Aptose Biosciences, Inc.

Good afternoon. My name is Hope and I will be your conference operator today. I would like to welcome everyone to the Aptos Biosciences conference call for the third quarter ended September 30th, 2023. At this time, all participants are in a listen-only mode. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. If you would like to withdraw your question, please press star 11 again. Thank you. As a reminder, this conference call may be recorded. I would now like to introduce Ms. Susan Pietropalo. Please go ahead. Thank you, Hope.

Good afternoon and welcome to the Aptos Biosciences Conference call to discuss financial and operational results for the third quarter ended September 30th, 2023. Earlier today, Aptos issued a press release relating to these financial results. The news release as well as related SEC filings are accessible on Aptos' website. Joining me on today's call are Dr. William Rice, Chairman, President, and CEO, Dr. Rafael Behar, Senior Vice President, Chief Medical Officer, and Mr. Fletcher Payne, Senior Vice President and Chief Financial Officer. Before we proceed, I would like to remind everyone that certain statements made during this call will include forward-looking statements within the meaning of U.S. and Canadian securities laws. Forward-looking statements reflect Aptos' current expectations regarding future events. They are not guarantees of performance, and it is possible that actual results and performance could differ materially from these stated expectations. They involve known and unknown risks, uncertainties, and assumptions that may cause actual results, performance, and achievement to differ materially from those expressed. To learn more about these risks and uncertainties, please read the risk factors set forth in Aptos' most recent annual report on Form 10-K and SDC and CEDAR filings. All forward-looking statements made during this call speak only as of the date they are made. Aptos undertakes no obligation to revise or update the statements to reflect events or circumstances after the date of this call, except as required by law. We encourage you to refer to today's press release and attend to you for additional information and disclosures regarding today's announcements. I will now turn the call over to Dr. Wright.

