Ampio Pharmaceuticals, Inc.

Good day everyone and welcome to NPO's fourth quarter 2021 earnings conference call. Today's call is being recorded. At this time, I would like to turn the call over to Mr. Dan Stokely, Chief Financial Officer. Please go ahead, sir.

Hello everyone and welcome to NPO's fourth quarter 2021 financial results and business update call. My name is Dan Stokely. And I'm joined today by Chairman and CEO Mike Martino and President and Chief Operating Officer Holly Cherevka. Our fourth quarter 2021 10-K and earnings information was released today, March 29, 2022, at 4.10 p.m. Eastern Time and can be found in the investor section on our website, ampiopharma.com, under financial filings. Before we begin, I'd like to remind our listeners that this presentation may contain forward-looking statements about our business. You should not place undue reliance on forward-looking statements, as these statements are based upon our current expectations, forecasts, and assumptions, and are subject to significant risks and uncertainties. These statements may be identified by words such as may, will, should, could, expect, intend, plan, anticipate, believe, estimate, predict, potential, forecast, continue, or the negative of these terms or other words or terms of similar meaning. Risks and uncertainties that could cause our actual results to differ materially from those set forth in any forward-looking statements include that are not limited to the matters listed under risk factors in our annual report on Form 10-K for the year ended December 31st, 2021, which is also on file with the Securities and Exchange Commission, as well as other risks detailed in our subsequent filings with the Securities and Exchange Commission. These reports are also available at www.sec.gov. Statements and information in this presentation, including forward-looking statements, speak only as of the date they are made or provided unless an earlier date is indicated. And we do not undertake any obligation to publicly update any statements or information, including forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Now, I would like to turn the call over to Chairman and CEO, Mike Martino.

Thank you, Dan. Good afternoon, everyone. Before I proceed, I'd like to take this opportunity to welcome Elizabeth Jobes to our Board of Directors. Liz has nearly three decades of legal and compliance experience. Her addition and skill set are essential to our future as we correspond with the FDA, organize our biologics license application, and pursue strategic partnerships. We're pleased to have Liz join the board. Just a few weeks ago, on March 2nd, We hosted a webinar to disclose and discuss AP 13 data, update you on the status of our discussions with FDA, and update you on the status of the COVID trials. Frankly, and as expected, not much has changed in the past few weeks. So this call will be a quick refresher, primarily focused on updating our financial results and answering questions. To begin, I'd like to summarize what we believe are the major takeaways from our webinar call regarding the status of AP 13 and discussions with FDA as follows. We enrolled 1,043 patients in AP 13 versus a targeted enrollment of 1,034 patients. COVID-19 had a material impact on the trial. specifically impacting sites and patient examination visits and resulting in a material amount of missing efficacy data. The FDA recommended we conduct a sensitivity analysis to detect the impact of COVID-19 on the study, which we outlined and documented in a study plan prior to unblinding the study data. This assessment determined that there were, in fact, two patient populations. A pre-COVID population with approximately 7% missing data and a during COVID population with approximately 70% missing data. Consistent with that plan and analysis, we have proposed a modified intent to treat or MITT population with an N of 618 patients to evaluate efficacy in the AP13 trial. Applying the statistical analysis plan and the trial protocol, we have determined the following. First, the intent to treat was not statistically significant for either pain or function. which is frankly not surprising given the large amount of missing data and mandated imputation. Second, modified intent to treat over 12 weeks was statistically significant for pain and trended toward functional improvement without statistical significance for function. Furthermore, modified intent to treat at 12 weeks was statistically significant for both pain and function. Finally, the protocol analysis in an N of 580 patients demonstrated statistical superiority for both pain and function. Now, Holly covered these points in detail in the prior webinar. and I'd point you to the recording with slides that is archived on our website. As reported, we have submitted these analyses in a Type C meeting request to the FDA. The central question in that request is whether FDA will accept the AP13 trial as a confirmatory trial to AP3A in support of a BLA. FDA has acknowledged that meeting request and committed to answering our questions in writing. I want to reiterate that, as previously communicated, we are on track to have clarity on that question by the end of the first half of this year. Additionally, I want to update you on our three active COVID trials, AP17, AP19, and AP20. Before doing that, however, I want to put this update into context by highlighting data in our first two COVID studies, AP14 and AP16. As a reminder, prior to AP17, 18, and 19, the company conducted two studies in respiratory distress in a very different COVID landscape. AP14 studied 40 patients with inhaled Ampion versus standard of care and demonstrated a nearly 80% reduction in mortality in the Ampion arm versus standard of care. AP16 studied 10 patients with IV Ampion versus standard of care and demonstrated no difference in mortality rates between the arms. So where are we with current studies? Well, firstly, AP17 was designed as a follow-on to AP16 to evaluate IV Ampion treatment in up to 200 severe COVID-19 patients with a planned interim analysis at 30 patients for sample size re-estimation. The interim enrollment and analysis is complete. The observed safety profile of IV and beyond treatment has been excellent to date and supports further study of IV administration. However, enrollment to date has been slow, and this is due to both the changing nature of COVID as well as increased competition for clinical trial patients from both approved drugs and other drugs in clinical trials. In addition, we have simply not observed sufficient differentiation in the treatment signal between the two study arms in the 30 patients enrolled in the interim analysis. Finally, given these factors, it would take a significant increase in time and money to expand countries and clinical sites to enroll more than the 200 patients originally planned to have the power to demonstrate clinical benefit. Therefore, we have stopped further enrollment in AP17. We'll analyze the data completely to determine next steps for the use of IP Ampion. Next, AP19 was designed as a follow-up to AP14 to evaluate inhaled Ampion treatment in up to 200 severe COVID-19 patients, again with an interim analysis for sample size re-estimation. Planned interim enrollment was completed with 129 patients in the first quarter of 2022. We're on track to complete the data analysis by the end of the second quarter of this year, at which time we'll determine and communicate next steps for this study. However, it's important to note that we've observed a significantly lower death rate in the 129 patients enrolled in AP19 than in the 40 patients enrolled in AP14. We believe this reflects the significant evolution in the COVID-19 standard of care from that which existed with the AP-14 and, in fact, AP-16 trials were initiated. The impact of this evolution of care on the AP-19 analysis remains to be seen. And then finally, AP-18 was designed to study inhaled Ampion use. at home in long COVID patients. We completed the planned enrollment of 32 patients in December 2021 and are currently performing planned day 60 post-treatment safety and efficacy evaluations, which we expect to be completed during this first quarter. Once we have final study results, We will determine and communicate next steps for this program. With that, I'd like to turn the call back to Dan Stokely, our CFO, to update our financials.

