G. library for additional indications, including autosomal dominant polycystic kidney disease.

Or 80, PKD entered inherited retinal disorders.

We have a strong and experienced team with expertise in clinical drug development basic research regulatory affairs, and I'm highly confident that we have the capabilities and the resources needed to deliver on our goals.

In cystic fibrosis, we're extremely pleased that we're conducting these trials the top CF clinical trial sites and the expressed level of interest and support from tough investigators trial sites and patient efficacy groups has been tremendous.

Our cystic Fibrosis Foundation program Advisory Group Butte, the positive results of the completed first cohort of our phase two clinical trial for you like so too in nephropathy Cystinosis.

And viewed the safety and efficacy data is very exciting for cystinosis patients and we're pleased that we met the primary safety endpoints.

Together with the supportive pharmacokinetics from this trial. These data further de risk our phase two CF program.

Our CFO phase two program consists of two open label trial, one for clinical investigators enrolling patients at sites in Europe in Israel.

The second phase two trial focuses on sites in the United States.

The expansion of our cystic fibrosis program to the U.S. has been made possible in part by funding provided by the cystic fibrosis Foundation in the Dorsen into our protocol by the therapeutic development network.

In Europe or protocol has been endorsed by the East CFS clinical trial network.

Despite the current pause of Rcs clinical trials, we expect that there will be a steady cadence of additional data scientific presentations and publications as we move through this year.

Yesterday may six we presented data from our inherited retinal disorders program at the virtual ARVO meetings in a few moments Dr. <unk> Derose, we'll update you on this data as well as the progress in our inherited retinal disorders and 80 PKD programs.

While our abstract for you look so to had been accepted for presentation at the European Cystic fibrosis Conference in June. This meeting has been canceled due to the covert 19 global pandemic and we have withdrawn the abstract.

We still plan to present data for you elect so too in cystic fibrosis at the North American Cystic fibrosis conference in late October.

We're pleased to report today that a scientific manuscript that details you feel like so to read through specificity towards premature stock codes has been accepted for publication by the journal of Pharmacology, an experimental therapeutics.

Oh screening programs continue to evaluate opportunities to advance the like so too and other novel molecules from our Ers cheese library for new indications.

Positive scientific data presented at last year's American Society of Nephrology kidney week from Air completed renal impairment study support the expansion of our research in the kidney into other areas such as 80, PKD, where there is high prevalence of nonsense mutation patients.

The data provides modeling necessary for dose adjustments based on renal function.

We continue to advance our work in ophthalmology and our team achieved an important proof of concept milestone demonstrating that our yours Ci compounds can restore protein production in the I went injected intravitreal eat in an animal model.

Weve built on this milestone with our ongoing formulation efforts, which showed encouraging results across multiple strategies to sustain compound exposure across longer treatment periods.

We are evaluating Usher syndrome, and other disorders of the photo receptors or RPG recently, demonstrating read through of the most common known since <unk> for the Sep 290, Mio seven eight and PD six be genes.

We are the most advanced company tackling degree challenge of developing potential new therapies for nonsense mutations.

There's a high level of interest and enthusiasm in the scientific and clinical committed for programs as well as in the business community.

We will continue to pursue partnerships where appropriate to expand our therapeutic footprint and accelerate our progress.

We ended the first quarter of 2020 with $44 million in cash and cash equivalents and with the realignment of our resources or cash runway extends through the end of 2021.

We are well funded to deliver topline data for you like so too in cystic fibrosis and to advance the preclinical activities free like so too and our library of molecules in additional indications.

In April of 2020, we applied for and received a loan via the U.S. SP A's Paycheck protection program.

Which was a component of the Cures Act signed into law in late March.

I would now like to ask duck not good arrows, our vice President of research and discuss our recent progress in 80, PKD and inherited retinal disorders.

Thank you Greg.

We continue to advance our preclinical efforts across our Ers GE library at molecule.

Working with our research partners to advance our programs, while taking all steps necessary to operate within health authority recommendations are combating it Colgate 19 global pandemic.

We are happy to announce today that our scientific manuscript titled Djelic, So to generates protein yet premature stop code on read through without inducing native stopped code on read through protein.

Has been accepted for publication by the Journal Pharmacology and experimental therapeutics.

It's manuscript demonstrates that while djelic so to mediate read through a premature stop code on its a delegates SAP code on stand at the end of healthy transcripts maintain.

This indicates that translation integrity is preserved with targeted therapeutic exposure of DLX. So Q consistent with the favorable tolerability profile across our preclinical and clinical dataset.

Prepublication version of this manuscript can be found within the fast forward section in the journals website.

Our preclinical efforts in renal and Okcular are progressing.

Our team focuses on applying our understanding of read through to the unique genetics it each disease and evaluating efficacy with a focus on coking function using athletes versatile enough to enable our personalized medicine approach.

As described by the to hit hypothesis, most individuals with 80 Teekay D are born with a single detective copy of either PKD, one or the PKD can gene.

For the disease. This is the primary genetic mutation or hit.

