Ladies and gentlemen, good morning, and welcome to the Acurx Pharmaceuticals Third Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Rob Shawah, Chief Financial Officer. Please go ahead.

Thank you, Ryan. Good morning, and welcome to our call. This morning, we issued a press release providing financial results and company highlights for the third quarter of 2023, which is available on our website at acurxpharma.com. Joining me today is Dave Luci, President and CEO of Acurx, who will give a corporate update and outlook; and Bob DeLuccia, our Executive Chairman, who will provide his perspective as the manager of our development programs, including the Phase II clinical trial. After Dave's comments, I'll provide some highlights of the financials for the quarter ended September 30, 2023, and then turn the call back over to Dave for his closing remarks. As a reminder, during today's call, we'll be making certain forward-looking statements. These forward-looking statements are based on current information assumptions, estimates and projections about future events that are subject to change and involve a number of risks and uncertainties that may cause actual results to differ materially from those contained in forward-looking statements. Investors should consider these risks and other information described in our filings made with the Securities and Exchange Commission, including our quarterly report on Form 10-Q, which we filed yesterday, Monday, November 13, 2023. You are cautioned not to place undue reliance on these forward-looking statements and Acurx disclaims any obligation to update such statements at any time in the future. This conference call contains time-sensitive information that's accurate only as of the date of this live broadcast today, November 14, 2023. Acurx undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date and time of this conference call. I'll now turn the call over to Dave Luci. Dave?

Thanks, Rob. Good morning, everyone and thanks for joining us to review our financial results for the third quarter and also to cover some exciting recent updates. Then we'd be pleased to take any questions. On October 2, 2023, we ended enrollment in our Phase IIb clinical trial of ibezapolstat, our lead antibiotic candidate for the treatment of patients with C. difficile infection or CDI. On November 2, 2023, we reported top line data from the Phase II clinical trial, including the ibezapolstat clinical cure rate at end of treatment or EOT of 96%, 25 out of 26 patients, including 100% in Phase IIa 10 for 10 and 94% in Phase IIb 15 for 16, as well as the cure rate for oral vancomycin at EOT of a 100% 14 of 14. No safety concerns were reported in either arm of the Phase IIb clinical trial or in the Phase IIb open-label trial. Based on the Phase II data, in consultation with our scientific advisors, we determined that clear evidence of clinical cure has been established with ibezapolstat, and it is clinically comparable to vancomycin. Ibezapolstat will now move forward to Phase III clinical trials. Further data will be provided when available on all of the secondary and exploratory endpoints in the Phase IIb trial, including sustained clinical cure, extended clinical cure up to 94 days and the comparative impact on the microbiome. We anticipate that these secondary and exploratory endpoints will provide clear separation between these two therapeutic options and all of these endpoints will be disclosed when available over the next 90 days. The Phase IIb trial was originally designed to be a non-inferiority trial and later amended to include an interim efficacy analysis with review by an independent data monitoring committee or IDMC. The decision to end…

Thanks, Dave. Our financial results for the third quarter ended September 30, 2023 were included in our press release issued earlier this morning. The company ended the third quarter with cash totaling $7.1 million compared to $9.1 million, as of December 31, 2022. I'll also note that subsequent to the quarter to the September 30, we did receive $2.2 million in cash from warrant conversions in October of 2023. Research and development expenses for the three months ended September 30, 2023 were $1.3 million compared to $1.6 million for the three months ended September 30, 2022. The decrease was due to the timing of Phase IIb trial related costs. For the nine months ended September 30, 2023, research and development expenses were $4.1 million versus $3.3 million for the nine months ended September 30, 2022. The increase is due primarily to Phase IIb trial related costs and an increase in consulting costs. General and administrative expenses for the three months ended September 30, 2023 were $1.8 million compared to $2 million for the three months ended September 30, 2022. The decrease was due primarily to a $0.2 million decrease in professional fees. For the nine months ended September 30, 2023, general and administrative expenses were $5.4 million versus $5.5 million for the nine months ended September 30, 2022. The amounts reflect a decrease in professional fees of $0.3 million, offset by an increase of $0.2 million in share-based compensation. The company reported a net loss of $3.1 million or $0.24 per diluted share for the three months ended September 30, 2023, compared to a net loss of $3.5 million or $0.32 per diluted share for the three months ended September 30, 2022, and a net loss of $9.5 million or $0.77 per share for the nine months ended September 30, 2023, compared to a net loss of $8.8 million or $0.84 per diluted share for the nine months ended September 30, 2022, all for the reasons previously mentioned. The company had 13,005,128 shares outstanding as of September 30, 2023. With that, I'll turn the call back over to Dave. Dave?