Thank you, Susan. I want to welcome everyone to our call for the third quarter ended September 30th, 2023. Today, I first want to remind everyone that earlier this year, we knew we had an impressive lead agent in Tuspatinib for the treatment of patients with AML. but we also had a limited cash runway to develop it. Strategically, we avoided any punitive financings and any potential warrant overhang. Rather, we extended the cash runway with an at-the-market or ATM facility, with a committed equity facility, and through an investment by our partner, Honmy Pharmaceutical. This was designed to give us breathing room and time to collect critical data with Tuspitinib that may drive improved financing terms and potential collaborations. We then undertook the Aptivate expansion trial to understand Tuspatinib single-agent activity and to identify relapsed to refractory AML populations with unmet needs and who are particularly sensitive to our Tuspatinib plus Venetoclax or TUSDEN doublet therapy. We learned that Tuspatinib as a single agent at our 80 milligram recommended phase two dose is highly active in patients naive to Venetoclax, with CR-CRH rates of 42% across all available patients, 60% in FLT3 mutated patients and nearly 30% in FLT3 wild-type patients, demonstrating potent single-agent activity across a breadth of patients. But we also observed that as we dose escalated above 80 milligrams to higher dose levels of tespatinib as a single agent, the response rates unexpectedly dropped. Initially, we were unsure what was driving this difference, but after careful analysis, we learned that the patients entering the higher dose levels of 120 milligrams and above represented an entirely different patient population. At the point in time when we transitioned above the 80 milligram dose, suddenly more than 80% of the patients coming onto our trial had failed prior therapy with venetoclax, and these Venn failure AML patients are known to be far less responsive to salvage therapy. The Venn failure patients continued to respond to Tuspatinib as a single agent, but at a lower response rate, so that mystery was solved. But more importantly, this rapidly emerging VIN failure population revealed a unique opportunity for Tospetinib. That's because Tospetinib targets the resistance mechanisms employed by AML to become resistance to venetoclax, which includes mutations in FLT3, KIT, JAK, and RAS pathways, and increases an MCL1 expression. These VIN resistance mechanisms play directly into the targeting capabilities of Tospetinib and suggested tuspetinib may resensitize VIN failure patients to venetoclax, and that the tuspetinib venetoclax, or TUSBIN doublet, may effectively treat this patient population in critical need of new therapies. And indeed, now we have learned that the TUSBIN doublet is clearly active in the relapsed or refractory VIN failure AML patients. In August of this year, we released our first data from 10 available patients that have received the TUSBIN doublet. nine of whom were VIN failures. The composite complete remission, or CR rate, was 44% among the VIN failure patients, whether they were FLT3 mutated or FLT3 wild type. That was impressive, and we continue to enroll these VIN failure patients onto the TUS and doublet. We then released a second data cut in September, showing roughly the same composite CR rates among 15 available patients. These data then generated tremendous investigator enthusiasm to place additional patients on the TUSDEN doublet. By the time we reached our planned presentation at the European School of Hematology conference last week, we had expected a total of up to 30 patients to have been dosed with the TUSDEN doublet. But we actually had dosed 49 patients with the doublet as of our data cut on October 23rd. To be clear, many of these patients were very early in their course of treatment. just two to six weeks into the treatment in many cases. The composite CR rate at this point in time with these early patients was about 29%, plus additional partial responses, or PRs, that emerged early for an overall response rate of 48%. While those early PRs are not yet CRs and are not counted in the composite CR rate, they are noteworthy. For example, one patient entered the trial with a bone marrow blast count of 82% and dropped quickly to 7% after receiving the Tusman doublet. That's a dramatic reduction in disease burden, but not quite below 5% in the bone marrow blast, so it scored as a PR. We'll continue to treat and watch such patients with the hope that many of these responses will mature to CRs over time. In fact, For all ongoing patients on the trial, we will continue to collect response maturation data and duration of response data. And to highlight our ability to execute this trial, we're approximately two quarters ahead of our expected enrollment rate in the Aptivate trial, and that will allow us to watch for maturation of responses and extended duration of response data earlier than we had expected, and to wrap up this trial up to two quarters earlier than we had expected. So what will we do with our findings? First, this sets us on the registrational path with the TUS-BEN doublet and relapsed to refractory then-failure AML patients, inclusive of both FLT3 mutated and FLT3 wild-type patients. And that registrational study could begin the second half of 2024 and potentially provide an accelerated approval pathway. Second, data with the TUS-BEN doublet are segueing us into the TUS-BEN doublet venetoclax azacitidine triplet pilot study in frontline newly diagnosed AML patients. That study is planned to begin the first half of 2024, and the findings could then support a TUS-BEN hypomethylating agent registrational trial in frontline AML. TUS-BET has demonstrated potent activity across diverse AML groups with adverse mutations, has a favorable safety and tolerability profile, is convenient as a once-daily oral tablet and mechanistically targets the venetoclax resistance mechanism. This makes tespetinib an ideal drug for frontline combination therapy and for combination therapy in the relapsed or refractory AML populations, particularly for the emerging wave of patients who fail venetoclax. In addition, these same properties of tespetinib and its action on AML patients are leading us to include the treatment of patients with higher-risk MDS and CMML in our trials going forward. We now are leveraging our clinical findings and plans to support financing and collaboration discussions. While we have no announcements to make and can make no commitments in these regards, we clearly are pursuing these paths. I now want to turn the call over to Dr. Behar, our chief medical officer and resident KOL, for his insights and comments on our latest data. Raf?

