Q1 2021 Forte Biosciences Inc Earnings Call

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First quarter 2021 conference call.

My name is David and I'll be the operator for this call.

On the call are Paul Wagner, Chairman and Chief Executive Officer of Forte, Biosciences, Danbury Forte, as Chief Medical Officer, and Tony Riley Forte, Chief Financial Officer.

Before I turn the call over to Paul and Tony to discuss the business of financial highlights of the first quarter I would 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 Companys 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 SEC for a discussion of the factors that could cause our results to differ materially additional.

The information is also set forth in <unk> quarterly report on form 10-Q for the quarter ended March 31, 2021 as filed today with the SEC and of <unk> Annual report on form 10-K for the year ended December 31, 2020 as filed with the SEC of March 16 2021 the.

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 this over to Tony who will discuss the financial highlights of the first quarter of 2021.

Thank you I will.

I'll now give an update of our financial results in the first quarter of 2021. We ended the first quarter of 2021 with approximately $54 $8 million in cash and cash equivalents, which we believe is sufficient to fund operations through at least the next 12 months as we continue to advance our lead product candidate.

<unk> hundred one clinical trials cash utilization first quarter of 2021 was $4 million.

In terms of the operating results research and development expenses were $3 $3 million and the bump was $4 million per the first quarters of 2021 and 2022, respectively.

Increases in 2021 were primarily due to manufacturing and clinical development costs and noncash stock based compensation expense.

As we advance <unk> through phase III clinical trials, we expect our research and development of expenses.

<unk> through the next 12 months as we continue the clinical development of <unk>.

<unk> hundred one.

General and administrative expenses were $1 4.7 million first quarters of 2021, and 2020, respectively. The increases in 2021, primarily due to professional fee legal auditing and business consulting services and increases in headcount expenses, including non cash.

Based compensation as we scale of operation and became a public company on June 15th 2020.

Lots of per share growth 36.

Seven.

It's one of the quarters ended.

March 31, 2021, and 2020, respectively.

He had $13 5 million shares of common stock outstanding at the end of the quarter.

Additional details on our financial results of the first quarter of 2021 can be found in our form 10-Q as filed today with the SEC you can also find more information in the Investor relations websites.

At Www Dot Forte bio Rx Dot com I will now hand over the call.

Great. Thank you Tony we're gonna keep todays call fairly short, but I wanted to give investors an opportunity to ask any questions that you may have before we get to the Q&A and for those of you on the call. There are not as familiar with Forte, we're developing SB 401 of live biotherapeutic, meaning that this therapy consists of living bacteria.

The the treatment of inflammatory skin diseases in the first focus is on atopic dermatitis, we've been working on <unk> hundred one in collaboration with the National Institute of Health and the National Institute of allergy and infectious diseases.

Atopic dermatitis is the disease that affects approximately 20 million people in the United States alone with more than half of those being pediatrics. In fact, one of our thought leaders of suggested that number could be as high of 60% to 70% of the population being pediatrics. There is no cure for atopic dermatitis at present and the treatment options. The pediatrics in particular are very limb.

<unk>.

We believe there's a significant unmet need for safe and effective therapies to treat these patients of a hopeful that before one can meet that need.

As we've highlighted previously in October FDA granted fast track designation to <unk> hundred one based on that unmet need and the seriousness of the disease.

Completed the phase Iia study and that data was published last year in science translational medicine.

As a quick recap and I know we've talked about this before but in that trial. The 20 of pediatrics treated for 16 weeks and the two day trial at the four one demonstrated a nearly 80% improvement from baseline in atopic dermatitis disease activity as measured by easy that's the X amount of activity and severity index net effect was durable for between three and eight months.

After stopping therapy the <unk>.

First of the patients that had at least the 50% improvement of disease referred to as easy 50, with 90% of the EZ 70, 570% and easy 90 was 30%.

Subgroup of moderate to severe patients of all of them of 100% of GPC to ft, nearly 90% achieved <unk> 75 of the third achieved the easing of 90 as.

As we announced last quarter, we've completed enrollment in the randomized controlled study. We originally targeted enrollment of 124 subjects, but due to strong demand we were able to enroll 154 subject trial enrolled pediatrics two years of age and older adolescents and adults with mild to moderate atopic dermatitis. The majority of those subjects enrolled are under age.

<unk> and the majority of our also of moderate disease severity.

We expect to announce the results of this trial in the third quarter.

In terms of our cash position as Tony mentioned at the end of the first quarter of 2021, we had $54 $8 million and our cash utilization rate of positions as well, we expect to have cash sufficient for at least the next 12 months.

I'm very pleased to announce that since our last conference call. We had two more patents issue. The rest of total patent portfolio up to 11 in the U S and we have similar filings progressing of greater than 15 ex U S countries. So with that David will now open the call up for Q&A.

