Acasti Pharma, Inc.

Good day, ladies and gentlemen, and welcome to the Acosti Pharma third quarter fiscal 2022 business update conference call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, David Waldman with Investor Relations. Sir, the floor is yours.

Thank you, Holly, and good afternoon, everyone. I'd like to welcome you to Acosti Pharma's fiscal 2022 third quarter conference call. On the call with us this afternoon are Jan D'Alvise, President and CEO, Brian Ford, Chief Financial Officer, Dr. Pierre Lemieux, Chief Operating Officer, Canada, and Chief Scientific Officer, Dr. George Katail, Chief Operating Officer, US, and Prashant Kohli, Vice President of Commercial Operations. Following our prepared remarks, there'll be a Q&A session. Should any questions remain after the call, please contact Crescendo Communications at 212-671-1020. I'd also like to remind everyone that statements on this conference call that are not statements of historical or current fact constitute forward-looking information within the meaning of the Canadian securities laws and forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and the Securities Exchange Act of 1934. Such forward-looking statements involve known and unknown risks, uncertainties, and other unknown factors that could cause the actual results of a custody to be materially different from historical results or from any future results expressed or implied by such forward-looking statements. In addition to statements which explicitly describe such risks and uncertainties, listeners are urged to consider statements labeled with the terms believes, beliefs, expects, intends, anticipates, potential, should, may, will, plans, continued, targeted, or other similar expressions to be uncertain and forward-looking. Listeners are cautioned not to place undue reliance on these forward-looking statements, which speak only as the date of this conference call. Forward-looking statements during this conference call may include but are not limited to the success and timing of regulatory submissions of the PK Bridging Study for GTX-104 and ACOSTI's other preclinical and clinical trials, regulatory requirements or developments, changes to clinical trial designs and regulatory pathways, legislative, regulatory, political, and economic development, ACOSTI's projected cash position operating runway, and the effects of COVID-19 on clinical programs and business operations. The forward-looking statements contained in this conference call are expressly qualified in their entirety by this cautionary statement. The cautionary note regarding forward-looking information section contained in ACOSTI's latest quarterly report on Form 10-Q, which is available on edgar at www.sec.gov. on CDAR at www.cdar.com, and on the investor section of Acosti's website at www.acostifarma.com. All forward-looking statements in this conference call are made as of the date of this conference call. Acosti does not undertake to update any such forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. The forward-looking statements contained herein are also subject generally to assumptions and risks and uncertainties. They're described from time to time in Acosti's public filings on Securities and Exchange Commission and Canadian securities regulators, including his latest quarterly report on Form 10Q. In addition, any forward-looking statements represent Acosti's views as of today and should not be relied upon as representing our views as of any subsequent date. Acosti may update forward-looking statements at some point in the future. Acosti undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they were made, except as required by applicable securities law. I'd now like to turn the call over to Acosti's CEO, Jan D'Alvis. Please go ahead, Jan.

