Rain Enhancement Technologies Holdco Inc (RAIN) Q2 2023 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen, and welcome to the Rain Oncology Inc. Second Quarter 2023 Earnings Conference Call. At this time, all lines are in listen-only mode and following the presentation we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on Thursday, August 10, 2023. I would now like to turn the conference call over to Mr. Dan Ferry, of LifeSci Advisors. Please go ahead.

Thank you, operator and good afternoon everyone. With me today on the phone is Avanish Vellanki, Chief Executive Officer of Rain Oncology; and Nelson Cabatuan, Acting SVP of Finance. Following the call, Dr. Robert Doebele, Chief Scientific Officer and Chief Medical Officer will be joining Avanish and Nelson for a short Q&A. Earlier today, Rain issued a news release announcing the company's results for the second quarter of 2023. Copies of this news release and SEC filings can be found in the Investors section of our website. Full details on updates from the quarter can be found in our news release and 10-Q issued today. Before we begin, I would like to remind you that statements made during this conference call that are not historical facts are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based upon Rain's current expectations and involve assumptions that may never materialize or may prove to be incorrect. Actual results could differ materially from those anticipated in such forward-looking statements as a result of various risks and uncertainties as described in Rain’s most recent quarterly reports on Form 10-Q, and annual report on Form 10-K filed with the Securities and Exchange Commission and other SEC filings. All forward-looking statements made during this conference call are based on management's assumptions and estimates as of today, August 10, 2023. Rain undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after today, except as required by law. With that, I'd like to turn the call over to Avanish Vellanki, CEO of Rain Oncology. Avanish?

Thank you, Dan, and thanks to everyone for joining us for our second quarter 2023 earnings call. The second quarter was an important time at Rain Oncology as we provided the top line data readout on our Phase 3 global registrational trial for milademetan, our oral small molecule inhibitor of the MDM2-p53 complex in dedifferentiated liposarcoma or DD LPS. We reported that the Phase 3 for milademetan did not meet its primary endpoint. We also announced that we would suspend the enrollment of our second clinical study, the MANTRA-2 study. We have begun the process of closing down MANTRA-2. Despite what we feel is very clear activity from the MANTRA-2 study, we do not feel its monotherapy activity rises to a level sufficient for registrational purposes. And closure of this study will ensure we remain judicious with our use of capital. We hope to present final data from the MANTRA Phase 3 study and updated data from the MANTRA-2 Phase 2 study of milademetan in MDM2 amplified solid tumor patients in the fourth quarter of this year. We note, the MANTRA-2 presentation will reflect a significant number of additional patients beyond what was presented last year. We continue to believe that reactivating p53 is an important therapeutic strategy to add to the armamentarium of anti-cancer therapies. At Rain, we're proud that we were able to move as quickly as we did to test the hypothesis in a robust trial, as we did for a global Phase 3 study, despite the results not being what we had hoped. Given these top line data for milademetan, we determined that Rain will be best positioned to achieve its business objectives by taking action to streamline operations, reprioritize its activities, and implement certain cost saving measures, including a reduction in force. We were able to implement those actions very quickly, resulting in substantial moderation of cash burn that will be apparent in the third quarter and beyond. Looking forward, we believe there are exciting opportunities ahead. It is no surprise that the challenging climate in biotech over the last few years has resulted in a number of interesting programs, companies, and technologies being underfinanced and often without strong cross departmental leadership. Our corporate development team has been rapidly reviewing an extraordinary number of actionable opportunities to license or acquire clinical stage programs and technologies that may allow Rain to continue to try to make a difference for cancer patients. Although we won't comment on programs under diligence, there are a number of opportunities that could be of great fit for Rain, with fascinating technology and novel therapeutic strategies for patients. We will update investors when appropriate on how we intend to push forward to add value for our shareholders. Let me now hand it over to Nelson Cabatuan to discuss our financials. Nelson?

