Good day, ladies and gentlemen, and welcome to the Second Quarter 2021 Salarius Pharmaceuticals Earnings Webcast and Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. I would now like to turn the conference over to your host, Mr. Jason Rando with Tiberend Strategic Advisors. Please go ahead.

Good morning, everyone and thank you for joining Salarius Pharmaceuticals 2021 second quarter and full year financial and corporate results call. Earlier this morning, Salarius Pharmaceuticals issued a press release detailing its financial results for the three months and full year ended June 30, 2021, which we encourage listeners to read. The press release can be found in the News section of salariuspharma.com. Salarius also filed a 10-Q this morning, which is available on salariuspharma.com and sec.gov. Before beginning the call, I'd like to make the following statement. Today, we will be making certain forward-looking statements about operating metrics, future expectations, plans, events and circumstances, including statements about our strategy, future operations, and the development and effectiveness of our lead investigational drug candidate, seclidemstat, and our expectations regarding our capital allocations and cash resources. These statements are based on our current expectations and you should not place undue reliance on these statements. Actual results may differ materially due to our risks and uncertainties, including those detailed in the risk factor section at Salarius Pharmaceuticals' Annual Report on Form 10-K for the year ended 2021 and subsequent Quarterly Reports on Form 10-Q, which had been filed with the SEC, as well as in our other filings we make with the SEC from time to time. Salarius Pharmaceuticals disclaims any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events or otherwise. With us on today's call is David Arthur, Director and CEO of Salarius Pharmaceuticals, who will provide an update on Salarius' corporate and clinical achievements during the second quarter and its vision for the future; and Mark Rosenblum, CFO, who will review Salarius' second quarter financial results. With that, David, please go ahead.

Thank you, Jason, and thank you to everyone for joining our conference call today, particularly, those of you dialing in for the first time. These continue to be exciting times for Salarius. The events of the second quarter and recent weeks have continued a period of substantial growth highlighted by significant progress in our clinical programs; including completing dose escalation in our advanced solid tumor trial, initiating our enlarged dose expansion Phase 2 sarcoma trial, and initiating a trial in hematologic or blood cancers. Salarius also sustained its balance sheet strength ending the quarter with more than $33 million in cash and cash equivalents. Ongoing trials are actively recruiting and treating patients with seclidemstat across five patient groups; three in high, unmet needs sarcomas, and two in high, unmet need hematologic cancers; and we are expecting potential data readouts later this year and into 2022. It is a long list of accomplishments for just one quarter, but with first half of 2021 now closed, we are pleased at how well Salarius' position for the second half of 2021 and beyond. Before I review our recent accomplishments in more detail and future plans, I would like to take a moment to provide some background to those of you on today's call who are new to the Salarius story. Our lead -- called seclidemstat is an oral drug, tablet actually, that inhibits the widely validated cancer target LSD1. Targeting the LSD1 enzyme has been an area of interest in cancer research for over a decade, as LSD1 plays a key role in the development and progression of numerous cancers. Seclidemstat is a novel, reversible inhibitor of the LSD1 enzyme with a differentiated mechanism of action that granted broad activity across several cancer types compared to other LSD1 inhibitors in the clinic. LSD1…

Thank you, David. For the three-month period ended June 30th, 2021, Salarius reported a net loss of $3.1 million or $0.07 per basic and diluted share compared to a net loss of $1.8 million or $0.13 per share in the first quarter of 2020. The loss from operations before other income for the three months ended June 30, 2021 increased by $1.2 million compared to the loss from operations of $1.9 million for the same time span last year which was primarily due to lower grant revenue and higher overall operating costs. Higher research and development costs resulted from increases in personnel, clinical trial activities, and higher laboratory expenses. The decrease in general and administrative costs resulted from lower legal expenses and overall lower personnel costs more than offsetting higher certain -- certain higher professional fees when compared with the same period a year ago. As of June 30, 2021, total cash and cash equivalents totaled $33.1 million compared to $7.2 million on June 30 in the prior year. Our working capital position in the current period was $36.8 million compared to just $7.8 million a year ago, a much healthier look. The company's overall cash position and its access to additional cash is the best in the company's history. In addition to our available cash, we have a receivable from the Cancer Prevention and Research Institute of Texas, also known as CPRIT, plus the availability to draw from the ATM facility established in February 2021 and potential warrant exercises that could all add to our currently strong cash position. During the quarter, we expended all remaining available funds from the CPRIT grant and $4.8 million is listed as a current receivable on our balance sheet. We believe that our current cash position will be sufficient to fund our activities through the completion of our current clinical trials in 2022 and beyond. With that, I'd like to return the call to David.

