Alterity Therapeutics Limited (ATHE) Q2 2021 Earnings Report, Transcript and Summary

Good morning, and welcome to the Alterity Therapeutics H1 Financial Results and Business update. [Operator Instructions]. Today's call is being recorded. And I'd like to introduce you to our host, Dr. David Stamler, Alterity Therapeutics Chief Executive Officer. He is joined by Mr. Geoffrey Kempler, Founder and Chairman; and Ms. Kathryn Andrews, the company's Chief Financial Officer. Over to you, Dr. Stamler.

Well, thank you, Greg. Good morning to our investors in Australia, and good afternoon to our investors here in the United States. Thank you for joining our call to discuss the first half year financial results and, more importantly, as a development stage company, our progress during the 6 months through December 2020 and during the first 2 months of this year. Before turning to those topics, I'd like to first provide a little background on myself as I was appointed to the role of Chief Executive Officer in January, succeeding our Founder, Geoffrey Kempler. The change in management reflects the significant progress we have made in advancing the development of our lead compound, ATH434, which has completed Phase I and is undergoing preparation for Phase II studies. I joined Alterity in June of 2017 as the Chief Medical Officer and Senior Vice President of Clinical Development. I'm a medical doctor, and it was through my early years in medicine that I became passionate about finding better treatments for persons living with debilitating illnesses. I've seen the devastation that diseases such as Huntington's disease, Parkinson's disease and other Parkinsonian disorders have not just on the affected individual but on their families as well. Before joining Alterity, I served as the Vice President of Clinical Development and Therapeutic Head for Movement Disorders at Teva Pharmaceutical Industries from 2015 to 2017 after Teva had acquired Auspex Pharmaceuticals, which I joined in 2011. It was during this time at Auspex and Teva that I led the clinical development and FDA approval of a novel agent for 2 neurological conditions. The first indication was for the treatment of Huntington's disease, a neurodegenerative condition, which causes uncontrolled movements, cognitive impairment and behavioral abnormalities. This approval came in the early part of 2017. The second approval, which came later in 2017 was for the treatment of tardive dyskinesia, a movement disorder that is an often irreversible side effect of commonly used medications. Before Auspex-Teva, I had led the prosecution of the NDA Advisory Committee and FDA approval of the first treatment for Huntington's disease in 2008. Drug development and commercialization is a true team sport, and I collaborated extensively across disciplines in order to reach these important milestones. This previous experience is critical as we at Alterity work through the development and commercialization planning for ATH434 and as we look to expand our therapeutic portfolio by mining our extensive library of compounds with potential application, both in and outside of the neurology area. I'm very pleased that Geoffrey Kempler is joining me on the call today as he continues to lead the company as Chairman. His history and tireless efforts in enabling Alterity to take the learnings from the past and positively influence and inform our future success is invaluable, and I look forward to continuing to collaborate with him. I'd now like to walk you through our progress we've made since July of last year, and then I'll hand over to our CFO, Kathryn Andrews, to provide an overview of our financial results. I want to start by first acknowledging the increased support and awareness of our lead compound ATH434 and the work we're doing at Alterity. This ranges from an increased presence at leading medical conferences focused on Parkinsonian diseases, including our first indication Multiple System Atrophy, or MSA, through to the endorsement and support from a growing list of key experts in the field of neurology. Our technology targets alpha-synuclein misfolding an aggregation, and this biological target is gaining significant traction in scientific and clinical sectors. More importantly, it's the connection between alpha-synuclein aggregation and its implication in the pathology of Parkinsonian disorders that is most exciting. It's been encouraging to see the independent validation of our technology. During the period, new animal data for ATH434 from the laboratory of Dr. Nadia Stefanova, Professor of Translational Neurodegenerative Research at the Medical University of Innsbruck, was presented at the American Neurological Association's 2020 Annual Meeting. This new data independently confirmed and extended previous findings in an animal model of MSA, demonstrating that ATH434 reduces alpha-synuclein pathology, preserves neurons and improves motor performance. We also presented for the first time important cardiac safety data where we evaluated the electrical activity in the heart as measured by the QT interval. This indicated that there was no evidence of cardiac liability at clinically tested doses. This is great news. And the data reinforced previous safety findings from our Phase I clinical study that ATH434 was safe and well tolerated at all doses and had an adverse event profile that was comparable to placebo. As I mentioned, our first indication for ATH434 is for the treatment of Multiple System Atrophy, which is a rare and rapidly progressive Parkinsonian disorder. It is a neurodegenerative disease with major sources of disability resulting from motor symptoms characteristic of Parkinson's disease, impaired ability to maintain normal blood pressure, along with bowel and bladder dysfunction. Current treatments include medications and lifestyle changes to help manage symptoms, but there is no treatment to address the underlying cause, and certainly, there is no cure. It is the burden on patients and their families that we most want to change. And this is what