Thank you.

At this time, we will be conducting a question and answer session.

If you would like to ask a question. Please press star one on your telephone keypad.

Confirmation tone will indicate your line is in the question queue. If any time you wish to remove your question from the queue. Please press star two for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys once again to ask a question. Please press star one.

Our first question is from Mohit Bansal with Citigroup.

Great. Thanks for taking my question and congrats on the progress.

A couple of questions. So one is.

Regarding the use of use of.

ECC ski as an endpoint and Youll see two trial.

Vs Iga, but just use baidu beta is the net.

The cruiser so any thoughts there the checkpoint is probably the bedroom one part of the kind of patient population you outlined gotcha.

Alright, thanks, very much of that question I appreciate it Dan do you want to address that and I could make the follow up with a few comments as well.

Sure sure.

Clearly the Iga is used in phase III studies, and that's what we would plan for our phase III as well, but when you do smaller phase II trials are usually not powered for that endpoint. So one usually uses alternative endpoints of the.

Easy 50 is a very common to use for a phase two clinical trial like the.

Alright, Thanks Derek.

And I'll just add you know theres a number of.

Secondary endpoints, obviously of Iga is one of those endpoints in a variety of different easy so well. The easy 50 is one we've talked about before but obviously we're looking at.

The improvement in easy as well as easy 75% to 90.

Got it Super helpful. And then one question, we have been getting a sense of just.

The vision of the D.

The seeking guidance from is it the immuno emission Deepak division audits at the.

Given that you also as of late.

So is it the ease.

The one which takes care of the night, Victoria and does it matter of who who who regulate this putting the Tennessee.

The really interesting question Mohit. So so it has been.

Overseen by the division of the vaccines and related products I think the history of that might just go back to the fact that certain vaccines were actually living bacteria color of axiom is one of those and so I think <unk> been given the mandate to review all of the living bacteria. So the biotherapeutics that consists of living bacteria the microbiome products.

But they do have.

The call into a reach out to the therapeutic the vision for the indication of interest. So in our case up to the Derm Division I think theres a close collaboration between those two.

In terms of whether there'd be any differences working with the division of vaccine of related product as opposed to the Derm Division.

But the.

This division has been very responsive and something I thought was interesting is that we did get that fast track designation really in the middle of the second wave of COVID-19 and I was a bit surprised about that I would not I would've thought that the debate and the vaccine related product and very focused on the COVID-19 vaccines and and maybe push our application out but.

Instead, we were granted fast track designation.

That just shows the responsiveness of the division and the support throughout the 401, Dan did you have any other comments you wanted to add.

No I think.

What you said is great and I do think.

I would just emphasize the fact of the Derm Division is highly evolved as Paul mentioned.

They do bring of consulting and on.

Our review from the <unk> Division.

Super helpful. Thank you very much.

Thanks, a lot.

Our next question is from Kumar of Russia, with Brookline capital markets.

<unk>.

Thanks for taking my questions.

So with regard to the trial.

What are your plans.

The open label extension once the.

Trial is complete.

And what are the parts on rolling or flexible patients too.

Free rein in the open label extension.

Yeah, that's of Great question, Tamara and thanks for joining the call Dan did you want to address that.

Sure sure so we.

We have initiated a open label extension for these phase III subjects. So it will allow the subjects to enroll into the open extension, including the placebo patients.

The study will focus on safety it will be a year long.

Okay.

In terms of plans.

You will pass relative ex U S. How are you guys thinking about that.

Yeah. That's a good question I'll, maybe make some comments and then turn it over to Dan if he's got any other insights here certainly what we'd like to do is to be able to have a.

An integrated global development plan that would include Europe as well as.

Asia and those are things that we're thinking about right now, we're having discussions about how to do that.

Potential pursuit of scientific advice in Europe.

So there are some unique aspects I think the European development and we're working through those now but Dan did you of any other comments you want to make on that.

Sure.

Just elaborate I mean, we are focusing on obviously the interactions with the FDA.

And we will continue to do so as we proceed from the phase two in growth Phase III program as Paul already alluded to we have begun the process with some consultants on approaching the EMEA, obviously looking for potential avenues for scientific advice. There are I just think of.

There are a lot of little issues with the with Europe.

We can work our way through those.

I would like to make sure that we have a program that involves both the U S. Non.

Europe.

Okay, great and finally.

You guys May turn the majority of the.

Patients in the trial there aren't the 18.

Can you give more color there is it more growth lift was the 18 all of these is much closer to the to the lower limit and how does that impact the comp plans as well as <unk>.

Your thoughts on the efficacy of data from those patients.

