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spk02: Greetings. Welcome to the Atomos Pharmaceuticals Corp Q3 2021 Financial Results and Corporate Update Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Mr. Robert Uhl. You may begin.
spk00: Thank you, Operator. Good afternoon, everyone, and welcome to the Atomos Pharmaceuticals Third Quarter 2021 Financial Results and Corporate Update Conference Call. Thank you for joining us today for the update, and welcome to our shareholders, analysts, and anyone interested in Atomos. Joining me today is Atomos' President and CEO, Dr. Dennis J. Carlo, Chief Medical Officer, Dr. Ron Moss, Chief Business Officer, David Margulio, and Adamus' recently named Chief Financial Officer, David Benedicto. The format for this call will consist of prepared remarks from management followed by Q&A. This call is being webcast and will be available for replay in the investor section of our website, adamuspharmaceuticals.com. In today's call, we will make certain forward-looking statements regarding our business based on current expectations and current information. Those statements speak only as of today. And except as required by law, we do not assume any duty to update in the future any forward-looking statement made today. Of course, any forward-looking statements involve risks and uncertainties, and our actual results could differ materially from those anticipated by any forward-looking statements that we make today. Additional information concerning factors that could affect our business and financial results is included in our most recent annual report on Form 10-K with the Securities and Exchange Commission and in other subsequent filings that we make with the SEC. These are available at the SEC's website. In addition, I would also like to say that if anyone would like to email questions in during the Q&A portion of the call or at any time during the call, please feel free to do so using the email address IR at AdamusPharma.com. With that, I will now hand the call over to Dr. Dennis Carlo, President and CEO.
spk07: Thank you, Robert. Well, obviously, a lot has happened since our last business update in June. And at that time, we were looking ahead to the following. Well, number one, FDA acceptance of the resubmitted new drug application for our Zinline Naloxone injection product Number two, enrolling of the first patient into our phase two, phase three clinical trial using TEMPL as a treatment for COVID-19. Number three, looking forward to increasing sales of our syngepi epinephrine injection product. Looking to get approval of our Zynhy treatment for opioid overdose and the subsequent commercial launch. And finally, following an IMD to enable the development of TEMPL for another indication at which time we were targeting radiation dermatitis. Well, I'm pleased to say we've made steady progress on each of these objectives, and with the exception of the commercial launch of Xenhyde, which will occur early in 2022, we have either already met or expect to meet by year-end each of these targeted milestones. Well, let me move forward now with an update on Xenhyde, our naloxone product. We submitted our NDA in May, and in June, the FDA indicated they had accepted it for review. In October, we received notice of approval, approximately one month ahead of the FDA's targeted action date. I'm only speculating that the alarming increase in overdose deaths and worsening opioid crisis may have contributed to the agency's expedited review. A recent New York Times article entitled, Overdose Deaths Reach Record High as the Pandemic Spreads, reported overdose deaths in the US top 100,000, according to the CDC data, for the 12 months ending April 2021. Our product, Zimhi, is the highest-dose naloxone product that is currently approved. It is differentiated from the currently available products in that naloxone enters the bloodstream faster and reaches higher concentrations than either of the competing nasal products. Every second matters during an overdose, and the higher levels are especially important when dealing with the highly toxic fentanyl substances. We and our commercial partners, U.S. World Meds, are very excited about introducing this product to the market, especially since they already are selling a complementary product in the area. They are already very familiar with this space. Now let me shift to Syngepi, our epinephrine product. Since taking over commercial responsibility for Syngepi in late 2020, U.S. World Meds has nearly doubled units sold during the same prior year period under Sandoz. Also, market penetration remains on an upward track. While we require continued growth before we approach our own sales expectations for Syngepi, we view the increase in quantity and availability of epinephrine products in the market as positive for those patients susceptible to severe allergic reactions. Additionally, we are very encouraged by the sales trajectory and U.S. worldwide strategy and commitment to make Syngepi a commercially successful product. David Mogulio will expand on this a little bit later in the call. Let me now move on to Temple. In early September, we enrolled the first patient into our ongoing Phase 2-3 clinical trial at Temple for the treatment of COVID-19. Dr. Moss will dwell into more specifics on the scope and timing of the trial, but I will say up until now, the combination of increasing numbers of vaccinated individuals and decreasing rates of COVID infections have presented challenges to patient enrollment. To address this challenge, though, we've begun a significant expansion on the number of clinical study sites, including potential sites outside the US. Now, lastly, some of you may have seen a webinar hosted by the NIH on Temple and its potential use in treating COVID-19. To date, which had been previously published by the NIH-demonstrated the antiviral properties of Temple that could be beneficial in a number of medical conditions, including COVID-19. We are aware of the NIH's recent activities related to Temple and its potential use in treating COVID-19, and we'll continue to monitor those