Moleculin Biotech, Inc. (MBRX) Q1 2024 Earnings Report, Transcript and Summary

Hello, and welcome to the Moleculin Biotech First Quarter 2024 Quarterly Update Conference Call and Webcast. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to your host, Jenene Thomas, Investor Relations. Please go ahead, Jenene.

Thank you, Daryl. Good morning, and welcome, everyone. At this time, I would like to remind our listeners that remarks made during this webcast may state management's intentions, beliefs, expectations or future projections. These are forward-looking statements and involve risks and uncertainties. Forward-looking statements on this call are made pursuant to the safe harbor provisions of the federal securities laws and are based on Moleculin's current expectations, and actual results could differ materially. As a result, you should not place undue reliance on any forward-looking statements. Some of the factors that could cause actual results to differ materially from these contemplated by such forward-looking statements are discussed in the periodic reports Moleculin files with the Securities and Exchange Commission. These documents are available in the Investors section of the company's website and on the Securities and Exchange Commission's website. We encourage you to review these documents carefully. Additionally, certain information contained in this webcast relates to or is based on studies, publications, surveys and other data obtained from third-party sources and the company's own estimates and research. While the company believes these third-party sources to be reliable as of the date of this presentation, it does not independently verify and makes no representation as to the adequacy, fairness, accuracy or completeness of, or that any independent source verified any information obtained from third-party source. Any data discussed regarding clinical trials and progress are considered preliminary and subject to change. Joining us on today's call from Moleculin's leadership team are Walter Klemp, Chairman and Chief Executive Officer; Dr. John Paul Waymack, Senior Chief Medical Officer; and Jonathan Foster, Executive Vice President and Chief Financial Officer. I would now like to turn the call over to Walter Klemp, Chairman and CEO. Wally, please proceed.

Thanks, Jenene. Well, calling 2024 transformational for Moleculin would be a massive understatement. We've now been able to lock in composition of matter patent protection for annamycin, giving us market exclusivity at least through 2040. This is the gold standard for intellectual property, and it's also underpinned by orphan drug designation in both the U.S. and the EU. Of course, all of this proprietary protection would be meaningless if we didn't have the safety and efficacy we need to be approved and to be useful for patients. Well, now we've treated over 80 patients and counting with 0 cardiotoxicity, something that no currently approved anthracycline can claim. But most importantly, we've now shown a 60% CRc rate in second-line patients, and key opinion leaders are beginning to weigh in on what they think of this level of performance. In fact, you can hear what they're saying by checking out the Clinical Day video by clicking on the banner on the homepage of our website at moleculin.com. Simply put, our efficacy results in our clinical trials to date are better than any drug ever approved for use in AML, period, and with a game-changing safety profile. Look, it's impossible for me to overstate the importance of our latest data. The greatest unmet need in AML is for an effective second-line therapy. Accordingly, we prioritize recruitment of second-line patients in our latest AML clinical trial. And as you can see, we had a 60% CRc rate. Not only that, but we had a 50% CR rate. Nobody does that in second line. Nobody. Again, we've never seen a performance this high from any approved AML therapy, and that's why the leading experts in leukemia are beginning to take notice. Since we closed the clinical trial to additional second-line patients, we've now added a few more first -- patients in first line and third line. And we've seen more complete remissions, driving the overall performance up for the trial in total, and putting us now at a total of 20 patients. We'll continue this type of recruitment, especially in first line, so that we can learn as much as possible before kicking off our registration trial. But let's be clear, we don't believe we need any more data before proceeding with the registration-enabling trial in second line, and that's why we're about to have our End of Phase II meeting with the FDA. And clearly, the most important next point of information is determining how the FDA views all this. As a point of reference, our Senior Chief Medical Officer, Paul Waymack, worked for the FDA and he has a pretty well-informed point of view on this. On that basis, we're requesting the FDA agree to an open-label single-arm trial of around 100 to 150 patients as our pivotal approval trial. This trial will be in second-line patients where there is a clear unmet medical need, as confirmed by the key opinion leaders on last week's conference call, and where we are confident that our most recent results, if repeated in this larger population, would be more than sufficient to achieve approval. In fact, we estimate we should be able to achieve approval with a performance level much lower than the one we've recently reported. So what does this mean for shareholders? In recent discussions, I've made no secret about the fact that we believe Moleculin is significantly undervalued. This chart on Slide 7 helps explain why we believe that. If you've been following the AML space, you have undoubtedly heard about Jazz Pharma paying $1.5 billion in 2016 for Vyxeos. And that's a drug that is really only relevant to the AML space and has a relatively limited share of market. And that deal was cut pre-approval. And now you have AbbVie's venetoclax, which is generating $2 billion a year in revenue, which at typical revenue multiples implies that venetoclax could be valued at over $10 billion as a stand-alone drug. What's even more illuminating though is how some of the gene targeted therapies are being valued. For example, you've got Servier, a French mid pharma company, paying nearly $2 billion for 2 niche-focused AML drugs, Idhifa and Tibsovo. We estimate their combined impact on the AML population is to potentially produce complete remission in about 6%, 6% of the overall AML population. Then you have companies like Kura and Syndax whose drugs are relevant to a fraction of the AML population and who are being valued in the billions. In fact, let's drill down on Kura for a moment. They're roughly at the same stage as we are: Phase II results and looking to start a pivotal trial. But by the way, their reported performance is significantly lower than ours. And yet Kura has a $1.5 billion market cap. To show you how ridiculous this disparity is, if we had their market cap, our stock would be trading above $600 per share. And I firmly believe we have a better drug candidate that will save many more lives. This kind of disparity simply cannot continue, and we believe it's only a matter of time before the market wakes up to this. In the meantime, this is an earnings call, so I need to give our EVP, CFO, Jon Foster, a chance to weigh in. Jon?