Thanks, Rob and to all of you joining us today. We outlined advances in several areas that we believe will spur continued momentum and growth to build on our strong fundamentals. We look forward to sustaining this momentum even during these challenging times and sharing future updates in the coming months. Now in advance of our customary Q&A, I'll ask my Co-Founder and Executive Chairman, Bob DeLuccia to provide his perspective given Bob manages our research and development programs, including the recently completed Phase II clinical trial. Bob?

Thanks, Dave and thanks for updating our stakeholders on our recent progress and thanks to all for your continuing support to reach this important clinical development milestone, which takes ibezapolstat one step closer to commercialization for CDI patients in need of a promising new antibiotic with a novel bactericidal mechanism of action. And this is especially important in this age of emerging antimicrobial resistance to the currently used antibiotics. So from my perspective, we now have robust scientific evidence to present a strong data package to FDA for an end of Phase II meeting. The outcome of this meeting will confirm our readiness to advance the Phase III clinical trials with specifics on trial design and patient enrollment targets. At the same time, we'll submit our plans to the European Medicines Agency for conducting Phase III clinical trials outside the United States and we expect to have their guidance around midyear next year. Bottom line is, I think we have a new antibiotic, which is first in a new class and fast tracked by the FDA. It's fully patented. It has regulatory exclusivity 10 years post market introduction in the U.S. as well. It works extremely well. It's clinically comparable to the standard of care after 10 days old treatment in a serious and potentially life-threatening infection that demands antibiotic treatment. From what we've seen so far, we expect to further demonstrate favorable effects on the microbiome and less recurrence of infection. It's also very well-tolerated and efficient to manufacture, so we can be cost-competitive in the marketplace. Now since we'll be the only C. diff antibiotic beginning Phase III next year, assuming success, we'll be next up at that for approval and market introduction in the U.S. and countries outside the United States. In my over 50 years' experience in antibiotic development and marketing, I think I've got a good rearview mirror that gives me a clear vision and a pathway forward to deliver a winner here, not only for patients with C. diff infection, but in general, for better public health and of course, for our shareholders. In my opinion, simply put, ibezapolstat kills the bug and preserves the microbiome. And back to you, Dave.

Thank you, Bob. I'll now open the call for questions. Operator?

Thank you. Ladies and gentlemen, we will now be conducting a question-and-answer session. [Operator Instructions] Our first question is from Jason McCarthy with Maxim Group. Please go ahead.

Hey, guys. How is it going? This is Michael Okunewitch on the line for Jason. And first off, I'd like to congratulate you on the progress.

Thank you, Michael.

So I guess to start off, I'd like to for you to give us a bit more of an idea of what you're thinking ahead of the end of Phase II meeting in terms of what a Phase III program could look like in terms of size and scope, potential costs? And then also if you would still be targeting non-inferiority as a primary endpoint. Can you just give me your thoughts on that?

Sure. And yes, we would still be targeting non-inferiority to the control arm, which would be oral vancomycin, much like Summit did most recently in its effort to get an antibiotic approved to treat C. diff. What we're looking at is we're looking at two clinical trials in Phase III, two registration trials. And we're considering, and all of this is preliminary, as you know, but we're considering an imbalanced approach pursuant to which we would have fewer patients in the first trial and more patients in the second trial, so that we could potentially raise money to fund the smaller first trial. And with continued good data in hand, non-inferiority in this case for a Phase III registration trial, we would hope to see an uptick in our share price and use that uptick to raise money for the second trial. Keeping in mind that this sequential approach is very possible for us because we have 10 years of market exclusivity with our new molecular entity status and QIDP. So I think that's what we would do. I think the first trial I think we would ballpark figures, we would try to have a 2:1 randomization potentially and preliminarily. If that gets through our science team and the FDA, it might look something like 133 patients on ibezapolstat and 66 on oral vancomycin. So it would be a much more discrete trial that I think a lot of people are thinking. So to pay for it won't, for a small company won't be that challenging.

All right. Thank you for that. And then one more for me and I'll hop in the queue. Just as we're getting up to those secondary analysis, could you talk a little bit about what you're looking for specifically in terms of clinically relevant separation from Banco? What kind of threshold do we need to reach in those secondary end points?

