Acurx Pharmaceuticals, Inc.

Greetings and welcome to the Acurex Pharmaceuticals Inc. Third Quarter 2024 Results and Business Update Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. Should anyone require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Robert Shawa, Chief Financial Officer of Thank you. You may begin.

Thank you. Good morning, and welcome to our call. This morning, we issued a press release providing financial results and company highlights for the third quarter of 2024, which is available on our website at accorexpharma.com. Joining me today is Dave Lucci, President and CEO of Accorex, who will give a corporate update and outlook. After that, I'll provide some highlights of the financials for the quarter ended September 30, 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 10-Q, which we filed on Tuesday, November 12, 2024. You are questioned not to place undue reliance on these forward-looking statements, and ACREX 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, November 13th, 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 third quarter of 2024 and also to hear some very exciting recent updates. Then we'd be pleased to take any questions. First, I'll summarize some of our key activities for the third quarter of 2024 or in some cases, shortly thereafter. In July, results from the Ibezopolstat Phase II clinical trial in patients with C. diff infection were presented at the 17th Biennial Congress of the Antirope Society of the Americas by Taryn Eubank, PharmD Research Assistant Professor at the University of Houston College of Pharmacy. Taryn delivered an oral presentation entitled Clinical Efficacy of Ibezopolstat in CDI, results from Phase II trials. Also in July, the USPTO granted Acurex a new patent for the Ibezopolstat, 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, subject to extension, if any, and we think will provide an important downstream competitive advantage. We also filed other patent applications with the USPTO in the third quarter, but we'll discuss those down the road if and when these patents are issued. In August, following our successful end of phase two clinical meeting with the FDA, which confirms our phase three clinical trial program readiness, and per FDA requirements, we submitted a manufacturing request to the FDA. for a meeting to review our manufacturing processes and specifications for drug substance and final product packaging. This will allow us to move forward to phase three clinical trials. FDA granted a meeting date in late October, which we did not meet because of our successful pre-meeting correspondence with the FDA. So from a regulatory perspective, we're delighted to announce CMC readiness for phase three in addition to FDA agreement on our clinical plan forward for phase three. In September, a presentation was given by ACRx executive chairman, Bob DeLucia, at the World Antimicrobial Resistance Scientific Congress held in Philadelphia. As many of you may know, Bob has over 50 years industry experience in new antibiotic development and commercialization, and is responsible for our clinical development programs, including Fribeza Polestat. In his presentation at the innovation showcase session, Bob highlighted that we have a complete roadmap, not only for the required components of our phase three clinical program, but also what's required for ultimate filing of an NDA, which is to be followed by submissions for marketing authorizations in other countries around the world. Bob also presented an update on the company's preclinical gram-positive selective spectrum program for systemic oral and IV treatment of other gram-positive infections. including MRSA, VRE, and DRSP. Bob summarized our progress, stating that we've made substantial progress toward lead compound selection of our gram-positive IV and oral compounds. Our current focus is to prioritize the oral form for acute bacterial skin and skin structure staph infections, including MRSA, to speed lead product selection and advancement to clinical trials. We also participated at the 8th Annual C. difficile Symposium, or ICDS, in Bled, Slovenia, which is the premier global venue for the review of C. difficile research. At the ICDS meeting, two presentations were made on our behalf. First, Dr. Kevin Geary, Professor and Chair, University of Houston College of Pharmacy, made a presentation on our behalf regarding Ibezopolstat's Phase IIb results. and its preservation of key bacterial species, which was an unexpected finding of a unique microbiome signature in two vancomycin-treated patients in the Phase IIb trial who experienced recurrence of CDI. Since these changes were evident and observed early during treatment and then consistently until the end of therapy, they may be predictive of pending CDI recurrence and suggest the need to modify therapy. Accordingly, as we move ahead to our planned international phase three clinical trials, we will continue to evaluate what we call our predictive model to determine if there may be a pathway forward toward commercialization as a new diagnostic tool or test kit, if you will. Second, in Bled, Slovenia, Dr. Wieb Klaus-Smits, Associate Professor, Leiden University Medical Center in Holland, delivered a presentation on the mechanism of action of PAL3C inhibitors. These definitive data result from our multi-year partnership with LUMC and the Dutch government to perform pioneering research on the PAL3C mechanism of action. Dr. Smits emphasized that his findings with Ibeza-Polstad regarding the structural biology of DNA PAL3C inhibitors have important implications for the development of a new family of antibiotics to treat high-priority, multidrug-resistant gram-positive infections, and that this novel class of DNA-PAL3C inhibitors could be an important new tool to address the pandemic of antimicrobial resistance. Also in the quarter, we announced that selected ACX375 DNA-PAL3C analogs demonstrated in vitro activity against anthrax, which is a bioterrorism category A pathogen, including activity against ciprofloxacin-resistant anthrax. This work was performed at two independent qualified laboratories, including the University of Florida. Planning is underway for an anthrax bioterrorism development program. In October, we participated at ID Week in Los Angeles, the annual scientific conference of the Infectious Disease Society of America. Doctors Kevin Gary and Taryn Eubank presented a scientific poster showing that in the Phase IIb clinical trial, Ibezopolstat had comparable clinical cure and sustained cure rates and safety profile to vacumycin, the standard of care. Also, five of five Ibezopolstat patients who were followed for a full three months after the end of treatment experienced no recurrence. Ibezopolstat-treated patients showed decreased concentrations of fecal primary bile acids and higher ratios of secondary to primary bile acids than vancomycin-treated patients. According to Dr. Gary, these exciting results demonstrate two properties of Ibezopolstat which may contribute to its anti-recurrence effect. First, the preservation and restoration of beneficial bacterial classes in the gut provide resistance to recolonized to recolonization by C. difficile. Second, these data presented for the first time indicate that these beneficial bacteria known to metabolize primary to secondary bile acids persist in Ibezopolstat-treated patients, providing another important mechanism to prevent recurrent CDI. So now we have even more momentum going into the fourth quarter. As we've continually reported, Ibezopolstat clinical results continue to outperform in a serious and potentially life-threatening infectious disease called C. difficile bacteria that the U.S. CDC categorizes as an urgent threat and calls for new classes of antibiotics for initial treatment that also have a low incidence of recurrence. Ibezapolstat also has FDA QIDP and fast-track designation for the treatment of CDI. Additionally, we believe that Ibezapolstat, if approved, could make a favorable economic impact by reducing the overall annual U.S. cost burden for C. difficile infection of approximately $5 billion per year, of which $2.8 billion is due to recurrent CDI infection. Given our continuing momentum, we do believe the best is yet to come. And now back to our CFO, Rob Schala, to guide you through the highlights of our financial results for the third quarter. Rob?

