Acurx Pharmaceuticals, Inc.

Greetings. Welcome to the Acurex Pharmaceuticals second quarter 2024 financial results. At this time, all participants are in listen-only mode. The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero from your telephone keypad. Please note this conference is being recorded. At this time, I'll now turn the conference over to Rob Bawa, Chief Financial Officer. Rob, you may begin.

Thank you, Rob. Thank you, Rob. Good morning, and welcome to our call. This morning, we issued a press release providing financial results and company highlights for the second quarter, 2024, which is available on our website at accorexpharma.com. Joining me today is Dave Lucci, President and CEO, who will give a corporate update and outlook. After that, I'll provide some highlights of the financials from the quarter ended June 30th, 2024, and then turn the call back over to Dave. for his closing remarks. As a reminder, during today's call, we'll be making certain forward-looking statements. These forward-looking statements are based on current information, assumptions, estimates, and projections about future events that are subject to change and involve a number of risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. Investors should consider these risks and other information described in our filings made with the Securities and Exchange Commission, including our quarterly report on Form 10Q, which we filed on Thursday, August 8, 2024. Your caution not to place any undue reliance on these forward-looking statements, and ACRx disclaims any obligation to update such statements at any time in the future. This conference call contains time-sensitive information that's accurate only as of the date of this live broadcast today, August 9, 2024. I'll now turn the call over to Dave. Dave?

Thanks, Rob. Good morning, everyone, and thanks for joining us to review our financial results for the second quarter of 2024, and also to hear some very exciting recent updates. Then we'll be pleased to take any questions. First, I'll summarize some of our key activities for the second quarter, or in some cases, shortly thereafter. In April, we completed a successful end-of-Phase II meeting with the FDA, confirming Phase III readiness for Ibezopustat, our lead antibiotic candidate, to enter Phase III clinical trials for the treatment of C. difficile infection. Agreement with FDA was reached on key elements to move forward with our international Phase III clinical trial program. Agreement was also reached with FDA on a complete non-clinical and clinical development plan for filing of a new drug application, or NDA, for marketing approval. We've since continued activities to advance Ibex and Polestat into international phase three clinical trials for the treatment of C. difficile infection. In parallel, we're also preparing to submit requests for regulatory guidance to initiate clinical trials in the European Union, the United Kingdom, Japan, and Canada. Also in April, we attended the European Society of Microbiology and Infectious Disease, or ESCMID, scientific conference. Dr. Kevin Gary provided an oral presentation of our Phase II data entitled, A Phase II Randomized Double-Blind Study of Ibexipolstat Compared with Vancomycin for the Treatment of C. difficile Infection. Dr. Gary is professor and chair, University of Houston College of Pharmacy, and the principal investigator for microbiology and microbiome aspects of the Ibezopolistat clinical trial program. And he's a scientific advisory board member for AccuRx. The oral presentation included additional analyses of clinical and microbiological data and is available on our website at accurexpharma.com. The complete phase two results are being prepared for submission to a prominent scientific journal for publication. Also in July, results from the Iveza-Polstad Phase II clinical trial in patients with C. difficile infection were presented at the 17th Biennial Congress of the Antirope Society of the Americas by Taryn Eubank, PharmD, Research Assistant Professor, University of Houston College of Pharmacy. And Taryn's oral presentation was entitled clinical efficacy of Ibezapolstat in CDI, C. difficile infection, results from Phase II trials. Also in July, and very timely given our late-stage development progress, the United States Patent and Trademark Office, or USPTO, granted us a new patent for Ibezapolstat, which specifically encompasses the treatment of C. difficile infection while reducing recurrence of infection and improving the health of the gut microbiome. This patent expires in June, 2042, and we think will provide an important downstream competitive advantage. And finally, some late-breaking news today. Following our successful end of Phase II clinical meeting with the FDA, which confirmed our Phase III clinical trial readiness, and according to FDA regulatory requirements, we submitted our request to FDA for a meeting to review our manufacturing processes and specifications for drug substance and final product and packaging, typically referred to as CMC or chemistry manufacturing and controls for our phase three clinical trials. We anticipate FDA to grant the meeting in the fourth quarter. So now we have further momentum as we continue to seek one or more strategic transactions for the further development and potential commercialization of our lead antibiotic candidate at Beza Polestat, territory or globally, in parallel with ongoing preparation for phase three clinical trials. We will provide a detailed update on our partnership transactions if and when we reach agreement with the third party. Throughout the rest of this year, we'll continue to roll out our phase two results in either oral presentations or scientific posters, or in some cases both, which will include results from new analyses as data becomes available at various prominent scientific conferences, including the World Antimicrobial Resistance Conference in Philadelphia this September. Also in September is the Eighth International C. difficile Symposium in Bled, Slovenia, which is the premier global venue for the review of C. difficile research. And in October, we'll be presenting at the annual meeting of the Infectious Disease Society of America or ID Week in Los Angeles. As we've continually reported, I've been supposed that clinical results continue to outperform in a serious and potentially life-threatening infectious disease caused by C. difficile bacteria that the Center for Disease Control categorizes as an urgent threat and calls for new classes of antibiotics for initial treatment that also have a low incidence of recurrence. Ivesipulsa also has FDA fast-track designation for treatment of C. difficile infection. Additionally, we believe Ivesipulsa, if approved, could make a favorable impact by reducing the cost burden of recurrent C. difficile infection on our U.S. healthcare system, which is estimated at $4.7 billion annually. We do believe the best is yet to come. And now back to our CFO, Rob Schallet, to guide you through the highlights of our financial results for the second quarter of 2024. Rob? Thanks, Dave.

