Altimmune, Inc. (ALT) Q2 2020 Earnings Report, Transcript and Summary

Greetings and welcome to the Altimmune Inc. Second Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Ms. Monique Kosse, Investor Relations for Altimmune. You may begin.

Thank you, Melissa, and thank you everyone for participating in today's Q2 2020 earnings conference call. Leading the call today will be Dr. Vipin Garg, Chief Executive Officer of Altimmune. Also participating on the call today is Will Brown, Chief Financial Officer; Scot Roberts, Chief Scientific Officer; and Scott Harris, Chief Medical Officer. After the prepared remarks, we will open up the call for a question-and-answer session. A press release with the Q2 2020 financial results was issued last night and can be found on the Investors page of the company's website. Before we begin, I would like to remind everyone that remarks about future expectations, plans and prospects constitute forward-looking statements for the purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Altimmune cautions that these forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those indicated, including those related to COVID-19 and its impact on our business operations, clinical trials and results of operations. For a discussion of some of the risks and factors that could affect the company's future results, please see the risk factors and other cautionary statements contained in the company's filings with the Securities and Exchange Commission. I would also direct you to read the forward-looking statement disclaimer in our earnings release issued last night and now available on our website. Any statements made on this conference call speak only as of today's date, Wednesday, August 12, 2020 and the company does not undertake any obligation to update any of these forward-looking statements to reflect events or circumstances that occur after or on today's date. As a reminder this conference call is being recorded and will be available for audio rebroadcast on Altimmune's website on www.altimmune.com. With that I will now turn the call over to Vipin Garg, Chief Executive Officer of Altimmune. Vipin, please go ahead.

Thank you, Monique. Good morning, everyone, and thank you for joining us as we discuss our Q2 2020 financial results and corporate update. Joining me on the call today is Will Brown, our Chief Financial Officer, who will review our Q2 financial results; as well as Scot Roberts, our Chief Scientific Officer; and Scott Harris, our Chief Medical Officer. After our discussion, we will open the call for Q&A. The first half of 2020 has been transformational for Altimmune and I'm very pleased with our progress to-date. We have made significant strides towards developing two product candidates to address the COVID-19 pandemic, a highly differentiated intranasal vaccine and a novel immunomodulatory therapeutic candidate. We secured additional government funding and capitalized the company sufficiently to fully lean into the challenges that lie ahead of us. Outside of COVID-19, we continue to push forward aggressively on our other product candidates. We have recently completed enrollment in our NasoShield anthrax vaccine trial and we are on track to begin an ALT-801 first-in-human NASH trial in Q4. We also had a successful IND submission for our chronic Hepatitis B therapeutic HepTcell that is slated for a Phase 2 trial to begin later this year. With these advancements, we are well poised to deliver shareholder value throughout 2020 and beyond. With that backdrop, I would like to spend a few minutes on our areas of focus for the remainder of this year. First, we are focused on expeditiously moving AdCOVID towards an IND and a Phase 1 clinical trial in Q4. We look forward to building on AdCOVID's outstanding preclinical data by moving it into the clinic as quickly and safely as possible. We are pleased with robust mucosal and systemic immunity, observed in preclinical studies conducted by our collaborators at the University of Alabama at Birmingham. We have simultaneously forged alliances with several manufacturing partners to secure clinical trial material and began that process in July. As Scot Roberts, our CSO, will discuss momentarily, these activities are going well and we remain on track to begin our Phase 1 clinical trial later this year. Second, we continue to pursue non-dilutive funding for AdCOVID. As previously announced, we entered into a teaming agreement with DynPort Vaccine Company, or DVC, to pursue federal and non-profit funding. DVC, a General Dynamics Information Technology company, has extensive experience in vaccine development and has been the prime contractor, and systems integrator for many government projects. The partnership with DVC significantly expands Altimmune's capabilities to execute on government contact, on government funding opportunities. And accelerate the development of AdCOVID. Third, we remain focused on executing the T-COVID trial and maintaining DoD support. During the second quarter, we announced not only that we had created a new program based on, respira-vac our replication-deficient adenovirus 5 platform. But that the Department of Defense awarded Altimmune $4.7 million to fund the EPIC Trial, our Phase I/II clinical trial of T-COVID in the prevention of clinical worsening, in COVID-19. We are especially excited about this program, as it represents a novel mechanism with tremendous promise. And we are one of the few therapeutics intended to stop the progression of early COVID-19 to severe disease and hospitalization. We are working very closely with our colleagues at the U.S. Army Medical Research & Development Command on this program. And as Scott Harris, our CMO, will more fully discuss, we look forward to enrolling our first patient imminently and delivering top line data readout from this trial in Q4 of this year. I would now like to turn the call over to Scot Roberts, our CSO, who will fully update you on the progress we have made with AdCOVID, and then, Scott Harris, who will discuss our clinical plans, across our portfolio. Scot Roberts?