Thank you, Bill. I first want to highlight our latest news. We announced last week that clinical data for tispetinib, or TESS, has been selected for an oral presentation at the ASH meeting in December, which will be given by our lead investigator, Dr. Naval Dhabar of the MD Anderson Cancer Center. Dr. Dhabar will present data from Aptos' ongoing Phase I-II Aptivate trial of tispetinib in relapsed refractory patients with acute myeloid leukemia. We're really pleased by this recognition from our esteemed colleagues and look forward to sharing the Aptivate data in this forum As Bill mentioned, just over a week ago, during the European School of Hematology meeting on AML, or ESH, we reviewed all the data to date from an October 23rd data cut from the TUS-Aptivate trial. We're not going to go through a full data rehash here. We'll make this call efficient. But I just want to clarify some key points, address some misperceptions, and answer some of the questions that we've been getting over the last week or so. If you did not listen to our ESH call, I encourage you to do so, and you can access it on our website under the Events tab. Dr. Diver joined us on the ESH call last week as an internationally recognized expert in the development of clinical therapeutics for AML, including combination therapies. It was extremely helpful to get his impressions of the ongoing needs in AML and how to spend it could help address them. One of the things we discussed is the changing AML patient population and emerging needs in the AML treatment landscape. The vast majority of U.S.-based AML patients entering clinical trials now have tried and were failed by venetoclax at some point in the course of their disease. In our ACTIVATE trial, the percentage of U.S.-based patients who have failed venetoclax has grown to about 90%. This leaves a patient population with highly resistant mutation patterns and dismal response rates to salvage therapy with CR rates often in the single digits, whether treated with monotherapies or drug combinations. This extremely challenging patient population with a rapidly emerging medical need is what all of us who are trying to develop AML treatments in relapsed or fractured populations are up against. we're seeing an entirely different group of patients than drugs that were developed just a few years ago. Indeed, what we're seeing in the aptivate expansion trial, the majority of patients have failed prior therapy with venetoclax and have unmutated FLT3 AML, a patient population that accounts for an estimated 70% of AML cases. And with few or no effective treatment options, being able to potentially target the larger FLT3 unmutated patient population and to do so safely is a key differentiator for testetnib. Now, for people who shake their heads because there's so much going on in AML and it's difficult to determine and the potential winners in this space, it's important to note that the sputum is differentiated by its clinical activity in this FLT3 unmutated population. So the positive data we've generated just for sputum, which includes responses in that FLT3 unmutated or wild-type AML, makes it that much more exciting. And there is room for many other AML drugs in development, too. AML is an extremely heterogeneous disease. with broadly resistant mutation patterns, and it'll take combination therapies of drugs targeting different kinases and other pathways to manage the disease across different populations. As we get into review of our data highlights, I want to give a quick explanation of what we mean by evaluable patients as it's defined in our protocol. Briefly, we consider evaluable any patient that has reached their second response assessment at the end of cycle one or has had an objective response at their first response assessment. Participants that discontinue treatment for disease progression after that first assessment are, in fact, considered evaluable. Only patients who don't undergo a response assessment or have stable disease with less than one cycle of treatment are considered not evaluable, or technically, in-evaluable. Currently, about 85% of our study participants are considered evaluable by the end of cycle one. But we also have several ongoing patients that have not yet reached this milestone and will do so in the coming weeks. For example, In our latest data cut with 31 evaluable patients out of the 49 patients dosed with the TUSPEN doublet, many had very recently entered the trial and have only just finished one cycle of treatment with TUSPEN, having been dosed in September and October, with many patients pending a valuability assessment in the next two to three weeks. Data reported at ESH are therefore early, and we expect more of the responses noted to continue to mature. We will have more evaluable patients over time, including next month at ASH, when we'll provide another update. A quick note on patient enrollment. As of today, more than 150 patients have been treated with tispetinib. 91 patients have received tispetinib as a single agent. And as Bill said, we have anticipated dosing up to 30 patients with TESFEN by the ESH 2023 conference. However, due to investigator enthusiasm, we ended up with more than 49 patients as of October 23rd, and patients continue being enrolled. Now let's talk about the safety profile. In the most recent data cut from October 23rd, the favorable safety profile remained consistent for TUS and TUS then-treated relapsed refractory AML patients with no new or unexpected safety signals noted. We've reviewed the safety profile of tispedinib often, so I'll keep it brief here. In short, tispedinib continues to avoid many of the typical toxicities observed with other agents, including FLIT3, IDH1 and 2, and menin inhibitors, such as QTC prolongation, differentiation syndrome, and elevations of muscle enzymes like CBK that are related to treatment We have not observed these as a clinical concern in our treatment. Some quick highlights of the data we presented at the ESHA email meeting regarding Tospetnib as a single agent. Tospetnib as a single agent was well-tolerated and highly active among relapsed or refractory AML patients with a diversity of genotypes. TUS single agent delivered a 42% and 60% CR-spot matrix rates across all patients and across split-three mutated patients, respectively. And among... in the evaluable ven-naive patient population treated at 80 milligrams, the recommended phase 2 dose for tispetinib. Tispetinib demonstrated a 29% CRCRH rate in ven-naive FLID3 unmutated or wild-type patients at this 80 milligram RP2D dose. This unlocks the potential for tispetinib to treat an additional 70% to 75% of the AML population without the FLID3 mutation that is not currently addressed by any approved tyrosine kinase inhibitor. Tospenib single-agent response rates compare favorably to Giltoridin in matched patient populations. Details on this interesting comparison are presented in our slide deck from the meeting, which is available on our website. Let's turn to the doublet data. In addition to the safety and efficacy of Tospenib we reported at ESH, we also presented a poster that warrants mention here. Tospenib directly targets pathways involved in Venn resistance. By shutting down these pathways, Tospenib appears to clinically resensitize prior Venn failure patients to venetoclax. Our overall response rates for the TUS-VEN doublet includes several recent preliminary responses. And as of last week, we had just 49 patients, 31 of whom were evaluable to date. Keen investigator interest has led to this increased rate of enrollment, and we expect to report on additional patients at ASH in December. Our evaluable patients showed an overall response rate of 48%. That's 15 out of the 31 evaluable patients. Eighty-one percent, or 25 out of the 31 evaluable patients, were prior events and failures. 44% overall response rate was observed in this Venn failure population. There was a 60% overall response rate in the FLT3 mutant population and a 43% overall response rate in the FLT3 unmutated population. As I mentioned, most patients are early in the course of treatment, having initiated dosing in the past two to six weeks, and we do expect these responses to mature over time. Our experience with the TUS-Venn doublet will inform how best to carry out the triplet combination with a TUS- HMA venetoclax in the frontline setting. In the near term, we continue to collect data to demonstrate that the doublet is active in patients with prior venetoclax exposure, both with and without the FLT3 mutation, and to meet and share with potential partners how we might be able to position Tospetinib for frontline triplet therapy and maintenance therapy and move Tospetinib and Aptos onto a clear path for success. Indeed, Tospetinib, with its proven breadth of activity and safety profile, may address the most sizable markets in AML, and we are developing it as such. The interest in Tospetanib from potential partners continues to grow, and we are engaged in multiple productive discussions because Tospetanib looks like a large biotech or big pharma drug. Therefore, we endeavor to design our patient accruals to meet the needs of Aptos, meet the needs of regulatory agencies, and to meet the desires of potential partners. We look forward to sharing more at the upcoming ASH conference, and we are very pleased that test clinical data was recognized and selected for an oral presentation by Dr. Dauber and We will also plan on releasing our next set of updated data around time. As Dr. Darber described in the question and answer session after our clinical update call at ESH, the safety and efficacy data that we're seeing with the tispetinib-venetoclax combination is very encouraging and suggests that TUS may effectively treat the growing number of Venn failures that we're seeing in relapsed refractory AML. We're now looking forward to moving TUS forward into a tispetinib-venetoclax-asacitidine triplet for the treatment of frontline newly diagnosed AML patients. The Spenib safety profile is key here, and we believe that it has the potential to be the ideal drug for combination therapy in AML, both in the frontline and in the relapse refractory settings. So to sum up our timelines and milestones, because Aptivate is an open-label trial, we will report the data when available in appropriate forums. As we discussed in our last call, we plan to present an expanded and more mature clinical data set, particularly for the test and doublet arm at ASH in December. Also, during the fourth quarter of this year, we expect to provide additional coverage around our registration plans. Also, we may release material findings at any time during these conferences and earning calls, so we have much to consider and to deliver as we look forward. Now, I'd like to turn the call over to our CFO, Fletcher Payne, for an update on our financial status. Fletcher?