Hey, thank you, David. I'd really like to welcome everyone on the call today. During the fiscal third quarter, we made significant progress towards advancing our clinical pipeline of drugs to treat patients with rare and orphan diseases. Our proprietary drug delivery technologies and capabilities are supporting an ever-expanding intellectual property portfolio of more than 40 issued and pending patents and a growing pipeline of drug candidates targeted to treat rare and orphan medical conditions. our clinical and preclinical stage drug candidates have been specifically designed and formulated to enhance efficacy and safety by providing potentially faster onset of action, prolonged treatment effect, and reduced side effects, all while being more conveniently delivered, which can ultimately increase patient compliance and potentially lead to improved clinical outcomes. Now, as previously disclosed, during the second quarter, we commenced enrollment for our pivotal pharmacokinetic or PK bridging study for GTX104, our novel aqueous formulation of nemotipine that's being developed as an IV infusion for patients experiencing subarachnoid hemorrhage or SAH that is triggered by an aneurysm. This PK study is the next required step in our proposed 505 regulatory pathway and it's being conducted in about 50 healthy subjects as a single center randomized two-period crossover study. The primary objective of the study is to evaluate and compare the relative bioavailability of GTX104 with the marketed oral nematopene capsules, which are currently the standard of care in the United States. The second objective is to assess the safety and tolerability of GTX104 as compared to oral nematopene capsules. Now, back in December, we were pleased to announce positive results for GTX 104 based on an interim analysis of the first 20 normal healthy subjects enrolled. GTX 104 met both primary endpoints for maximum concentration, or Cmax, on day one, and area under the concentration time curve, or AUC, over a 24-hour period on day three. These interim data were very encouraging, and allowed us to continue the study under the current infusion protocol to its pending near-term completion. We believe that the tight correlation of the primary endpoint data for the first 20 patients is a strong indication that GTX104 could achieve comparable bioavailability with oral nematopene in the full study cohort of about 50 subjects. Very importantly, and as we observed in the earlier PK study, The inter- and intra-subject variability in the interim analysis was significantly lower for GTX104 as compared with oral nemotipine. This could be a very important differentiator for GTX104 as reduced variability of blood levels should correlate with better control of hypotension, which could result in better outcomes for patients with SEH as well as improved economics for the healthcare system. Since we reported these interim results, the study has now advanced significantly with 46 subjects having completed the full protocol. To date, there have been no serious adverse events observed and only mild adverse events such as headaches were reported in both groups and they were resolved with common over-the-counter medications. The last cohort of subjects required to complete the study have already been enrolled and the study remains on track to report the full results in calendar Q2. Assuming the final study results are consistent with the interim results, we plan to proceed quickly to finalize the phase three safety study design and protocol for GTX 104 with the FDA. We still expect to initiate this safety study in the second half of calendar 2022. Based on its already favorable safety profile, we believe the safety study for GTX104 to be relatively low risk, and given the expected small number of patients to be enrolled, it should be completed relatively quickly and cost-effectively. Importantly, the safety study is expected to be the final step required before submitting our new drug application, or NDA, to the FDA under the 505 regulatory pathway. Our NDA, if approved, would be enhanced by the previously granted orphan drug designation already assigned to GTX 104 by the FDA, which would grant the company seven years of market exclusivity in the United States. As we have discussed previously, we believe GTX 104 addresses an important and underserved market. SAH is caused by a ruptured aneurysm, and it's a rare and life-threatening medical emergency. It's estimated to affect about 50,000 patients per year, representing an addressable market of more than $300 million in the United States alone. Nimodipine is currently only available as an oral dosage form in the U.S., and many of these SAH patients are unconscious or have a hard time swallowing during their hospital stay. We believe GTX104 delivered intravenously could be a much more convenient and efficient way to deliver Nimodipine And importantly, because of its better absorption profile and more consistent blood levels, GTX104 could potentially provide physicians with a more effective tool for hypotension management. We really look forward to providing regular updates on how the GTX104 PK study and the phase three safety study protocol develop in the weeks and the months ahead. Now regarding our other two clinical candidates, GTX 101 and GTX 102, we continue to make steady progress moving these two drug candidates forward towards their next major milestones. As a reminder, GTX 102 is a novel, easy to use oral mucosal spray formulation of beta-methazone intended to improve the neurological symptoms of ataxia telangiectasia or AT. AT is a progressive neurodegenerative genetic disease that primarily impacts children, causing severe disability for which no FDA-approved treatment currently exists. Based on an independent study conducted in Italy with an oral liquid form of beta-methazone, we believe GTX102's novel concentrated beta-methazone oral mucosal spray formulation has the potential to improve the symptoms of AT and simplify drug administration. We recently selected a CRO partner to manage our PK bridging study for GTX102. This study will be fully randomized, open label, three arm, crossover study designed to evaluate the comparative bioavailability, pharmacokinetics, and safety of GTX102 administered as a concentrated oral mucosal spray. And we will compare it to beta-methazone administered as an intramuscular injection for filing purposes in the US and Canada and to an oral solution of beta-methazone for filing purposes in Europe. This study will be conducted in healthy male and female volunteers. We expect this PK bridging study to be initiated on schedule in calendar Q2 and to report out before the end of 2022. If this study meets its primary endpoints, we expect to initiate our phase three safety and efficacy study in AT patients in the first half of calendar 2023. Now turning to GTX 101, we're developing this drug candidate to treat patients with postherpetic neuralgia or PHN which is persistent and often debilitating neuropathic pain caused by nerve damage from the varicella zoster virus, the virus that causes both chicken pox and shingles. PHN can persist for months and even years after a shingles infection clears up, and some patients end up requiring opioids to relieve their severe pain. Our GTX 101 is a novel, bioadhesive, film-forming, topical spray formulation of bupivacaine that we believe could provide significant benefits over the current standard of care, which most often consists of oral gabapentin and prescription lidocaine patches And refractory cases are often prescribed opioids to address persistent pain. As you know, opioid abuse has continued to proliferate and gabapentin and the prescription lidocaine patches are suboptimal for many reasons. According to third-party primary research commissioned by ACOSTI, approximately 40% of patients using lidocaine patches experience insufficient pain relief. Lidocaine patches are also difficult to use. They fall off, they look unsightly and can cause skin sensitivity and irritation. Additionally, optimal pain relief can take up to two weeks to be achieved with the lidocaine patch. The potential benefits of GTX 101 could include the faster onset of action because of our active ingredient bupivacaine as compared to lidocaine and longer lasting pain relief as the patch can only be used for 12 hours on and then must be taken off for 12 hours. This regimen can lead to breakthrough pain while we expect that regular use of GTX 101 will provide continuous around-the-clock pain relief. Consequently, we believe our GTX 101 topical spray could be a very effective non-narcotic, non-addictive alternative for PHN patients that could also provide greater ease of use and convenience. Our primary market research has shown strong physician receptivity towards GTX 101's value proposition with the majority indicating that they saw the potential for GTX 101 to not only replace but to potentially further grow the prescription lidocaine patch market. Note that in the US, lidocaine patches are only indicated for PHN but in fact are broadly prescribed and reimbursed for a range of pain indications including back pain, osteoarthritis, diabetic neuropathy, and other neuralgias. PHN is estimated to affect approximately 150,000 patients per year in the United States, and according to a third-party report commissioned by ACOSTI, the total addressable market for GTX 101 could be about 1.6 billion, consisting of about 400 million for PHN pain and about 1.2 billion for non-PHN pain. As for our near-term clinical milestones for GTX 101, an IND-enabling eight-week skin sensitivity study in mini pigs is underway now, which we expect we'll report out in calendar Q2. Results from this mini pig study will enable us to start our multiple ascending dose ranging study in humans, which is a requirement for our phase two study that's scheduled to start recruiting patients before the end of this year. By the way, I should also mention that a previous PK study in humans showed no skin sensitivity from GTX 101. So we're very excited about our entire orphan drug portfolio and believe it holds tremendous potential that could drive significant value for our shareholders in the months and years ahead. And as I mentioned, we're expecting to achieve multiple important milestones for each of our lead programs throughout 2022. With the exciting results we've seen thus far in our PK study for GTX104 and the active development work now underway for GTX102 and 101, I hope you share our enthusiasm for the outlook for our entire clinical portfolio as we continue to advance our lead drug candidates through clinical development and ultimately towards commercial launch. We look forward to reporting on further progress as it occurs as well as at our next quarterly and annual update. So with those operational updates, I'll now turn the call over to Brian Ford, our CFO, to discuss our financial results for fiscal Q3. Brian?

