Q2 2021 Vyne Therapeutics Inc Earnings Call

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Greetings and welcome to the vine Therapeutics second quarter, twenty Twenty One earnings call. During the presentation. All participants will be in a listen-only mode afterwards. We will conduct a question and answer session at that time. If you have a question, please press the one followed by the four on your telephone. If any time during a conference need to reach an operator, please press star zero. As a reminder. This conference is being recorded Thursday, August a month 2021. I would not like to

To convert over to chase, Oswald from lifesci advisors, please. Go ahead.

Good morning, everyone. And thank you for joining us before we begin formal remarks. That remind you that some of the information in the press release issued this morning. And on this conference call contain forward-looking statements. That involve risks and uncertainties and assumptions that are difficult to predict including statements forecast and observations regarding future financial and operating performance. Impacts of the covid-19, pandemic on Vine and observations regarding ongoing operating expenses in that Revenue.

These statements will include observations associated with the commercialization of amzeeq and silk city in the United States. There were also include plans and expectations regarding strategic transactions. In the South's timing and cost of clinicaltrials words that Express and reflect optimism satisfaction, current progress, prospects are projection as well as words. Such as Belize, intends expect plan anticipate and similar variations identify forward-looking statements.

Absence, does not mean that for statement is not forward-looking.

Step forward looking statements are not a guarantee of performance and a company's actual results May could material, differ materially from those contained. In such statements, several factors that could cause or contribute to such differences are described in detail. In Vines, Therapeutics filings with the SEC. These forward-looking statements speak only as of the date of today's press release and conference call and the company undertakes. No obligations publicly update. Any forward, looking statements or Supply new information regarding the circumstances after the date of this call.

All in addition Financial portion of this call will include certain non-gaap financial information for additional disclosures relating to these non got Financial measures, including a Reconciliation to the most directly comparable gaap measures. Please see today's press release, which is posted on the investor relations section of our website.

Participating in this morning's call our Dave, Jones Allstate Vines president and chief executive officer and Tyler's Rhonda finds Chief Financial Officer. Dr. Ian Stewart, the company's Chief scientific officer and the company's general counsel and chief legal officer will also be online and will be available during the Q&A session. At this time. I'd like to turn the call over to Dave Dombrowski Dave, please. Go ahead.

Thank you Chase and good morning to everyone. Hopefully you have had a chance to read the two press releases that we issued this morning related to our second quarter earnings and announcing our new license agreement within freedom.

On today's call will be going through our second quarter financials. However, I want to spend the majority of my time this morning, talking about the change to our corporate strategy and our focus on RD and advancing a proprietary pipeline.

This morning. We released our earnings revenue. For the quarter was flat compared to last quarter, as we continue to face, headwinds commercializing our products in this environment.

We've been evaluating our commercial and RD assets for some time in order to determine how to optimally deploy capital and drive shareholder value.

During the course of this process. We carefully consider the revenues received from the commercialization of amzeeq, silk sea, and the associated costs to drive those revenues.

The protracted negative impact of the covid-19 pandemic over the past 18 months, during the commercial launches of both. Amzeeq, silk C and the current payer landscape has made this an incredibly challenging environments.

Throughout this process. We explored several strategic options including the acquisition of marketed assets. Out licensing are approved products outside of the United States and possible partnering or co-development relationships with interested parties.

As you all, are where we've had to make considerable cuts to our operating expenses over the past 18 months, in light of covid-19, in order to preserve our commercial operation.

We have.

Our sales force intact throughout this time, and our efforts to educate Healthcare Providers and increase awareness of both. Amzeeq ends oxy.

While we have had to balance our cash expenditures for commercial operations, throughout these periods of unpredictability and customer access restrictions since the covid-19 pandemic began last March, important consumer digital and e-commerce initiatives. That we would have sequence during a normal log cycle have unfortunately needed to be sidelined.

Watching you products, bring a variety of challenges in any environments. Particularly for a company of our size.

There is a roadmap to maximize the potential of our Minocycline franchise. We know we have excellent products and responses from patients and the healthcare providers continues to be very positive.

The issue for us is ultimately one of time and money though. We remain optimistic about the potential of our launch Brands. The factors. I have discussed coupled with our current operating costs significantly impact our ability to become a profitable Enterprise within an acceptable time frame.

We believe that our existing Minocycline franchise including our base 3, ready combination product FCD 105 has significant value.

As we assess our current Minocycline franchise, and the costs associated with commercialization, alongside are Ambitions for our pipeline including the transaction announced this morning with inferred arm, which provides us with exclusive access to a novel Betty platform.

We came to the conclusion that we cannot appropriately support, both a commercial Enterprise and our d operations.

After careful consideration, we have made the Strategic decision to explore a sale or license of our Minocycline franchise, including the underlying molecule stabilizing technology platform specific to our Minocycline portfolio.

We are working with the prominent Investment Bank to lead us through this process.

We believe that the potential of this franchise could be maximized by a partner that can deploy the necessary resources to unlock its true value.