So we think that the microbiome advantage is the key advantage because that's the thing that most antibiotics don't do. So if we can address the acute infection, while at the same time, fully restoring a healthy microbiome to baseline, that's something which I don't know of any other antibiotic that's able to do that. We're still studying the mechanism of action to see how that's done. But I think that provides clear separation by itself. We're also the only folks that have gone out formally 94 days for antibiotics and C. diff at least, to see that there are no reinfections that far out. So I'm particularly excited about that 94-day out data to see in a subset of patients how many patients of ours are reinfections 94 days out compared to vancomycin. So those are two real exciting pieces. And what we're going to do since all of the secondary and exploratory endpoints are so material from a corporate level perspective, and we don't want to be holding material non-public information for any sort of period of time for the SEC purpose. So we'll be getting the data out as it comes in, the sustained clinical cure, the extended clinical cure and of course the microbiome comparison. We won't wait for it to be all together, and we'll get it out as we receive it.

All right. Thank you very much.

Thank you, Michael.

Thank you. Our next question is from Ed Arce with H.C. Wainwright. Please go ahead.

Hi. Good morning, everyone. This is Thomas Yip asking the [indiscernible] questions for Ed. Thank you for taking the questions. So perhaps first question, I believe you touched on it a little bit. When can we expect to see more Phase II data? Will this be in a purification -- or will this be around major medical companies?

I'm sorry, when can you expect to see the secondary endpoint information?

Yes. That's right. This additional Phase II data additional analysis.

I see. Okay. So we'll have a first press -- in terms -- I'll start out with the press release disclosure and then I'll turn it over to Bob DeLuccia for the scientific conference disclosure. I think some of that is still a bit up in the air. But on the press releases, we'll very likely come out with the first press release on sustained clinical cure in December. In either December or January, we'll have the 94-day out data, the extended clinical cure data. And in January or February, we'll have the data on the microbiome. Then, of course, in March, we'll have the meeting with the FDA, and we'll have a press release around that too after it's completed. But Bob, did you want to mention the scientific presentations with the Phase IIb data?

Yeah. I think with some of the data we targeted in early next year as it becomes available, as Dave said. But concurrently, as we get the final study report, we'll be preparing the data for publication as well.

Great. Thank you. We definitely look forward to that. Perhaps just one more question from us. This one is financial. You mentioned a little earlier Phase III is expected to be conducted in a sequential manner. Can you provide some preliminary thoughts, estimates on estimated costs for this first Phase III study? And what are some options to move forward this initial Phase III study?

Yeah. I mean we have -- we're going to unveil our detailed plan in coming weeks. We think the first of the two trials, and again, this depends on the data and as you know, it is preliminary. But the first of the two trials will probably range between $20 million and $25 million. So right now, as we sit here with between $9 million and $9.5 million and we have about another $15 million in warrant exercises, which after more successful data is announced, we expect to see some of that coming in, in terms of cash for the warrant shares. But beyond that, we don't have a very heavy lift and we have a detailed plan. And what I can tell you is it's going to be as non-dilutive as humanly possible.

Understood. Thank you again for taking our questions. Looking forward to your updates in the next coming months.

Very good. Well, thank you, Tom. Assume that and thanks to Ed as well.

Thank you. Our next question is from the line of James Molloy with Alliance Global Partners. Please go ahead.

Hi. Good morning. Thank you very much taking my questions. Could you walk us through a little bit, maybe a little competitive analysis where Summit their failure in '21, but Dave said back in 11 (ph) obviously with the approval. Can you walk through a little bit to sort of the dosing, the reinfection rate what Summit did wrong with what Merck and Cubist did right on deficit and how that ties into ibezapolstat and what you guys are hoping to do here in your Phase III?