motivates the entire Alterity team to continue to pursue treatments that not only slow the progression of disease but potentially stop it. I'm pleased to report that we've made significant progress since July. Since reporting our successful Phase I clinical trial results and following guidance from the U.S. FDA on our Phase II program, we have been undertaking significant preparatory work. It's important to note that as there is no treatment for MSA, there is no regulatory precedence in terms of trial design, clinical endpoints to be tested and the best patient population to participate. While these aspects of the development plan represent challenges, they also represent significant opportunities to differentiate from our competitors. To address many of these issues, we've now launched a natural history study in people with early MSA in the United States, and this will inform our Phase II trial design. The study is called bioMUSE and is being conducted in collaboration with Vanderbilt University Medical Center in the United States under the direction of Dr. Daniel Claassen, Associate Professor of Neurology and Principal Investigator. Natural history studies are important for characterizing disease progression. Over the course of the study, patients will undergo comprehensive evaluation with detailed neurological examination and clinical rating scales of motor, autonomic and activities of daily living symptoms, along with specialized neural imaging and assessment of protein biomarkers in diverse biological specimens. Data from bioMUSE will also be used to inform patient selection in the Phase II clinical trial with the U.S. FDA encouraging us to utilize data from this population to aid in the development of efficacy endpoints. Dr. Claassen has commented that this is an important study to expand our understanding of MSA and the targeting early-stage patients who stand to gain the most from disease-modifying agents is a key consideration. Dr. Claassen is a widely recognized specialist in MSA and other neurological disorders, and we're pleased to be collaborating with someone of his standing. His interest and enthusiasm to work with us is an important validation of both the need for new therapies and the potential of ATH434. While 434 is our priority development program, we continue to pursue novel compounds to support the next-generation of potential treatments for neurodegenerative diseases. Based on the in-house discovery research by our chemists, the U.S. Patent and Trademark Office advised the allowance of a new composition of matter patent in November. The new patent identified compounds that act in a similar manner to ATH434, and it is central to our strategy to expand our drug development portfolio. The patent covers more than 150 novel pharmaceutical compositions that are designed to redistribute the labile iron implicated in Parkinson's disease, Alzheimer's disease and other neurodegenerative conditions. And it is aligned with our hypothesis that our technology can disrupt the underlying pathology and slow disease progression. This patent opens up important new indications for us in the future. We've also identified a potential new path for our drug development candidate, PBT2, outside its legacy use in the neurodegenerative disease area. In December, we were granted a license by UniQuest the commercialization arm of The University of Queensland to novel zinc ionophore technology to combat antimicrobial resistance, or AMR, in superbugs. AMR is an emerging public health crisis as it has hobbled the ability of commonly used antibiotics to treat routine bacterial infections. A recent published article in the high-impact journal Science Translational Medicine showed the PBT2 could reverse antibiotic resistance to superbugs and demonstrate efficacy in an animal model of sepsis. Under the license, Alterity has secured the worldwide exclusive right to patented technology to develop and commercialize therapies that resensitize bacteria to antibiotics. The license technology combines Alterity's PBT2 and other zinc ionophores with commonly used and often generic antibiotics used to treat infections caused by resistant bacteria. This represents an opportunity for Alterity to leverage its prior investment in PBT2. In exchange for the grant of exclusive worldwide rights, once Alterity generates commercialization revenue, UniQuest is entitled to receive certain payments commensurate with academic licensing arrangements. Professor Mark Walker of The University of Queensland has said that these results demonstrate the PBT2 and other zinc ionophores have the potential to restore the efficacy of several widely available antibiotics. The authors of the paper referenced above also noted that superbugs exposed to a combination of PBT2 and antibiotics had a very low propensity to develop further resistance, making the emergence of cross-resistance to the novel treatment unlikely. Thus, PBT2 may address the issue of antimicrobial resistance without becoming part of the problem. It's certainly an exciting development for PBT2. Before I hand over to our CFO, subsequent to the end of the reporting period, we received some very good news. As we announced earlier this month, the Michael J. Fox Foundation for Parkinson's Research awarded Alterity a grant of nearly USD 500,000 to evaluate the pharmacologic profile of ATH434 in a primate model to determine optimal dosing in future Parkinson's disease clinical trials. This is the second grant that Alterity has received from the Fox Foundation to support the development of ATH434 in Parkinson's disease, and it provides independent validation of our approach. While available therapies can treat some symptoms, people with Parkinson's disease urgently need new treatments to slow or halt disease progression and improve quality of life. The potential to expand into Parkinson's disease has always been part of our strategy, and this funding allows us to take another step towards realizing this goal. I'd now like to hand over to Kathryn Andrews, our CFO. Kathryn?

