Q3 2020 Forte Biosciences Inc Earnings Call

Hello, and welcome to Forteo Bio Sciences third quarter 2020 Conference call. My name is Michelle and I'll be the operator for this call on the call are Paul Wagner, President and Chief Executive Officer of Forte Bio Sciences, Jan Bertsch, Fortes, Chief Medical Officer, and Tony Riley for taste.

Financial Officer before I turn the call over to Paul and Tony to discuss the business and financial highlights of the third quarter I'd like to make a comment regarding forward looking statements.

Many of the statements made during the call today are forward looking statements, including statements with respect to the company's cash position and the potential development timeline of the company's product candidate.

Actual results could differ materially from those contemplated by our forward looking statements and reported results should not be considered as an indication of future performance. Please look at our filings with the FCC for a discussion of the factors that could cause our results to differ materially.

Additional information will also be set forth in our quarterly report on form 10-Q for the quarter ended September Thirtyth 2020 filed with the FCC earlier today.

The forward looking statements on this call are based on information available to us and we disclaim any obligation to update these forward looking statements except as required by law.

I will now turn the call over to Tony who will discuss the financial Hello, excuse me financial highlights of the third quarter.

Thank you Michelle we ended the quarter with $20.2 million in cash our cash burn for the third quarter was approximately 7.6 million of which 2.4 million was related to reverse merger. Its token and includes two Virgin wind down costs subsequent to quarter end we.

Closed an underwritten public offering of one.

1.6 million shares of common stock.

Member second which include share settled upon the full exercise of the underwriters option to purchase additional shares at a public offering price of 20050 cents per share, including the option exercise and net proceeds from the offering were approximately $42.7 million after deducting underwriting.

Discounts and commissions and other offering expenses. There are 12.8 million shares outstanding as of November 32020, we believe that our cash position will be sufficient to fund operations for at least the next 12.

In terms of operating results research and development expenses were.

3.7 million and 7.0 million for the three and nine months ended September Thirtyth 2020, respectively compared to the zero point <unk> million and 1.5 million for the comparable periods in 2018.

Increases in 2020, primarily due to manufacturing and clinical development costs as we continue to advance if before walking through clinical trials.

General and administrative expenses were 1.3 million and 2.8 million plus your nine months ended September Thirtyth 2020, respectively, compared to zero point, Threemillion and 1.0 million for the comparable periods in 2019.

The increases in 2020 were primarily due to professional fees.

While legal auditing tax and business consulting services as well as personnel expenses as we transition to being a public company.

In the second quarter of 2020, we recognized a charge of 32.1 million for acquired in process research and development related to the reverse merger Arb told region, which closed on June 15 2020.

Additional details on our financial results for the third quarter 2020 can be found in our form 10-Q, that's filed earlier today with the FCC. You can also find more information in the Investor Relations section of our website at www dot for tape bio Rx Dot com.

I'll now hand over to Paul.

Great. Thank you Tony.

40 is developing FC for one our lead product Allied bio therapeutic for the treatment of inflammatory skin diseases with a focus on any topic dermatitis, we've been working on EPS before a one closely with the national Institutes of health and the National Institute of allergy and infectious diseases, which have been thought leaders in understanding the bacterial composition and interaction with.

Can.

Atopic dermatitis is a disease that affects approximately 17 to 20 million people in the U.S. alone with more than half of those being pediatrics, there's no cure for a d. president and the treatment options for pediatrics in particular is very limited.

We have extensive preclinical and mechanism of action data demonstrating that up before one improved eight topic dermatitis disease parameters by driving tissue repair and anti inflammation.

The completed phase 128 trial data and adult adolescent pediatric atopic dermatitis patients three years of age and older was published recently in science translational medicine. The data demonstrated good tolerability and significant activity across mild moderate and severe disease across age groups, including pediatrics.

And adults and across key endpoints, including easy school right and for right. So rich we look forward to further validating this data set with the ongoing multi center randomized placebo controlled clinical study, which we expect to read out mid next year.

In October after year granted fast track designation to ft. Four one for the treatment of a topic dermatitis, but those of you who are not familiar fast track is a process designed to facilitate the development and expedite the review product candidates to treat serious conditions and fill an unmet medical need the purpose is to get important new drugs to the pace.

And earlier, specifically Fasttrack allows for more frequent meetings and written communications with the FDA eligibility for accelerated approval priority review and Rolling review of the BLE, We're very appreciative of the recognition that empty for a one has the potential to fill an unmet need in the treatment of the topic dermatitis and look forward to working with the FDA to expedite.

The development.

In September 2020, we initiated a multi center placebo controlled clinical trial that before a one which is enrolling pediatric adolescent and adult eight topics dermatitis patients aged two years of age and older. Brent additional information about the trial see clinical trials dot Gov enrollment is going well and Dan it's available during the Q any.