Thank you, Vipin, and good morning. We have made excellent progress, toward our Phase I clinical trial of AdCOVID, a single-dose intranasal vaccine candidate for COVID-19. Earlier this year, we created different vaccine candidates based on our respira-vac replication-deficient adenovirus vaccine platform. Candidates, expressing different portions of the viral spike protein, were evaluated in a series of preclinical studies performed by our collaborators at the University of Alabama, at Birmingham. Based on those results, we selected the candidate that expressed the receptor-binding domain or RBD of this viral spike protein for clinical development. The RBD is essential for viral infection. And the great majority of neutralizing antibodies in convalescent [serum] [ph] are directed against the RBD. So it's clearly an important target for the immune system. In our preclinical mouse studies a single intranasal dose of AdCOVID, stimulated strong serum antibody responses, and [high] [ph] virus neutralizing titers. Importantly, AdCOVID also induced a very robust mucosal IgA antibody response, in the respiratory tract. Mucosal IgA is a special type of immunity that is produced locally to provide local protection, from infection. When stimulated in the respiratory tract, mucosal immunity offers a potential to not only block infection, but also block transmission of the virus to others. By far, the most important way to induce a nasal IgA response is to administer the vaccine intranasally. Bear in mind, that all of the vaccine candidates, in advanced clinical testing are delivered by intramuscular injection. Not only is that method of dosing more complicated than intranasal dosing, it's also unlikely to elicit mucosal IgA immunity, in the respiratory tract. The presence of nasal IgA maybe especially important for protection from COVID-19 because of two important considerations. One, the SARS-CoV-2 virus replicates well in the nasal cavity. And two, antibodies against the virus that are in your blood, can't get into the nasal cavity very well. So in the absence, of local mucosal IgA immunity, the nasal cavity may become a safe haven for the virus. Over the next few weeks, we'll be reporting on the ability of AdCOVID, to stimulate T-cell immunity, a third type of immunity we expect to stimulate, in addition to the neutralizing antibody and mucosal IgA responses. Once we have the T-cell data in hand, we plan to quickly publish the preclinical data, so we can share it with the scientific community. Now, having identified the vaccine candidate we are taking forward, we initiated a dual-track approach, towards the manufacturing of AdCOVID. While moving quickly to provide clinical trial material to conduct our Phase I trial later this year, we will begin scaling the manufacturing process in parallel, to meet the requirements of Phase III testing and commercial launch of AdCOVID. To accomplish these aggressive goals, we have established multiple alliances, with key manufacturing partners that have deep experience, in the manufacturing of viral vectors. Notably, we are using the same manufacturing process for AdCOVID as for our other vaccine candidates, including our NasoShield intranasal anthrax vaccine that we are developing with BARDA; and NasoVAX our intranasal influenza vaccine. Using the same manufacturing process allows us to manufacture quickly and with confidence. Additionally, vaccine candidates based on our respira-vac platform have shown excellent stability at room temperature potentially allowing for the distribution of AdCOVID without the refrigeration or freezing that is normally required for other vaccines greatly simplifying getting the vaccine to those who need it. With that, I will turn the call over to Scott Harris, who will provide a clinical update on our programs. Scott?