In the kidney sporadic second it will trigger CES formation throughout life.

Leading AG and potentially end stage renal disease.

We are focused on those individuals whose primary hit isn't nonsense a wheel.

Using a reporter assay, we have already observed dose dependent read through with our year I see across the most common PKD one illegal and have now demonstrated dose dependent read through across the most common PKD two wheels.

We are now applying this information to our functional model efforts in order to confirm that to read through we observe has an impact on this formation and growth.

Our cystic fibrosis platform has highlighted utility of ordinary technology to assess function the translational model.

Similarly for 80, PKD organ, though it is derived from patient cells or induced pluripotent stem cells and be differentiated in a manner at recapitulate cellular diversity of the kidney.

In generate it's it characteristic of Michigan state.

Using a patient derived organized with the most common PKD to nonsense illegal we observed encouraging result of reduced again.

These results demonstrate that a read through approach can have a direct impact on a meaningful metric of 80 Teekay de progression.

Number one.

We intend to evaluate additional models of 80 to 80 and with positive results advance towards 90 submission.

Turning to inherited retinal disorders.

Our library of compound has demonstrated dose dependent read through using our in vitro assay platform.

Acceptable Intravitreal tolerability and restored protein production in animal model, Yeah, Ers G Intravitreal injection.

As Greg mentioned some of these results are presented yesterday at this year's virtual ARVO meeting.

Which stands for the association for research and vision in ophthalmology.

Our presentation entitled Intravitreal administration of small molecule into region demonstrate.

Optional activity in a nonsense mutation mouse model.

Describes our study in a mouse model within naturally occurring nonsense mutation.

Two gene.

Which results in a form of held aneurysm present in human type two akio cutaneous albinism.

In this model our 262 X. mutation result in a lack of CA to channel.

Which is needed to establish the ph of the organelle that produces pigment Atlantic though.

The results showed a significant increase in the melanin production, which validate the potential to promote read through activity in our target tissue via Intravitreal injection.

Our intravitreal read through approach provides the opportunity to reach the totality of the right now.

To extend the duration of the delivery our team is actively working to achieve the desired sustained release formulation.

We are exploring several bio degradable controlled release polymer technology and are encouraged by the in vitro release rate achieved to date, which are consistent with our target remains profile of one to three month.

When it tissue exposure data is coupled with their ongoing sustained release formulation efforts and the read through potential we answer.

Against nonsense mutations in the east causative gene such as a two way my of 70.

Two nine and TD 60, we are encouraged that the Intravitreal Ers GE approach could provide restoration of critical protein to preserve or restore visual function across nonsense related inherited retinal disorders.

I would now like to ask Steve Macdonald, our VP of finance and accounting to provide a review of our first quarter 2020 financial results.

Thanks, Matt.

As of March 31, 2020.

The company reported total cash, including cash equivalents and marketable securities a $44 million.

Which we believe will fund the company's operations through topline data in cystic fibrosis and through the end of 2021.

For the quarter ended March 31 2020.

The company incurred a net loss of $13.9 million or 35 cents per share.

That's compared to a net loss of $11.9 million or 33 cents per share.

The same period in 2019.

The first quarter 2020 results included a onetime restructuring charge of $4 million associated with our realignment.

2.1 million of which was noncash stock compensation.

Noncash stock compensation expense from our ongoing operation totaled $1.9 million.

With 1.7 million allocated to GSK and open 2 million to R&D.

In 2019, we entered into an agreement with the cystic fibrosis foundation to provide up to $1.6 million and funding contributing towards our U.S. phase two cystic fibrosis study.

In Q4 2019, we received the first payment of $400000 and in Q1 or 2020, we received the second 400000 dollar payment.

First quarter 2020, R&D expense totaled $4.5 million.

Compared to $6.0 million for the same period in 2019.

The quarter to quarter R&D expense decrease was driven by lower professional fees and noncash stock compensation offset by an increase in head count and related salaries for a portion of the 2020 period.

DNA expense for the first quarter 2020 was $5.2 million a decrease from $6.1 million for the same period in 2019.

Due to lower noncash stock compensation and infrastructure related costs.

Given the realignment effective in March we expect that our quarterly cash burn will decline sequentially as we move throughout the year to reflect the company's reduced head count elimination of non priority programs spending and targeted efficiencies.

While the majority of cost savings will fall in January there will be some reduction in our R&D spend.

We expect that our cash burn rate will reach its low in the fourth quarter 2020 and remain fairly stable throughout 2021.

In April 2020, we applied for and received the loan of approximately $800000 via the U.S. SBH Paycheck production program, which was a component of the care that signed into law in late March.

TPP loans are eligible for partial forgiveness, which we will apply for based on using the proceeds for payroll maintaining head count and other specified call.

The remaining balance of the loan bears interest at the rate of 1% and it's to be repaid commencing at the end of 2020.

Also for your modeling purposes, our total shares of common stock outstanding as of March 31, 2020, or 40.125 million.

This concludes the first quarter financial covenants and I'll turn the call back to Greg.