To provide additional perspective.

We very much appreciate the support of our existing investors and I'm really pleased with the high quality new investors that participated in our recent offering we're excited about that before once potential to address a significant unmet need for the treatment of a topic dermatitis, particularly in pediatrics, which have limited therapeutic options without Michel I think we're ready to open up the call to today.

Thank you we will now be conducting a question and answer session.

In the interest of time, we ask that you. Please limit yourself to one question and one follow up if you would like to ask a question. Please press star one on your telephone keypad.

Information tone will indicate your line is in the question queue.

Press Star two if you'd like to move your question from the Q.

Participants using speaker equipment, maybe necessary to pick up your handset before pressing the star keys.

One moment please poll for your questions.

Our first question comes from the line of Nicole Jeremy You know what's true with Securities. Please proceed with your question.

Good afternoon, guys. Thanks for taking my question when you look at the competitive landscape there.

There are several you'd have a dermatitis products that are also being developed for psoriasis or their plans for us before I wonder if he developed for adjacent skin diseases and if so what's the strategy or approach that you're taking for additional indications.

Thanks, very much to cool thanks for that question as well it's a it's a good question from the mechanism of action data, we certainly do see activity.

In terms of tissue repair and anti inflammation and one can imagine other inflammatory skin disease is there have been mouse models run and other inflammatory skin diseases that look promising and I do think it a longer term those are all important areas to explore our first focus as you know it really is on a topic dermatitis, its a large market and particularly for the pediatrics is a significant unmet.

Need and so that really for the near term and intermediate term is the focus and we would look for potential ways to advance and other indications.

Cost effective ways, which could include investigator sponsored studies as well, but but again. The first focuses on any topic dermatitis, and we do see opportunities to expand beyond that.

Great. Thank you so much.

Thank you. Our next question comes from the line of Coppola Moosa with Chardan. Please proceed with your question.

All right. Thanks for taking my call and congrats on starting your phase two trial. It's good to hear enrollments are going well there could you or first of all the skus based on the inclusion and exclusion criteria in clinical trials.

How much of the opportunity you mentioned earlier on the call is include it or are you going to be able to grow core if that's for let's say the label in the and how much are you ruling and how much you're ruling out by this trial design.

Sure Dan would you like to address that and then I can follow up as well.

Yes, yes, so yes, the clinical trial design is a aimed as you noted for mild to moderate a topic dermatitis in a broad age group going down the pediatric population adolescence and and adult so we would anticipate.

From the study that we will gain the information we need to approach you know that entire spectrum of disease in our phase three program.

And so that that would be.

Congrats Paul Yeah.

Yeah. Thanks, Thanks, Dan I would just add to that as Dan highlighted the trial. What we're conducting currently is in mild to moderate patients now as a reminder, the phase one two way data that was published in science translational Medicine did include a severe patients and we do see an opportunity in fact, the most severe patients in that trial saw an easy improvement and improvement in the EASI score of between nine.

He three and 94% so we do see an opportunity there I think we want to be careful about how we approach the severe population in terms of the clinical trial design. The initial focus is on the mild to moderate patients, but we would look to potentially expand that over time as well.

Got it and then a follow up question for me.

One of the potential benefits of your product is that it's a nonsteroidal alternatives and I understand that and something like 80% of parents don't want to use steroids and and kids are off within days of the dermatology because it how do you address that issue in your trial I E.

Parents, not wanting to stay on other products that are in the trial, how do you keep how do you ensure a good balance and also compliance with your product.

That's correct.

Sure Dan do you want to address them.

Sure I mean first of all I think the parents are very excited about our product because it is a non steroids product there's been a lot of enthusiasm for the fact that it's a live bacteria isn't the chemical it doesn't penetrate into the scan it doesn't get absorbed and they're not having these concerns for systemic effects of.

Before one is they may with steroids.

And other therapies that have some absorption to them. So I think there's great enthusiasm.

In regard and because of that I think there's some degree of compliance forget just from that enthusiasm. Additionally, we have a product that didnt set of being dosed once or you actually most commonly twice a day like maybe steroids are were.

Those to on a three times a week basis. So the intermittent basis makes it a lot easier intolerable, particularly for the children, who are not necessarily very excited to have these there any therapy put on twice a day. So I think we've got a lot of advantages to provide for the the patients and their children.

To really be able to utilize this drug effectively.

And I'll just add to that the patients are washed out of background medications before being randomized into the trial. So there's no there's not a steroid use as part of the trial.

Oh, that's right. So there are those shoes on pallets. Okay. Good understood and then quite final question just has to relate to enrollment, which you mentioned, it's going well so far.

Could you discuss sort of one one when do you hope to get that last patient then assuming the coke at 19 backdrop doesn't on on do we pressure your trial.