Thank you, Scot, and good morning, everyone. Continuing with our – with the AdCOVID program, we expect to file the IND and launch the Phase 1 clinical trial of AdCOVID in the fourth quarter of 2020. This trial will include approximately 120 subjects. And while our preclinical studies and clinical trial data from our other intranasal replication-deficient adenovirus 5 vaccine trials have not suggested the role for a prime boost, we nonetheless plan to evaluate the effects of one and two doses of vaccine to confirm this hypothesis. Immunogenicity analyses will include total serum IgG, neutralizing antibodies, nasal mucosal, immunity and T cell responses. We anticipate the data readout for the trial in the fourth – in the first quarter of 2021 and launch a Phase 2 trial on the heels of this readout. Based on the preclinical findings discussed earlier, and prior experience with our other intranasal vaccines, we expect potent responses in all aspects of immunity and for AdCOVID to be safe and well tolerated with adverse events and reactogenicity events similar to placebo. We also previously announced that, we're awarded $4.7 million by the U.S. Army Medical Research & Development Command to fund the entire cost of conducting a clinical trial with T-COVID. This trial will be known as the EPIC Trial, or the Efficacy and Safety of T-COVID in the Prevention of Clinical Worsening in COVID-19. We have completed all of the government contracting processes and institutional reviews, and clinical sites are now active with enrollment expected to commence imminently. T-COVID is an immune modulator for pulmonary viral infections and is differentiated for most other COVID-19 therapeutics in development, as it is focused on non-hospitalized patients prior to the development of pulmonary dysfunction and the need for hospitalization. Because of the broad protection T-COVID could afford against a variety of other respiratory pathogens, we believe it could be used to defend against future strains of coronavirus or other pandemics. The data readout from this trial is expected in the fourth quarter of 2020. And if successful, we plan to initiate a Phase 2/3 trial early next year and commence discussions regarding emergency use authorization. We recently announced that we completed enrollment in our Phase 1b trial of NasoShield for anthrax and expect data readout on target in the fourth quarter of 2020. If NasoShield is shown to be safe and effective the remaining options of our $133.7 million contract with BARDA could be awarded to complete Phase 2 clinical testing and begin stockpiling of NasoShield in the strategic reserve. We also remain on track with IND-enabling studies in manufacturing to commence dosing in our first-in-man clinical trial for ALT-801, our GLP-1/glucagon dual agonist for NASH in Australia in the fourth quarter of this year. We expect to have a readout on body weight loss and reduction in liver fat toward the end of the first quarter of 2021. This will be a value-driving event for investors as it will place ALT-801 squarely in the forefront of NASH development. We expect ALT-801 to be better tolerated than similar therapies and achieve weight loss and improvement of liver fat in the Phase 1 trial without the need to dose titrate for GI intolerability, which has impacted the GLP-1 development space. At the conclusion of this first-in-human trial, we plan to file an IND in the U.S. and initiate a 12-week trial in patients with non-alcoholic fatty liver disease. We expect a data readout on this trial in the third quarter of 2021 and a transition rapidly to a full Phase 2b biopsy-based trial based on NASH endpoints by the end of 2021. Pending the results of the first-in-human trial, we may also elect to initiate a separate program in the treatment of obesity. We feel confident that the efficacy and pharmacokinetic profile of ALT-801 in preclinical studies will translate to improve weight loss and tolerability with more potent effects on weight loss and reduction in NASH activity compared to other agents. Finally, we successfully filed the IND for HepTcell, our chronic hepatitis B immunotherapeutic. The Phase 2 trial is designed to evaluate the antiviral activity of HepTcell in chronically-infected patients as an -- and is an important milestone in our goal to develop a functional cure for this disease. Depending on the patient population being treated, the immunotherapeutic mechanism of HepTcell is intended to work alone or in combination with the new antiviral therapeutics that are being developed for this disease. We expect to initiate enrollment in the fourth quarter of 2020, pending evaluation of the impact of the COVID-19 pandemic. And with that, I'll turn things back over to Vipin Garg. Vipin?