Well, everyone, for some reason, we're unable to hear Fletcher, so I'm going to jump in at this point, and I apologize. I'd like to start by noting that in addition to our comments in this call, additional information may be found in today's press release and the 10Q followed with the evidence. As discussed in our financial statements, the company plans to raise additional funds to fund business operations. During the 2023, we used the 2022 ATM facility, the 2023 committed equity facility, and the HONME subscription agreement to raise capital. We continue to use these methods to raise capital And we are also actively evaluating other options to raise capital, including debt, equity issuance, and corporate collaborations. Lastly, we continue to evaluate ways to reduce operational expenses. Based on current operations, the company expects that cash on hand plus available capital from HONME's subscription agreement, permitted equity facility, and the ATM facility provide the company with sufficient resources to fund planned company operations, including research and development through March of 2024. I would direct you to also review the company's risk factors and the discussion in the going concern footnote in our 10Q. Now let's review the third quarter of 2023 financials. We continue our disciplined financial management of our operations and prioritization of our investments in the test bed and clinical program. We ended the third quarter of 2023 with approximately $17.7 million in cash, cash equivalents, and investments. a decrease of approximately $5.6 million as compared to June 30, 2020. The $5.6 million decrease in cash and investments is a result of the use of funds for the Aptivate study and operating expenses, which was offset by an increase in cash from financing activities. On a cumulative basis through September 30, 2023, the company has raised a total of $6.1 million, $3 million from the Honme subscription agreement, $1.9 million gross proceeds from the 2022 ATM facility, and 1.2 million gross proceeds from the 2023 committed equity facility. During the quarter, the net loss was approximately $11.4 million, translating into approximately $1.76 per share loss per share, compared to $9.8 million loss, or 1.59 cents, $1.59 loss per share from the same period in 2022. As of November 9, 2023, Aptos had 7,806,923 common shares outstanding. All references to loss per share and shares outstanding have been presented to reflect the 1 for 15 reverse stock split completed on June 6, 2023. As seen in the income statement, we had no revenue during the first nine months of 2023. Research and development expenses were approximately $8.3 million for the quarter, compared to $6.6 million during the same quarter of 2022. Program costs for Tuspatinib were $5.8 million by the three months ended September 30, 2023, compared to $3 million by the three months ended September 30, 2022. The higher program costs for Tuspatinib in the current period represent the enrollment of patients in our Aptivate clinical trial, clinical materials, the Healthy Volunteer Trial that we've completed, and other expenses. Program costs for LUCS evidence were $648,000 for the three months ended September 30, 2023, and decreased by approximately $742,000 compared to $1.4 million for the three months ended September 30, 2022, primarily due to lower clinical trial costs, and lower manufacturing costs as a result of the current G3 formulation, which required less API, or active pharmaceutical ingredient, than the prior formulation. G&A expenses were $3.4 million for the quarter, compared to $3.5 million from the same quarter of 2022. The decrease is primarily due to lower stock base compensation, partially offset by increased salary expenses and higher professional fees. We now would like to open the call for questions. And please feel free to pose questions to any of us. So operator, if you could, please introduce the questions.