I can speak generally to that end and can comment as well you know we want to be careful about being too precise as you mentioned you know called it can can create some uncertainties, although even with this most recent bump up in cold that enrollment is Glenn has been going very well and just in terms of last patient and or more importantly, when we're able to read out this data were still talk.

Getting.

Midyear next year, though that as mentioned done open portion of the call enrollment is going well and Dan do you want to comment a little bit more on the enrollment.

Yeah, I guess you know again.

The receptor this as we said before it's been very positive by people and their work we're targeting the the the right population. There is a lot of enthusiasm and our our popular our enrollment to date is really on track exactly where we projected so the dates the pauls describing.

Describing I think are.

We're quite comfortable with now with right now and again, obviously, we can't predict what might happen with Kobe, but we're taking every precaution we can to make sure that we can mitigate any issues with that.

Great. Thank you very much.

Excellent. Thank.

Thank you. Our next question comes from the line of Justin Zealand with B. Riley Securities. Please proceed with your question.

Hi, Paul and Dan Congrats on all the progress this quarter and thanks for taking my question. So given there is a fairly common and standard of care in this indication I'm. Just curious if you could expand on whether it's expected that before one could eventually be using combination with steroids or whether you'd imagine that for one could be used either in sequence before.

Or after steroids and eventual treatment regimen. Thank you.

Yeah, I think that's a good point, Dan was referring to this previously, but even with steroids being standard of care. The we've had it does say the thought leaders cite that 80% of parents don't like being having their kids on steroids and the parents do put their kids on steroids only had them onto a pretty short period of time. So you know just among parents of these kids as a resistance to this.

Right you know certainly we do think combination use could be an interesting opportunity either what steroids or other background medications. In fact, one of the thought leaders has highlighted the possibility to use it even in combination with a drug like Dupixent, which is a systemic where you've got a large body surface area involved into patients you wouldn't necessarily use a topical for that get them under control with a with a systemic.

And then provide.

Provide before one in combination with that in order to get those patients further under control and right now those patients are using steroids, but oftentimes complained about thinking of the scan or stretch marks on the scans. So this would provide a I think a really nice alternative then is there anything you wanted to add to that.

Oh to answer yes to all those possibilities [laughter], though it said that people will use his prior to steroids for sure as Paul's already described with a phobia that people have of steroids. When these chemicals I think there could be used in combination and it can be used in patients who are already fail.

Failing or not having inadequate response to steroid maybe then be placed on and hopefully have a steroid taper thereafter.

Right now that's really clear and helpful and if I could just ask one more follow up you know thinking about how steroids are currently administered via their.

How often they're administered whether its on an as needed basis or can you just kind of comment on how you'd expect your drugs administration profile. If you kind of compare to kind of a topical steroid profile and b it but I've heard from patients that they don't really like degrees the aspects of the start rates.

That's a great question, Thanks, Jess and I think you're exactly right I mean, there's one aspect as a is that this is a water based up before one is water based and so it drives very quickly after being sprayed on the skin. The other point is that it's only administered three times a week that compares to steroids, which are administered as Dan mentioned before twice twice a day and they're typically in a.

Lotion or anoint, then and that you know for a particular for a parent of a of a child trying to rest of the kids down and put the the lotion on you know in the morning to get all of the closer at night. It gets all over the sheets can can be challenging that can affect compliance. So so I do think that there's a big convenience advantage to left before one relative to the current standard of care. In addition to what we think is a.

Safety and hopefully an efficacy advantage as well.

Excellent well thanks for taking all my questions. Thanks.

Thanks, Justin.

Thank you. Our next question comes from the line of Michael Higgins with Ladenburg Thalmann. Please proceed with your question.

If all congrats on the progress during the quarter and even since going public he does.

As a.

Yeah.

Good question, so far on the on the trial enrollment and so forth.

Can you give us any insight as to how you're addressing.

Ongoing impacts room covenant, specifically is there a virtual components how much.

Face to face is required and the trial. Thanks.

Sure Dan to try to address them.

Sure sure. So there first of all what we've done with all the sites. We made sure that all the sites have a covert mitigation plan in place and as you know back last spring was a little more challenging were who is new to the sites. They didn't know how to handle this on both sites really have no. If you go to the Doctor you know they all have protocols in place to keep everybody safe and.

People are all wearing masks and so all the appropriate precautions are are being taken up.

We do you know [laughter] have constant contact with our sites. You know we were constantly query them about any concerns about covance. So there is regular interaction on that regard to any concerns that maybe happening in their region.

I think he lastly, you know we do have some thoughts some plants I should just say thoughts and plans in place should sit on site have significant issues about how to mitigate those I don't think I know one of the really describe all of those at length right now, but I think you should know that we do have a number of possibilities in place for how to mitigate problems.

The site really gets into trouble. So we've been working on a lot to prepare for that and I think we're very comfortable with where we are.