Sure. The Merck example is the most clear example because they -- Merck's predecessor Optimer went to Phase III with 15 out of 16 cures in an open-label trial. We have 15 of 16 in IIb and another 10 of 10 in IIa. So we're going at 25 of 26. So as Bob mentioned, it's a robust package and is supplemented by our manufacturing, preclinical and other data. So we're delighted with that and we're following a successful pathway with the fidaxomicin pathway. What others have done wrong, so Summit Therapeutics, you mentioned, they conducted a superiority trial, as I understand it, and it wasn't involved. But from what I gather from the public disclosure, they enrolled quite well through COVID at around 169 trial sites internationally. And we like that model for our Phase III, which we expect to be international as well. And you can see their sites on clinicaltrial.gov. But they had a superiority trial. And while they are conducting that trial, Jim, they actually try -- they changed their primary endpoint and unblinded the data and took a look. And only after that did they go to the FDA to try to get the FDA to kind of ratify what they did, and the FDA wasn't comfortable with that. So I don't know exactly how that series of decisions kind of happened. We didn't do that. We contacted the FDA prior to ending the Phase IIb trial to make sure that everything was copacetic and they were very good at getting back to us quickly. And we also reached out and contacted our independent data monitoring committee and our Scientific Advisory Board to make sure that we are in unanimous agreement that this was the right decision. And certainly, we think it was. So that's kind of like an alternative to how Summit kind of ran their Phase III. So the thing about Summit's Phase III that we like is the pace of their enrollment. I think they got about 750 patients internationally in about two years' time. Our first study will be, I think, somewhere in the neighborhood of 200-ish.

Understood. And also, one of the -- you talked about the healthy microbiome with the ibezapolstat, I know -- again, not to pile on some of what, they are most recent relevant company to look at. They were talking about the microbiome and their data as well and obviously didn't help them very much. How do you quantify sort of a healthy microbiome? And how much do you think that plays into the FDA's decision vis-a-vis just really being noninferior to Banco?

I think it's a burgeoning fast-growing kind of business sector, the microbiome. And the reason why it's so important is because when you have an imbalanced microbiome, just generally outside of C. diff, it leads to disease, whether it's cancer or C. diff or diabetes, all kinds of things are triggered as we find more and more by an imbalanced microbiome. Now in terms of C. diff, the primary cause of reinfections is an imbalanced microbiome, right? And the C. diff reinfection market is best estimate $4.7 billion a year in the U.S. So if you can restore a healthy microbiome, you're basically able to make a very nice dent in the public health cost in the recurrent C. Diff market. So we think that's going to play an important role. And it's going to distinguish us from a broad spectrum antibiotic like oral vanc, which has -- it just decimates the microbiome because it's a broad spectrum. I think oral vanc was approved in 1986 to treat C. diff because there was so little out there that was useful to treat C. diff. It wasn't that it was the best tool because it's broad spectrum, not narrow spectrum, but there was just such a need that it got the approval and its first approval was in 1958. I hope that answers your question.

It does indeed. And just a couple of questions, if I could, please. Any updates on the PASTEUR Act?

We haven't had any updates on the PASTEUR Act specifically. We understand there's a number of different legislative options out there that are being considered. But the more I watch Washington, the more I realize that I have no idea what's going on. I mean, it looks like we're coming up to another government shutdown. And I'm sure nobody is thinking ahead of the holidays. They're trying to keep the government open right now.

Okay. Maybe just a last question for Robert. Keeping a close eye on the accrued expenses here in the third quarter. Can you walk us through what the 82% of the [indiscernible] vendor are on that, please?

Rob, do you want to?

Yes, that's our clinical research organization. Yes.

Our CRO, yes.

Great. Thanks for taking the questions.

Thank you, Jim.

Thank you. Our next question is from the line of John Stinton (ph) an Investor. Please go ahead.

Thank you for taking my questions.

Good morning, John.

Can you hear me now?

Yes. I can hear you.

Right. So with regard to the 94-day study, is it possible that, that study when fully digested will prove clinical superiority rather than non-inferiority?

There will be numbers that people can interpret, but it won't be statistically driven.

Correct. You're right, Dave.

Okay. Then follow-up is the original Phase IIa and b studies, you said were to prove non-inferiority, was it your expectation at the time that it would indeed prove clinically superior? And was that a disappointment that it did not or was that just not something you were measuring at all?

Well, originally, that was the plan, to measure for statistical noninferiority, and if proven, to test for superiority. But just like with the independent data monitoring committee mechanism, those mechanisms kind of got put to bed when we decided to end the Phase IIb trial early because there are so few patients evaluable in the IIb. There was no mathematical mechanism to measure for non-inferiority or superiority. So in Phase II, unlike registration in Phase III trials, you need to establish clinical comparability to move on to Phase III. So we decided that since we are looking at the blinded data and it looks so positive, you could see how many failures there were, or in our case, there were not, that it was certain to us that we would be able to establish clinical comparability and move on to Phase III. So we didn't want to -- for a number of reasons, we didn't want to waste the time, the money and not have our drug at market as soon as possible. We figured we have a win on the table here, let's take it off the table and move on.