activities. Now, I'd like to remind investors, Atomos licensed exclusive worldwide rights under patents, patents that have issued, patent applications and related know-how related to Temple for certain licensed fields, including the treatment of respiratory diseases, including asthma, respiratory syncytial virus, influenza, and COVID-19. Patents have already issued. In addition to our work in COVID, we continue to look for additional indications for the use of Temple and to explore options regarding funding and design of a clinical study to examine the effects of Temple for other clinical indications with the goal of being in a position to follow an IND. We initially explored radiation dermatitis, but because of the recent changes in treatment regimens, i.e. shorter treatment, the incidence of dermatitis has decreased and oncologists are seeing success treating the less severe cases of dermatitis with steward creams. We'll continue to monitor the area, but for now, we've decided to prioritize other potential uses. Now, with the recent approval of Zimhi, it made sense to look for other opportunities in the addiction space, Since multiple preclinical studies have suggested Temple could play a significant role in the treatment of methamphetamine and cocaine use disorder, we've decided to further explore this area. Now, lastly, I must address where things stand with the previously announced opinions that the company and our U.S. compounding subsidiary received from the U.S. Attorney's Office for the Southern District of New York in connection with an investigation by the U.S. Attorney's Office. The subpoenas requested a broad range of documents and materials relating to, among other things, certain veterinary products sold by USC, certain practices, agreements, and arrangements relating to products sold by USC, including veterinary products, and certain other matters relating to the company and USC. Also, as previously disclosed, our audit committee initiated an independent internal investigation, and now I am pleased that we have reached the stage where we are able to file our quarterly reports. As has been disclosed in Form 10-Q as of the end of July 2021, the company sold assets relating to U.S. human compounding pharmacy business, has subsequently ceased the manufacturing both human and veterinary pharmaceutical products, and is engaged in the process of selling or otherwise disposing of the remaining assets of the business and the employment of all USC employees has ended. I would now like to introduce our long-time controller and recently named CFO, David Benedicto, to provide some highlights from our recently filed financials. David?
spk03: Thank you, Dennis. As Dennis mentioned, we are pleased to have filed today our Form 10-Q for the first three quarters of this year. The sale of assets of USC and the widening down of its business resulted in a change in the presentation of financial results relating to the company and USC because of discontinued operations accounting principles. And as a result, I will focus on the financial results for the nine months ended September 30, 2021. I encourage everyone to thoroughly review its content individually for additional details and disclosures. The business conducted through our USC subsidiary is treated as a discontinued operation as of September 30, 2021. Accordingly, for this period, the major assets, other assets, current liabilities, and non-current liabilities have been reported as components of total assets and liabilities separate from those balances of continuing company operations. At the same time, the results of all discontinued operations have been reported as components of net loss separate from the net loss of continuing operations. Additionally, the financial statements of the comparable prior periods were reflected in conformity with the current period's presentation as discontinued operations. Reflecting discontinued operations accounting principles, The revenues for the nine months ended September 30, 2021 and 2020 were approximately $3.4 million and $2.1 million respectively. The increase in revenue was primarily attributable to the U.S. World Med's marketing initiative for SMGP. The selling, general, and administrative expenses for the nine months ended September 30, 2021 and 2020 were approximately $13.2 million and $9.6 million respectively. The increase in expenses was attributable to an increase in legal fees. The research and development expenses for the nine months ended September 30, 2021, and 2020 were approximately $9.1 million and $6.6 million, respectively. The increase in expense was primarily due to development related to the Semhi and Tempol products. Loss from discontinued operations for the nine months ended September 30, 2021 and 2020 was approximately 10.3 million and 7.6 million respectively. The increase in loss was primarily due to the decrease in USC revenue and gross profit and the impairment of various tangible and intangible assets resulting from the disposal of US. This loss was offset by the reduction in operating expenses and the gain from the sale of assets to Pagora. Cash and cash equivalents at the end of September 30, 2021 were approximately 28.7 million. Based on the operating capital required by USC over the last four quarters, we estimate the shutdown of the division may increase the company's overall cash burn by approximately 1.2 million per quarter starting in the fourth quarter of 2021, excluding expenses associated with the winding down of USC's business. Additionally, over the four quarters, the company estimates to receive additional cash from amounts payable relating to the previously announced of certain USC assets to Fagrad. The company will be selling or otherwise disposing of the remaining assets of U.S. compounding which includes land, the building, the machinery, and the equipment. Once again, please see our December 31, 2020 Form 10-K and our quarterly reports on Form 10-Q for additional details and disclosures. I will now turn it over to our Chief Medical Officer, Dr. Ron Moss, for an update on our regulatory pipeline development.