Recognizing the continued pressure on our share price. We believe the best way to create value for our shareholders is to focus our resources. On our existing R&D capabilities and strong partner Network to advance our proprietary pipeline.

As we transition our focus and spend toward developing our pipeline. We will continue to selectively fund certain aspects of the commercial business, including our Salesforce for a finite period of time while we actively work to identify a partner for our Minocycline franchise.

This will reduce our overall burn rates and allows to make appropriate investments in our pipeline, which we believe will create significant value for our shareholders.

Separately and light of the Strategic change. We've had a number of discussions with our lenders, regarding our outstanding debt.

They were very helpful in working through potential options and we're willing to provide us Runway to keep the debt outstanding for a period of time during the process of identifying a partner for the Minocycline franchise.

When considering the carrying costs and fees, however, associated with doing so we believe it was more prudent to prepay the loan and use the cash. That would have otherwise funded those carrying costs to invest in our pipeline projects.

Tyler, our CFO will discuss our cash and cash Runway, when we get to the financial discussion.

Going forward, we will invest in developing therapies for the treatment of immunology and inflammatory conditions with high unmet needs.

Drug development is a core competency of Vine. We have a track record of successfully developing complex molecules and advancing Therapeutics through the clinic and Regulatory approval process.

We intend to leverage those core capabilities and building and enhance pipeline of innovated nces alongside. Our current development program. For fmx, 114 for the potential treatment of mild to moderate atopic dermatitis.

We believe this is the right direction for the company and have the unanimous support of our board of directors.

This leaves me now to the licensing agreement. We announced this morning with in, for term-limited a spin out of the University of Dundee School of Life Sciences.

Dundee is one of the foremost integrated University Hospital and biotechnology research institutes in Europe.

We've been following the work of this group and have been impressed with their progress in developing multiple novel and differentiated drug Discovery platforms relevant to autoimmunity and immuno, oncology disciplines.

We are particularly impressed with the potential and Broad applicability of their work and identifying highly potent and selective bromodomain and extra terminal protein Inhibitors also refer to as bet Inhibitors or Betty for short.

As outlined in our press release this partnership with infant, Derm provides Us exclusive worldwide rights to a novel class of Betty compounds.

The BET family of proteins are epigenetic Regulators that control the transcription of genes.

Inhibiting that proteins stalls, a transcriptional process. And therefore, reduces the extent of inflammation and tissues.

There's a lot of interest in Betty's as therapeutic targets for a wide range of diseases.

To date much of the clinical research, particularly by large Pharma has been focused on oncology.

There is also a compelling signs to show that bet. Inhibition can play an important role in effectively treating immuno inflammatory diseases. We believe this partnership within for Derm is transformational for Vine as it exponentially. Expands our pipeline, providing us with a library of small molecule nces and a unique platform to develop those topical and oral Betty Therapeutics.

The initial candidates.

Plan to develop we refer to as fine, 201 and Vine 202.

The first of these find 201 is a pan bromodomain or pan BD that inhibitor.

It is a first in class soft pad BT bet. Inhibitor. That is designed to mitigate systemic drug exposure and will be developed for topical applications.

We intend to progress, find 2001, and to rare neutrophilic garment, illogical indications, such as pyoderma gangrenosum Palmer, plants are pustule osis, and generalized pustular psoriasis. Where there is significant unmet need due to a lack of indicated treatment options.

Plan to enter this program into the clinic next year. After the prerequisite nonclinical safety, assessments have been completed.

The second candidate find 202 is an orally delivered first in class that inhibitor that's highly selected for bd2.

Recent research suggests that the majority of pro-inflammatory signaling from best protein action is through the interactions with bromodomain to by selectively inhibiting. Bd2 We Believe Vine 202 could have a more targeted anti-inflammatory effect within improved benefit risk profile.

We view by in 2002 as having significant potential as a novel oral treatment for major immuno inflammatory indications, such as rheumatoid, arthritis, ulcerative colitis, and multiple sclerosis.

Upon final candidate selection. And exercise of our option. We intend to commence an IND, enabling nonclinical safety program and enters the clinic next year as well.

Bet inhibition is good science, and we are enthusiastic about the potential broad utility of the Betty platform.

Over the coming months, as we prepare to take these nces into the clinic. We will provide further details on the initial indication that we intend to pursue for each of these programs.

With respect to the economics of our partnership with inferred arm.

We structured the transaction to provide us the exclusive right to develop any and all of their Betty compounds or any indication worldwide.

Additionally, we have the ability to sublicense to a third party that development of anybody program in any jurisdiction.

This gives a significant optionality to how we deploy our resources and maximize the potential of the platform.

In essence, this is a pay-as-you-go or a la carte model which provides us the ability to control costs at our discretion.

For perspective, the total Milestone payments to progress one topical products through approval in the United States is approximately 16 million dollars for all indications.

Similarly, the total Milestone payments to progress one oral products through approval in the United States is approximately 44 million dollars for all indications. This obvious Clues R&D costs and any royalties, pale Pond payable upon commercialization.