Our financial results for the second quarter and the June 30th were included in our press release issued earlier this morning. The company ended the quarter with cash totaling $6.4 million, compared to $7.5 million as of December 31, 2023. During the second quarter, the company sold an additional 133,066 shares under its ATM financing program with gross proceeds of approximately $0.3 million. Research and development expenses for the three months ended June 30th, 2024 were $1.8 million compared to $1.7 million for the three months ended June 30th, 2023. The increase was due primarily to an increase in manufacturing related costs during the quarter of $0.4 million, partially offset by a reduction in consulting fees of $0.3 million. For the six months ended June 30, 2024, research and development expenses were $3.4 million, compared to $2.8 million for the six months ended June 30, 2023, an increase of $0.6 million, primarily due to $0.8 million increase in manufacturing-related costs offset by a $0.2 million decrease in consulting-related fees. General and administrative expenses for the three months ended June 30, 2024 were $2.3 million, compared to $1.7 million for the three months ended June 30, 2023, an increase of $0.6 million. The increase was primarily due to a $0.3 million increase in professional fees and a $0.2 million increase in non-cash, share-based compensation-related costs. For the six months ended June 30, 2024, general administrative expenses were $5.1 million, compared to $3.6 million for the six months ended June 30, 2023, an increase of $1.5 million. The increase was primarily due to a $1 million increase in professional fees $0.4 million increase in non-cash share-based compensation costs, and a $0.1 million increase in legal costs. The company reported a net loss of $4.1 million, or 26 cents per diluted share, for the three months ended June 30, 2024, compared to a net loss of $3.4 million, or 28 cents per diluted share, for the three months ended June 30, 2023. and a net loss of $8.5 million, or 54 cents per share, for the six months ended June 30, 2024, compared to a net loss of $6.3 million, or 53 cents per share, all for the reasons previously mentioned. The company had 15,996,168 shares outstanding as of June 30, 2024. With that, I'll turn the call back over to Dave.

Thank you, Rob, and thanks to all of you for joining us today. I'll now turn the call over to Rob, our operator, to open the call for questions. Rob?

Thank you. We'll now be conducting the question and answer session. If you'd like to ask a question today, please press star 1 from your telephone keypad and confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to withdraw your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Thank you. Our first question today comes from the line of Jason McCarthy with Maxim Group. Please proceed with your questions.

Hey, David. Good morning. Thank you for taking the questions. How do you divide it? any information on what the phase three could look like in terms of its size and scope, and also is the plan to try to seek a partnership and or grant funding for some non-dilutive capital to advance that program, or will the company look to fund that trial itself?