And I'll also comment or two on that very point that we've got the sites that are generally geographically dispersed so they're not all concentrated for example in one state and they do have backup sites as well so the potential to pivot to backup site should that be necessary and and so far even with the incident, a cold but increasingly we are seeing very good enrollment as we talked about too early.

He is without any good enrollment from the pediatric portion as well we've had a pretty robust response can parents parents are very comfortable with this therapy and good enrollment from the pediatric portion.

[noise], great that kicked off a few backup questions as well thanks for that just a follow up from your comments.

In the protocol home.

How many face to face interactions are are expected.

[noise] Dan did you want to talk about that I can just generally comment that you know theres a monthly monthly visits I mean, the endpoint is between baseline and 16 weeks and there are the the monthly visits for the Oh for the intervening periods, but then did you want to talk more about them.

Yeah, there's there's a total of seven visits or overall between this as Paul said screening baseline your monthly visits and then a follow up.

I think that I, just sort of give additional piece of data as we've talked in interactive with a number of our sites and basically they're having great compliance with their patients and that are in clinical trials and so we feel.

The the patients in the clinical trials have actually been much more willing.

Willing to come in and visits even though the harder times of the coated epidemic or pandemic then.

Then the.

The typical patient so I think again despite.

The issues I think again I'll just reiterate again, we got a lot of mitigation stride.

Strategies in place and that we are seeing really good compliance with patients.

That's terrific one final question and answer that one of your answers are kind of Dovetailing with my next questions, but so just one final one here.

Any early lessons from the pie so far as to how it's going what's working with the Rumble, the pacers or are saying I know it so its blinded and so forth what if there's any kind of feedback you can provide on either enrollments.

Or other of their comments from the FDA has to be helpful. Thanks.

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Well the only go up.

We will.

For me.

I'm, sorry to hear that myself on mute there I apologize I was just going to say to dance and doing a great job getting out and making sure that the sites are going well.

He and I had an opportunity to visit with one of those sites recently and maybe you can provide some perspective on that as well.

Sure I mean that that's exactly what I was going to go basically what we're hearing from other sites is the the patients and the parents of the children. They really get after you.

For one that really understood. They love. The fact that this this natural bacteria therapy. They love. The fact that it's not a chemical drugs for the kids are very enthusiastic about it and so they've been really responses in that regard and I think the dot the docs are telling us the same thing they've got.

Feel that Theres, great promise for this therapy. They are looking forward to enrolling their patients. So the ones. They have already enrolled and you know additional patients and getting the trial completed work.

We're sensing just a huge amount of enthusiasm across the board from the from the patients in the study coordinators and the physicians.

Great. That's a great feedback thanks, guys I'll jump back in the queue. Congrats again.

Thank you. Our next question comes from the line of Kumar Raj Shah with Brookline Capital markets. Please proceed with your question.

I'm fine congratulations on all the pools that.

With regard to the EM all unions back would be allowed in the phase two trial what are your thoughts on that how do you expect to Miami.

People just want to.

And also in your earliest thirtyth. It has been there, but this time de Bruin mine pinned.

Disease, even up and stopping the treatment.

So what are your plans for that regard to following the patrons falling to try and.

Do you plan to move them into open label extension.

And with regard to the placebo patients or.

Do you plan to drop them already because the treatment pulling to try and.

Dan did you want to address those.

[laughter], yes lots of questions. There. So weve Stan you first asked about the emotions and the impact on that we've standardized the emollients across all the patients. They are all basically getting the same emollients throughout the trial. So we feel that we've got that control to standardize very well.

In regard to.

What we're doing with the patients after completion of the trial, it's not typical in phase two when you haven't.

Completed your randomized placebo controlled phase two trial to actually have.

Have a continuation prowl for them yet will be we have a follow up visits for observed the <unk> you know the duration of the therapy in the digital safety data in Africa.

After completion of the study design and we will consider what opportunities we have for these patients after completion of this trial.

And with regard to the POS Black basic didn't have you had any interactions with them via following the Pos truck basic nutrition, and what I do buy bonding with regard to that.

Yes, so as we mentioned in the open portion of the call you know the fast track designation allows for ready your interactions with the FDA. We just received that recently so no. We haven't taken advantage of that yet, but there is a number of different points, where you know we have access to FDN can ask them questions. There's also the formalized interactions a type C meeting Santa Fe.

These two meetings and <unk> and we're certainly going to be taken advantage of that actually data communications with the FDA to help accelerate the development of that before one.

Okay, great. Thanks.

Excellent.

Thank you we have reached the end of our question and answer session I'd like to turn the call back over to Mr. Wagner for any closing remarks. Thank.

Thank you Michelle I, just want to say to everyone. Please feel free to reach out to US directly. If you that there are any additional questions that you have often thank you all for dialing in and have a good afternoon.

Thank you. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.

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