In summary, we are.

Very excited about the possibilities of the Betty platform and our collaboration with inferred arms. As we prioritize the growth of our pipeline by coupling in for dorms, deep expertise, and rational drug design in Leading Edge, farm ecologies with vines drug development capabilities. We see a strong Foundation to build real value for patients and shareholders alike, and we look forward to providing further progress.

Through our updates.

Moving to fmx 114. We remain on target to enroll the first patient in our phase to a proof-of-concept study in mild to moderate atopic dermatitis later this quarter.

Clinical trial supplies are at our third party distributor, in Australia for subsequent shipment to investigator sites, pending approval of the protocol by the local, Ethics Committee.

Again, we anticipate having top-line results from this study by the end of the year.

Turning to commercial for the second quarter, the Minocycline franchise, exceeded 57,000 prescriptions, this represents an approximate 10 percent increase over the first quarter of this year and is the highest quarterly prescription count since the launch of both. Amzeeq silk. See,

Individually, amzeeq over 47,000 prescriptions and silk see 10,000 prescriptions which both resent Court represent quarterly hives.

Today, roughly 9,000 unique Health Care Providers have prescribed amzeeq.

Similarly, zilxi has over 3300 total unique prescribers since launched in October with a 42 percent penetration rate of our Target Universe.

Additionally, your to date our sales team is executed educational speaker programs for over 1,600, Healthcare practitioners on both amzeeq and silk see.

Market access for amzeeq has remained stable as the brand continues to have coverage for approximately 72 percent of commercially covered lives.

Market access for silks. He has improved to approximately 68% of commercialize. An increase of 7% from last quarter, due to successful pull through efforts by our team with Downstream custom plans.

We do these as positive metrics for the franchise. Despite Our Brands continuing to face pandemic related, headwinds.

You may recall that the sales team began the year with approximately 35 to 40 percent access to Target positions in a live setting. This has progressed to approximately 60 to 65 percent recently, but it's clear that the covid-19 pandemic continues to have an impact on the launch of both products.

On the IP front, we announced on Monday that we have initiated a patent infringement lawsuit against Perrigo, Israel Pharmaceuticals.

We filed this lawsuit in response to Perrigo. Zanda file.

Seeking FDA approval to manufacture and sell a generic version of an seek in the United States, prior to the expiration of our 12 patents listed in the orange book.

We are seeking an order that the effective date of any FDA approval of Perrigo. Sanda be no earlier than the expiration of are listed patents. The latest of which expires on September 8.2037,

We are confident in the strength of our patents and we intend to vigorously defend our intellectual property rights in the United States and globally.

I'll now turn the call over to Tyler to cover the financials. Thanks, Dave and good morning. Everyone. Revenues in the second quarter. Twenty Twenty One til four point three million dollars in consisted of four million dollars of product sales from amzeeq B. And point three million dollars of royalty, revenues are second quarter..2021 Gap. Net loss was Nineteen point nine million dollars or 39 cents per share. When excluding one point, nine million dollars of stock based compensation expense our

Coors 2021 adjusted. Net loss was 18 million dollars or thirty five cents per share for the second quarter 2021 adjusted. Operating expenses were 20 point three million dollars including adjusted sgna expenses of fourteen point, four million dollars and adjusted R&D expenses of six million dollars. We've historically guided to adjusted operating expenses of approximately 20 to 25 million dollars per quarter, which is where we have been Landing over the last three quarters from Q for 2020 through Q 2.

20:21 as we transition, our focus in spend toward developing our pipelines. We anticipate the Q3 adjusted operating expect should be in the low end of that range. While we continue to selectively fund certain aspects of our Commercial Business including our sales force. While we seek potential partner for our Minocycline franchise. This amount also includes 1.5 to 2 million dollars of severance and related benefits associated with our restructuring plans that Dave described earlier buttocks.

Includes any non-cash charges. We expect to substantially complete our transition to an RD focused biopharmaceutical company by the end of this year. Therefore, beginning in the fourth quarter. We expect to further reduce our adjusted operating expenses to a range of 15 to 20 million dollars, including the anticipated $4,000,000 Milestone payment related to the exercise of the license agreement for the oral Betty. Byn 202.

Please sir, current plans to conduct a phase 2B trial for f of X1.14, assuming positive results in the phase to a trial later this year and to progress, both vyn to a 1 and v. Y n, 2o 2 into the clinic in 2022. We anticipate that are adjusted. Operating expenses will be approximately 10 million dollars per quarter next year. Now, turning to the balance sheet, our cash position as of June 30th was a hundred and four million dollars as Dave. Outlines is prepared remarks subsequent to June 30th. We

Prepaid or outstanding debt of 35 million dollars, in addition to a four percent.