Thank you. At this time, I would like to remind everyone that if you would like to ask a question during this time, you would need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. If you would like to withdraw your question, please press star 11 again. Please one moment while we compile our Q&A roster. Our first question comes from John Newman with CanoCore Genuity. Hi, guys.

Thanks for taking my question. Sorry if there's some noise in the background. No problem. I'm just curious here. I know that earlier in the study, there were a lot of patients that were doing very well on tispetinib, and those patients were able to go to transplant. I'm curious if the mechanism by which that can occur is the same. So are physicians still able to sort of make whatever call that they believe is in the patient's best interest and say this patient should go to transplant? Or is there anything different about the study at this point in time, especially for the doublet? Thanks.

Okay. So, John, the earlier patients you were talking about were on the single-agent TUSPETINib, and now we're primarily talking about the TUSPEN doublet. And I'm going to ask Dr. Behar to address that, please.

Sure. Yeah, so I think I understand the question. So you're correct that we had several patients go to transplant in the single agent portion of the study. And the rules haven't changed. The physicians can continue to do whatever is in the best interest of the patient. We would encourage them to take the patients to transplant if that is an option. We're hoping that the ability to reduce their blast count and reduce their disease burden might allow more patients to go to transplant than would otherwise. But as we said in the call, it is still early. So decisions about transplant are likely not made yet in many of these patients that have just started the study in the last couple of months. John, does that answer your question?