Thank you, Steve it's our highest priority to resume our phase two proof of concept clinical trials in cystic fibrosis and to report topline data, which we believe will be a major value inflection point for the company.

We are laser focused on ensuring that we have oh investigators are clinical sites ready to complete this trial as soon as possible.

We look forward to presenting data annealing, so to the North American cystic fibrosis conference in late October.

Beyond cystic fibrosis, we continue to advance our portfolio of novel IAR SG molecules. Several of these compounds demonstrated encouraging level for free tour activity and Tolerability supporting their further therapeutic development.

Dr. Proterra shared with you some of the latest scientific data from our preclinical programs in 80, PK Gi and inherited retinal disorders.

Yesterday may six we presented some of these data from our inherited retinal disorders preclinical activities at the virtual ARVO music.

We're pleased that our recent scientific menu script in the journal of Pharmacology, an experimental therapeutics can be viewed in the fast forward section of the journals website.

We thank you for joining us on our first quarter 2020 earnings call and look forward to continuing to update you on our progress. Thank you very much.

Operator, you May now open up the call for questions.

Ladies and gentlemen, you have a question or comment at this time. Please press Star then one key on your touched on the telephone if your question that's been answered Houston with yourself from the Q. Please press the pound cake.

One of them before first question.

Our first question comes from Michelle Gilson with Canaccord.

Hi, Thank you for taking my question I, just hoping you could maybe give us some clarity given the results you sorry, yes. It can you just remind us all.

Why these data are de risking their cystic fibrosis in.

What is most important important here with respect to two does do we do have those data.

And and then maybe just remind us some of the differences in trial design.

As well and.

Why.

Why.

Right Okay.

So two in fibrosis is so different from since it's necessary as well the program.

Good.

Sure. Thank you Michel appreciate your question.

So firstly with the different Pathak Cystinosis trail, we saw a couple of things. This was the first time that we have.

Employed our daily dosing dosage regimen in healthy volunteers are patients we got exactly the pharmacokinetics that were anticipated through three different doses in cystinosis. So that is excellent news secondly, we saw a clean.

Safety profile. The data were reviewed by an independent safety Review Committee.

They approved us to go forward with a second cohort of patients that included kids.

We've since paused the trial in decided not to continue the trial because there were issues with the study design that complicated.

Interpretation of the data.

From an efficacy perspective.

We saw that the first dose of ILEC. So too was not effective in the nephropathy cystinosis patients. We did see in the second dose that we saw system a statistically significant reduction of white blood cell system, which was the.

He pharmacodynamic measure in that study.

The third cohort was somewhat mixed and that was because of some baseline drift across those patients overtime. There had been a a lengthy period of time between administration to be like so too for the second cohort and beginning of that third excuse me second.

Treatment group.

And beginning for administration for the third treatment group. So the issue with the design related primarily to baseline drift associated with some particularly severe nephropathy cystinosis patients and.

Overall, the date are very encouraging, though because we did see reductions directly attributable to be like so to a they are clear signs a biologic activity. We saw a favorable safety profile, we saw pharmacokinetics exactly as we anticipated so for all of those reasons. These help to D. Ray.

Risk Rcs program in fact in a conversation with.

CSS Advisory group.

They were very enthusiastic about what these results mean potentially for neuropathic cystinosis patients as we go forward.

Now.

In contrast to the neuropathic Cystinosis study.

Patients into C.S. trial.

Our primary.

Our primary efficacy.

Pharmacodynamic assessments.

Is going to be on.

Sweat chloride sweat chloride doesn't really drift and doesn't really bounce around the way white blood cells 15 does so the issue that we had was study design in Cystinosis is not going to recur in the C. S trial.

In Cystinosis, we'd looked at three different doses.

They were dose escalation within patient sub 0.5 million.

Per kilogram, one milligram per kilogram.

Escalating to two milligrams per kilogram.

In the CF trial, we're looking at four different doses for dose escalation, we're starting from 0.3 milligram per kilogram.

Escalating to 0.75.

After a week treatment.

Up to 1.5 per week treatment.

And then up to three milligrams per kilogram.

It could be and we would anticipate with all of them that there was a large upside opportunity for read through and for safety. We are in the process now is continuing our I.M.D., enabling trials and sorting out which compound we would go with.

As we approach clinical trials.

Dr. <unk> would you care to add anything further.

<unk>.

Point I think that big concern is that we're choosing the right molecule or reach are within the kidney and as you may know from our results in yellow like though too we found this molecule.

Based on a P.K. profile has a really good exposure to that kidney and so it does lead it to the possible choice within their snake.

Because we have active molecule that also show good activity and read through against relevant 80, P. Katie mutation.

We're not luling these out just yet.

Okay, great. Thank you again for the information.

And I'm not showing me further questions at this time.

<unk>.

Well. Thank you all very much we we really appreciate your your interest in in you locks, it's going to be a a fantastic quarter and we look forward very much to being.

Able to reopen our trials and to providing with additional information as we go forward.

Bye-bye.

Ladies and gentlemen, such include today's presentation. You may not disconnect you have a wonderful day.