Matt theme as a result, our pro forma cash position as of June 30th after giving effect to the full prepayment of the loan facility was approximately 68 million dollars. We believe that that this cash will be sufficient to fund our operations through the second quarter of 2022. Want to point out that this projection does not take into account any potential proceeds from the sale or license of the top Coleman is cycling franchise new business development transactions or additional financing activities, finally, our

Shares outstanding as of June 30th totaled 50.1.5 million shares for additional information regarding our second quarter results. And prior period comparisons. Please, refer to today's earnings release and our form 10-q filed with the SEC. Now. Let me turn the call back over to Dave for closing comments.

I saw Tyler.

But we've covered a lot in this call to summarize. We are refocusing the company from a commercial Enterprise in therapeutic. Dermatology to a biopharmaceutical company with unique and proprietary assets. Our partnership with inferred arm provides us, access to an exciting Betty platform for both topical, and oral treatments or immuno inflammatory diseases of high. Unmet, medical need

We intend to leverage our existing development capabilities, and strong network of Discovery, and preclinical science, Partners to develop products, and Advance, a series of truly Innovative. New medicines throughout the clinic, through our reductions and sgna related, operational, expenses and repayment of debts. We are cleaning up our balance sheets, so we can focus on advancing our pipeline as I outlined earlier.

We're excited about the prospects of these programs as we anticipate multiple early stage clinical Milestones over the next 12 to 24 months.

Making strategic shift was not an easy decision. However, I have complete conviction that this is the right decision and the clearest path to create value for our shareholders. Our team is already busy at work to execute on our plans, and I look forward to updating you on our progress. That concludes our prepared remarks. I will now turn the call over to the operator and open the call for questions. Thank you.

Thank you. If you'd like to register a question, please. Press the one followed by the four. On your telephone. You will hear a three-tone prompt to acknowledge your request. If your question has been answered and you withdraw your registration, please press the one. Followed by the three. Once again to register question. It's one four on your telephone keypad.

And our first question comes from the line of Louise Chen with Cantor Fitzgerald, please proceed.

Hi, good morning, everyone. This is Carvey and Louise, congratulate quarter and the licensing agreement, and thank you for taking my questions. First question is, what are some potential competitive advantages of a Betty or BG, inhibitor versus other immuno inflammatory treatments for rare skin disease, has a secondly as mentioned earlier this class of drug that's been more investigator in oncology. So, what is it?

Income preclinical research. That kind of push. Cody agreements.

And honestly, there are a plethora of where our skin diseases and you have to scroll back up to you during your opening statement. So I just specific ones that you're in super interested in and what is going to be your process in narrowing down which ones to pursue. Thank you.

The challenges with some of these neutrophilic drama towards these and Dave, in the prepared, remarks generalized forces as it all have one common theme and that is pretty catastrophic inflammatory signaling. Where a more

Targeted approach may not necessarily provide the best clinical outcome. There are others who have looked at specific monoclonal antibodies against specific receptors and I've come up with somewhat limited clinical response. The Betty's particularly vyn 2 or 1, which is a pain. Bromodomain Betty inhibitor as the potential turbo mode brought or anti-inflammatory effect in vitro data, that we have generated a

And and freedom have generated a virtually shown great utility across. A number of T helper cell groups that are relevant to these pretty catastrophic damage. Was he's so we're quite excited about the direct, applicability of 2012 to these diseases, moving to 2002. This is a Beady to, or bromodomain to selective inhibitor. So, why is that important? And again, it's a referring back to do.

From marks, BD to appears to be driving the majority of anti-inflammatory effects through the BET protein signaling pathway. So it does make sense to obviously Target up one more selectively. Equally most of the early stage bet Inhibitors that having targeted towards oncology where pan BD Inhibitors and binding to be D1, has been implicated and may be armed or not, or benefit risk profile, which

Obviously lends itself to oncology indications, but maybe not necessarily to broader autoimmune diseases as the ones that David referred to such as rheumatoid arthritis and you see Crohn's and multiple sclerosis. Again. We want to develop a CO2 as a totally delivered, select BD 2 inhibitor of bats were confident of done today. I was shown Exquisite selectivity to be D 2 versus VD 1. We are working and obviously identifying a candidate.

For the development, but that is also progressing very well, as well as the stage.

Anything else Kirby?

Yeah, maybe opening statement talks about different skin diseases that this is applicable. So maybe you can talk about which specific ones, are you more interested in which ones you're most excited for and what's going to be your process in narrowing down? Which one to the importantly beginning.

Sure.

Three diseases as I said were pyoderma gangrenosum generalized, pustular psoriasis, Palma plan to pasteurellosis. We obviously will be conducting. A great deal of nonclinical work to specifically Target or prioritize that order. But what's most what the Hubble in common other than this? Pretty catastrophic neutrophilic response. The immune system is that they are either significantly life-threatening or Stanley light quality limiting. So for

Example, python more gangrenosum the mortality rate for an untreated pyoderma gangrenosum is 100%. So these patients tend to suffer from obviously the very large very embedded ulcers in their skin that ultimately confirmed the septic and if that sepsis becomes systemic clearly that has significant impact on metallic Palma, part of pasteurellosis. If you can imagine large blisters on the path,

Defeat tremendously debilitating. If you can't use your hands or you can't talk clearly that is an idiot that we will also be looking at and generalize partial psoriasis is similarly as almost like a broader cutaneous presentation of that others have looked in this space as well. Very difficult to control as a chronic relapsing condition and also has significant mortality and related to it. So it will be based on a virtual data ex Vivo data animal models. As we start.