Thanks, Wally. For the quarter, R&D expense was $4.3 million -- for the quarter -- versus $5.7 million same period a year ago. The decrease of $1.4 million is mainly related to the clinical trial activity decreasing as we're winding down MB-106 and MB-107 trials as compared to a year ago. G&A expense was $2.4 million for the quarter, less than the $2.6 million in the same period last year. The use of cash was higher in this period as we made some expenditures on drug supply previously accrued, leaving us with roughly $17 million in cash on hand for the quarter. Our market cap is at roughly $13 million, taking into account the 2.5 million shares outstanding, which includes prefunded warrants. Our average daily trading volume is at 30,000 shares per day. And we have moved some planned expenditures from 2024 into 2025, and our cash runway now runs deeper into Q4 2024 than previously planned. Wally?

Thanks, Jon. Well, if there's one takeaway from this call, I hope it's that we believe our clinical data is strong enough to warrant approval if repeated in the context of the pivotal trial. And that's exactly where we're heading. Assuming we receive a supportive response from the FDA, we should be kicking off that pivotal trial by the end of this year. And in our view, that means we are now entering the window that is typical for exits in our industry. Obviously, our stock price is not yet tracking with this possibility, but we believe it eventually will. And if we're right about that, we believe shareholders will finally have an opportunity to see the kind of valuations that they deserve. I challenge anyone considering an investment in Moleculin to just look at the data. Compare us with any other asset in the AML space. Listen to what key opinion leaders are saying about annamycin. And I promise you, when you do, you will ask yourself, how can MBRX be valued so low? My answer is, we shouldn't be. And we won't be for much longer. Now clearly, that's only my opinion, but this isn't just talk on management's part. We've been investing our own after-tax dollars in Moleculin stock because of our confidence in this opportunity. So thanks for joining us today, and we look forward to the upcoming critical news flow on our progress.

[Operator Instructions] Our first questions come from the line of Jonathan Aschoff with ROTH MKM.

I was curious, has there been anything else even remotely akin to allergic reactions, or is it just as was reported several weeks ago for the, I think, 1 patient?

Well, there's no new information, Jonathan, but I want to give Paul a chance to sort of weigh in, because that's an important point as it, as you know, it actually, we think, has mathematically the potential to cause our numbers to be currently actually slightly understated. But Paul, do you want to explain why that is?

Yes. First, to your question, that case was a typical allergic reaction where, when the drug infusion began, the patient began to have a little wheezing, and cutting back on the rate did not stop it. It's been the only patient in whom this has happened in over 80 patients whom we have treated. So it appears to be a relatively rare event. We say unfortunate because that patient was 1 of the 10 patients who received second-line therapy, and of course, in an intent-to-treat analysis, he counts even though he never was going to get a response since he never received more than a micro amount of the drug. So of the 10 patients, we had the 6 CRs, 1 PR. Of the 3 people who had no response, he was 1 of the 3 where that was because he never got the drug.

But then we also had another one that was allergic to cytarabine, correct, Paul?

Yes. That was not a second-line one, though. But yes, we had 1 allergic reaction to cytarabine.

Okay. And I was thinking about the, what should be this quarter, the End of Phase II meeting. When you say 1 half '25 to start the trial, are you just being conservative and maybe it's more like the beginning of the first half? Or do you really need a year, with that decent CRc rate, to start a trial after that meeting?

We are trying to -- I mean, Jonathan, we've interacted with you for a long time, I think you know we're fairly conservative and we always like to leave room for the unforeseen. Technically speaking, we should be in a position to start the trial even before the end of the year. But inevitably, in clinical trials, there's always one last thing that has to be ironed out. So we're describing it as 1 half '25 to give ourselves a bit of leeway, but I agree with you, it should be right at the beginning of '25.

