CNS Pharmaceuticals, Inc. (CNSP) Q4 2019 Earnings Report, Transcript and Summary

Welcome to the CNS Pharm Business Update Conference Call. At this time, all participants are in listen only mode. Following management's prepared remarks, we’ll hold a Q&A session. [Operator Instructions] As a reminder, this conference is being recorded March 12, 2020. I would like to turn the conference over to Yvonne Briggs. Please go ahead, ma'am.

Thank you, operator, and good afternoon. This is Yvonne Briggs with LHA. Thank you all for joining CNS’s Pharmaceuticals business update conference call. Earlier today, CNS issued a news release announcing financial results for the 2019 fourth quarter and full year. If you'd like to be added to the company's email distribution list to receive future announcements, please register on the CNS website at cnspharma.com or call LHA in Los Angeles at 310-691-7100 and speak with Casa Chen [ph]. Before we begin, I'd like to remind you that any statements made during this call by management, other than statements of historical facts will be considered forward-looking, and as such will be subject to risks and uncertainties that could materially affect the company's expected results. Those forward looking statements include without limitation, the various risks described in the company's annual report on Form 10-K for the year ended December 31, 2019 filed today and subsequent filings with the SEC. Importantly, this conference call contains time sensitive information that is accurate only as of the date of the live broadcast today, March 12, 2020. Except as required by law, CNS undertakes no obligation to revise or update any forward looking statements to reflect events or circumstances after the date of this call. Joining me from CNS Pharmaceuticals are John Climaco, Chief Executive Officer; and Chris Downs, the company's Chief Financial Officer. During today's call, management will provide an overview of the company's clinical development programs and future milestones and its recent financial results. At the conclusion of the prepared remarks, we'll open up the call to your questions. With that, let me turn the call over to John. John?

Good afternoon, everyone. And thank you for joining the call today. Since completing our IPO exactly four months ago, it has been an eventful time for the company. We've expanded our pipeline, received positive feedback from the U.S. FDA regarding our lead clinical program and completed GMP manufacturing of our lead drug candidate, all of which I will discuss in a moment. However, as this is our first conference call as the public company. Let me begin by giving some background on CNS Pharmaceuticals, and our lead drug candidate Berubicin. Berubicin was developed by Dr. Waldemar Priebe, a professor of medicinal chemistry at the MD Anderson Cancer Center in Houston. Dr. Priebe is also the Founder of CNS and serves as Chairman of our Scientific Advisory Board. Dr. Priebe's research combines biology and chemistry with a focus on the design and development of drugs that selectively target DNA and the inhibitors of signaling and metabolic pathways that are important to tumor progression and survival. CNS drugs are in clinical trials and several others are in various stages of preclinical development. Berubicin is currently being developed for the treatment of patients with glioblastoma multiforme, or GBM, which is the most aggressive form of primary brain cancer. GBM Cancer cells reproduce quickly and are supported by a large network of blood vessels, making this cancer highly invasive and virtually incurable. Approximately 15,000 new GBM cases are diagnosed each year in the U.S. with optimal therapy, including surgical resection, radiation and chemotherapy with the current standard of care drug temozolomide, patients have a median survival of only 15 to 23 months. Sadly, only approximately 40% of patients are genetically predisposed to respond to temozolomide. And even these patients will almost all eventually relapse following first line therapy. The remaining 60% of patients currently have no approved or effective treatment for their disease. All these patients are still treated in the United States. And other countries, such as Poland, Germany or other EU states, these patients are generally introduced to hospice care in an effort to make their last days with this devastating disease as comfortable as possible. In this bleak landscape, lies the opportunity for Berubicin and GBM patients around the world. Berubicin is an anthracycline, which is a class of anti-cancer agents that are among the most powerful chemotherapy drugs ever created and are the most effective against many types of cancer. Anthracyclines are designed to damage the DNA in targeted cancer cells by interfering with the action of the topoisomerase II, an enzyme critical to cell proliferation. Anthracyclines as a class have been used for more than 60 years to treat a variety of cancers such as breast, ovarian, lung and other major malignancies. However, historically anthracyclines have never been used to treat primary or metastatic brain cancers, because scientists could not demonstrate that anthracyclines were able to cross the Blood Brain Barrier. Berubicin may change that history, because it is the first anthracycline that appears to cross the Blood Brain Barrier, which of course is critical for any GBM therapeutic. In 2006, Reata Pharmaceuticals conducted a Phase 1 clinical trial with Berubicin that demonstrated a 44% response rate in 25 valuable patients, two partial responses, and one durable complete response. CNS holds an exclusive worldwide license to Berubicin and had acquired required all data, assets and know how from Reata related to the Phase 1 trial. Building upon the foundation of this very promising Phase 1 trial, we are proud to have made significant progress toward initiating our Phase 2 clinical study of Berubicin to treat GBM. In the second half of this year, we look forward to initiating our open label Phase 2 clinical study in approximately 60 patients in the U.S., pending FDA approval of our investigational new drug application or IND. In May of last year, we received positive feedback from the FDA regarding our pre-IND request, including our proposal to use a previously manufactured and currently available supply of Berubicin in the Phase 2 clinical trial, along with utilizing a dosing regimen based on Reata's successful Phase 1 trial. It was beneficial to understand the FDA viewpoint on these two major considerations, as we prepare our IND submission. With a favorable response from the FDA to use the currently available supply of Berubicin, we have worked diligently to ensure that material meets all GMP and purity specifications with analytical testing underway. We have reprocessed the existing batch one of Berubicin, which provides the necessary supply for most patients to be enrolled in the U.S. clinical trial. We are continuing large scale production of Berubicin to supply the remainder of our Phase 2 trial in the U.S., as well as supporting our research and development partner, WPD Pharmaceuticals with their clinical trials in Poland. WPD will also be conducting a Phase 2 clinical study with Berubicin for GBM patients and adults, which will mirror our own adult Phase 2 trial in terms of size and protocol, allowing us to have twice as much data available for FDA review. WPD will also be conducting a first ever Phase 1 clinical trial study of Berubicin in children. CNS has a sublicense agreement with WPD that grants them commercial rights in a limited territory for Berubicin, primarily consisting of parts of Eastern Europe and Central Asia. In exchange, WPD committed to spend certain amounts on clinical trials of Berubicin, all of which will benefit CNS in seeking eventual approval of the drug. WPD was awarded a $6 million grant from the EU Polish National Center for Research and Development to fund these upcoming trials, far exceeding the required $2 million of development spending required under the license agreement. We believe the award of that grant underscores the therapeutic potential of Berubicin, while also recognizing the unmet medical need facing patients with GBM. WPD was also founded by our founder, Dr. Priebe. And as such, the relationship is conducted even best practices for related party transactions, including approval of all transactions by our audit committee, comprised of independent directors. We previously announced that the single site for the WPD pediatric trial has been engaged and that is Children's Memorial Health Institute, the largest pediatric hospital in Poland. WPD is finalizing site selection for the adult Phase 2 trial. And we look forward to making that announcement in the near future. Both for Phase 1 pediatric trial and the Phase 2 adult trial are expected to be initiated in the second half of the year. Our second drug in the pipeline is WP1244, which we licensed from MD Anderson earlier this year. WP1244 is a novel DNA-binding agent designed to cross the blood-brain barrier for the potential treatment of primary and metastatic brain cancers. In preclinical studies, WP1244 was shown to be 500 times more potent than chemotherapeutic agent daunorubicin in inhibiting tumor cell proliferation. The in vivo activity in orthotropic brain tumor model, and it's potentially novel mechanism of action are highly promising. While the target tumor type for this new drug candidate and Berubicin are identical, they differ in their mechanism of action. As I mentioned, Berubicin is a topo II inhibitor, while WP1244 is a DNA binding agent. This allows us to study a second method of attacking GBM tumors, and opens the door for potential combination therapy approaches involving both compounds. In 2020, we look forward to several key catalysts for the creation of shareholder value, starting with the initiation of our clinical trials for Berubicin and GBM, including the Phase 2 study in the U.S., the Phase 2 study in Poland and the Phase 1 study in Poland. In addition, we anticipate binding for orphan drug designation, with the U.S. FDA, which is granted will provide market exclusivity for up to seven years from the date of the NDA approval. As I mentioned, we also expect to initiate preclinical studies with our second drug candidate, WP1244 by the end of the year. With that overview of our pipeline in near term milestones, let me turn this call over to Chris Downs for discussion of our financial profile. Chris?

