Quoin Pharmaceuticals, Ltd. (QNRX) Q2 2023 Earnings Report, Transcript and Summary

Good morning. Welcome to Quoin Pharmaceuticals, Ltd. Second Quarter Fiscal Results and Business Update Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please also note that this event is being recorded today. I would now like to turn the conference over to Gordon Dunn, CFO. Please go ahead.

Thank you. And good morning. We appreciate you joining us on today's conference call. With me on the call are Dr. Michael Myers, CEO, and Denise Carter, COO. We're pleased to provide an update of our progress for the second quarter of 2023, as well as discussing our Q2 2023 financial results. Please note that our operational and financial results press release is now available on Quoin's website. In keeping with our normal procedure, to begin, Michael will provide a corporate, clinical and operational update, following which I will review our Q1 financial results. I'll then hand the call back to Michael for closing comments. We will also be pleased to answer any questions 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 involve 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 financial results press release issued this morning for more information. It is now my pleasure to turn the call over to our CEO, Michael Myers.

Thank you, Gordon. And good morning, everyone. On our last call, I reported on the very strong start Quoin has had to 2023. Today, I'm very pleased to announce that this momentum carried into and through the second quarter. On May 24, we announced that our open label Netherton Syndrome clinical trial had achieved 50% recruitment and additional subjects have been enrolled since then. You may recall that we only dosed the first subject in this study in March of this year, so we are very pleased with the pace of recruitment overall. Our other Netherton Syndrome clinical study is on track to have recruited a majority of subjects this month. And it is extremely encouraging how high the interest level continues to be for participation in both studies. We announced today the availability of data from the first patient to complete our open label clinical study, and I will provide more commentary on this later in the call. Also during the quarter, we made substantial progress on our plans to initiate additional Netherton Syndrome clinical studies, including one in a preidentified cohort of approximately 20 Netherton patients in the Middle East, as well as an ex-US study in pediatric subjects. We believe these additional clinical trials will supplement and enhance the data package that is currently being generated by our ongoing studies here in the US. As a leading company in this space, we are fully committed to generating a compelling body of clinical evidence to support global regulatory approval for QRX003 as a safe and effective treatment for Netherton Syndrome. During the quarter, we also continued to engage actively with Queensland University of Technology, or QUT, in Australia. Quoin has two ongoing research programs with QUT, one for Scleroderma and the other for Netherton Syndrome. The active ingredient in the latter program has a different mechanism of action to our own QRX003, and we believe this product potentially has complementary features to QRX003. As previously outlined, while both of these programs are still at an early stage of development, we continue to believe that they are important components of our product portfolio, and we look forward to their advancement into clinical testing. Both research programs are being conducted in Australia where Quoin is able to take advantage of a 43.5% tax rebate from the Australian government, as well as a more rapid advancement into human clinical testing than is possible here in the US or in Europe. Also, during the quarter, we made tangible progress on our plans to initiate clinical testing of QRX003 in additional indications beyond Netherton Syndrome. These indications into Peeling Skin Syndrome, SAM Syndrome, and Palmoplantar Keratoderma, none of which there are any approved treatments for. We hope to provide further updates on our progress in the near future, including timing of initiation of proof of concept clinical testing in patients. During our last call, I also updated everyone on our M&A strategy. As discussed, given our strong balance sheet and the potential access to additional capital, we are acutely focused on expanding our product portfolio via acquisition, licensing, or other means. We are primarily interested in late stage assets in the rare and orphan disease space that are underpinned by strong clinical data and highly favorable commercial opportunities based on readily identifiable competitive strength. While there can be no guarantees that a transaction will be consummated, I can tell you that a number of discussions continued to advance significantly throughout the quarter, and we are optimistic that Quoin will enter into at least one such transaction by the end of the year. We look forward to keeping you updated on our progress during this very exciting time for Quoin. Also, on our last call, I noted that another company had filed an IND with the FDA and received a study may proceed letter to initiate the clinical development of their product as a potential treatment for Netherton Syndrome. As of this morning, following a review of the clinicaltrials.gov website, it appears that this study has not yet been initiated and Quoin remains the only pharmaceutical company to be actively conducting clinical studies in Netherton Syndrome under an open investigational new drug application, or IND. We and our ace global commercial partners continue to be excited by the extent of the commercial opportunity that obtaining the first regulatory approval for a treatment for this disease represents. Turning now to our ongoing clinical studies in Netherton Syndrome patients. Today, we have the privilege of announcing the availability of clinical data from the first subject to complete testing in our open label study. I'm very pleased to be able to tell you that this data is positive across all measured endpoints. You may recall that, in this open label study, subjects are currently receiving off label systemic treatment and will continue to do so in conjunction with QRX003 for the duration of study. It is worth noting that all subjects in this study have been treated with off label systemic therapy for at least one year and, in a number of cases, for multiple years. Notwithstanding this ongoing, long term systemic therapy treatment, all patients recruited into the study demonstrated clear symptoms of Netherton Syndrome, including compromised skin and pruritus or itch. As a result of this long term systemic therapy, subjects recruited into the study provided a natural baseline for us to assess if treatments with QRX003 over a duration of 12 weeks would lead to any therapeutic improvement across a number of assessed clinical endpoints. And so it was for the first subject who completed testing in the study. Despite the long term systemic therapy, this subject exhibited classic symptoms of Netherton Syndrome on entry into the study. However, I'm very pleased to say, on completion of the study for this subject, QRX003 treatment area was deemed to be fully clear, both by the clinical investigator as well as by a well-recognized visual scoring system. Furthermore, the subject also expressed a very favorable impression of QRX003 across a number of important metrics. Importantly also, on completion of the study, this subject's pruritus or itch at the QRX003 treatment area was deemed to be negligible. Bear in mind, one of the primary reasons for people with Netherton Syndrome to go on systemic therapies is for symptomatic relief from their pruritus. For this particular subject, despite having been on systemic therapy for well over a year, it was only after 12 weeks of treatment with QRX003 that their pruritus had decreased to a negligible level. Although this data represents an important milestone for Quoin as it is the first clinical evidence of the potential efficacy of QRX003 in Netherton Syndrome, I do want to strongly caution that it is from a single patient only, and care should be taken not to read too much into this data. As other patients in the study reach the same point, we plan to provide additional updates in due course. As mentioned earlier, our ongoing double-blinded study is now on track to have a majority of subjects recruited this month. We are frequently asked if the open label study is cannibalizing subjects from the double-blinded study, and I can tell you this is not the case at all. Both studies are recruiting independently of each other and feedback from the Netherton community is that the availability of two such distinct clinical trial options allows patients the flexibility to enroll in a study that is best suited to their own ongoing treatment regimen. I also want to highlight that in both studies to date and across all subjects tested, QRX003 is demonstrating an exemplary safety profile. Given the highly compromised skin that Netherton patients have, this is very encouraging news and further bolsters our confidence in the potential for QRX003 to become the first product to safely and effectively treat this disease. With that update on our operational progress, let me turn it over to Gordon now to discuss our second quarter financial results.