Thank you for the question, Jason. Yes, so we provided guidance on the phase three There are two required Phase III registration studies. They are going to be set up as international trials with 450 patients in an IPT population apiece, and they would be one-to-one randomized to either RI-bezopulstat or oral vancomycin. So that's the structure of the trials. What we're attempting to do is to raise money, as you say, non-dilutively to the extent possible to pay for all or as much of the Phase 3 program as we can and then backfill with whatever else we need with an equity offering only if it's needed. So, for example, if we were to get among the deals that we're attempting to lock in, if we were to get a royalty finance partner, that may be a big number and may pay for an entire phase three out of the two we need to do. We're also looking at territorial partnerships, including South America, Europe, Japan, and there are a couple that are considering kind of like the whole enchilada, in which case, of course, the phase three would be conducted by whoever buys us. We're also planning to file for a couple of grants, non-dilutive government grants or quasi-government grants, if you will. And pardon me if I don't mention the names. I just want to maximize our competitive position on the grants that we're thinking of. But those are all non-dilutive ways to raise money that don't have anything to do with equity financing. And a recent vintage, we're even looking or we're going to start looking at some stuff that's a little bit more creative with these SPACs that have lost favor, but there are still a number of SPACs that are outstanding that may have an interest. So that's a new stream that we're going to start pulling.

Okay. All right. Are you also looking at the potential for new antibiotics? Just generally, that's the space. There's a company, Interim Therapeutics. We actually happen to cover it. But they do have an ad comp in early September, probably right around when you're presenting or one of your presentations on it, for a new antibiotic for UTIs. I don't know if it's something you guys are watching or paying attention to because we could see the antibiotic space getting a little bit active. Any thoughts on that?

Interim therapeutics, I'd have to check with our team to see if we've reached out to them. I don't think we have, but certainly we'd be wide open to a conversation.

Yeah, no, I was saying just in terms of that's Fine, but just in terms of activity in the space, just getting busy may be an opportunity for Acurex to benefit tangentially. Just last question. What is the cost, do you think, of both trials combined, the two Phase 3s?

So the two together, they should be $25 million apiece. So together they should be $50 million. But we're in this – advantageous position that when you think about dilution, we can run the trials consecutively instead of concurrently. And then with positive data from the first phase three, as that's released, theoretically, our share price should see a significant rise. And then we could raise money at much higher prices to do the second phase three. And the reason that's available to us almost uniquely is because we have 10 years of commercial exclusivity from the point of FDA approval with similar regulatory protection in Europe, the UK, in Japan, and Canada. So that would actually work for us. And we also have this new patent going out to 2042, which is, if not unique, very unusual for an antibiotic to get a patent on an antibiotic.

That patent covers what again? One more time, I missed. I see you mentioned it earlier.

Yeah, the treatment of C. difficile infection. and the reduction in reinfection and protection of the gut microbiome. But, you know, Jason, I'd like to address something that you mentioned at the end of your first question, you know, about antibiotics picking up some steam. It's true. Antibiotics are picking up steam. So we've seen a substantial uptick in cases of C. difficile. We think it's a result of what's happened with the COVID experience worldwide. And at the World Antimicrobial Resistance Conference in September in Philly, where we'll be presenting, you know, we expect even more scientific push for the government to pass regulations like the Pasteur Act, which would have a tremendous benefit at getting new classes of antibiotics to the market because of the need. Now, I think what we have to do is find a way to satisfy that scientific need that's being enunciated at the Antimicrobial Resistance Conference and other conferences throughout the world, like in BLED, because antimicrobial resistance has become a real hot topic. There's a scientific need, but we've got to marry that up with the political tendencies not to want to do anything to benefit big pharma. So I think the government and the Congress needs to find a way to satisfy the scientific need without throwing a bone to the pharmaceutical companies.

Got it. Interesting. Good stuff, David. Thank you.

Thanks, Jason. Our next question is from the line of Ed Arce with H.C. Wainwright. Pleased to see you with your questions.

Hi, good morning, everyone. This is Thomas Yip asking a couple of questions for Ed. I appreciate picking up questions. Thank you. Hi, good morning. So first question from us regarding Phase 3 study in the U.S. You mentioned CMC review schedule for the FDA in fourth quarter. So just trying to figure out when should we expect the trial to start, specifically the first patient dosing? Would that be a fourth quarter event?

From where we are today, I think it would be naive of me to be that aggressive. You know, I think we'd be lucky with the CMC being cleared in the fourth quarter. I think we'd be lucky to start in the first quarter of next year. at the earliest, you know, I would kind of calibrate myself in that direction. And keep in mind, you know, before we enroll, these are international studies, right? So we want to get, I mean, we've talked about the international kind of areas where we want to seek regulatory guidance. We want to make sure that we meet at least with the European Medicines Agency before we start enrolling patients in their territories. So, we can't submit a regulatory package to the European Medicines Agency until we conclude the CMC review by FDA, because once that's done with FDA, then we can complete the process we've already started, which is the European Medicines Agency submission. It needs to include all of the CMC stuff and the FDA's position, and then we can submit it in Europe, you know, which we would hope to do in, you know, probably in November or December of this year.