Yeah. Good question Kumar Thank you.

I'll make a few comments and then Dan could can provide his insights as well.

The breakdown as we said the majority of under 18, so about 75% of the subjects are under 18% to 25% our adult very roughly.

In terms of the compliance I really don't see that much of an issue.

But the very young patients between two to three year olds Theres, a caregiver typically of parent that's applying the therapy and again this isn't a therapy that has to be applied multiple times a day.

The other therapeutics, whether it's steroids or other therapies in development oftentimes are creams that have to be applied multiple times a day of ointment. So that could be applied multiple times, a day and again just as a reminder of this therapy is a spray. So it's the water based spray and it's only applied three times a week so.

I think from the compliance perspective.

I don't think that Thats an issue, we certainly haven't heard of that being an issue. It wasn't an issue in the <unk> trial and did you have any other thoughts.

Yeah, I was just gonna say of the nature of our product. The fact that it's a naturally occurring bacteria again, though it's highly selected streams that's applied to our patients. The the parents of the children are are really.

And they're really love with this kind of idea and so I think that's what's allowed us to over and rollout of trial. So theres a lot of excitement about a non chemical drug therapy. So I think theres been a lot of.

The interest by the parents to allow their patient sort of the children two to be participate in this trial and I think that will reflect in our compliance as we go forward.

Thanks, so much.

Great. Thanks for your questions.

Our next question is from Michael Higgins with Ladenburg Thalmann.

Thanks, Congrats guys on the continued progress.

I appreciate the opportunity here to ask them additional questions.

During the forthcoming so far here this is great.

Just curious in the.

The ongoing phase two are you looking for anything specific by the different age groups.

The younger kids the older Kids.

In the phase II of any secondaries that are that are based around that.

Yeah, I'll make a couple of comments and then Dan if you want to provide any other insight. So theres a stratification agents one of those certifications and so we are looking at that.

Maybe even related to the previous question I don't think we certainly didn't see any significant difference based on age whether was younger pediatrics or adolescence in the two day trial or even in the adult side of the adults in the two day travel a little bit different again, they were only treated for six weeks and.

And treat.

Treat it regionally, but no no significant that we saw in terms of the overall activity. The the consistency was there between the adults and the pediatrics.

And the adolescence, Dan was there any other comments you want to provide.

No no I think we're looking at people very consistently because of what we observed previously.

Thanks, guys.

As more of a development question I suppose there's been some difficulties with others recently in their devices.

If you could just remind us of.

Where you are with your device in terms of human factor studies that have been completed.

The other conversations with the FDA regarding the spray devices.

Yeah, absolutely. Good question. So so first of all of that spray device has a master file and it's actually being used in an approved FDA product. So it's already in the market.

So we don't really expect many issues there.

In terms of whether this is considered the device again, we would say it's agnostic to the attitude. The method of application could be of drop rate could be of spread it could be a form swipe. There are many different ways of the bacteria can be applied to the skin.

So with that said you asked about human factor studies, and obviously, that's something that we're focused on we're actually moving forward of human factor studies, but in the study that we've had ongoing now as well as the prior to a study the.

The the therapy is pretty straightforward again, it's just adding the water into the lap of life bacteria of putting the pump sprayer and currently adjusted Reconstitutes almost instantaneously. So as soon as the the diluent hits that <unk> cake resize the license almost instantaneously and then the pumps were put on and it's just a prime day, then pumped immediately after its reconstitute.

So so far it's pretty straightforward and no issues with the patients being able to use the applied the therapy.

Okay. That's great can you remind us on your of milestone payments to the IHS when those may begin.

Yeah, I don't think we'd give us some specific items on that but they are late.

So they would be after a major value inflection points in the program.

Okay I appreciate the feedback.

Thanks.

Sure.

Our next question is from is from Nicole Romanow with true Securities.

Good afternoon call, Dan and Tony Thanks, So much for taking my question I kind of cool. Thank you.

So for the phase two coming up in the third quarter. If the data is positive and given that youre going after of prop people.

Can you give us a sense of how many patients across the true you would need for approval in the satisfy the safety database.

We're a growth the cadence of the pivotal study the focus on pediatric populations first and then adult.

Or both of these trials be run in parallel he achieved at the on label.

Dan can comment on this more but just at a high level I mean, what we've seen and you know certainly we need to have discussions with FDA on this but what we've seen with approved therapies for this type of indication is that one trial is sufficient for that broad label in other words pediatrics, all the way through to adults and not looking too dissimilar from what our phase II study looks like.

And then in terms of the safety database I always think it is good to have an extension study of can encourage patients, particularly the placebo patients who may not be responding to stay on study if they have a guaranteed that they can go onto the active after the end of the study, but as Dan highlighted we do have an extension study also as part of the phase II and hopeful that that might be able to satisfy some of the safety questions that FDA.