Thank you, Scott. As you may have noticed from Dr. Harris' remarks, it is important for us to continue the development of our portfolio outside of COVID-19. In addition to developments with AdCOVID and T-COVID, we expect to have a data-rich time period over the next 12 months with data readouts from NasoShield in our anthrax trial, ALT-801 with our NASH trials and the initiation of a chronic hepatitis B trial with HepTcell. One of the key tenets of our philosophy is to have multiple shots on goal, and we look forward to sharing the results of these clinical trials as they become available. With that, I'll turn the call over to Will Brown, our Chief Financial Officer, who will provide an update on our financials. Will?

Thank you, Vipin, and good morning, everyone. For today's call, I'll be providing an update regarding our second quarter financial results. Our cash and short-term investments balance was $80 million at June 30 for an increase of $47 million since the first quarter. The increase is attributable to $31.3 million of warrant exercises, and nearly $23 million from our aftermarket facility. Since quarter end, we've received an additional $9.6 million from the exercise of warrants and $2.5 million from ATM sales. Additionally, we closed a public offering for gross proceeds of $132.2 million. With these additional cash receipts, Altimmune has more than $200 million of cash and investments on hand and is well positioned to advance its pipeline for at least the next two years. As Scot Roberts discussed, a major use of the cash will be on the scale-up of manufacturing for both AdCOVID and T-COVID to meet the demands of both those COVID-19 product candidate. Turning to the income statement, revenues for the second quarter were $720,000, which is a reduction of $900,000 compared to the second quarter of last year. Our revenue was lower year-over-year, considering the NasoShield clinical trial and preclinical work performed during 2019, compared to clinical trial startup activities only performed in 2020. Research and development expenses were $23.8 million for 2020 compared to $6.2 million in the same period last year. The increase year-over-year of $13.6 million is primarily attributable to stock-based milestone payments associated with ALT-801. We carry a liability on our balance sheet for the fair market value of these non-cash payments. And during this quarter, we recognized $11.9 million of expense for an increase in the fair market value of the liability due to an increase in our stock price and an increase in the probability of success. Also impacting the change are increases in spend for the development of AdCOVID and T-COVID in addition to a decrease in spend for NasoShield due to the cycle of product development. Second quarter G&A expenses of $2.5 million is $300,000 higher than the second quarter of 2019 due to an increase in compensation, legal and professional costs. Our income tax benefit for the quarter was $1.6 million, which represents the second quarter portion of our 2020 net loss, which we expect to file a refund claim next year. Finally, net loss attributed to common stockholders for the second quarter was $16.8 million compared to $3.4 million in the same period last year with net loss per share equaling $0.94 in the second quarter of 2020 versus $0.26 per share for the second quarter 2019. With that, I would like to now open the call for questions-and-answers. Operator?

Thank you. At this time, we will be conducting the question-and-answer session. [Operator Instructions] Our first question comes from the line of Yasmeen Rahimi with Piper Sandler. Please proceed with your question.

Hi, team. Congrats on the continued progress. Two questions for you. The first question is, can you shed light on what type of preclinical data we should be seeing between now and initiation of the Phase 1 study, maybe to the level of granularity that you can provide us? And then the second question is for Vipin. Can you shed light on the manufacturing? Maybe what is left in order to kick off the Phase 1 study? Are you thinking about working and adding on multiple manufacturers and continuing growing that? And thank you again for taking our questions.

Yes. Good morning, Yasmeen. Thank you for the question. I would let Scot Roberts first to answer your first question and I'll take the second question. Scot?