Right. Got it. Thank you for the additional part. And then you touched on it earlier in the prepared remarks regarding partnership discussions. What form of partnership would you consider to be the ideal situation for Atherix?

Well, so our priority is to raise enough funding to keep Ibeza Pulsat on a roll into and through phase three to get it to market as quickly as possible. So that's our top priority. Now, if that means behind that, you know, we would take the lead of whoever we're talking to as their preference. That could be, say, a European license. and co-development agreement. It could be a Japanese license and co-development agreement. The typical agreement would be an upfront payment, clinical and commercial milestones, and a royalty. We would probably try to remove the clinical and commercial milestones altogether and replace them with some degree of funding for the phase three program. That fits our factual position most acutely. Or it could be an M&A transaction. South America is also a hot place right now. I mean, we're getting some play from a couple of companies there. But that would be a smaller deal. And a royalty deal would also be a wonderful thing because those are quite chunky. So, you know, that could be 20 or 25 million dollars of non-dilutive financing at the closing. And you give up for that, you know, a royalty based on the financial modeling that the royalty finance group does. So it'd be a percentage, you know, royalty on the back end, you know, whether it's 10%, 15%, whatever the number is that our board agrees to.

All right, thanks for that. And then perhaps one last question from us kind of following up on your thoughts, the priority is to start phase three ASAP. Would it be possible to start the phase three study, both US and ex-US sites, would it be possible to start piecemeal, starting with US sites first, even with ex-US agreement in hand, such as with EMA? Would that be a possible way to roll out the phase three study?

Yeah, I mean, we'd have to talk to our R&D team to make sure that we're not, you know, we're not kind of stepping on any toes in Europe if we were to do that, or to make sure that we're not, by doing that, we don't want to be stopped from some benefit in Europe that we could have gotten if we had it pre-agreed. So that is certainly something that we're interested in. If we had the financing to do one of the two Phase 3s today, I'd say we'd still be on target to start at least piecemeal in the fourth quarter.

Understood. Thank you so much again for taking our questions, and looking forward to updates in coming months.

Awesome. Well, thank you for your questions and participations.

Our next question is from the line of James Malloy with Alliance Global Partners. Please proceed with your questions.

Good morning, James. Good morning, David. Good morning, Rob. Thank you for taking my questions this morning. I want to follow up a little more on Jason's question about partnerships. It sounds like you're speaking a little more on this call perhaps than you have, or maybe it's my faulty memory, about outright acquisitions. Can you walk a little bit through that? how that environment may have changed over the quarter or how things may be looking? I know it's been a challenging space for biotech over the last year or so, but what do you see in purchase levels? Are you able to disclose sort of the number of people you may be talking to or relative sizes of the companies you're talking to?

Yeah, you know, so the companies that we're talking to, they range in size, but they're all substantially larger than we are. And some of them are household names that we'd all recognize if we open our medicine cabinet. So it's a great range. And you didn't miss anything, James. We started this process in earnest in the middle of May, around the time of our last earnings call. And I announced on that call that we were formally starting the process. Because at that point in time, we had what we considered all the appropriate pieces, having done our end of phase two meeting with the FDA and, you know, really having some good stuff, de-risked stuff to talk about. So at the time it was perfect because in late, in late May, you know, I signed up for the bio CEO conference and got an unbelievable audience of potential interested parties around the country. And, you know, I had, I think 29 meetings out in San Diego. and we've hired a household name consultant that works on M&A on the business side, and they've reached out to dozens more on our behalf. We have a number of confidentiality agreements signed, you know, north of five, maybe less than 12, but it's a lot more than I anticipated. Now, you know, clothes only count in horseshoes and hand grenades, right, James? So, Um, you know, we have to, you know, we have to close something out and it's not done until it's done, but there's been a lot of interest. And I, and as, as we're talking about with, uh, uh, with, uh, Jason, the interest is more than I anticipated it would be in the antibiotic space. And I think there are scientific reasons for that. You see listeria and some of these other things, uh, along with C diff peaking. And I, you know, I think there's also an element of social responsibility because the regulatory body, CDC, WHO, they're saying more and more publicly about the need for new classes of antibiotics and about the problem of antimicrobial resistance. So I don't know if that answers your questions, but, you know, so as I mentioned to Ed Orsi, you know, we're leading in these discussions with, you know, we're looking for a way to keep Ibex at Polestat, you know, on as prompt a pace as possible to get out to market. And we like to, you know, kind of do that as non-dilutably as we can. And, you know, then we're an open book. We listen to what potential partners would like to do. So, you know, some folks like the worldwide rights. Some folks don't. you know, are not positioned that way. They don't have infrastructure, say, in the U.S. So they would be more of a European or a territorial Japanese deal. South America seems to go hand in hand with Central America. So we're talking to the biggest and second biggest down there. So that's what we have going on. I mean, I don't know how I can't be more transparent than that without violating confidentiality agreements.