Thank you, Jan. Please note that unless otherwise indicated, all numbers that I mentioned are in U.S. dollars. The loss from operating activities for the three months ended December 31, 2021, was $4.5 million compared to a loss of $2 million for the three months ended December 31st, 2020. The increase was due mostly to an increase in research and development expenses and an increase in general and in expenses related to increased legal, tax, accounting and other professional fees. The net loss for the three months ended December 31st, 2021 was 3.8 million or nine cents per share compared to a net loss of 3.2 million, or 26 cents per share, for the three months ended December 31st, 2020. The increase in net loss resulted primarily from an increase in research and development expenses related to accelerating the development of the new clinical assets acquired from GRACE. Research and development expenses before depreciation, amortization, and stock-based compensation expenses for the three months ended December 31st, 2021, totaled $2 million compared to $62 million, $0.62 million for the three months ended December 31st, 2020. The net increase was again mainly attributable to increased contract research activities as the clinical... Hold on a second. as the clinical program got underway. As I mentioned earlier, this increase was the result of increased legal taxes, accounting, and other professional fees. Cash equivalents and short-term investments totaled $46.3 million as of December 31st, 2021, compared to $26.5 million cash and cash equivalents as of December 31, 2020. The company believes these funding resources provide at least 21 months of operating runway based on management's current projections. With that, I'll now turn the call back over to Jan.

Thanks, Brian. That concludes our prepared remarks. Now, I'd like to open the call to any questions from our shareholders. Holly, can you open it up to questions? Certainly.

Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions. Your first question for today is coming from Alexandra Heller. Please announce your affiliation, then pose your question.

Hi, this is Alex Heller on for Lee and Groeschel at Oppenheimer. Congrats on the progress made this quarter, and thanks for taking my question. First off, recognizing that you will be completing the PK Purchase Study for 104 and moving into Phase 3 Safety Study, as well as the phase two safety study of GTX 101, what can we expect R&D expenses to look like in the upcoming quarter?

Yeah, maybe I'll turn that one over to, by the way, Alex, thanks for the question. Really appreciate it. I'll turn that over to Brian. Brian, do you want to comment on kind of the ramp of our overall expenses due to the ramp up of the clinical programs?

Sure. You know, for the next 12 months, we expect our R&D expenses to be growing moderately from roughly $1.5 million per month to almost $2 million per month. We have some incremental expenses above that with the departments. We expect the R&D to grow again another further 12 months out, As we get into more of the phase three trials, we begin to invest in commercialization activities for GTX 104. Does that answer the question?

Yeah, and I might add, Alex, that, you know, as we've said, the current cash that we have on our balance sheet will allow us to completely fund the full GTX 104 program and significantly advance both the 102 and the 101 programs.