Thank you, Mark. Let's return to our recent key opinion leader event and the recent announcement of our newest clinical trial, which launched our hematologic or blood cancer development program. During our key opinion leader event presentations, Dr. Johnathan Whetstine, Dr. Sant Chawla, and Dr. Kapil Bhalla each discussed unique aspects of seclidemstat that make it well suited to potentially address a host of cancer indications. During his remarks, Dr. Whetstine spoke to LSD1 inhibition and the broader field of epigenetics, which are the scientific underpinnings of seclidemstat. Dr. Whetstine noted that in context of cancer, LSD1 overexpression is associated with poor prognosis across a variety of cancer types and seclidemstat has a distinct advantage compared to other LSD1 inhibitors as they cannot only inhibit the enzymatic activity of LSD1, but also inhibit more of LSD1's scaffolding properties. The scaffolding property has high relevance in several cancer types including solid tumors in large commercial markets. And so inhibiting this function may result in a more potent LSD1 inhibitor with advantageous therapy to properties. Dr. Chawla spoke directly to seclidemstat's potential in a range of sarcoma indications, including observations from the clinical trials of seclidemstat in Ewing sarcoma and FET-rearranged sarcomas. Notably, Dr. Chawla highlighted that extending progression-free survival by even four to six months would show a significant improvement in treating these difficult-to-treat advanced sarcomas. As previously mentioned, seclidemstat has already shown it can achieve that progress-free survival in certain FET-rearranged patients. Dr. Chawla also addressed the potential of seclidemstat in combination with chemotherapy as a potential advancement in the treatment of these sarcomas given the synergistic effects of each therapy. Concluding the event was Dr. Bhalla who discussed the potential of LSD1 inhibition in the treatment of hematologic cancers noting that LSD1 overexpression and dysregulation of LSD function can…

Your first question comes from Aydin Huseynov with Benchmark.

Hi. Thank you for taking my questions. Congratulations with the quarter. I just wanted to elaborate a little on the seclidemstat in hematologic malignancies trial with azacitidine at MD Anderson. So, what are your expectation about this trial? So, we see that clinical trial as Gold mentioned, September 2022, as a readout date and its overall response rate timely endpoint. But just trying to understand what's the -- what's target Dave, what's the target rate or are that you're trying to achieve and what was the historic rate that we need to compare this to?

Aydin, thanks for the question. Good morning. Let me turn that over to Dr. Mirza to give -- add a little more color, and then we can weigh in with some follow-up if needed.

Hi, Aydin. Thanks for the question. The trial is a Phase 1, Phase 2. So, the first component of the trial is to determine the recommended Phase 2 dose of the combination. The second component of the trial is to look at efficacy in terms of overall response rate. So, the trial has a primary -- it has primary objective of safety, tolerability, maximum tolerability dose, and a co-primary endpoint of what all the response rate. These patients that are being enrolled in this trial actually have failed all standard treatments. These are HMA failure patients. As you know, these patients have really very poor prognosis and have very low overall response rate. This is a small study. Once we determine improvement in response rate that will be reported. It -- the trial is, as I mentioned, is a small trial. It includes around 30, 40 patients total, but the data will give us an indication to move into a larger trial.

And Nadeem, I believe also we're looking at the blast activity…

Yes.

Which will information -- well, it -- which will inform and allow us to move forward into AML.

That's correct. So, we will be doing some biomarker analysis in this trial. As I mentioned early, it's a proof-of-concept study and these patients actually have a very poor survival. I mean, these -- would expect that some of the patients that have received combination of azacitidine and venetoclax are also eligible to be enrolled in the study. So, these are late-stage patients, and I believe are response rate of 20%, 30% would be a reasonable response rate.

Yes. I just want to ask or follow-up on that. What do you think is the differentiation of seclidemstat versus other LSD1 inhibitors that are being tried in the same indication, AML, MDS, and CMML?

Daniela, would you like to try and address Aydin's question?

Yes, of course. Thanks, Aydin for your question. So, there are other targeted agents being developed with azacitidine like venetoclax. I think the advantage that we have with seclidemstat is that LSD1 has been established as an important player in progressing hematological malignancies, but the safety profile that we have in terms of not causing significant heme-toxicities is better suited for the combination with azacitidine. And mechanistically, we're approaching heme-malignancies from a different point than some of these other targeted agents where we're causing release of that differentiation block, which work synergistically with azacitidine. It's another epigenetic agent that's also causing release of this differentiation block. And so, like David mentioned before, those two working together, end up being synergistic. So, I think there's advantages in both the mechanism and how they're both epigenetic agents and resulting in synergies and then also the safety profile I mentioned.