To prioritize that sequence. But those are the three that we're kind of honing in on right now. Their car is the data to. I would also share that there's been some work that's been done with with that. He's we know that there's, there's one company that's looking at developing as possible, Betty for psoriasis. We know that a product. I topical bet. Inhibitor could also very well, be applicable for diseases such as a top.

Dermatitis because of its potential anti-inflammatory effect, but these are marketplaces that as you know, there's been a lot of work in it. We're quite familiar with those marketplaces. We have a product or atopic dermatitis is getting ready to go into. If they to a study or combination tofacitinib been going up product fmx 114. So ultimately our mission is to develop products that can treat significant unmet needs and the areas that he and outlines there is no indicated.

Audit and if we can advance their we believe that can be tremendous for patients. And so we're really excited about that in the prospects of this platform.

Great. Awesome. Thank you so much, and I congratulate you. Thank you.

Ken Cacciatore, hey, Dave, obviously tough year and share your disappointment in the. The core asset that you're now going to seek to divest. Can you just talk about the decision process going forward? You are going to continue to spend Behind These the marketing. So just wondering as you're working through the Strategic options that you must feel good to continue to want to spend to.

The franchise as is ahead.

Of another decision sounds like by year-end. So can you give us some context on where we may stand in terms of monetizing these assets and the again the decision to continue to spend before it sounds like under any scenario. You going to pull back spending by two one? Thanks so much.

Much. Yeah, sure Ken. Thanks. So, first of all, we believe that there indeed will be a home for this franchise. We believe there's a lot of value for this man Meadow cycling franchise as I outlined earlier. The issue is ultimately one of time and resources and a partner that has the resources and the bandwidth to to take this franchise to certainly maximize the potential of its. And again, I want to stress this is

Entire franchise to marketed products and Zeke and silks. You pastry ready, asset and a platform with long IP. So this is this is not a single asset Sale Route license. And we think there's, there's certainly value for that. We're getting this process initiated right away. We believe it's prudent to keep some basic support behind this franchise while we go through this process and part. A potential partner may want the infrastructure that goes along with that. So,

So we're not at all abandoning the franchise, stop. You supply, the quite quite the opposite. We're going to keep things moving along. But for a finite period of time in Salesforce will continue to be engaged. We intend this to go into the fourth quarter. I think along sides of that though, as I outline it as Tyler commented, we will and have already significantly. Cut back is supported A&P expenditures and will continue to do this ratably as we move through the balance of dish.

Year with a while. We're going through, obviously this process and then we envisioned. By the time we get to the end of the year. We will materially have completed this transition. And by the time we get to the turn of the New Year, our operating expenditures will be dropped in half as tile outline. We've been running at a top tax rate of it's guided 20 to 25 million per quarter. Over the last few quarters. We've certainly been on the low end.

Of that, that will continue to fall as we move through the next two quarters, and then again, by the time we get to the turn a year, we anticipate that our op ex is fenced will be down to around 10 million quarters. So literally a cut in half so really only around 40 million objects for the entire year for 2022. So hopefully that provides some color. I'll see you at Tyler's. Got anything else to add or no. I think you covered it. Well do. Okay. Thanks again.

The next question comes from the line of David amsellem with Piper Sandler, please proceed.

He thinks so just a few questions here regarding the the assets you required. Can you talk about the extent to which there was competition for them? And I guess the maybe another way of asking it is it is where there are other parties as far as you know, that we're looking into the assets. I just wanted to get a sense to regarding the extent to which you, you

QA.

Find something that really nobody else was looking at. So, so that's number one. And number two regarding your strategic, thinking the Minocycline franchise. You know, I guess my question here is

As we eventually move out of the pandemic and let's also assume that that will happen at some point, but was it just your view that the the challenges with payers in particular? Excuse me. We'll just too great and the resource challenges with two significant even as you moved out of the pandemic, and I apologize.

Okay, no problem. So so, so first of all, regarding the the partnership that we have with infants arm again, I can't stress enough. How do we are with it? We believe it's potentially transformational for the company. This is an outstanding group that we are partnering with as I outlined David. We've been following them for some time. It's a group over in Scotland. Ian's, been has had

You know, contacts have been watching this team and talk with them for some time. And we believe we're very fortunate. We've been looking and I've commented on this for the past year plus that one of our key objectives is to broaden our pipelines. And I've been very clear, we would at everybody should expect that. We would move Beyond five of five, b-2s beyond tetracyclines beyond, Foams Beyond topical.

And moved towards broader indications and nces that can address significant unmet needs for patients. And and we believe the partnership that we have with inferred arm is is huge for that. And is a core for our business going forward. We're fortunate as I outlined. There's been a fair amount of work for bed Inhibitors, especially with some large Pharma companies.