Thanks, David. As a development stage biopharmaceutical company, Alterity has no revenue to report, noting the Michael J. Fox Foundation grant just referenced by David will fall into our end-of-year full year results. Our results were very much in line with our expectations and budget. The key details for you to be aware of are an operating loss of $8.6 million and a net operating cash outflow of $7.3 million for the period. In relation to our cash burn, this was in line with expectations and reflects the preparatory work underway for further clinical trials for 434. Of note, we have in the past recorded the receipt of an R&D tax incentive rebate in our half year cash flow results. Eligibility for this rebate for the last financial year is currently under assessment. Importantly, our cash position is $35 million as at December 31. This was buoyed during the year with a $35 million capital raising to Australian and international institutions and other unrelated sophisticated, professional or exempt investors. The placement was fully subscribed, and we welcome to the register some significant Australian, U.S. and European institutional investors. The interest in the capital raising was certainly another validation of both the progress we've made and the potential for Alterity in the future. The proceeds from this placement are being used to progress Alterity's clinical development program for ATH434, including the bioMUSE natural history study and a Phase II trial, both in MSA patients as well as ongoing research and discovery and working capital. That concludes our presentation. I'll now hand back to our operator, Greg, who will facilitate the Q&A. We've received a large number of questions and have, therefore, grouped some of these together where they cover the same or similar content. Thank you, Greg.

[Operator Instructions]. Our first question to the team is how is the preparation for ATH434 Phase II trial going?

So, hi, this is David Stamler again. Things are going quite well. As I mentioned in my presentation, we received feedback in the first half of last year from the U.S. FDA, and we've been in the midst of receiving feedback from European health authorities over the last several months. We expect this to conclude and to provide some guidance on our European regulatory advice in the near future. As it relates to the actual clinical trial preparation, we are completing ongoing manufacturing and preclinical work to enable that clinical trial and feasibility for site and country selection for the Phase II trials ongoing. So overall, things are proceeding according to plan, and we look forward to commencing the trial in the second half of this year.

Are you expecting further peer-reviewed and published research on ATH434?