Thank you, Michael. As of June 30, our cash and marketable securities was approximately $15.4 million compared to $17 million as of March 31, which we continue to expect will be sufficient to fund our operations into late 2024. Our net loss for the second quarter was $2.1 million compared to $2.7 million for the second quarter of 2022. The decrease was primarily due to exceptionally high legal and professional fees in the second quarter of 2022. I'll turn the call back to Michael to make some closing remarks and begin our Q&A. Michael?

Thanks, Gordon. Today marks an important milestone for Quoin and we hope for Netherton Syndrome patients everywhere. We are extremely excited to announce the results of the very first clinical data for QRX003 in Netherton patients. As outlined, we strongly caution, and I do want to emphasize this point, the data is just from a single subject only and may not be representative of findings from additional subjects. However, that being said, the positive nature of the data across all measured clinical endpoints is certainly encouraging. With both of our studies continuing to recruit subjects, we look forward to releasing additional data in due course. We remain diligently focused on pursuing M&A activities and are targeting executing a least one such transaction by year-end. With that, operator, we are now ready for questions.

[Operator Instructions]. The first question comes from Naz Rahman with Maxim Group.

Congratulations on the data and the progress. I'm going to talk a little more about the data you saw from the single patient. I just want to start on, can you talk a little more about the onset, the cadence and I guess the timing of the benefits? Did you see most of the benefits early in the trial? Or did you see more of the benefits towards the end of the trial? Or did the timing of the different benefits or, I guess, improvements on the different endpoints consistent for the different endpoints or did different endpoints sort of reach, I guess, like, positive [indiscernible] or positive results at different time points?