Understood. All right. Thank you very much.

Your next question comes from Hunter Diamond of Diamond Equity.

Hi, everyone. Good morning, and congratulations on the quarter. So, my question is, Salarius has been discussing immuno-oncology trial. So, I just want to get an update, what's the status and the market opportunity from your view?

Hunter, this is David Arthur. Good morning. Hope you're doing well. Great question. We are – a couple of answers. We are continuing to work with our clinical investigator and their administrative offices to get this trial activated, and hope to have an announcement very soon. This is a very important trial for us and for patients. But an equally important question would be, what is this trial going to mean to patients and investors when it's activated? First, it's important to note that, there's an FDA allowed trial protocol. It's been submitted and we have already packaged seclidemstat. It's ready to ship. So, we're hopefully right in the finish line. Second, we are continuing to work on finalizing a clinical trial agreement with this renowned research center and initiate the investigator-lead trial. Third, according to the website clinicaltrials.gov, once investigators begin to treat patients with seclidemstat in combination with Keytruda, which is a checkpoint inhibitor, they will begin to generate clinical data, which could demonstrate the seclidemstat unmasks tumors and synthesizes those tumors to checkpoint inhibitor therapy. For patients fighting these gynecological cancers, this means a new treatment option for these patients who have failed all other existing options. Now, for investors, this could mean that seclidemstat could increase the number of eligible patients who could benefit from checkpoint inhibitor treatment. And as you know, checkpoint inhibitors are roughly a $16 zillion-a-year global market that only is able to access about 40% of the potential patient. So, if a drug like seclidemstat can unmask tumors and allow the checkpoint inhibitors to access some of that 60% of the market they're unable to access, this would be a – we believe this would be a significant opportunity not only for Salarius but also a huge benefit to patients.

Great. No. Appreciate the additional color and that's all I have in terms of questions. It was a terrific update. So thank you.

Okay. I'd like to take a question from the web, if that's okay? David, Salarius seems undervalued. What am I missing? From a retail investor. This is probably one of the most asked questions I get these days, and I don't think you're missing anything. Let's just recap. Given Salarius stage of development, potential markets and strong cash position, we believe the company is current quite undervalued. Let's recap, just for a moment, recent events. We hit important clinical milestones including completing dose escalation in both the sarcoma and advanced solid tumor trials while demonstrating drug activity in trials primarily designed to study safety. We have initiated and expanded sarcoma trial with three X the patients originally plan to enroll representing three X, the patient groups originally planned with trial updates coming late this year and 2022. We're now treating Ewing sarcoma patients second and third line in combination with chemotherapy where we have shown one plus one is greater than two in anticancer activity. MD Anderson has activated and is enrolling patients in a clinical trial launching seclidemstat in the hematologic or blood cancers, again where the seclidemstat combination therapy showed synergy. This potentially launches Salarius into an expand-to-market opportunity. As I mentioned according to the American Cancer Society, AML accounted for almost 20,000 new US diagnosed cancer patients in 2020 alone. We're in the strongest financial position we have ever experienced and are funded to complete our ongoing clinical trials and continue into 2023. And finally, we believe that LSD1 space received significant validation with the recent initial public offering of Imago BioSciences. Imago is one of the other companies with an LSD1 in clinical trials and a company where their LSD program appears to be their lead asset. In the recent S1 filing, Imago reported unaudited interim Phase 2 data which is where Salarius plans to be next year. I think Imago closed yesterday with a market capitalization of $800 million, but I'd ask you to confirm that number. So, based on these factors, I don't think you're missing anything. I stand by my comment. I believe Salarius is undervalued both as a company and in comparison to our peers.

Okay. And you do have another question over the phone.

Hello?

Yes. Your next question over the phone is from Mike King with HC Wainwright.

Good morning, guys. Thanks for taking the questions. David, you just mentioned Imago and I wondered if you comment or Daniela could comment about the fact that Imago's initial studies are in EV – sorry – polycythemia vera and essential thrombocythemia with the current formulation of the drug and they've stated their work in solid tumors will be dependent on – depend upon another LSD1 inhibitor, but they don't get into the details as to why. So, I'm just wondering if you could care to comment about why Imago looks at solid tumor universe as non-overlapping with liquid whereas, you guys kind of see them as fungible.

Happy to, and good to hear from you, Mike. Daniela, would you like to take this question?