spk06: Thank you, David. As Dennis mentioned, in September we began enrolling patients into a Phase II-III clinical trial testing Temple in early COVID infection to determine the effects on clinical improvement, inflammation, and the rate of hospitalization. Temple, as you know, has a unique triple mechanism of action, including antioxidant, anti-inflammatory, and antiviral activity, which differentiates itself from other approved or unapproved antivirals and monoclonals. Of note, a trial requires individuals with moderate COVID-19 symptoms to be unvaccinated and have comorbidities such as heart disease, as those patients typically have worse outcomes requiring hospitalization. We continue to enroll the trial and remain blinded to the data as required by the study to design. However, we have experienced enrollment challenges, as Dennis mentioned, precipitated by the dramatic decrease in COVID infections and increased immunizations in this country. To mitigate this challenge, we are engaged in the process of opening new sites across the U.S. and are ready for the next COVID surge should there be one this winter, as many are predicting and as we're reading in the newspapers. It should be noted on average, working with an experienced clinical research organization, new sites take 10 weeks to open and involve multiple steps. In addition, we are also planning to consider clinical sites outside the U.S. in geographic locations where vaccination rates are lower and COVID rates are higher. The company plans on announcing the interim analysis decision by the Data Safety Monitoring Board when it becomes available. I want to emphasize again, the company is blinded to the data on a daily basis. As mentioned, we report on the trial list of the DSMB interim analysis for the first 50 to 60 patients. Until then, we do not plan on announcing any new information publicly. At this time, I'd like to turn it over to David Margulio.
spk05: Thank you, Ron. As we previously disclosed and as mentioned a few times on this call, we sold certain assets at the end of July relating to the USC's human compounding business to Fedron. That agreement provided that we will receive monthly payments over the next 12 months, or excuse me, over a 12-month period, an amount equal to one to two times the total sales of products. Certain identified customers in the book of business, it was included as part of that agreement. In addition, we've sold additional USC assets and are engaged in a process of winding down the remainder of the business and selling or otherwise disposing of any remaining assets of USC, including the land building and the manufacturing equipment. Please refer to our most recent filings for additional details regarding the sale of USC. Now, turning to product commercialization. According to market data from Symphony Health, sales of epinephrine injection products in the U.S. exceeded $1.7 billion for the 12-month period ending September 30, 2021. So it remains a very large market opportunity. And despite marketing challenges posed by the pandemic and related lockdowns, Symphony market data indicates that for the nine months ending September 30, 2021, some JEPI unit sales have increased approximately 98% versus the first nine months of 2020. While these numbers continue to lag our own expectations, the trend suggests that U.S. World Meds is gaining traction And based on the overall size and growth of the market, we remain bullish on the long-term commercial potential for Simgepi. Now, turning to Zimhi, certainly last month's early approval was exciting, but as quickly as the excitement came, we immediately shifted gears to preparing for a commercial launch. Since the approval, Atomos, along with our manufacturing partners, I've been working closely with U.S. World Meds to prepare for the launch of Zimhi in 2022. We will provide additional information on the status of that launch in future updates, but in the interim, I would encourage you to explore the new Zimhi.com website for additional information on the product itself and its availability in the market. With that, I'll give it back to Dennis for closing remarks.
spk07: Thank you, David. I'll conclude by listing some of our major corporate accomplishments for 2021. Number one, we filed an IND and we initiated our Phase II, Phase III clinical COVID trial. Number two, we resubmitted our NDA for naloxone and received early approval. Number three, we've increased sales of our Syngepi epinephrine products. Number four, we've sold both the human and veterinary businesses of U.S. compounding. Number five, we began GMP production of Temple. Number six, we continued working with our commercial and manufacturing partners to enable the launch of Zimhi, our high-dose naloxone product. And number seven, we intend to file an INV for another application for Temple by year-end. With that, I'd like to close and I'd like to open it up to questions. Thank you very much.
