Quoin Pharmaceuticals, Ltd. (QNRX) Q3 2022 Earnings Report, Transcript and Summary

Good morning and welcome to the Quoin Pharmaceuticals Limited Third Quarter Financial Results and Business Update Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to your host today, Gordon Dunn. Please go ahead, sir.

Thank you and good morning. We appreciate you joining us on today's conference call. With me on the call today are Dr. Michael Myers, CEO; and Denise Carter, COO. We're pleased to provide an update on progress of the quarter and discuss Quoin Pharmaceuticals' Q3 2022 financial results. Please note that our operational and financial results press release is now available on Quoin's website. To begin with, Michael will provide a corporate, clinical and operational update. Following which I will review our Q3 2022 financial results. To close, I will hand the call back to Michael for further comments. We will also be pleased to answer any questions that you may have at the end of the call. Before we begin, I'd like to remind everyone that statements made during this conference call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which involves risks and uncertainties that can cause actual results to differ materially from the information expressed or implied by these forward-looking statements. For more information regarding such risks and uncertainties, please see the risk factors outlined in the company's filings with the SEC. Any forward-looking statements are made only as of today, and we disclaim any obligation to update these forward-looking statements, other than as required by law. Please see the forward-looking statements section in our release issued this morning for more information. Now my pleasure to turn the call over to our CEO, Michael Myers.

Thank you, Gordon. And good morning, everyone. Quoin continue to make significant progress in the last quarter as we execute on our plan to build the organization into a global rare disease company. And I'm very pleased to provide an update of our most recent achievements on this call today. The key highlights of the quarter was, the successful completion of the $16.8 million public offerings, which was twice upsize and heavily oversubscribed. As a result of this capital raise Quoin is now funded into 2024, which is well beyond a number of key inflection points for the company. During the quarter, we continue to make significant progress towards our goal of delivering a safe and effective treatment for Netherton Syndrome, a rare and devastating genetic disease for which there is currently no approved treatment or cure. Significantly, during this past quarter, we initiated a clinical trial under an open-IND to evaluate our lead products QRX003 in Netherton patients. As discussed previously, this trial is a randomized, double-blinded vehicle-control study. It will assess two different doses of QRX 003 topical lotion, versus a placebo lotion in 18, Netherton patients. The test materials will be applied once daily over a 12-week period to pre-designated areas of the patient's body. And as agreed with the FDA, a number of different clinical endpoints will be evaluated. This study will serve as the first cohort of a pivotal study for U.S. and EU approval. As previously noted, the FDA has indicated that a total of approximately 20 Netherton patients tested would QRX003 at a commercial dose may be sufficient for regulatory approval in the U.S. Based on the positive and constructive feedback we previously received from the EMA, we believe a similar number will also enable us to obtain regulatory approval for QRX003 in Europe. I am pleased to inform you that a majority of clinical sites are now fully open with the remaining sites on target to open by year-end. In support of the study, this quarter we launched a dedicated website, www.nethertonsyndromeclinicaltrials.com which provides details of the study design, the location of the clinical site, and survey link for patients interested in participating in this study. We are also working closely with the Rothschild Foundation and our CRO, Therapeutics, Inc. to maximize awareness of the study in the Netherton community, and aid in patient recruitment, which is now actively underway. Interest in the study remains very high among the Netherton community and in fact, just yesterday, a patient traveled almost a full length of the country to get to our Boston clinical site, where he will be screened today for our participation in the study. We are seeing similar levels of willingness to travel great distances to participate in the study from across the country, and also internationally as we frequently receive requests from overseas patients who are extremely eager to be recruited into this important study. During the quarter, we also announced plans to initiate a second clinical trial to evaluate QRX003 in Netherton patients who are currently receiving off-label systemic therapy. This trial will also be conducted on the Quoin's open-IND application, and will run concurrently with our ongoing clinical trials. The clinical protocol has already been submitted to the FDA, and pending no comments from the agency, we will initiate patient's recruitment next month. With no approved treatments for Netherton Syndrome, we are increasing increasingly aware that some patients are being treated with investigated systemic therapies, including biologics in an effort to provide any level of relief to some, but by no means all of the symptoms of this disease. To maintain the integrity of our currently ongoing clinical studies, patients must completely wash out of any systemic therapy in order to be eligible to participate. For many patients, this is a very difficult decision. Discontinuing a therapy that is providing even modest relief would result in the return of all of their symptoms just to enroll in a clinical trial, where there is a one in three chance that they'll receive a placebo. We fully understand how challenging of a decision that must be. So in order to accommodate those patient, we have announced our plans to run the second study. This will be an open label study in approximately 10 Netherton patients who are currently receiving and will continue to receive off-label systemic therapy throughout the duration of the study. The trial will not be placebo controlled, and all patients will have a 4% dose of QRX003, which is the highest dose applied once daily to pre-designated sites on the body every day over a 12-week period. As I just mentioned, we anticipate that this study will run concurrently with our ongoing study. And we'll use the same clinical site and the same investigators. By availing of the infrastructure that we have already put in place for current trial, we will be in a position to maximize the efficiency of this new study whilst minimizing incremental costs to the company. Fundamentally, we believe that assessing the safety and efficacy of QRX 003 as adjuvant treatment with systemic therapy could potentially yield valuable clinical data, and possibly result in more treatment opportunities for patients and physicians. I would now also like to take a moment and mention that as we continue to deepen our engagement with the Netherton community of patients, family members, treating physicians, and supporting foundations, we find ourselves more and more in awe of the absolute strength and resilience that we see on a daily basis from this patient population. We are constantly humbled by the immense courage of this community, something which only serves to increase our determination to provide a safe and effective treatment for is absolutely devastating disease. Turning now to our research product, research projects at Queensland University of Technology or QUT, we continue to make great progress and are hopeful that one or both programs will initiate clinical testing next year. While it's still at a relatively early stage of development, we view these products as important components of our Rare Disease portfolio. We are very pleased with the strength of this partnership and continue to be impressed with the quality and depth of the science being performed by the QUT researchers. The initial clinical testing will be performed in Australia, where Quoin will be able to take advantage of the very generous incentives offered by the Australian government, including but not limited to a rebate of 43.5% of all research dollars spent when these highly cost effective programs for the company. And finally, during the quarter, we continue to expand our list of international distribution partners of QRX003. On July 15, we announced that we entered into an exclusive license, distribution and supply agreement for the Canadian market with Endo Ventures Limited, the subsidiary of Endo International PLC. And those affiliates, Paladin Labs will be responsible for the commercialization of QRX003 in Canada once approved. This latest agreement marks our eighth such partnership for QRX 003 that now covers 60 countries including Australia, New Zealand, China, Hong Kong, Taiwan, and Middle East Central and Eastern Europe, Turkey and parts of Latin America. We continue to work closely with these partners to advance the development of QRX003 in their respective territories as they pursue the entry of the product into early access and compassionate use programs in our local markets. With that update on our operational progress, let me turn it over to our CFO, Gordon Dunn to discuss the third quarter financial results.

