Brickell Biotech, Inc.

Greetings. Welcome to the Brickell Biotech Inc. Q3 2021 Financial Results 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, Garth Russell with LifeSci Advisors. You may begin.

Thank you. And good afternoon, everyone. Joining me on today's call are BRICL's Chief Executive Officer, Rob Brown, Chief Financial Officer, Burt Marcio, Chief Medical Officer, Monica Lucchi, Chief R&D Officer, Deepak Chadha, and Chief Operating Officer, Andy Squalor. Before we begin, I would like to remind everyone that this conference call and webcast contain certain forward-looking statements about the company. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially. Please note that these forward-looking statements reflect our opinions only as of the date of this call. We will not undertake obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events. Factors that could cause actual results or outcomes that differ materially from those expressed or implied by such forward-looking statements are discussed in greater detail in our most recent filings on Form 10-K and other periodic reports on Form 10-Q and 8-K filed with the SEC. I would now like to turn the call over to the company's chief executive officer, Rob Brown. Rob, the floor is yours.

Thanks, Garth. Good afternoon, everyone, and thank you for joining our call today. The past couple months has been an exciting period in our company's history as we successfully delivered on several key milestones that we believe position us to execute against our future growth strategies and create long-term value for shareholders. Just last month, we announced positive data from our two Phase III pivotal clinical studies of soft-cronin bromide gel, 15%, SB gel for short, for the treatment of primary axillary hyperhidrosis, also known as excessive underarm sweating. In both studies, all primary and secondary efficacy endpoints achieved statistical significance, and SB gel was generally well-tolerated over six weeks of treatment. to briefly summarize the key takeaways from the phase three cardigan studies top line results, starting with the co-primary efficacy endpoints. SVGEL resulted in a statistically significant greater proportion of subjects achieving at least a two-point improvement on the HDSM-AX7 patient-reported outcome scale from baseline to end of treatment as compared to vehicle, And SBGEL resulted in statistically significant greater reduction in sweat production from baseline to end of treatment when compared to vehicle. The results of all three secondary efficacy endpoints were statistically significant, favoring SBGEL over vehicle. SBGEL was generally well tolerated. The majority of treatment emergent adverse events in the SBGEL group were mild or moderate in severity and transient in nature. no treatment-related serious adverse events were reported. We appreciate the commitment from everybody that contributed to these two phase three pivotal studies, including the patients, study investigators, our CROs, partners, and the BRICL team. Looking forward, these results will form the basis for a new drug application, or NDA, to the US FDA, which we expect to submit in mid-2022. In addition, the results of these studies further support the potential for SBGEL to be a best-in-class treatment option. We will evaluate all options as we plan for the potential commercialization of SBGEL and will base any strategic decision on what we've determined to most likely to maximize the value of the asset for our shareholders while positioning the company for growth. Turning to our new pipeline programs, the DERK1A inhibitor platform. In September, we announced the acquisition of a phase one ready DERK1A inhibitor and cutting edge platform of small molecule precision MCEs with broad potential to treat autoimmune and inflammatory disorders. There are several key reasons we are excited about this platform technology. First, this is a novel mechanism. that comes with the potential to target both the adaptive and innate immune responses in patients whose immune system is imbalanced due to an underlying disease. Targeting DERK1A aims to restore this immune balance. Notably, achieving immune homostasis is an emerging field in the industry with real potential to completely change the way we think about treating autoimmune and inflammatory diseases. We believe there exists a significant market opportunity here for the DERK1A program under development, which is covered by strong IP position, including composition of matter patents in the U.S., Japan, China, and other countries through at least 2038. The initial lead program we will be advancing with this platform is DBI-02, which is a phase one ready, highly selective, orally bioavailable DERK1A inhibitor. BBI-02 has a scientifically robust data package that includes a thorough characterization of the molecule and its proposed mechanism of action, as well as a non-clinical data package that we believe supports the initiation of a first in human study. In addition, we have preclinical efficacy data in over 10 different animal models of various autoimmune diseases, which confirm that BBI-02 It has best-in-class potential to target autoimmune disorders. With respect to the next steps, we plan to initiate a Phase I study for BBI-02 in Canada in the first half of 2022, with top-line results anticipated by the end of 2022. This study picks up on the planning Voronoi, the company we acquired the asset from, had started, so we believe it is the most efficient path forward to initiate this first in-human study. Our second program from this platform, BBI-03, is a topically applied DERK1A inhibitor that is currently in the preclinical stages of development. Like BBI-02, BBI-03 has been tested in several preclinical efficacy models and has displayed promising preclinical efficacy in various debilitating diseases such as psoriasis and atopic dermatitis. Our team expects to conduct formulation development activities for the BBI-03 program next year. Lastly, the platform we acquired provides us with the possibility to expand efforts from immunology to neuroinflammation. To this end, we aim to select and initiate development of a lead next generation candidate from the platform in 2022. I want to take this opportunity to remind everyone that we recently hosted a webinar featuring a presentation by Key Opinion Leader Dr. Bernard Kaur of the Benaroya Research Institute. During this event, Dr. Kaur discussed the latest findings on the novel DERK1A target, its role in autoimmune and inflammatory diseases, and the broad therapeutic potential of restoring immune homostasis by inhibiting DERK1A. A replay of this event is available on the Investors section of our website. We believe this webinar offers a wealth of information about our novel therapeutic platform, and I invite everyone to listen to the event. Before I hand the call over to Bert for a financial update, I'd like to highlight two other recent events for the company. First, we expanded our leadership team with the appointment of Dr. Monica Lucchi as BRICL's chief medical officer. Dr. Lucchi brings over 20 years of immunotherapeutic and drug development experience to BRICL and will lead our clinical development and medical affairs functions. Second, we strengthened our balance sheet with the recent completion of an equity offering resulting in net proceeds of approximately $8.9 million, which Bert will discuss in more detail in a moment. With that, I'd like to turn the call over to Bert to provide a financial overview. Bert?