Thanks, John. As John mentioned, the company completed its initial public offering of common stock in November of 2019, and raised gross proceeds of $9.8 million, including the underwriters exercise of the overlock adoption. As of December 31, 2019, our cash position totaled $7.2 million. With this cash balance, we believe we have the runway to advance our current clinical development programs into approximately mid-2021. Let me summarize some of the key financial items for our fourth quarter financial results, which we issued in a news release earlier today. There will be more commentary on our results and our business in our Form 10-K, which was filed simultaneously. General and administrative expense was $1.0 million for the fourth quarter of 2019, compared with $0.2 million for the prior year period. I would highlight here that there is -- the year-over-year comparability is limited due to the prior year comparison period being prior to the IPO. As such, it is a time when the company had not yet accelerated its clinical development efforts due to capital availability, nor was there yet the necessary G&A infrastructure fully in place to allow for the clinical development work to proceed. The fourth quarter 2019 G&A expense of $1.0 million also included $0.3 million of non-cash stock-based compensation at one-time non-recurring expenses. Research and development expense for the fourth quarter of 2019 was $1.5 million, compared with $0 for the fourth quarter of 2018. The expense in the quarter was largely related to the front-loaded costs of reprocessing and validating the existing batch of Berubicin to be able to commence our trials, as well as starting the production of a new batch of the drug to allow us to complete the clinical trials, both in the U.S., and in Poland. The net change in cash in the fourth quarter was $6.3 million. As of December 31, 2019, CNS had cash and cash equivalents of $7.2 million, which included $8.8 million in net proceeds from our IPO. We've publicly stated that our total cost for our Phase 2 trial is between $8 million and $13 million. And that to ensure we have adequate capital to complete the trial, we would need to raise up to $7 million of additional funding. We would also like to state that our expected cash burn for G&A overhead is expected to be approximately $2.5 million to $3.0 million annually, and that we are doing everything possible to keep that number as low as possible without impairing our ability to successfully conduct the trials. With that, I'd like to open the call for questions.

While we're waiting for the operator to take questions, I also wanted to mention, we will be participating in the 32nd Annual ROTH Conference next week, which is now being held on a virtual basis. We are available to have virtual meetings with institutional investors on March 16th and 17th. If you're interested, please contact your ROTH salesperson or Yvonne Briggs at LHA. With that, I will turn it over to the operator for questions. Operator?

Ladies and gentlemen, that concludes your conference call for today. We thank you for your participation and ask that you please disconnect your lines at this time.