Okay. Thank you. One last question is since October 2, we've had some very wild swings in the price of this Acurx with the company with some days as many as and exceeding 8 million -- almost 10 million shares being traded in a single day, which is pretty unusual. Do you have any comments on that?

No. I mean, we came out with data, right? So we're going to be coming out with even more data. Three to five solid press releases in the next kind of period of time ending at the end of the first quarter. So we expect to have a lot more high-volume days between now and the end of the first quarter. I will note that as part of the corporate maturation process, this is what happens. At the end of 2022, we were trading about 21,000 shares a day, if you recall, average daily trading volume. So now as you look at it in the rearview mirror, as Bob says, we’re now entering kind of the mid-life of microcap pharmaceutical company. And as we become Phase III ready in every sense, it’s – we expect the trend to continue. What I like about it and what I will say as well, I like the notion that it seems to me, and this will be coming out more and more through public filings of our ownership. It seems to me that more and more of our shares are entering institutional hands, which is another thing that’s very healthy for the company.

All right. Thank you.

Thank you, John.

Thank you. Our next question is from the line of Ryan Mulholland (ph) with 50-50 LLC (ph). Please go ahead.

Hi, David. Thank you very much for taking the time. Just a couple of questions. One regarding the Phase IIb trial and the randomization. Was that a block randomization that was used? And are we to assume that the two incomplete participants were then from the vancomycin arm? And then second question -- you can go for it.

Yeah. I was just going to say, I don't know what a block randomization is, and I wouldn't assume -- I don't know the two protocol violators, I don't know which arm they were in. What I can tell you is that the randomization in the IIb was done at the local level as opposed to a centralized randomization. So I think that means it's not a block randomization. But I'm not entirely sure where the two protocol vials have come out.

Okay. Thank you. Do you know if that information will be forthcoming?

I mean, I don't expect to know. I haven't asked because they're protocol violators. So there's nothing that I can assume if I had that information. So I don't even think I asked, so the numbers are not evaluated.

And then lastly, over the past year you've had several discussions, several interviews where you have discussed potential M&A participation and your kind of interest in not taking maybe ibezapolstat over to Phase III yourself, but finding a partner. Is that still something that's on your radar? And are there interesting parties who have signed NDAs to investigate that interest on their own?

Yes. So there's a lot to bite off there. But yes, we do have NDAs signed in some cases, with interested parties. They being confidential, I can't tell you the names. And yes, M&A is definitely on our calendar for 2024. We think sharing risk with a big pharma partner for Phase III in the commercial period is a prudent idea. Now it takes two parties to create a deal. I'm not certain whether or not a deal will come to fruition. And we won't know what our value is until we unveil and find out what the secondary and exploratory endpoints are from the recently completed trial. So we kind of have to have that information in order to formally launch that process. But in the first quarter of the year, I'm sure we'll formally start the process with an asterisk that if we were to get a term sheet in the meantime, then we would be forced -- if they were within the ballpark that the Board of Directors find generally interesting, then they may form a special committee and have us move forward earlier than we expected. But that's about it. So for now, I would just refer you to the most recent deals in the C. diff space that have been consummated. And you can kind of get an idea of what evaluations are like. So one deal from November 2020 was when Astellas sold European rights to fidaxomicin, to Tillotts Pharma AG in Europe. And another deal was the Destiny Pharma deal with Sebela Pharmaceuticals, which look big, $540 million, but that was only $1 million upfront and the $540 million of all of that money isn’t payable until the very end of the marketing period, which, I don’t know, might be 15 or 20 years out. So those are the comparables that we see in the space. And we’ll look at our data. And hopefully our data shows a clear separation and we’re able to get something done in terms of M&A in 2024. And we’ll be working on a parallel track with Phase III preparation, and we’ll see how far we get with each.

Thank you and your team. I appreciate all your efforts and it’s a pretty great product you put out there.

Thank you, Ryan.

Thank you. As there are no further questions, I would now hand the conference over to Dave Luci for his closing comments.

Thank you very much, Ryan. We're pleased for all of you coming to the conference today and expressing your thoughts and questions and we look forward to updating you soon. Let's sit tight and buckle up and 2024 is going to be a great year, we expect. Thank you.

Thank you. The conference of Acurx Pharmaceuticals has now concluded. Thank you for your participation. You may now disconnect your lines.