spk02: At this time, we will be conducting a question and answer session. If you'd 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'd 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. As a reminder, if you'd 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'd like to remove your question from the queue. It looks like there are no questions at this time. Oh, a question has popped up in the queue. Our first question is from Elliott Wilbur with Raymond James. Please proceed with your question.
spk04: First question, I guess, for Dr. Moss, maybe with respect to Tim Fall, I guess, given your experience to date with the compound, maybe you could just outline for us in terms of how you would sort of rank order the potential future opportunities in terms of clinical development programs for the asset outside of COVID-19, you know, what you're thinking about doing. in terms of moving that asset forward?
spk06: Sure. Thank you for that question. So TEMPL, as I mentioned earlier, is a very unique product, particularly its antioxidant, anti-inflammation components. And one of the things that we've been intrigued with is its effects on neuroinflammation. There's multiple animal models and studies of TEMPL for various models that include substance abuse disorders, stimulant abuse disorders, Alzheimer's, multiple sclerosis. In many different models of neuroinflammation, it appears that Temple seems to be very effective and safe. So we will continue to look at these opportunities of other areas, but we think because of its good brain penetration, that one particular area would be treatment of neuroinflammation, and that includes methamphetamine, youth disorder, Alzheimer's, multiple sclerosis, et cetera.
spk04: Okay, thanks. And then with respect to the adaptive trial, phase two, phase three in COVID-19 patients, I think you mentioned the first DSMB interim look is going to occur at 50 patients. I believe there was also a second look in that trial. I just wanted to confirm that if you could remind us at what patient count that would occur.
spk06: Yes. There is a second interim analysis at approximately 120 subjects.
spk04: Okay. Is there any update on some of the various funding initiatives with respect to utilization of that compound that you had been pursuing earlier in the year?
spk06: We are applying and are continually in contact with the government, but we are applying for a grant for a particular indication of Temple.
spk04: Okay. And then one last question for you, Dr. Moss. With respect to the NIH webinar on Temple, anything emerging from that presentation that highlights different aspects of the product that you strongly agree with, or was there anything that the NIH presentation focused on that you think maybe necessarily was, you know, inconsistent with what you have seen previously or sort of how you're viewing the asset?
spk06: No, I think the program by NIH solely focused on the antiviral effects of Temple and we believe that its antioxidant, anti-inflammatory activity are also relevant for the treatment of COVID-19, particularly if you can't treat patients very early. We know that the sequelae of COVID-19, the virus is very self-limited and the sequelae are primarily due to an overzealous immune activation that occurs So their presentation was devoid of that very important information.
spk04: Okay. Maybe just following up on your response there. So given the current evolution in terms of the advancement of, you know, various oral or potential oral therapies for the virus, you know, where do you see Tempol potentially fitting in with respect to some of these newer emerging therapies? Could it be a complementary asset, or there are various patient populations you think this might be more appropriate for than what we're seeing from some of the large pharma companies pursuing oral treatments?
spk06: I personally believe it's complementary to the other therapies that are out there. Similar to utilizing flu antivirals, The efficacy of the antivirals may be limited depending on when they're given in disease, and I think that Temple, because of its anti-inflammatory activity, has broader coverage for the true sequelae. So I could see this drug being used alone, but I can also see Temple being used in combination with other therapies.
spk04: Okay, and then just a couple of quick financial questions here for David, I guess. Could you walk us through, I may have missed this in your prepared commentary, but if there are any upcoming cash exit costs associated with the remaining USC operations?
spk03: Yes, thank you for the question. It's actually part of our thank you filings So currently, yes, we have estimated around $1.5 million related to the exit cost with regards to the disposal of USC. It's part of the temp filing and the restructuring costs.
spk04: Okay. And then just last question around Zimhi. Can you just remind us if the relationship with US World Meds includes anything other than simply straight royalties on commercial sales? I can't recall if there were any associated milestones with respect to approval or launch, but any payments outside of royalty-based obligations? David, do you want to take that?
spk05: Yeah, sure. Thanks, Elliot. Yes, there are additional milestone payments that they are all targeted to performance-based milestones, and they are part of a combined overall revenue targets for both products. So the... The success of both products together leads to cumulative total targets that lead to about a half a dozen additional milestones.
spk01: Okay.
spk04: All right. Those are my questions. Thank you.
spk02: We have reached the end of the question and answer session, and I will now turn the call over to Mr. Robert Uhl for closing remarks.
spk00: Thank you very much, operator. That will conclude our call for today. I thank you for participating and for your interest in Atomos Pharmaceuticals. Have a good evening, everyone.
spk02: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
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