Thanks, Rob, and good afternoon to everyone on the call. Before I provide a summary of the third quarter financial results, I want to encourage you to read our full consolidated financial statements and MD&A contained in our quarterly report on Form 10Q, which can be accessed through the investor section of our website, once filed with the SEC. Starting with cash, the company reported $21.4 million in cash and cash equivalents as of September 30, 2021. As noted by Rob, subsequent to the end of the third quarter, we announced the completion of an all common stock equity capital raise for net proceeds totaling approximately $8.9 million. We intend to use these proceeds from our offering for research and development, including clinical trials, working capital, business development, and general corporate purposes. Most importantly, we believe our current cash position will support our operations beyond the potential SBGEL NDA submission to the US FDA, which is expected to occur in mid-2022. as well as the receipt of phase one top line results for BBI 02, which are anticipated by year end 2022. Revenue for the third quarter was approximately 0.1 million, which consisted of royalty revenue we recognized from the sales of eClock in Japan by Kaken. This was similar to the total revenue reported for the comparable period in 2020, which was driven by collaboration revenue recognized for R&D funding provided by Kaken to Brickell back in 2018. R&D expenses were $10.2 million for the third quarter of 2021 compared to $1.3 million for the third quarter of 2020. This increase was primarily due to higher expenses of $4.8 million related to upfront payments to Voronoi Inc. in cash and shares of our common stock in exchange for exclusive worldwide rights to the proprietary DERC-1A inhibitor platform, as well as $3.8 million related to the clinical costs for SBGel. Moving forward, we expect our R&D expenses for the coming quarters to decrease as we focus our R&D efforts on the earlier stage DERC1A inhibitor platform. G&A expenses totaled $3.3 million for the third quarter of this year, compared to $3.2 million for the third quarter of the prior year. Lastly, our net loss for the third quarter of 2021 was $13.3 million, compared to $4.3 million for the third quarter of 2020. And with that, I'll turn the call back over to Rob for closing remarks. Rob?

Thanks, Bert. As I stated at the beginning of the call, we are very excited about all that we've accomplished over the past few months, with several positive events that have expanded our long-term growth prospects. As we turn our attention to the next year, we have a promising set of near-term value creation milestones on the horizon, such as the Phase I study for BBI 02, further development of our DERC-1A inhibitor platform, as well as the NDA submission for Sophrony and Bromide. In addition, we will continue to explore business development opportunities, including ways to generate meaningful value for our current programs and further expand our pipeline of products that we believe have the potential to become transformative therapies for our patients. We look forward to providing additional updates as appropriate. This concludes our prepared remarks. I'll now ask the operator to open the call up for questions. Operator?

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. 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. Our first question is from Thomas Flatton with Lake Street. Please proceed with your question.