Thank you, Michael. As Michael outlined in August, we successfully completed a $16.8 million public offering, which results in net proceeds of $14.9 million after costs. As of September 30, we had $15.2 million in cash and marketable securities, as compared to $2.7 million in cash as of June 30. Like as Michael also mentioned, we expect our current cash and investments to be sufficient to fund the company's operations into 2024. We reported research and development expenses of $750,000 for the third quarter, which is primarily attributable to expenses related to our clinical trial and associated manufacturing costs, as well as our research projects with QUT. General and administrative expenses were $1.6 million for the quarter and we recorded an operating loss of $2.3 million and a net loss of $3 million for the quarter. I'll turn back to Michael to make some closing remarks and begin our Q&A. Michael?

Thanks, Gordon. In closing, we are extremely pleased with Quoin's progress over our first 12 months as a publicly traded company. Our clinical trial evaluating our lead product candidate QRX03 for Netherton Syndrome has been initiated under an open-IND. And we look forward to updating everybody on the study's progress. Underscoring Quoin's leadership position in the Netherton Syndrome space, we're excited to announce our plans to initiate a second clinical trial that will enable patients who are not eligible for our current study to participate. Also, we increased the number of international licensing and distribution partnerships to aid during the quarter with the signing of our latest deal for Canada. This now brings the total number of countries covered under these partnerships to 60. And we continue to work closely with each of these partners. Operator, we are now ready for questions.

Thank you. At this time, we will begin the question-and-answer session. [Operator Instructions] And the first question comes from Aydin Huseynov from Ladenburg Thalman.

Good morning, everyone. Good morning, Michael, Gordon, thank you very much for the presentation and walking us through the achievements in the last quarter. So I have several questions. Michael, could you walk us through the inflection points in 2023 the ones that you described in a sense that, you mentioned that you have funding till 2024. But wanted understand how would you describe those inflection points in 2023?

Thanks, Aydin. Good morning. Appreciate the question. And so the two key inflection points will be from the Netherton clinical trials. The first study, we anticipate will read out first half of next year. And the second study should probably read out right around the same time. So you're going to have two very important inflection points here. These will be the first clinical data from formal clinical studies for this disease. So those are two very important inflection points for the company.