Yes, we are. We continue to investigate both the mechanism of 434 as well as its potential use in animal models. And we do expect that later this year, we will be able to publish data on recent animal work and continue to present information on the mechanism of action of how 434 achieves its efficacy.

Are you planning to do mitochondrian-level studies? Is this necessary?

Yes. So this is an interesting question. Given the role of iron in cellular energy production, we are well aware of the potential impact of 434 on the mitochondria, which many people refer to as the powerhouse of the cell. So as we interrogate the mechanism of 434 with our external consultants, we are looking at establishing various cellular models to assess mitochondrial function. And as we accumulate information, we will release this accordingly.

Have you confirmed any participation in scientific congresses?

Yes. We continue to get significant interest from basic science and neurology conferences surrounding our compounds and our programs. As a matter of fact, the 7th international MSA conference, which is being held in Japan virtually, commences in the next day or so. And we will actually make an announcement about the presentation of some interesting new safety data at that conference. In addition to that, we do have upcoming presentations at the American Academy of Neurology, and we do expect to be presenting data at the movement disorder conference later this fall.

Another question was, is there any general interest in Alterity's technology with big pharma?

Yes. We've historically had ongoing discussions with several pharma companies, many of them are large companies that tend to look to small biotechnology companies for their novel research. These discussions have been ongoing. And we continue to keep in touch with these partners who are very interested in our work. So yes, I'm enthusiastic and expect that these collaborations may ultimately lead to an excellent partnership.

A further question submitted was that it was good to see new application for PBT2 in treating antibiotic-resistant infections. Do you have any other estimates of the market value? And could this be bigger than ATH434 in the U.S.?

So we are very excited to evaluate the program of PBT2 to combat antimicrobial resistance. It represents a unique opportunity, and it certainly addresses a very large unmet clinical need. As many have read in the press recently, antimicrobial resistance both in the hospital setting as well as in the community setting is becoming -- increasingly becoming a problem, brought into further focus by the bacterial infections typically acquired in patients who are afflicted with COVID-19. So we do believe there is significant potential here, although we haven't determined the clinical path forward as yet. And until we do that, we won't be able to assess a market value. One of the things to note is that as we do contemplate beginning a development program in this area, given the level of interest that there is in combating antimicrobial resistance, we very well may seek nondilutive funding to support these programs. But there's no doubt that there's tremendous interest in the medical and scientific community to address this problem.

Alterity's very promising lead compound PBT2 was put into a partial clinical hold by the U.S. FDA for Alzheimer's. How will this affect future trials for PBT2, particularly as we look to antibiotic resistance?

Yes. Well, this is an important question for us to consider as we chart our development path forward. The prior nonclinical data is well aware to the entire development team. And we will certainly take some of the prior feedback from the FDA into account as we determine our clinical plan. But rest assured that once a clinical plan is determined, part of that process will be to address the partial clinical hold and to overcome the nonclinical findings that interfered with the development of PBT2 for chronic administration.

A further question asked was, what are the plans to progress new compounds that fall under the new patent?

Yes. Well, this is an ongoing effort from our discovery chemists and our Head of Biology. We've got a very clear plan in place to take the novel compounds that have been identified in our recently issued patent and evaluate them, try to optimize them from a pharmacology standpoint and also to try to modify them and assure their metabolic stability. And this program is underway, and as we will progress with identifying compounds that meet certain milestones, we will introduce them into different nonclinical models. So things are progressing nicely. And as we have new information to share, we will bring that forward.

[Operator Instructions]. As we have no further questions, I'd like to hand back to Dr. Stamler for concluding remarks. End of Q&A:

Well, thank you, Greg, and thank you all for joining today's call. We're committed to holding biannual conference calls and appreciate the level of interest expressed in our call today. We are certainly very pleased with the progress we've made in the first half of this year, and we're excited to see the opportunities for ATH434 and PBT2 into the future. Have a good day to those in Australia, and good afternoon and evening to our investors here in the United States.