Hey, thanks, guys, for taking the question. Bert, just back to your comment on R&D expenses going down. Could you give us a sense of, you know, maybe a little bit more granularity on how low you think they'll get and then what your cash runway looks like?

Hey, Thomas, it's Rob. Bert, I don't know if you've got your phone up. Feel free to answer the question.

I'll let you address it because it's It's going to be early stage work requires a lot less money. Again, this is phase one, so I'll let Rob continue on that one.

Yes, yes, thanks. So, Thomas, obviously the last few quarters have been burdened by the phase three trials. Fortunately, as we've tried to represent here, the vast, vast, vast majority of those expenses have been have been expensed already. I've seen often where there's been kind of a phase three tail, if you will, that kind of goes off in time, but that's not the case in this situation. Phase one studies are exponentially less expensive to do, and the early development work as well. So we feel pretty good about that, and obviously that's why we feel like this gives us more than enough resources to get through the NDA submission, which does take some obviously costs and efforts, as well as all the way through the top line data from the phase one at the end of next year.

Got it. And speaking of the NDA, critical path items that you still need to check off, is CMC done? I'm assuming the preclinical is all set. Can you just walk us through kind of what those components look like?

Yeah. On the critical path is really, frankly, we have to finish the final study reports for the phase three data. Remember, we've provided top-line data, but it takes a while to close out the writing of those reports and signing off on the Phase 3. So that's probably the most important thing. All the other critical items that you need to have in a submission are done, except for the writing. And then it's a matter of putting the writing together, etc., as we go forward. So, I mean, we're targeting mid-next year to get all that done. We feel good about that timeframe, but there's not, you know, there isn't some big concerning thing out there that we're worried about needing to get done in order to meet that timeline as we go forward.

Great. I appreciate you guys taking the questions. Thanks so much.

Thanks, Thomas.

Our next question is from Leland Gershel with Oppenheimer. Please proceed with your question.

Hey, good afternoon, Rob and team. Thanks for this update and for taking my questions. Just a question for me, just to follow up from the KOL webinar you had on DERC-1A. I think you had mentioned, you know, with that target is implicated as a special rescue mechanism in trisomy 21 or, you know, Down syndrome. I think the company had planned to do some preclinical investigations around that in that setting, potentially with the compounds. Just wanted to know if you can give us a sense of when we may see that preclinical data emerge, perhaps sometime next year. Thank you. Sure.

Why don't I have Monica answer that question? Monica, if you could help Leland out here.

Sure, absolutely. Thanks, Leland, for the questions. We're actually determining right now which of the preclinical models we're going to be conducting with Dirk or May. We have a couple of choices. Clearly with Dr. Kaur's work in Down syndrome, that's very intriguing and potentially to other neuroinflammatory conditions. I can't tell you anything about the timing of that yet because we're still determining what our prioritization is going to be for each of the different preclinical models we're going to be running. but I expect we'll probably be starting those next year. I just don't know what the timing would be in terms of when you might expect results.

Great.

Thanks.

One more question for me, just strategically, as you look to do additional business development type of deals and bring in perhaps other technologies and assets, obviously with DIRC-1A, you know, there's a dermatologic component to that, and obviously Sulfuronium is in the DIRM, Just wondering to what extent you want to stay within Durham as a focus for additional deals or, you know, to the extent you may be agnostic to Durham, you know, for applications for, you know, further deals going forward. Thank you.

Yeah, thanks, Leland, for that. And, you know, obviously Durham has been our home. But as we looked at assets to in-license this first round, when we acquired the DIRT 1A, we saw a lot of innovation that was actually happening outside DERM that you might be able to apply into DERM. And so because of that, we chose to take a wider scope and really saw immunology, autoimmune diseases, as maybe a little broader scope. frame for the company as we go forward. We think that's the right approach for us as we go forward to not limit ourselves to dermatology but rather look for assets that might play in dermatology but play in that broader immunology space. That's where we'll focus. That's where we are focusing on our work to look for additional assets. We're pretty excited about that. There's some interesting things out there we can be excited about

Terrific. Thanks so much, and congratulations on the progress. Hey, thanks, Leland.

We have reached the end of the question and answer session, and I will now turn the call over to Mr. Rob Brown for closing remarks.

Thank you for taking the time this afternoon to listen to our update. I wanted to close the call out by thanking everyone for joining us today and for your continued interest in BRICL. As always, feel free to reach out to us anytime you have a question, and have a great afternoon.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for participation.