The benefit really started to become evident for this particular subject in the second half of the study. So, as you know, it's a 12-week dosing period. So it was really from six weeks on. Now, we're not assessing the patient every week. So it's hard to pinpoint exactly when, but certainly it was in the second half of the study. And the timing of onset of benefit was consistent across all of the endpoints. So, once the benefit started to kick in, it became evident across each of the four endpoints that were being measured.

I know it's only been so long since you evaluated that first patient. But since the patient has been off therapy, do you guys conduct, like, a follow-up and has the patient seen any recurrence of symptoms? Or have you found durability?

That's information I don't have, Naz. The way the study was setup is that the patient was enrolled in the study just for 12 weeks and then they're gone. So there really isn't follow-up. Now we are looking to see if we can continue to treat patients further in an extended open label part of the study. But I don't have any information as to what the current situation with that patient is. I will tell you, though, that the product, QRX003, is a competitive serine protease inhibitor. So once you discontinue treatment with it, then – it targets the kallikreins in the skin that are responsible for a lot of the issues that patients suffer from. Once you discontinue treatment, those kallikreins go back to being out of control. So I would strongly suspect that the treatment areas of the patient have now reversed back to the previous Netherton Syndrome symptoms that they had on entry into the study.

My last question is somewhat of a two-parter. Once again, acknowledging that this is just data from a single patient, have these findings somewhat impacted your thinking on how you might have define or adjust later studies? And also, since Netherton Syndrome is really like a full body disease, are you considering potentially having larger application or more application areas for later studies?

These are really good questions. And, look, we started this, we went into complete uncharted territory. Nobody had ever been there before. And neither us nor the FDA had any precedent. So our thinking is starting to evolve now as data starts to be generated. First of all, and importantly, we're not seeing any safety signal. So, that's really good news. So that allows us to think, holistically, should we increase the dose, should we maybe look to dose twice a day. So these are discussions that we're having because now we feel like these options come into play. And with regards to full body dosing, that is something that we are talking about. I mentioned potential study in the Middle East on preidentified Netherton patients. That's something that we're considering for that particular study. I don't feel like we will deviate too far from what we have agreed with the FDA for US approval, but certainly for these other studies, there's a lot more scope to either increase the dose, increase the frequency, and increase the surface area that's been tested.

Once again, congratulations on the data and looking forward to your future readouts.

[Operator Instructions]. And the next question is from Jim Malloy, Alliance Global Partners.

This is Laura calling in for Jim Malloy. With the enrollment for both the QRX003 trials moving along, what's the potential timing here for top line data and subsequent Phase 3 program as well?

We certainly will have top line data from the open label study by the end of the year, and believe for the double-blinded study, early in next year. So, we're continuing to target regulatory approval in the early part of 2025. So, we are in a position to move pretty quickly here. And as you know, the number of patients that we need for approval is quite limited. So I think those targets remain.

You've mentioned the 20 patients study to be conducted in the Middle East. So just what are some of the other updates you have on the potential expansion of QRX003 outside the US? And maybe some of the timelines here as well?

As you know, we have established eight commercial partnerships outside of the US that now span 60 countries. So, our focus here is not just US and Europe. We are looking at this as a global opportunity. So the data that we're starting to generate now from these ongoing studies could be used by some of our partners to obtain approval earlier in their respective jurisdictions than, say, in the US and Europe, and also allow for entry into compassionate use or early access programs. So the generation of data now starts to open up a lot of opportunities for us. And as we continue to assess, how do we build the strongest possible database for this product, we're looking at these additional studies. So we're taking a very broad-based look at this. We're in very close communication with our commercial partners, what are their needs to obtain approval in their countries? So a lot behind the scenes discussions happening, Laura, and stay tuned. We'll have further updates.

Congratulations on the progress this quarter.

This concludes our question-and-answer session. I would like to turn the conference back over to Michael Myers for any closing remarks.

Thank you. Just to say appreciate everybody turning up this morning. And as always, if you have any further questions or need any additional information, please feel free to reach out to us. We remain readily accessible. So have a great day and thank you very much.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.