Might have Dan was there.

Of that you wanted to add there.

No.

Chris I've got approved with adults children and adolescence all of the single program and again, we would.

Aimed to do the same and we would expect the.

That would be acceptable in the Paul alluded to I think previously.

We have been.

Very satisfied with their interaction with the agency when we finished the phase II will discuss with them.

Farmers for phase III.

Yeah. So the expectation would be the we wouldn't need to have separate status for adults and pediatrics, but again that was just all of the one study.

Oh great.

One quick follow up on.

Just to could you just elaborate a little bit more on a potential European or even a filing.

And would those geographies, except at G. H scores readily or would you need to conduct separate studies any different endpoint.

And what is it what is the.

The regulatory path forward for those geographies or what are their endpoints that book more.

More of a question Kim.

Dan did you want to address that and maybe I can add a few comments sure sure again.

Crystal Boral recently got approved with the with the EMEA youth.

Using the Iga of the studies they did in the United States. So.

Clearly they have different focuses the in the U S does but they have been the doctors who've demonstrated there that the Iga is acceptable to them. So again, we'll be having some interactions with consultants and then potentially get some scientific advice to clarify what would be required for the <unk>.

Great. Thank you so much.

Thanks, Michael.

Once again to ask a question. Please press star one our next question is from Calvert Patel with B Riley.

Yes, hi, thanks for taking my question.

Just a quick one on the ongoing study.

There are specific delta.

Now that Youre looking for in the trial that would be clinically meaningful in your view in addition to hitting stat Sig.

If there's a range of that'd be super useful thanks.

Yeah, Great question and thanks for joining the call cockpit. So that's a question that we've asked the thought leaders as well and the the answer that comes back is if the safety profile is clean that the delta between active and placebo doesn't need to be very large and what they've talked about is in terms of the easing of measure somewhere between 10 and 15 point difference.

Would be clinically significant to them in other words, if what the clean safety profile and of 10 to 15 point of difference and an easy based endpoint relative to placebo, but thats the therapy that would be used broadly and I think there is there is precedent for that in the market. There's other therapies in psoriasis and the only therapy in psoriasis for example.

Where the activity isn't quite as great of some of the biologics, but the safety profile is very clean and that has had robust uptake in the market and I think in this indication, particularly going after the pediatrics safety really is number one the parents are very focused on safety the want something that's natural but they can be comfortable putting it under their kids, it's not gonna have any serious.

Either near or long term issues to the kids health and that also has some effect. So I think the bar the highest bar really is on safety followed by the activity.

Some fraction of the patients don't respond to this therapy I think then the parents would start moving them onto more aggressive therapies, but I really think that safety profile is paramount to getting uptake in the particularly in the pediatric market.

Okay. Thanks, I just had a quick follow up actually on the IP related for.

The IP around funding.

Some of the S 401, I'm trying to understand is the.

It is more related to the formulation of the drug or does it also include the bacterial species I mean can you can you protect the bacterial species under IP like this I'm just curious to hear your thoughts on that sure.

Sure kind of it so as I mentioned, we just had two new patents issued so we're up to 11 now and it's really a broad range of intellectual property I mean, the starting the foundational patent is around culture and Gram negative bacteria off of the skin. So that was not trivial and the NIH. Originally came up with that technique and we were able to get a patent issued for that and from there. It is.

The compositions of taking bacteria off of the skin and formulated into of drug product. It is us using that product for the treatment of different diseases, including atopic dermatitis, its formulating that into a kit, it's combining that with the with other potential therapeutics. So it's really broad you've been very aggressive on the other intellectual property for that very reason.

And then have been really pleased with the number of patented of issued in fact very early on we went down track, one which is more accelerated path of patent issuances and I wasn't sure. If we're going to be able to pursue that but again because there hadn't been much work done on gram negatives broadly or specifically on Thursday of modest because of the prior art was fairly clean.

Because again before the NIH came up with this technique for culture and Gram negative bacteria that really wasn't a way to separate this off of human skin and start the study them.

So again, we will have more patents coming I think we're in a very solid position with the 11 that we have and that will expand to be reflected in the nationally as well.

Okay. Thanks, very much Paul.

Okay got it thanks for the call.

Ladies and gentlemen, we have reached the end of the question and answer session I would like to turn the call back to Paul Wagner for closing remarks.

Thanks, David So we're really excited we're looking forward to the readout.

You know all of you are as well of the trial in a few months in the third quarter. So thank you again for dialing in and if any of you have any questions. We are available after the call to take those and have a good afternoon. Thank you again.

This concludes today's conference.

Thank you for your participation you may disconnect your lines at this time.

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