Thank you, Avanish. Before I proceed in providing updates for the financial results for the three months ended June 30, 2023, I would like to invite you to review our quarterly report in Form 10-Q filed today for more details. For the three months ended June 30, 2023, Rain reported enough loss of $22.1 million as compared to a net loss of $17.6 million for the same period in 2022. The increase was primarily related to clinical trial costs for our Phase 3 MANTRA trial and Phase 2 tumor agnostic basket trial MANTRA-2, as well as personal costs. General and administrative expenses were $5.4 million for the three months ended June 30, 2023, as compared to $3.5 million for the same period in 2022. The increase was primarily due to higher costs associated with launch preparation in anticipation of the commercial launch of milademetan and liposarcoma, personnel, legal, outside consulting, and accounting and audit fees. In May 2023, we announced a reduction in our workforce in connection with the reprioritization of the company's clinical strategy designed to optimize company resources. We recorded restructuring charges of $2.8 million in the statements of operations for the three months ended June 30, 2023, comprised of $2.8 million cash severance, bonus, and related employee benefits and taxes of affected employees, as well as $37,000 of stock-based compensation expense related to option modification. Total non-cash stock-based compensation expense were approximately $0.8 million for the three months ended June 30, 2023, as compared to $1.4 million for the same period in 2022. As of June 30, 2023, Rain had $86.3 million in cash, cash equivalents, and short-term investments. Rain anticipates that its quarter-end cash position will provide runway into year-end 2026 in the absence of a corporate transaction and partner financing. As of June 30, 2023, Rain had approximately 36.4 million shares of common stock outstanding. Let me now turn it back to Avanish.

Thanks, Nelson. With that, we'll turn it over to the operator to take any questions. Operator?

Thank you. Ladies and gentlemen, we'll now begin the question-and-answer session. [Operator Instructions] And your first question comes from Michael Schmidt from Guggenheim. Please go ahead.

Hey, good afternoon. It's [Ige] (ph) on for Michael. Thanks for taking our questions. Maybe a quick one on the potential new opportunities you guys are reviewing. Avanish, I know you can't talk much on it, but maybe on a high level, can you talk about what modality are you more interested in at this moment?

Hi, Ige. Thanks for the question. So, at a very high level, we're trying to be opportunistic across a multitude of opportunities. I think we have certainly been approached with a variety of precision oncology strategies, but across both small molecule and large molecule approaches. So, that's what we have certainly been reviewing so far. But I won't comment more broadly than that.

Okay, that's very helpful. Thank you.

Thank you. Your next question comes from Yigal from Citi. Please go ahead.

Hi, guys. This is Ashiq Mubarack on for Yigal. Thanks for taking my questions. I guess I wanted to ask about the future of milademetan at this point. Is it more or less on the shelf at this point for the foreseeable future, or are there plans in the background that you're thinking about? And then my second question was, I recall in the past you had a RAD52 asset which you [indiscernible]. I'm wondering if you have any thoughts on that asset and if maybe there's a world in which you reactivate that program? Thanks.

Hi, [Ashwin] (ph). Thanks. We can be brief here. So, there are no plans at the current time for milademetan, and there's really no intention for deploying capital to support milademetan today. And same for the RAD52 program, we're not moving that forward, and we stopped all investment over a year ago.

Okay, understood. Last question from me. I guess what's embedded in your cash runaway guidance at this point? It doesn't sound like it includes any considerations for any potential bill you might do. So, just curious what's in there right now.

Sure. I'll start that, and then I'll ask Nelson to follow up with any additional detail. So, in the cash runaway guidance, we are certainly reflecting the closure of the existing studies that we had alluded to and maintenance of a lean organization that we think is sufficient for developing multiple earlier stage clinical programs. Nelson, do you have any additional comments?

Yes, I just want to highlight that, when we speak about cash runaway through the end of 2026, it does not incorporate additional corporate transaction, as well as additional financing. I just want to highlight that in the second half of this year, 2023, you will see a significant reduction in cash runaway.