Perfect. Yeah, that was incredibly helpful. Thank you for that. And then I guess the next question I have is, as there's no approved product for AT, have you had any discussions on what that pivotal trial design might look like in 2023 when you're looking at starting it with the FDA? And maybe when we might have clarity on that design for 102?

Yeah, we've had preliminary discussions with the FDA about the trial design. And we expect that it will be a safety and efficacy study. Probably in a small number of patients, I would guesstimate about 100 patients, maybe less. You know, we'll have to see how long the FDA wants us to, you know, treat these patients and follow them. You know, we plan to have a meeting with the FDA once we complete the PK study to lock down the study design for the phase three. But based on the preliminary discussions, that's what I can tell you for now. Perfect. That's helpful. Thank you. Yep. And that's all my questions.

I appreciate you taking them. Yeah, sure. Thanks, Alex.

Your next question is coming from Sahil Kazmi. Please announce your affiliation, then pose your questions.

Hi, team. How's it going? Congrats on the quarter and all the progress that's gone. This is Tyler Casney from B. Reilly Securities. A couple of questions from us, maybe focusing on the data that you have in hand today on these 46 patients. Could you provide a bit more granularity on what we're seeing in terms of the variability, both between patients and relative to the oral formulation, and how that might be, you know, both clinically relevant and also inform your thoughts for the patients, right?

Yeah, thanks, Sahil. Hey, listen, thanks for the question. Really appreciate it. Appreciate your attending today. I'll speak to it generally and then turn it over to Pierre and George. But we saw a dramatic difference in variability. GTX 104 showed really tight very little variability. So from patient or subject to subject and over time, the variability was very low compared to the oral, which it was no surprise. We'd seen this before, and this is obviously the big complaint of physicians. It makes it very difficult to control blood pressure when you have the oral nematopene causing huge swings in blood pressure. And that's what we saw. I mean, it was just significantly more variable. Now, I would just caution that this is based on 20 subjects. We do have 46 completed so far, but we don't have the data on those 46. We're still blinded. We should be finishing up the study in the next few weeks, and then they've got to clean up the data. It'll take some time to do that and then report out the results, but we expect to report out still on track in Q2. And I don't know, Pierre, do you want to add anything? Did I pretty much cover that or anything you want to add? Pierre, I think you might be on mute. Okay, we're not getting, George, are you there?

Yes, I'm here, Jan.

Okay. George, anything you want to add?

Yeah. Sahil, so essentially exactly as Jan said, the interim data in 20 subjects showed very little variability, both from an AUC perspective as well as from a CMAX perspective. We don't expect this to be any different after we complete the analysis of 56 or so subjects. and the clinical portion of the study should be complete by mid-February this month, and we'll have some kind of a draft report at the end of March, early April.

Excellent. That's really helpful. Thanks. And then maybe one more from us, either Jan or Brian. Just as it relates to the cash position today and the guided 21 months of runway, Just given what we're seeing in the 104 program, how you guys were actually able to go a little bit quicker than anticipated, can you talk about how you might be able to, you know, use this capital to either focus on one of the emerging programs, and how you think about the pace of development for both AP and PHS?

Yeah, so I'll jump in, and then, Brian, you can add more from a financial perspective, but Yeah, we expect the current cash to complete GTX 104. We are running a little bit ahead of schedule. I would say a few weeks, maybe a month or so. But I don't think it's going to have a significant impact on the bottom line cash projection. We are moving 102 and 101 forward very aggressively. But again, all of that was in our plan. So having said that, we have a couple other assets in the preclinical pipeline that are quite interesting. And we are looking at potentially moving one of those forward into clinical development later this year. But a lot more planning work has to be done before we say too much more on that. But Brian, do you want to make any additional comments on the cash runway?

No, I mean, we've been tracking our cash a little better than planned from the date of the merger. And, you know, not that that's necessarily going to continue as we start, you know, continue to build on these programs. But, you know, we continuously look at our plans and revise the forecasts as new information and new agreements or new research agreements come into play. But so far, you know, our estimates have held up pretty well.

Yeah, I would say overall we are running a bit ahead. In other words, we've managed our cash very well. So, we are running, you know, a bit ahead of our projection in terms of cash runway. You know, and I fully expect we'll continue to run these programs tightly. You know, let's hope the data holds up and we can move forward as planned. So I hope that answers your question, Sahil.

Yes, that was extremely helpful. And congrats again on the progress in this environment. Look forward to seeing the update on 104.

Great. Thank you.

Once again, if there are any questions or comments, please press star 1. There are no questions in queue at this time.

Okay. Well, again, I want to thank everyone for joining us today. We have, as you can tell, a lot of really exciting programs underway, and we look forward to continuing to provide updates in the very near future. So, again, thanks and have a good day.

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.