It's a real credit to the team and to the relation that we've structured within for, Derm that we were able to force his partnership with them at this stage. So we're excited. And we also believe we're fortunate thrilled to be working with them. So I think coming back to your second question, David on the decision process and indeed. I think we all hope and believe that at some point in time.

Yeah, this pandemic will be behind us, but it has been 18 months, going on, 20 months. That's that we've been facing these headwinds in these challenges and not unlike other companies. Everybody out there. It's tough. As I said commercializing laundry products and any environments especially for smaller companies of our scale. I've said in the past, you know, there's no Playbook and how to do that in within a pandemic. You know, I'm enormously proud of the job that the team has done.

Navigating over.

This time period but it has been challenging. And as I outlined, we've had to make a variety of adjustments cuts to the operation and the organization to sustain our commercial efforts. Ultimately, as I shared it's an issue of time and money. We have we have we don't we do not have unlimited resources and we look at what's the best way for us to deploy capital and to maximize shareholder value certainly, when thinking through the on son, sir.

Certainties of this current environment, we believe that the franchise in the hands of a partner that doesn't have the constraints that we do, will, obviously maximize the potential for that business and that was what was driving the decision and that move. And then the subsequent proceeds that we anticipate will get from that will certainly be incredibly helpful rot for us as we advance our pipeline that about line earlier. So Glory,

Gaap, multiple clinical Milestones over a 12 to 24 month, period. The first of which would be coming up we anticipate before the end of the year for fmx..114 R phase 2A studies. And then, as we move towards the balance of 22, and that's when we'll start looking at potentially additional milestones for fmx, 114 and it will begin to start seeing the Milestones, the clinical milestones for our Betty products by in 2001 and 2002. So,

That's the decision behind we believe it's cleared the right decision. We're excited moving forth. But again, it was a difficult decision. It was not an easy decision, but we believe it's the right decision and we're moving forward.

Understood. And if I may sneak in a follow-up and thankfully I had my voice back. We're so in terms of 114 assuming you do see favorable data. How should we think about the trajectory of R&D spending? You know, you said, you're going to be cutting the burn but at some point, you know, Rd is going to ramp up and certainly aad.

Programs can be quite large and expensive. So, as we move through 2022, is it safe to say that, you know, we're going to eat real uptick in R&D. And that eventually the burn was sort of re-accelerate. Obviously, is a very different kind of burned, but just help us think through that.

Lat, yeah, this is Tyler. I'll take that question. So, in terms of next year from an object's perspective, I mentioned the 10 million dollars per quarter, you know, that, that assumes success in the stage 2A, and bringing fmx 114 into the to be trial. And so that as we look forward or in potentially success beyond the space to be trial, you know, we could see expenses increase.

Beyond 20/20 too, but we'll look.

As we get the final trial design, and things of that nature, but just to reiterate for the phase to be that we anticipate that's within the 10 million dollars per quarter that we that we've estimated. Yeah. I think that at further context of that David is that includes not just the, a potential phase 2B, but obviously the work that we would be doing for both Vine, 201 and 202 and taking those into the clinic. So, we believe, certainly, when we move into next year, we will have obviously a significant

We reduced the op X and the majority of that will be for the RDI percent were be conducting across three programs. So when and when you couple that or compare that versus save one phase 3 program for STD 105 that we've outlined before, that would cost 35 million plus for two pivotal phase, three studies in the long-term extension. We will be able to

Assuming success in the, to a study for at the next 114 will be able to. Our plan is to have, obviously a to be study a dose ranging study. And a couple of early stage Phase 1, Phase 2 studies for both Vine, 201 and 202, and that's all within the 10 million per quarter that Tyler. Outlines. So, you know, obviously As you move out Beyond two years, then things can change, but

As we say, I was you those as, as high class, you know, items for us to deal with and we're excited about the Prospect and assuming we demonstrate proof of concept and efficacy for these programs. I think things will fall into place after that, weird. I can't, I can't, I can't stress enough. How excited about this platform and the prospects of it going forward. So hopefully that gives you some contacts over the next 18 months of spent.

Yeah, that's helpful. Thanks Dave. You got it, feel better.

The next question comes line of Patrick. Those Val with lifesci capital, please proceed.

Hi, thanks for taking the questions. So I think I'm understanding the decision-making process behind the divestiture of the existing commercial assets, but kind of going forward. How will you plan to prioritize the pipeline to avoid such put balls in the future? Obviously, there's been a bit of a strategic reprioritization in terms of the targeted disease areas, but perhaps speaking more specifically, to 114, if you could describe to us why the commercial environment is different and Mild moderate, a topic Derm.

Bruce has acne rosacea and, you know, whether there's any reason to believe that similar headwinds might be face for that program and then, you know, maybe providing context around the BET Inhibitors and indications are going after there would be helpful as well.