Okay. And then not to nitpick, but in that same little list of future events, there's -- this quarter, there should be the meeting, like I said, the EOP2. But then there's another line item, second half of 2026, for feedback from the EOP2 meeting. I don't really get that. Is that supposed to be something that happens after your single-arm trial?

No. That sounds like a typo.

No, I'm looking at the slide right now. It's End of Phase I meeting first half of 2024; initiate pivotal trial, 2025. So feedback in the third quarter of this year.

It says H2 2026 in the press release.

That's conclude the pivotal trial. We'll check that. Thank you, Jon.

Yes. Have you seen enrollments, recruitment ease, I guess, let's call it, go -- become more easy commensurate with the additional responses you've been showing over time? How are you faring against the other clinical-stage AML competition? Because there's a decent amount of that. And has your data...

Yes. There's no question that once we started to see complete remissions in second-line patients -- there's a regular conference call where all the investigators have a chance to participate and share in the information that's going on with the clinical trial, once that -- and so that information gets out pretty quickly. And once that started to happen, it was -- you could just see it. All of a sudden more and more people start recruiting, and recruiting picked up -- I mean, we saw recruitment probably triple in pace when that started to happen. I can't really comment relative to other competitive trials, other than to say clinicians, all -- every one of these clinicians, when you sit down with them and really talk about the reality of clinical trial, it becomes glaringly apparent what they care most about is the welfare of their patients, as they should. And so even though there are clinical trials out there for targeted therapies -- and let's face it, the performance of targeted therapies has been kind of dismal. I mean it's just enough to get them approved, but it really sets a low bar. 20% CR rates, that kind of thing. And clinicians are not blind to that. And so if they see it, let's say, their patient might line up for FLT3 or might line up for another mutation that is -- for which there are clinical trials, but now that they realize they can achieve a 60% CR rate with annamycin, it puts a lot of pressure on them to pick our trial over somebody else. At least that's been based on our -- the 9 clinical sites that we have right now. We're going to obviously have more clinical sites for the pivotal trial. And I think one of the most important jobs we're going to have is making sure all of those sites really understand the data, so they have the same level of enthusiasm that our current sites do.

Great. That sounds like it bodes well for Phase III.

Yes. Thanks, Jonathan.

Our next questions come from the line of Jason McCarthy with Maxim Group.

This is Chad on for Jason. So can you give us an idea of the end values of the pivotal trials for the 5 approved second-line drugs? And how would that compare to the upcoming potential pivotal design?

So I'm going to let Paul comment on the impact on the pivotal design. But just as a point of information, in fact, there's a -- our corporate deck on the website, that's available on the website, has a slide dedicated to this question about the approval rates for the 5 currently approved drugs. And just for the record, there are 5 drugs that are approved for use in second-line AML in the U.S. Not all of them are approved in the EU. And that has a lot to do with, frankly, the relatively poor performance levels and the fact that many of these drugs were approved on the basis of a single-arm open-label trial, which the EU categorically will not utilize for drug approvals, for marketing authorizations. But that slide in our corporate deck lists out the -- both the CR and the -- the CRH or CRI, the additional component that makes up CRc, composite CR rate. And what you'll see is the CR rates on average are 21%, some below, some above. And you get a little bit better performance because these drugs tend to produce CRIs or CRHs. But no matter how you look at the data, we're double that performance basically. So that's why we're so, frankly, bullish about our capability. But Paul, you want to weigh in here relative to the impact on approval?

Sure. To answer the question, for the 5 drugs that were approved to second-line monotherapy, the number of patients vary from around 100 to 300. Now I think it's important to always recognize who is your audience, what do they want? And the answer is the FDA. And for the FDA, the average response is not as important as the 95% confidence intervals. And the CR rate for these drugs was from around 15% to 30%, which does not give you overwhelming confidence and the 95% confidence interval with low numbers of patients. So when you're getting low response rates, you're going to need more patients. The reason we proposed only 100 patients is, if we're getting anywhere near the 60% response rate, when you do 95% confidence intervals for that, you don't need a lot of patients to show you're getting a big effect, because the FDA is going to worry about the lower limit of the 95% confidence interval. So although this would be a rather low number of patients from a perspective of other drugs, because our response rates are so unprecedented, we can propose a lower rate. Full disclosure, the only concern we have is we are a combination therapy, as opposed to those other 4 drugs. And that might cause the FDA to say, "Well, we generally want a randomized trial for a combination therapy." But again, it's been true in the past, but there has never been a drug with this response rate. This is just unprecedented. So we think we, therefore, have a case to say, when it's that high, you have to do a different general plan for the final clinical trial of the drug.