Yeah, this is this is helpful. Yeah, it's obviously trial readout are huge inflection points. So regarding to recruitment for these two trial. So I know you got the verb side with Netherton Syndrome. And you got a survey asking patients about the disease and what their what -- how they're being treated with. So could you share any information how many patients are actually uploaded their data, how many requests we've received so far? And overall, just share with us your perspective about the recruitment in both trials so far?

Yeah, so we have not released any numbers yet regarding number of patients that have been screened, or any patients that have been fully enrolled in the study. We intend to do so. But what I will tell you is, this first study, we are taking a very systematic approach here to it. So patients first go through the survey, then those phone calls, then they come to the site, where they're at their screen, they have to get to genetic testing done, because we want to be sure that every patient who's enrolled in the study, actually has Netherton Syndrome and not some other related disease. Because misdiagnosis as can be a problem here. So what you see is kind of this systematic process to get patients into the study, and then you have got this kind of hockey stick effect where once that time lag has elapsed, then the patient recruitment starts to come in very, very quickly. So there's an initial lag, as we go through the work, but then it starts to move very, very quickly. And while at this -- on this call, I'm not giving any numbers. I will tell you that I am extremely pleased with the race of recruitment. And again, as we mentioned, the overall interest level. We have a patient from Canada, who's driving to Indiana, on a regular basis to participate in the study. I've been doing this for 35 years. And we used to have to chase patients to get them into study. We're not seeing anything like this. So I feel really good about where we are.

Is this adult patients, adult patient, driving?

All patients currently are adults. The FDA prefer that you start with adults, before you move to children. So these two studies are adults only. And then the next cohort of the of the study will be adults and children and probably primarily children. And the good news is that most of the children today have the genetic testing already done. It also wasn't that available back in the day. But nowadays, so children will not have to go through that process. And we feel like there'll be a faster entryways into the study.

Okay, understood. And would you envision at all that you would file NDA for combinations that are not the combination like on top of biologic not as a single agent? Would you envision that scenario at all?

It's a really good question. It's something we're thinking about. It's something we're talking about. We're discussing it with the appropriate experts. I'm not going to rule it out. I'm not going to say we're going to do it. But at this point, it's a little bit TBD. We expect 03 to be frontline therapy for all Netherton patients. This study, the second study should hopefully show that it's safe and effective to be used in combination with biologics. So bear in mind that these biologics are not approved to treat Netherton anyway. So there would be a whole process there that we'd have to undertake. So I'm going to answer it as a maybe. And we'll have further discussion about it.

Got it, got it. And for publications for 003 can you kind of give us any timelines, whether you're planning to publicize any of the findings or any sort of reasons why you believe 003 will be good for any treatment, any maybe preclinical data, anything that would be relevant for us to sort of establish a proper probability of success for the drug.

Absolutely. So we will embark on a publication strategy, once clinical data reads out. So we're not going to get ahead of ourselves here. And look there is obviously competitive reasons as well, that we want to keep a lot of this under wraps. We're continuing to explore new intellectual property opportunities. But once we have data, we will certainly publish that data and make it freely available.

And the last question I have regarding financial. So you have $15 million in cash. And then you have short term and long-term liability due to officers. So about $4.2 million or something. Could you explain to us what that is?

Yeah, well, first of the cash is about $15.2 million, when you look at cash and marketable securities, or to T Bills. In terms of the liability to officers, the founders of the company, like companies, essentially, were working without any pay and incurring expenses for years before the company finally got funded. First, some premerger and then at the merger. So we agreed with the investors at the time that the that those liabilities will be repaid over time. And that's what we're doing at a rate of 50,000 per month to the two officers.

Okay, thank you very much for taking my questions.

Thank you. And the next question is on Jason Butler at JMP Securities.

Hey, it's Ryan for Jason. Thanks for taking our questions. Just a couple of quick ones for me that the patients that are on the off label systemic therapy, what proportion of the patient population do you think that subgroup represents? And it sounds like you believe those patients are getting minimal benefit from the systemic therapy. If you're hoping to see a signal from 003 over that?

Yeah, so it's hard to -- first of all Ryan, thanks for the question. It's hard to quantify the percentage because, first of all, it's not being reimbursed. So it's money coming out of their pocket. And these biologics are very expensive. So that that's a limiting factor. And for many them, they don't see any benefit whatsoever so they take more of them. So there's probably an I'm guessing -- guesstimating here, less than 10% of patients, who are all these biologics. Now, everybody's on something, right? Because they're willing to try anything, steroids, just really anything at all to provide even minor relief. So what we do know is for patients who get some relief from the biologics, it helps with the pro writers, because they've suffered from an extremely terrible itch. So that's really the only effect that they see maybe a little bit with the inflammation as well. But I would put it, maybe 10%.