Thanks, Dave. Our financial results for the third quarter ended September 30th were included in our press release issued earlier this morning. The company ended the quarter with cash totaling $5.8 million compared to $7.5 million as of December 31, 2023. During the third quarter, the company raised additional proceeds under its ATM financing program with gross proceeds of approximately $1.6 million. Research and development expenses for the three months ended September 30th, 2024 were $1.2 million compared to 1.3 million for the three months ended September 30th, 2023. The decrease was due primarily to an increase in manufacturing related costs of $0.1 million offset by a reduction in consulting fees of $0.2 million. For the nine months ended September 30th, Research and development expenses were $4.6 million compared to $4.1 million for the nine months ended September 30th, 2023. An increase of $.5 million primarily due to $.9 million increase in manufacturing related costs offset by a $.4 million decrease in consulting fees. General and administrative expenses for the three months ended September 30th, 2024 were $1.6 million compared to $1.8 million for three months ended September 30, 2023, a decrease of $0.2 million. The decrease was due primarily to a $0.5 million decrease in non-cash share-based compensation offset by a $0.2 million increase in professional fees and a $0.1 million increase in compensation-related costs. For the nine months ended September 30, 2024, general administrative expenses were $6.7 million compared to $5.4 million for the nine months ended September 30, 2023, an increase of $1.3 million. The increase was primarily due to a $1.1 million increase in professional fees and a $0.2 million increase in legal costs. The company reported a net loss of $2.8 million or 17 cents per diluted share for the three months ended September 30, 2024 compared to a net loss of $3.1 million or 24 cents per diluted share for three months ended September 30, 2023. And a net loss of $11.3 million or 71 cents per share for the nine months ended September 30, 2024 compared to a net loss of $9.5 million or 77 cents per share for the nine months ended September 30, 2023, all for the reasons previously mentioned. The company had 16,770,378 shares outstanding as of September 30, 2024. With that, I'll turn the call back over to Dave. Thanks, Rob. And thanks to all of you for joining us today.