Yeah, sure, obviously, with the inhibitor platform and I want to stress that it's a platform for us to develop and work in partnership with in, for Derm and multiple programs. Both potential shots on goal over the course of time. But obviously, we're going to be disciplined and decide where we take these these assets first, but these are new chemical entities. The topical program that Ian outline our intent be to take it into a rare skin.

When, and for the oral program, that would be your larger broader II type of indications from to arthritis, ulcerative colitis, Crohn's, Etc. And our view is that assuming we're successful. We will have highly differentiated products and markets that have significant unmet needs and will create the right profile for repairs as we as we advance these programs. I think similarly to what you mentioned around once.

14, there obviously is significant unmet needs bill for atopic dermatitis. We focus specifically on the mild to moderate area with 114. Most, a lot of the work that's being done is in your moderate-to-severe area, and we believe from a commercial perspective that it's more prudent to address, the mild to moderate Arena, where there's not a lot of optionality or the other than steroids or products that are

Relatively have minimal Effectiveness. So we're encouraged certainly by our preclinical animal data that we shared earlier. In this year. We're excited to get this program off. The ground is Phase 2A. We are first in human study and assuming that the results of their, if they're anywhere in the range of what we showed in our preclinical data, link that will, that could be highly beneficial obviously for patients and providers, and for the payer Arena, so,

That's a review on it and hopefully that provides you some color and some context.

South Pole, thanks. And you know, I guess just one more perhaps if you could just provide details around the paddock as form and a filing, you know, your tickets to the likelihood of of marketing approval in time frame and any impact, as it relates to the successful licensing or style of the Minocycline portfolio.

Comment on the specifics of the litigation but we're well prepared to deal with this litigation was you know, we've filed an infringement action earlier. This week. We have 12 patents listed in the orange book and have had experience dealing with Perrigo in the past, with regard to the finacea, some litigation that we worked with with Leo Pharma with respect to the sale and the paragraph for litigation. I mean, I don't think that

a partner or potential partner would be surprised if there is a paragraph or litigation already outstanding, there's going to be a stay until December 2023. And you know, we will deal with it as matters progress. And obviously we have strong confidence in the strength of our patent and we're going to vigorously defend them.

Great. Thank you.

The next question comes from the line of or live net with HC. Wainwright, please proceed.

Hey, don't mean to beat a dead horse. But I do want to follow up a little bit on David's questions regarding the, you know, decision to exit the commercial business. Can you just talk about, you know, your view of that landscape evolution in general? You know, if the pandemic was over, do you think we're still in a new normal? And that is just not really viable, you know, with realistic resources for a small company, you know, one molecule to launch into the space now.

Kevin parents and it really just a question of scale and you know, bread portfolio, you know, or is you know, in molecule specific. Do you think topicals or in the acne? Space particular are uniquely challenging and then I do have some other pipeline question.

Yeah, thanks Lauren. So I'm not one to speculate but the reality is that we've been in a pandemic for 18 months and we've had to deal with that and I'll just reiterate again. It's challenging the launch product or any company, especially a couple of our scale. We demonstrated out of the gates, the potential of and seek going all the way back to the first few months of

20/20. But then the world changed covid changed. And we've been wrestling with this ever since, as you recall, we had a period of four months or so. We're basically shut down and try and pivoted to a digital process. That's tough for small companies. Larger companies, certainly have more resources. We certainly again believe in the potential of the franchise, but when we balance the current

environment in commercialization with

Covid. And as I'm and challenged with the payer Arena, balance that with the opportunity, we have to advance our pipeline.

Ideally you'd like to be able to do both but for a company our scale we don't have that ability and we believe again that the opportunity to maximize shareholder value is to transition and focus. Our efforts on advancing are very unique and proprietary pipeline. We're obviously excited about that. Coming back again to just the overall environment. These are really good products. This is a really good franchise and patients have been spoken very well of amzeeq.

Consult the as have providers. We've got a franchise. We've got a phase three, ready, asset with FCD 105. The results in the face. Phase two study were potentially best in class. But ultimately, we can't predict the future, you know, we've been dealing with this for over a year and a half or still, we all know right now. What's going on in the environment that the additional issues with covid, variant? I have no idea how long it's going to go, but

we believe that it was clearly The Prudent responsible decision to make this change now because if it doesn't change or not ratably change, we could be in a different situation, you know, as we move into next year. And so that's the rationale behind it. We believe again, a partner that's got the appropriate resources and, and structure to maximize potential for this. And we look forward to having those discussions.

Yeah, I don't doubt the, you know, I think it's pretty obvious from an option ality perspective. But you know, there's a lot it's a lot more exciting to take here, ladder strategy with the pipeline, which another company's transition from commercial to R&D and it's worked out pretty well to that effect. And that any platform, you know, you mentioned, there's an exciting science there and it's all in vitro improve clinical or all in vitro that you're you know basing your decision on right now. Is there specific topical, I guess proof.