Thank you, Mike. The following is an overview of our results from operations for the fourth quarter and 12-month periods ending December 2021 and 2020. We realized a net loss of 6.2 million for the fourth quarter of 2021, compared to a net loss of 4.6 million for the fourth quarter of 2020, and 17.1 million for the year of 2021, compared to a loss of 15.9 million for the year ending December 31, 2020. A breakdown of the key variances are as follows. Research and development expenses were $4.7 million for the 2021 fourth quarter, compared to $2.1 million for the fourth quarter of 2020, and $11.9 million for the 2021 year, compared to $9.2 million for the year ending December 31, 2020. The primary drivers of the year-over-year increase were incremental costs associated with the COVID-19 Phase I and II studies, which were initiated late in 2020 and continued during the 2021 period. These costs were partially offset by a reduction in costs associated with the AP013 study, which was paused in the 2020 period. General and administrative expenses were $4.5 million for the 2021 fourth quarter, compared to $1.8 million for the fourth quarter of 2020, and $8.7 million for the 2021 year, compared to $6.7 million for the year ended December 31, 2020. The increase was primarily attributable to increase in non-cash share-based compensation along with professional fees for legal and other advisory services. Cash and cash equivalents on December 31, 2021 totaled $33.9 million compared to $17.3 million as of December 31, 2020. This increase was driven primarily from net proceeds received from the closing of a registered direct offering in December of 2021, totaling $20.7 million, and net proceeds of $10 million from the sale of common stock with the at-the-market equity offering program throughout the year. This increase was partially offset by cash used in operating activities totaling $14.1 million. We expect that our cash position will fund current operations into the second half of 2023. I would now like to turn the call over to Nick Johnson with Russo Partners, who will coordinate the Q&A session. Nick Johnson Thank you, Dan.

As a reminder, in order to submit questions, participants must have internet connectivity, as questions will only be addressed via the webcast. The conference call line will be in listen-only mode. First question. What is a realistic timing if all goes smoothly to get FDA approval for the use and sale of Amphionic?

Thank you, Nick. You know, I think realistic timing based on the guidance we've provided would be clarity by the end of the first half. I think we're on track to achieve that. As previously communicated, and I know some of you have recoiled at this, but the reality is that even for large pharmaceutical companies, the typical time required to submit a BLA is about 12 months. Now, we believe we have a jump in that process. As communicated, we've begun what's called a gap analysis to determine what we have in place and what remains to be completed and assembled for that BLA. And the guidance that we've given is end of Q2 of next year. We've also indicated that we would expect resources from a partner to potentially help us accelerate that schedule. Finally, on approval, again, I think for those specifically not accustomed to drug development, approval time can typically take up to 12 months. And with COVID, that has taken a longer period of time for many, many drugs. And that's simply beyond drug sponsors' control. So, you know, I think a safe assumption is end of second quarter of next year for submission of the BLA and for an approval cycle to take up to a year.

Next question. Do you anticipate that the same or a different partner will handle the implementation of Amphion for different medical conditions? Example, one for me, one for long-term COVID. Question.

Nick, I appreciate the question. And I think at this point, I have to repeat what we said on the last call, which is at this point in time, all potential sizes, shapes, and flavors of partnerships are on the table. And I think once we have a heads of agreement in hand and can actually announce that, we'll be in a better position to provide clarity.

Next question. With COVID-19 cases dwindling down in the U.S. at the moment, what are your prospective plans for Amphion for COVID-19 and Long COVID following the completion of the current COVID trials?