I'll now turn the call over to the operator to open up the call for questions. Operator?

Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove 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. The first question is from Ed Arcee from HC Wainwright. Please go ahead.

Hi, good morning, everyone. This is Thomas. You're asking a couple of questions for Ed. Thank you for picking up questions. So first question, hi, good morning. Perhaps for first, can you discuss more about the predicted model that you discussed earlier on the call, you know, as a potential diagnostic tool?

Yeah, so that's one of the items that we filed a patent for in the quarter. Basically, there are certain measurements, kind of proprietary, but there are certain measurements of the stool samples that Dr. Gary and our medical director, Mike Silverman, were able to focus in on and see by the end of the third day of treatment if certain measurements were as they found, they would consistently be the same for the rest of the 10-day treatment period. And those measurements seem to be predictive as to whether a patient will reinfect. So basically... if they find certain ratios of different things in the stool samples, they can predict, they believe, certainly they need a lot more patients to prove it out, but they think they can predict by the end of three days of treatment, if any antibiotic is going to be a high risk of reinfection. So we're going to continue to monitor that in phase three, but that, by itself could be a diagnostic that could be quite useful to reduce the $2.8 billion per year cost burden for recurrent C. difficile infection because treating physicians could use this test kit as a way to swap out one treatment or one therapeutic for another to try to increase the likelihood that a patient will successfully remain uninfected.

Right, that sounds interesting. That's definitely very interesting to learn more about this in the near future. And then perhaps another question related to the press release. You mentioned that international regulatory filing initiatives are ongoing this quarter. Can you discuss more details about these initiatives?

Sure. So we're starting in Europe with the European Medicines Agency, and that process will probably lead to a meeting either the tail end of the year or more likely a first quarter of next year. And that would be a meeting with the European Medicines Agency to just set the regulatory pathway to approval on the basis of doing international phase three trials, including in Europe, And, you know, some may ask why haven't we set up that meeting sooner, and the answer to that is we needed the results from the FDA clinical and manufacturing regulatory processes to be completed in order to go to the EMA, as it's now called, with a final package that FDA cleared. After Europe, we'll proceed with the UK, Canada, and eventually Japan.

Understood. And then I suppose, as you mentioned, we're close to wrapping up the phase three program in the U.S. Can you outline what are some top options that you will consider likely to be able to fund dependable trials, you know, and which one would you prefer?

Well, in all cases, we prefer anything that's non-dilutive, as I'm sure you understand. But we like partnering options, and I use the word partnering broadly to include the government, along with territorial license and co-development partners, which we have active dialogue going with several companies now in Europe and Japan and South America. With the government, we did have a TechWatch meeting back in October, and we've had a lot of follow-up from that meeting. I think there were about 50 government partners from different agencies of the government that could fund Phase 3 and also could fund ACX 375, the second program, which now has the new hook with the anthrax. So the non-dilutive sources of funding obviously are better for our shareholders. And don't forget the Pasteur Act is still out there, and I understand that it's much more prominently possible to be passed in the near future more than it's been in any of our prior calls.

Understood. Thank you so much for the kind of questions again and looking forward to progress in the U.S. and in Europe as well.

Thank you so much, Thomas.

The next question is from James Molloy from Alliance Resource Partners. Please go ahead.

Hello, this is Laura on for Jim Molloy. Thank you for taking the question.

I'm sorry, was it Laura?

Yes, Laura.

Good morning.

Good morning. So for the upcoming Phase 3 program, maybe just have a bit more insight on the earliest potential start for the first Phase 3 trial, as well as any proposed study designs or data readout timelines that you have here for both of the Phase 3 trials.