Yes. Good morning, Yasmeen and thanks for that question. So as far as the preclinical data between now and the clinical trial, as I mentioned during the call, the most immediate will be the T-cell data. This is activation of T-cell responses that are able to kill infected cells and reduce the infection that way. And we expect to have those data here very shortly. We'll also be reporting at that time on additional neutralizing antibody data that we've obtained that we're looking forward to sharing. Beyond that, there'll be a continued evaluation of the specific types of antibody responses what are the epitopes that are being targeted by both T-cells and B-cells. And we'll be looking at challenge models of COVID-19 in both rodents and nonhuman primates. So that's kind of the broad brushstrokes of where we're going with that and we look forward to sharing that data as it becomes available.

Thank you.

And Yasmeen with regards to manufacturing. As far as Phase 1 is concerned, we are well on our way to manufacturing materials for Phase 1 as we announced almost over a month ago now that we entered into a partnership with Vigene Biosciences and we've been working with them for a while. So they have -- they're in the process of manufacturing the Phase 1 materials and actually Phase 1 and Phase 2 materials. But in addition to our partnership with Vigene, we have entered into an agreement with another large manufacturer, international manufacturer and a third manufacturer. We have not announced the names of these two manufacturing partners, but we are well on our way to securing sufficient manufacturing capacity for Phase 3 and beyond into commercialization of AdCOVID.

Thank you, team. Congrats again.

Thank you.

Thank you. [Operator Instructions] Our next question comes from the line of Jonathan Wolleben with JMP Securities. Please proceed with your question.

Hi, good morning and thanks for taking the questions. Just a couple on AdCOVID for me as well. This is the first I think we've heard about exploring a prime boost regimen, and I think you mentioned 120 subjects in Phase 1. Can you tell us a little bit more about your thoughts on the design as far as number of study arms? Will there be a control? And how many different dose levels will you be looking at?

Scott Harris?

Thanks, Jonathan. Regarding the prime boost as we noted previously based on our preclinical data and our experience in some other clinical studies, we don't think that a prime boost will be necessary, but we'd like to explore that to make absolutely certain that we're not leaving effectiveness on the table. So we're planning 120 subjects. Currently, the study would have four arms, two doses and for each dose, a single prime and then a second prime boost. There will be a placebo control that will be matched for the active ingredient as well. So, four active arms if you would and one placebo. We have not made a final determination of the doses, but they'll be in the range of the doses used in our prior studies with NasoVAX and NasoShield based on that experience and would reflect the doses that are being used in some of the other adenovirus vector studies.

Great. And just one last one for me. You mentioned a little bit on your rationale for including just the receptor binding domain in your construct. I know Pfizer decided to use a whole spike protein when they looked at their kind of array of options. Did you see something preclinically with your intranasal approach that favored the receptor-binding domain only? And is there options to maybe develop multiple constructs to move forward? Thanks.

Scot Roberts?

Yes. So, our selection of the RBD candidate was based on immunogenicity. All of these constructs were well tolerated that the animals look fine as they always do during the studies. As you know, these products are extremely well tolerated in the clinic as Scott Harris mentioned. So, our selection of RBD is really based on the immunogenicity, where it was greatest with the RBD. And so, with respect to Pfizer, it seemed as though they had selected the alternative vaccine based on safety considerations. And as you know, there's rather strong immune response on the second immunization of the RNA vaccines. And so evidently, they saw a better tolerability profile with the full length. And in the RBD, we don't expect to see that sort of effect. So our focus is on immunogenicity and with the safety expected to be as excellent as it has been in the past.

Terrific. Thanks again and congrats on all the progress.

Thank you. Ladies and gentlemen, this concludes our question-and-answer session. I'll turn the floor back to Dr. Garg for any final comments.

Thank you everyone for listening in today. We look -- to you again on our next earnings call. Thank you.

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.