Got it. Thanks very much.

Thank you. And your next question comes from Joe Catanzaro from Piper Sandler. Please go ahead.

Hey, guys. I just had one quick question, actually, on milademetan, though. I appreciate that you won't be moving forward with that program at all. I'm wondering if, since you've had more time to digest the MANTRA trial, whether you've been able to sort of hone in on any potential reasons as to why milademetan underperformed the previous data you had generated in DD LPS? Thanks.

Hi, Joe. Thanks for the question. This is Bob Doebele. So, I think for that question, we'll refer you to our upcoming planned presentations in the fourth quarter at a medical conference.

Okay. Got it. Thank you

Thank you. And your next question comes from Sam Slutsky from LifeSci Capital. Please go ahead.

Hey everyone, this is Anshul on for Sam. Thanks for taking our question. One question I had is, basically as you're looking into these licensing and bringing in other assets, is there sort of a sweet spot of deals you're looking for in terms of stage of development or deal structure and so forth?

So we'll share -- first of all, thanks for the question, Sam or Anshul. I think what we’d comment there is, we want to be able to leverage our clinical organization. And again, I think the expertise that the team demonstrated through the MANTRA, MANTRA-2 studies, we think is exemplary. And so, clinical stages is an important attribute of where we're looking. But I'll leave the comments there.

Great, thank you. That makes sense.

Thank you. And your next question comes from Greg Suvannavejh from Mizuho Securities. Please go ahead.

[Technical Difficulty] on for Greg. Just a question for me. How do you weigh the pluses and minuses between starting essentially a new, almost like a new type of Rain Oncology with a new asset versus other corporate options like a potential reverse merger or with some public or private company?

Hi, Avantika. Thanks for the question. It's a great question. So I think the way that we approach that is to take a look at the attractiveness of the options that were presented, the options that we find, and the actionability of those opportunities. And if we can find an avenue that we think we can add value to, that's when it becomes more attractive than one of the other alternatives. So we're certainly looking at all of those avenues. And in the absence of an investable option with our existing cash resources and even our personnel, then other options become available. But at the current time, I think with my comments on the call, this is a unique time in biotech where there's a multitude of opportunities that are available to companies in our current position.

Got it. Thank you.

Thank you. [Operator Instructions] And your next question comes from Mitchell Kapoor from HCW. Please go ahead.

Hi, team. Hope you're doing well and thanks for taking the questions. First, I just wanted to ask about the, just broadly, the options on the table. Obviously, you mentioned a new precision oncology therapy, a new technology platform. I wanted to learn a little bit more about what you're thinking about a technology platform? What could that look like? What broadly does that mean? And then, how many assets might you end license? Is there kind of a limit there? And then is there a hope for how long this could take?

All great questions, Mitchell. Thanks for the question. We're not going to respond in any meaningful depth to any of those questions. We want to leave it sufficiently broad at this point until they reach a point where it warrants further articulation to the public. And we'll provide those commentaries when we can. But now is not the appropriate time to provide that color.

Okay. Understood. And maybe this is a question for Nelson. I just want to ask a finance question. So, as expenses have changed to kind of moderate the cash burn, what kind of broadly could we see for the next few quarters in terms of SG&A and R&D in the absence of any kind of transaction?

Thanks, Mitchell. So, in terms of the cash burn expense in Q3 onwards is going to be significantly lower compared to what you've seen in the first two quarters of this year and the prior year. I don't want to go through the details of this, but we'd expect a runaway of really low compared to the runaway in the top $20 million in the first two quarters of this year.

Okay. Great. Thank you, guys.

Thank you.

Thank you. And there are no further questions at this time. Avanish, you may continue your conference.

Thank you, operator. We look forward to keeping everyone abreast of our plans once a forward plan has been certified. Thank you.

Ladies and gentlemen, this concludes your conference call for today. We thank you very much for participating and ask that you please disconnect your lines. Have a great day. Goodbye.