Well, again, I think that that is a question we'll be better prepared to answer once we have the totality of data from the three current trials in addition to the two initial pilot studies that were conducted. One thing is very, very clear, and that is the COVID landscape has evolved rapidly. We're in the process of completing some externally conducted market research, for example, that suggests that since we initiated 17, 18, and 19, there are eight new drugs available for the treatment of COVID-19. that weren't available when we initiated those trials. One is a neutralizing monoclonal antibody. Three are antivirals. Four are anti-inflammatories. And that's in addition, of course, to the significantly ramped up use of vaccines. So I think what I can say at this time with clarity is is that we are very pleased with the safety profile for IV Ampion that emerged in our AP17 trial. And that gives us encouragement, in fact, that IV administration of Ampion is a viable potential administration route. I think we need to wait until we've completed the analysis of the data and the initial two trials. And, of course, a part of that will continue to update our evaluation of market opportunities. So I think, unfortunately, we have to wait until about the middle of this year before we can provide further clarity on that.

Next question. Are there any plans to run additional trials on other joints and other forms of arthritis?

At this point, tangible plans, no. We do not have any specific clinical trial protocols pending or approved to run additional trials. However, I can tell you that both internally and in discussions with potential partners, We are very excited about the possibility to expand applications of Nampion from treatment of pain of severe osteoarthritis in the knee to treatment of osteoarthritis in other articular joints. And I think the plan to actually accomplish that expansion will benefit significantly from partner input And so, once again, I think that's something we'll be able to provide clarity on later in the year.

Next question. Do you see any potential earning differences between Q421 and Q122? Yeah, hi, Nick.

You know, it's a good question. If you look at our earnings release, you know, Q421, uh of 2021 had a fairly significant skew compared to the prior year and and even if you were to look at the prior quarter in the current year and um you know one of the large and and we spelled out in the earnings release one of the large denalities was um you know we issued some restricted stock units in the fourth quarter um you know and As we put it on press release, those are non-cash expenses, and there was a piece of that that was vested upon issuance and was vested about 20% per year. So there was an acceleration of costs on cash in the fourth quarter. There was also some professional fees that I would consider to be more weighted in the fourth quarter. On the R&D side, In the fourth quarter, there was a fairly substantial enrollment uptick on the COVID program, specifically on 019 and the completion of 018. And as we have said to the public markets, you know, 018 is finished enrollment. And so, you know, I would expect the run rating Q1 from a cash a cash burn standpoint to probably be slightly lower. And then taking into account the non-cash, you know, it would be slightly lower on that perspective as well because of the acceleration of the non-cash expense.

Next question. From the AP013 study, can you please explain the difference between the two modified studies submitted to the FDA?

Sure. The difference between the two modified studies submitted to the FDA, I would first say that the first study submitted, 3A, wasn't modified. That has been submitted and accepted by the AUC as one trial to support a BLA based on both the intent to treat and per protocol endpoints that were specified in the protocol. I would ask Holly to review the proposed modifications to trial 13.

Thanks, Mike. To elaborate on what you said, the AP13 protocol includes the submission and proposal to the FDA, includes the two populations just discussed, the intent to treat or ITT population and the per protocol population, as well as a proposed modified intent to treat to take into account an evaluation of those patients with a target indication who are not impacted by COVID-19.

Next question, so what will management focus on while we wait for clarity with the FDA?

What will we focus on? Well, number one, as I indicated earlier, we aren't waiting for the answer from FDA. We're beginning to assess our BLA, fill the gaps, and assemble that document. Number two, I think we've been pretty clear that we're pleased with the level of interest from potential partners, and that interest takes up a lot of time in terms of both confidential discussions, follow-up and answering questions, and keeping the confidential data room to give them access to our confidential data fresh. Number three, I hope it's been pretty clear that we are not giving up on product development. I would characterize our research and development approach as more focused. And related to that, we are undertaking to, on the one hand, update our appreciation and understanding for the oak market and what will be required to successfully launch product in that market. And even though we don't plan to do that ourselves, we plan to get a partner, our conversions on those issues, our level of knowledge on those issues will be a very important part of the negotiating process. And then finally, as indicated, we're very excited about the opportunity to expand Ampeon application from Oak. to other joints, perhaps beyond the treatment of other joints, and perhaps in other dosage forms and or other formulations. So you've heard me say before that we're a 20-person team, and I would say that that team is very well engaged today on five or six key corporate goals for the coming year.

That concludes our Q&A session. We will now turn the call back to Mike Martino for closing remarks.

Thank you, Nick. Listen, everybody, I want to summarize that I really believe we've made good progress and have maintained and, if anything, increased momentum as we move from Q4 of 2021 into Q1 of 2022. I'm extremely proud of the lean team here for their hard work in delivering this progress. I am very optimistic, cautiously so, about the future and specifically the next value inflection point being feedback from FDA. And I and we look forward to updating you on our next call as we continue to make progress. So thank you, everyone. Operator, please conclude the call.

Thank you. This does conclude today's call. Thank you all for joining. You may now disconnect your line.