Got it. Okay. That was really helpful. And then, while of course second line is the focus now, can you maybe just speak a bit to the plan eventually for first line and sort of the opportunity there?

Yes. Again, let me maybe kick that off, but then have Paul weigh in. We mentioned in the prepared remarks here that we're continuing to recruit first-line patients into the existing MB-106 trial. And the reason we're doing that is maybe twofold. But in general, we just want additional data. We want additional knowledge. As Paul said, the response in second line is unprecedented. You would expect, generally speaking, an even better response in first-line patients. And in fact, so far, that's what we're seeing. Now it's on a small n, we've only had 3 first-line patients so far. So you need to be careful with that. But as expected, that we're seeing a slightly better response rate. It becomes important, I think, on 2 levels. One, from an approval standpoint. If we're successful in negotiating a single-arm trial with the FDA, then it undoubtedly means we will have to eventually run a confirmatory Phase III post-approval. That's a high-class problem because you're, at that point, you're already generating revenue and running a trial in parallel. But when we think about the trial, the Phase III trial design we would most prefer, it turns out it's probably a first-line trial where you're comparing head-to-head against, let's say, the existing 7+3 therapy. And so the more we know about our drug's performance in first line before we run that trial, the better we are at structuring that trial. That's, let's say, one important factor. The other important element here is in terms of exit opportunity for big pharma. They're already looking -- we know they're already looking at us and watching what we're doing. And once you start to understand the drug, you realize it's not just -- it's not going to be simply a second-line treatment for AML. That's our pathway for approval, and we love that pathway, but the drug is going to be so much more than that. In our view, it will be -- become the standard of care, most likely displacing all other anthracyclines, not just in AML but in many indications, which, again, goes back to why the comparison to drugs with companies like Kura is so ridiculous, because annamycin is going to be so much more important to the medical community at large. But Paul, do you want to comment at all on the strategy behind the first line versus second line?

Sure. And I would agree fully, first-line therapy is the ultimate indication because everybody at some point is first line. Only some patients progress to second line. However, again, focus on your audience, focus on FDA. FDA looks and sees there are lots of drugs that have been approved to treat first-line therapy for AML. However, the 5 drugs for treating second-line therapy are all for subsets of the population, for patients with FLT3 mutations, with isocitrate dehydrogenase mutations. But that's, combined, less than half of the population. A majority of patients who get -- who need second-line therapy, there is no FDA drug approved and indicated for that. And that is the FDA definition of an unmet medical need, which lowers the bar dramatically as far as patient numbers, trial design and the like. So recognizing that, that that's the easiest, quickest way to an approvable NDA, that's where we're going first. But we have not given up on first-line therapy. Indeed, although we have shut down enrollment in our 106 trial for second line, because we have enough data to power a second-line pivotal trial, we are continuing to enroll first-line therapy patients so that we will eventually have enough data to power a first-line study, because that will be our second Phase III study.

Okay. Awesome. Congrats again on all the progress.

Thanks, Chad.

Our next questions come from the line of Vernon Bernardino with H.C. Wainwright.

Congrats on the progress as well. So given the date, today's date, and the milestones we expect to see first half of this year, obviously, other than announcing the conclusion and then having conducted EOP meeting with the FDA, what can we expect as far as additional results from the MB-106 trial and as well as the End of Phase II meeting? And do you anticipate announcing what you're going to announce at MB-106 before the End of Phase II meeting -- having conducted the End of Phase II meeting? Or will you just announce the End of Phase II meeting or will you actually also announce perhaps some of the details of the discussion with the FDA?

Sure. Jon, you're the kind of the keeper of important dates and announcements. Let me hand this off to you so you could kind of navigate this.

Sure. Vernon, we're not going to announce when we're having the meeting. We're staying true with what we've said earlier. We will have it by the end of June. We don't want to give the specific date out, just because we don't want people calling around that date and bugging us, to be quite honest. And we'll have feedback in early Q3 and we'll share that with the public. And we're very excited about that potential of what that feedback is. And so we're -- as we've said before, we think long and hard about our key events, and we try to be conservative to be sure we're going to make those. And we're going to make those 2 dates.

I think it's important to add, because you did ask about the MB-106 trial. Yes, it's ongoing. What -- it's -- I think it's unlikely, given the time span between now and when the FDA meeting will occur, I think it's relatively unlikely that we'll have additional MB-106 data to release between now and then. It's not impossible, but it's probably not likely.

Yes, we'll probably announce -- give an update of the MB-106 on the first-line patients in August with our quarterly earnings.

Okay. Thanks for that fine detail. I appreciate it.

Thank you. We have reached the end of our question-and-answer session. And with that, that does conclude today's teleconference. We appreciate your participation. You may disconnect at this time. And enjoy the rest of your day.