Is there anything else? It does. That does answer my question. Thank you.

Thank you, John.

One moment for our next question. Our next question comes from Gregory Renza with RBC Capital Markets. Your line is now open.

Hi, Bill and team. It's Anish for Greg. Congrats on the quarter and thanks for taking my questions. Just firstly on the expansion into high-risk MDS and CMML for tispetinib, what aspects of the data to date give confidence on this expansion opportunity? How should we be thinking about mechanistic overlap? And then just when thinking about this sort of progression and development for Tispetinib, how should we be thinking about resource allocation and any considerations for collaborative opportunities in these ventures? Congrats on the progress, and thanks again.

All right. So I'm going to ask Dr. Behar to address the first part of that. That fits right into his expertise in the high-risk MDS and semen map.

Yeah, thanks for that question. So the higher-risk MDS patients, particularly those patients that have increased blasts in the bone marrow that are just shy of that AML threshold, have very similar pathophysiology and, unfortunately, very similar outcomes to patients with frank AML. In fact, the ICC, the International Classification Consortium Committee, recently redesignated these patients with more than 10% blasts as being MDS slash AML because of the shared physiology and outcomes. What we've observed in our study is that we have several FLT3 unmutated patients that have very MDS-like mutation patterns, mutations in things like splicing factors, genes like ASXO1, types of mutations that we associate with AML with myelodysplasia-related changes. So this is the clinical rationale for extending the treatment of TUSBENDED into this very AML-like MDS population. CMML also shares some of these pathophysiologic features, but also has a very proliferative phenotype with regard to the monocytes that give the disease its name. And we think that the particular axis of activity for TISPET might be particularly favorable in that patient population. We don't want to exclude them from this potential benefit. So we know that there aren't that many of them out there, and we hope that we get a few in our trial so we can at least explore the activity in this really underserved patient population.

Okay, I'll take on the next part. So, regarding the MDS patients, as Dr. Bayar said, there is a need. There's also a great deal of larger pharmas, larger biotech companies who are interested in seeing data in those patients because it can represent a large commercial opportunity. Regarding the resource allocation, currently we're forming the TUS-BIN doublet study with patients. As I said, those patients have been accruing very rapidly, and we expect to be able to tidy up that trial probably one and a half to two quarters earlier than expected. So in terms of our next top priorities for how we're going to allocate the resources, the next one is the next top priority is that triplet, the BIN, The TUSBEN HMA triplet, it's the pilot study in, say, 20 to 40 patients. There's tremendous interest in driving this drug to the frontline newly diagnosed patients, and we'd like to get data there as quickly as possible. The next priority, then, would be the MDS CMML patients. Again, tremendous interest from a variety of additional resources outside of our company that are interested in that patient population. Beyond that, then we would look to the registrational trials that could then start. The first would be in the doublet patients, so that would be TUSDEN and the relapsed refractory patients who have failed venetoclax previously. And then after that would be the triplet, the registration trial for the triplet and frontline newly diagnosed patients. So did that, Anish, thanks for the question. Did that answer it? Yes, great. Thanks so much for the color. Okay. Thanks for being here today.

Again, if you'd like to ask a question, please press star 1-1 on your telephone. I'm currently showing no further questions. I will now turn the call back to Dr. Rice for closing remarks.

Okay. Thank you so much, Hope. I also want to thank everyone for joining us this afternoon. As you can tell, we're really excited about the growing body of safety and efficacy data on Tuspatinib. and the tespitinib-venetifax combination, and these very difficult-to-treat patient populations of AML. We believe tespitinib could improve upon the standard of care from AML patients that are currently imperfectly served by the current therapies. As always, we thank our patients, investigators, and employees for their important role in this effort. Our clinical team has been key in ramping up the enrollment in the AptivAid trial and collecting data for our latest data cut, and I continue to recognize them for their executions. We appreciate our shareholders and analysts who continue to support us, and we look forward to keeping you updated on our progress. I want to thank all of you and have a wonderful evening. Take care. Bye-bye.

Thank you, ladies and gentlemen. That concludes today's conference. You may all disconnect and have a wonderful day.