No, absolutely not. As always, say as much as you can. I appreciate it very much. And almost also counts in closest to the pin, as I recall. But I have a question for Rob Schaller following up on that. You know, I'm always interested in the accruals. But on a different note, I know you guys, on the ATM, you have about 8 million views to the ATM of the 17 total. What's kind of the run rate with the current cash you guys have before or even utilizing the ATM? What does that get you to as you're, you know, negotiate with these potential partners or other non-diluted funding methods?

Sure. Yeah. Go ahead, Dave. I was just going to say, you know, with the ATM, you know, we probably have sufficient funds without any trials going on until like the middle of 26th. Without the ATM, it's probably the middle of 25. Excellent.

That's all my questions. Thank you, gentlemen.

The next question is from the line of Jonathan Kolber with BioPub. Please proceed with your questions.

Hey, David. How are you this morning?

Good morning, Jonathan.

Good morning, sir. Kind of following up on the ATM question, How many shares are still outstanding on that? And then secondly, are there any warrants still outstanding from previous financing?

Oh, sure. Yeah, there's the way an ATM is set up, there's no share number associated with it. You know, we can pull down cash off the ATM at an intraday price on any given day. And it just, you know, the question of how many shares are granted is just the math of what the share price is and how much we sold. So there isn't, like, a fixed number, you know, where we're limited. And your next question, I'm sorry, what was your second question?

Are there any warrants still outstanding from previous financings?

Oh, yeah. Rob, what's the warrant number? Is it about $5.5 million? Yeah.

Yeah, there are warrants outstanding from previous financings and, you know, from, you know, legacy warrants. The actual number is 6.1 million. 6.1 million warrants outstanding. Weighted average exercise price of $3.28. Thank you, Rob.

David, if you could, could you kind of walk through a bit of what this new microbiome patent, kind of how does that give Ibiza, Polstad, and Acura such a, Obviously, like you said, it's kind of a newfangled thing, if you will.

Well, the first advantage is that, you know, we now have patent protection in the U.S. which we can export abroad that goes out to June 2042. So that's, you know, we can have slow enrollment, you know, for a lot of years before, you know, kind of, The commercial value is any question on this thing. It's just a really long period of time. What's unusual about it is most antibiotics cause dysbiosis. That's, you know, kind of an imbalance in the healthy gut bacteria. And we now have validation from the USPTO that, in fact, RI-Bezopulstat is able to kill C. difficile bacteria and is able to reduce the likelihood of reinfection. That's part of the patent. And also we're restoring the healthy microbiome. So anybody who's looking at antibiotics as, you know, not being a good thing because they cause dysbiosis generally will look at our antibiotic and say, well, you know, Maybe we don't need to replace antibiotics with other stuff because of the dysbiosis it causes. Maybe we just need to find antibiotics that don't cause dysbiosis and, in fact, help restore a healthy microbiome. So in that regard, it's the only antibiotics patent of its kind that I know of.

Gotcha. Thank you. Kind of codifying what we've already seen in preclinical and clinical data of the very, you know, the specificity as well as kind of the, you know, protective nature of what we suppose that.

Yeah. And when you think about business development in, you know, within big pharma, you know, these big pharma companies tend to want to be cutting edge science and they tend to want their reputations to be tied to cutting edge science. And this just helps make our case.

Gotcha. Thank you.

No problem, Jonathan. Thank you.

Thank you. At this time, there are no additional questions. I would like to thank everyone for joining us in our conference today. You may now disconnect your lines at this time, and we thank you for your participation. Thank you, Rob. Thank you.