Okay, great. And then do you plan to have the two trials read out at the same time? Or do you think the ongoing trial can read out first and then are we going to see all the doses at the same time you're going to give us data from one dose before another? Thanks.

No, see, I suspect there will probably read out around the same time. I mean, curiously enough, the second trial was smaller number of patients may actually read out a little bit faster. But I am anticipating around the same time and will provide data from all the doses. So all the data will be released at the same time.

Got it. Thank you.

Thanks. Great.

Thank you. And the next question comes from Jim Malloy with Alliance Global Partners.

Hey, Mike, thanks for taking my questions. On the two Phase 3 that are running -- I apologize administered. Is it now the second half '23 do you anticipate getting top-line on these will still remain to be seen depending on how the hockey stick on traction picks up for enrollment?

Yeah, so we're still tracking towards mid-'23. Jim. If that changes we'll alert. So far, that seems to be the pace that we're on.

Excellent. Then, on the second Phase 3, you mentioned that 10% on biologics, is that everyone's getting something. So the second Phase 3 includes folks on steroids are really anything that including the 10% potential on biologics.

So just to be clear, Jim, the second study is not a Phase 3, this is more of an investigational study. As I said, there's no placebo control. So patients will do on both systemic and topical therapy. So if you're on topical therapy, you just have to wash off the topical therapy for the sites where the products will be, will be applied to the rest of your body, you can continue to use the topical steroids. But the main thing here is that for patients who are on systemic therapy, they stay on that systemic therapy throughout the course of the 12 weeks. And we see, is there any incremental benefits? And hopefully, no, no safety signals, which we don't anticipate that anyway.

Understood, understood that maybe moving over to 004 are dead? Have you want to receive some positive data out Krystal's looking for a PDUFA in February and Amryt, I guess they got dinged by the FDA. Has sort of the movements over the RDEB space changed or not changed your expectations for an IND for 004 RDEB?

So really good question. And first of all, as you know Abeona produced positive data in the past couple of weeks, and we'd like to take the opportunity to congratulate them on that. Because clearly, this is a patient population that is in dire need of an effective treatment. As you said, Amryt had a setback with the FDA, and was expecting to get yes or no in terms of approval I think by the end of February of next year. Look, there's no one size fits all opportunity here. Some of these other products can't be used in all patients, because it's just not technically feasible. Some of these other products have manufacturing challenges that may make things a little complicated for them. Our product is very patient friendly, easy to use topical lotion. I will say by middle of next year, we'll be in a position to make a go no go decision. As we said before, if we think there's a commercial opportunity for us, we will be in a position to move very quickly, we have very positive feedback to our pre-IND submission, the clinical protocol is written, the product can be manufactured very quickly. So if we make the decision to move, then we will do so quite quickly. But we will not share something that's not there. And there's still more shoes to fall or more balls to drop next year. And as we see what happens, then we will make a decision. But I would guide you towards middle of next year as a reasonable timeline for us to give a go no go decision.

Excellent. Thank you for taking the questions.

Thanks Jim.

Thank you. [Operator Instructions] And we do have a question from Naz Rahman with Maxim Group.

Hey guys, thanks for taking my question. Just a quick question. The patients that are on the biologics, do you know which biologics they're on? Are these like anti-TNF inhibitors or the Jak [ph] inhibitors are what are they taking?

It's primarily two Naz, dupixent and Taltz. Those are the by far the ones that are being used most frequently.

Got it and like for statistical purposes, how do you plan on addressing the fact that there's so many patients that are like on contaminant therapies because the stomach therapies?

Yeah, so that's why for the first study that we're running, they have to wash completely out of that. So they will -- nobody in the first study will be on any systemic therapy whatsoever. They can use topical therapy, but they have to wash off it for the sites where our product will be applied. For the second study, obviously then patients can be on systemic therapy, and they stay on us for the duration of the study. But the first study, the eligibility requirements are extremely rigorous. And patients have to wash out over a 12-month period to make sure there is no systemic therapy left in their system whatsoever. Thank you.

Got it. Thank you.

Thank you. And this concludes the question and answer session. I wanted to return the call Dr. Myers for any closing comments?

Thank you very much. I would just like to conclude by thanking everybody for their participation here today, and their ongoing interest and support and Quoin. Please feel free to reach out to us with any questions or comments, either by email or by phone we're always available. So thank you and good morning.

Thank you. The conference has now concluded. Thank you for joining today's presentation. You may now disconnect your lines.