Yes. Thanks, Mike, for the question. So, yes, you bring up a great point and the answer is really it all falls back on the specific LSD1 inhibitor's mechanism of action. So, Imago, like other reversible inhibitor does a great job of interrupting a portion of LSD1 scaffolding activity and that portion is with LSD1 and proteins that drive hematological indication, like myelofibrosis, like ET, and PV, which are the ones you mentioned and that's what Imago is pursuing. Our inhibitors, seclidemstat, interrupts those LSD1 protein interactions, but we interrupt LSD1 from interacting with other proteins where that association is important in driving other solid tumors. If you see what Imago is doing for the second-generation LSD1 program that's going to focus on solid tumors, you'll see that they're approaching it more from a protect perspective where they're looking to degrade LSD1. And the reason for that, again, is because of LSD1's multiple properties as an enzyme but as also as a scaffolding protein. And again as we have, like mentioned, is that not only are we inhibiting the portion of LSD1 scaffolding properties that drive heme-malignancies, but because of where we're binding we inhibit more of those scaffolding properties and we actually see decreases in LSD1 protein expression with our compound already. And so that would open the door for Salarius to not only look in heme indications but also do solid tumors compared to some of the other LSD1 inhibitors currently in clinical trials.

Okay. So, if I could summarize, Daniela, are you saying that you guys hit the enzymatic and David said this in his formal remarks as well, you hit the enzymatic and the scaffolding; whereas, the Imago hits the current one hits the enzymatic and perhaps the next-generation version hits the scaffolding properties, is that a fair way to look at it?

Yes. So, they hit the enzymatic and a portion of the scaffolding. We hit the enzymatic and…

Okay.

Bigger portion of the scaffolding and that difference in the amount of scaffolding that we inhibit allows us to venture into solid tumors.

Got you. Okay. Thanks for the clarification. And then, I wanted just to ask a couple of quick financial questions. I'm not sure Mark can comment about the funding from National Pediatric Cancer Foundation, but how much still remains on that grant or grants? Could you help us understand that?

Mike, this is David. Let me take the NPCF question and then I'll turn it back over to Mark.

Okay.

So, we did not necessarily receive a – well, let me rephrase this. We have received, in the past, grants from the National Pediatric Cancer Foundation. When we embarked on the Ewing sarcoma program, the National Pediatric Cancer Foundation agreed to fund a significant portion of the clinical trial costs by paying the hospitals directly for the cost of running the studies. So, the money didn't actually flow into Salarius. Now, the second part of your question is, what's left? Well, there isn't really a grant, per se, but the National Pediatric Cancer Foundation is funding a significant biomarker project that is being run with a couple of renowned researchers and they're going to be looking at these tumor samples we've been collecting not only in the Phase 1 portion of the study but also the tumor samples we'll be collecting in the Phase 2 portion to help us understand what type of biomarkers can be developed for Ewing sarcoma.

Okay.

Mike, this is Mark.

Go ahead, Mark.

When discussed grant funding, we are always discussing CPRIT. We have received from CPRIT the full complement of their original grant which was $18.7 million modified to $16.1 we have received. We have spent all that funding and we have a receivable. We've received, just to get the math easy, we've received $11.3 million from CPRIT and they still owe us $4.8 million and that $4.8 is on our balance sheet this quarter as a receivable.

Right. Okay. And then the other question is with respect to the ATM. Just remind us, how much is left on that please?

Well, the ATM was established for $25 million, well, right at the beginning of July. We had sold no shares under that. We had filed an ATM back in February 2021 for $6.3 million. The market was quite active at that point and we sold all shares under that $6.3 million ATM in early February.

Okay. Great. I believe that's it. Thanks so much, guys.

All right. And I'm showing no further questions on the phone at this time. And now, I'd like to turn the conference back to David Arthur.

Thank you. As you've heard today from today's discussion, Salarius continues to advance and expand its clinical programs. We continue to fire on all cylinders as clinical trials are now actively enrolling across five-patient populations in trials investigating seclidemstat as a single agent and as a component in two different combination therapies both of which have demonstrated synergistic anticancer activity. Preclinical studies are underway exploring seclidemstat in several new tumor types and we plan to announce additional clinical trials in the near future. Our strong financial position provides a firm foundation to fund our ongoing clinical trials to completion and beyond. We look forward to continuing to advance and expand the clinical program of seclidemstat and provide additional updates during the second half of 2021 and 2022. In conclusion, I would like to thank, as always, our employees for their dedication and loyalty and our stakeholders for their continued support. I appreciate your time and attention today and would like to extend my sincerest wishes of good health to all. Thank you.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may all disconnect.