Concept in your mind with regards, this platform. I assume, you know, the oral targeting of these inflammatory Pathways is not necessarily the same as the, you know, topical, you have, you know, a Unity unique technology in mind to marry with this or is this, just a spread it and forget it so to speak. And it should be. Hopefully, maybe what you're seeing in that test in the test tube. I like that or spread in for gas. Yes, there is. So, as I said,

My comments a little bit earlier. One of Louise's questions. The Vivo n21 is ippon. Bromodomain pet inhibitor. I also mentioned the fact that promote in one may potentially impact on the overall benefit risk of the product. So we really driving that three ways and this is what makes the wind to one quite unique. What is to go? Topical obviously inherently. That's the potential to reduce overall. Systemic exposure.

to the gradients to we've actually,

Program than is specific metabolic liability. So that any driver is systemically exposes rapidly and activated and cleared by the liver. So that obviously keeps a systemic exposure low and the other one is today's remarks. We're targeting Just a Filly, December? 2006 for the res, no indicated indication that these are potentially life-threatening disorders. We see great utility in a topical application format. So after three elements for

We see the uniqueness of you and to one is a topical. As I said, we are aware of one, other room with domains and then terminal. Inhibitor has been developed for topical psoriasis, but you believe and of course, ours would also be equally applicable to psoriasis is a more General dammit illogical indications. We see the biggest need is in is pretty catastrophic neutrophilic Dermatology. Dammit Aziz.

Okay. Oh, and it's just I met on the other paragraph for situation which you know, I understand you can't come at them. Can you just remind us? Is there a draft guidance on that front for a topical? Minocycline should should we assume that any and a filer has to do actual clinical trials and if they filed Nanda should be assumed that they already did.

There is no product specific guidance. Yes. It's out there for topical Minocycline. If you look at the reference other paragraph product specific, guidance has for topical, complex product, like finacea some, they had to do a clinical trial, right? So I guess you can file it and hope it works out. But if that guy comes out that you have to do a trial that ended, you know, pretty much pre square one, right?

I can't predict but, you know, I think you're on the right track. Appreciate it. Thanks. Thanks, Lauren.

The next question comes from line of Balaji Prasad with Barclays, please proceed.

I'd morning and thanks to questions. David. Hi while I can understand the commercial challenges, currently wanted to understand the rationale Behind These sales further, especially with the path for again, state. I'm trying to get your thoughts on how can such a commercial agreement evolve with the risk of an IP and from your own perspective. Would it have been better for you to mitigate this IP risk and then Explorer Sail on the sea?

Extensional that question also want to understand the value of the tech platform, which also planning to sell with a pair of war against the lead-acid generator from this platform. Lastly wouldn't retaining the tech platform as you continue to build a newer, Derm pipeline, made more sense, or do you see nose images all with this platform. Thanks.

Yeah, thanks. I'll take the last two and then I'll turn it to you for your first one. In terms of the platform is very clear. The platform is our molecule stabilizing technology specific for Minocycline. It is not specific to the rest of our portfolio of products. As we talked about over the course of the last. Several years, developing a topical tetracycline top of them in a cycling is

unique, we have upwards of

Nearly a dozen different phone platforms within our library. The only one that works. Specifically this MST, test platform for a minute cycling franchise. It is. As we've talked about a pass. It's our oil-based or lipid-based foam technology, which is very specific. If you took say these tetracyclines this case Minocycline.

And you try to use any one of our other platforms that we have. It would not work with the great. And so I just want to again be clear and subsequently taking other compounds and dropping it into. That platform would be very difficult. So when I say that it's the franchise, including the platform, its specific just to the Minocycline product line and we have MZ. So PC and have cd 105 which all have been cycling is so hopefully that helps yeah.

Yeah, and with regard to the the earlier questions and I think I'm understanding what you're asking. I mean, we're obviously open to all different forms of deal structures, whether it's a license or whether it's a sale and with regard to sale or license, while there's a paragraph or litigation outstanding. I mean, we know a number of deals that have occurred, where there is a paragraph or litigation outstanding, obviously the participant,

Artis will need to factor that in with regard to what the deal terms might look like. They're certainly precedent for for deals that have occurred with the paragraph four outstanding. I don't actually think that that's going to be an issue. As I mentioned before, with regard to the strength of our litigation. Miss, folks get into due, diligence on our patents. I think the still feel the same. Furthermore. I think that, you know, as you know, litigation has Waxman litigation can go on.

For a long long period of time, you know to wait until the resolution is such a litigation would not be prudent for us as we you know want to be able to progress our strategic strategy as soon as we can. So, you know again, I don't think that it's going to be an issue and we've certainly seen other deals where there is key for litigation outstanding connection with the life.

Orr sale.

Thank you. Sure.

And there appear to be no further questions. I'll turn the call back over for any closing remarks.

Guys, I'd operator again. We cover a lot here today. It's a transformational time period for our company. We've got a lot of work to do. We look forward to providing you an update on our progress in the coming months and next quarter. So, thank you again for taking time out of your out of your days, and we look forward to speaking with you soon. Thanks, and have a great rest of the week in a great weekend.

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