So it's a little bit up in the air as we continue to source the resource that we need to fund the Phase 3 trials. But the trial design is two Phase III registration trials, international, at about 150 trial sites, 450 patients per trial for a total of 900 patients, and both trials are the same, one-to-one randomized against oral vancomycin for a 10-day treatment period. The primary and secondary endpoints are identical to the Phase IIb clinical trial endpoints that we worked with for Phase 2B. So that's really about it. We're in a great position in that we can do the Phase 3 program sequentially instead of doing both trials at the same time. We have that kind of flexibility because We have 10 years of regulatory exclusivity from the time we get FDA approval and there are similar advantages available in Europe. I think it's nine years in Europe. So really we're not confined by the commercialization need of having patents that expire. So we really just need to raise the money for one phase three and then As the plan would go, if we can raise the money for one of the Phase 3s and the data is good as we expect, then we can raise the money at a higher price for the second Phase 3.

Got it. And then also for your ACX 375 candidate, you've mentioned the research conducted in anthrax at the University of Florida. So where are you currently in the development of the anthrax bioterrorism program that you've mentioned? And then... Also, what are some potential partnership opportunities currently looking like for this program specifically?

Well, this program is preclinical, so we don't want to get over our skis on it. We have some laboratory studies that we have to do, some animal studies that we have to do to kind of dress it up. Right now, we have this independent research, MIC studies at a couple of independent labs The data is really good, and obviously anthrax gets stockpiled by governments around the world because of bioterrorism. So there's not a lot of anthrax patients out there, so it wouldn't be the kind of thing that we would find a commercial partner to partner with and go out and sell anthrax somewhere. It would be kind of like if somebody bought it, they would be buying it to try to get government contracts around the world for stockpiling. But this has just been discovered a couple of months ago. So we're just in the beginning phases.

Understood. And then just one more question from us. So you also mentioned the recent presentation done on the preclinical GPFS program, specifically in targeting MRSA. So what are other future clinical development plans that you have for this program as well?

Well, it will start with MRSA infections, and then it'll go into VRE and DRSP infections. But Epsissi is probably the biggest incidence of MRSA infections. So we think that's the most attractive one for us to go after. So it's acute bacterial skin and skin structure infections that we start with. Those are ones caused by MRSA. And then we'll get into... other areas of MRSA infections and VRE and DRSP.

Got it. Thank you for taking the questions.

No problem. Thank you, Laura.

As a reminder, it is Star 1 to ask a question. The next question is from John Stinson, a private investor. Please go ahead.

Good morning, David. Thank you for taking our questions.

Good morning, John.

I'm kind of surprised that we haven't heard from a big partner, big pharma partner by now. Did you say you're trying to hold off on that because of the amount of dilution that they're demanding? Can you talk a little more about that possibility of partnership in the near future?

Sure, John. Well, you know... It reminds me of my first biotech company. We signed up a bank. I think it was Credit Suisse. It took three or four years by the time we got a deal done. These things are sometimes very time-consuming. Things don't happen overnight. I don't know if you've had experience in Japan. But just as an example, Japanese companies move very slowly. They watch, they learn, they look, they diligence, and you keep going until you find deal terms that your board likes, that they think it reflects the right value. So we have different parties looking at M&A, different parties looking at territorial deals, And we have the government, which is obviously the ultimate non-dilutive partner. But we're not slowing any partnerships down. Partnerships with private companies won't dilute our shareholders at all. What we would do is, in our financial modeling, if we were to, say, do a Japanese territorial license and co-development agreement, our financial modeling and Wall Street's financial modeling on our company would become one based on upfront payments, clinical and commercial milestones and royalties, as opposed to straight-up operational advancements, R&D costs, followed by commercialization revenues in the territory. So it wouldn't be a dilutive thing to have a private license and co-development agreement in Japan or Europe or South America. it would be a positive thing for us and it would raise us the money that we would need to, you know, kind of move toward phase three. So what we look at generally speaking, because we need to raise so much money for phase three, we're taking a multi-step approach and we're basically, you know, using all the levers that we have available to us to raise the money that we need as non-dilutively as possible. So that's kind of in a nutshell, that's what we're doing. All right. Thank you, David. No problem. Thank you, John, for asking the question.

This concludes the question and answer session and today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Thank you, operator. Thank you.