Brickell Biotech, Inc.

Inc. Quarter 1, 2022 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. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Garth Russell, LifeSky Advisor. Thank you, and over to you.

Thank you, and good afternoon, everyone. Joining me on today's call are BRICL's Chief Executive Officer, Rob Brown, President and Chief Operating Officer, Andy Scholar, Chief Financial Officer, Bert Marcio, and Chief Medical Officer, Dr. Monica Lucchi. Before we begin, I would like to remind everyone that this conference call and webcast will contain forward-looking statements about the company. These forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ. Please note that these forward looking statements reflect our opinions only as of the date of this call. We will not undertake any 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 our other periodic reports on Forms 10-Q and 8-K filed with the SEC. It is now my pleasure 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. This is an exciting time for us as a company as we recently completed a transaction that reflects our new business strategy and commitment to develop our pipeline of novel autoimmune and inflammatory therapy candidates. Just last week, we announced the sale of Sophronium bromide, or SB for short, to Botanics Pharmaceuticals. Under the terms of the deal, Botanics acquired all assets primarily related to SB, which Brickell had developed successfully through Phase III pivotal studies as a topical therapy for the treatment of primary axillary hyperhidrosis. In exchange, we received an upfront payment of $3 million at closing and anticipate receiving up to an additional $6 million in potential near-term regulatory milestone payments over the next 18 months from Botanics. The company is also eligible to receive success-based regulatory and sales milestone payments of up to $168 million, as well as tiered earn-out payments on net sales ranging from high single digits to mid-teen digits. This transaction with Botanics allows us to immediately unlock value of SB while eliminating the significant investment required for Brickell to move SB gel through the FDA review and commercialization. We plan to directly invest the proceeds and potential future economics from this deal to continue advancing our pipeline and novel potential first-in-class therapy. This includes a first-in-human phase 1 study that is set to start imminently for our lead DERK1A inhibitor, BBI02, the development of our lead sting inhibitor, BBI10, and the advancement of our next-generation kinase inhibitors through early preclinical stage studies in 2022. We believe our team's clinical and regulatory experience and track record of operational execution is as shown by our ability to develop SB from an early preclinical stage through phase three and up to NDA submission, is what positions Brickell to lead the successful development of these promising new programs. Now I'd like to pass it over to Monica to provide an update on our ongoing pipeline activities.

Monica? Monica, I don't think we can hear you.

I'm sorry. Is that better? Yes. Thank you, Rob, and good afternoon, everyone.

Yes, we can hear you. Thank you.

Okay. As Rob just mentioned, our team is thrilled to now be fully focused on the advancement of our novel drug candidates in the immunotherapeutic space, including a potential first-in-class DERK1A inhibitor, CBIO2. into the clinic and preclinical development of our novel STING inhibitors and next-generation kinase inhibitor platform. Our lead development stage program, Bbio2, is a highly selective and orally bioavailable DERK1A inhibitor that we plan to develop for the treatment of a broad range of autoimmune and inflammatory diseases. Based on the scientifically robust data package and promising preclinical validation that's been observed with this compound to date, We believe that Bbio2's dual mode of action modulating both the adaptive and innate immune systems could represent a paradigm shift in the way we currently treat these debilitating diseases. As Rob touched upon, we're on track to initiate the phase one clinical trial of Bbio2 in Canada later this month, which we are calling Bbio2 101 study or the 101 study. During the first quarter of 2022, We successfully submitted a clinical trial application for Bbio2 to Health Canada, and we have since received a no-objection letter from the health authorities, which allows the 101 study to proceed as planned. The 101 study is a randomized, double-blind, placebo-controlled trial designed to evaluate the safety, tolerability, pharmacokinetics, and pharmacodynamics of Bbio2 capsules in both healthy volunteers and subjects with atopic dermatitis, or AD for short. Part 1A of the study is a single ascending dose, or SAD, assessment of Bbio2 capsules or placebo. The SAD part of the study is expected to enroll up to 56 healthy volunteers across seven cohorts at one center. Part 1B of the study is a multiple ascending dose, or MAD, assessment of Bbio2 capsules or placebo administered once daily over 14 days. The MADD part of the study is expected to enroll a total of 33 healthy volunteers across three cohorts, also at one center. Finally, part two of the 101 study will compare Bbio2 to placebo in patients with moderate to severe atopic dermatitis over 28 days of dosing. This part of the study is expected to enroll approximately 40 AD patients across up to 12 centers. and will also include a preliminary assessment of efficacy as an initial model for inflammatory disease. With patient enrollment expected to start in the coming weeks, we currently anticipate reporting top line results from the sad, mad parts of this 101 study by early 2023. With respect to our sting inhibitor program, in the first quarter of this year, we acquired exclusive global rights to a portfolio of novel, potent, and orally available STING inhibitors from Karna Biosciences, an established drug discovery company in Japan. STING, which stands for Stimulator of Interferon Gene, is a well-known mediator of innate immune responses. Excessive signaling through STING is linked to a number of high unmet need diseases, ranging from autoimmune, and inflammatory disorders, such as systemic lupus erythematosus, non-alcoholic steatohepatitis, or NASH, and dermatomyositis, as well as rare genetic interferonopathies. Several established pharmaceutical companies are currently investing in this space, and we are looking forward to developing these next-generation sting inhibitors that we believe are differentiated through their covalent inhibition of sting palmitolations. Preclinical development activities are already underway for our lead sting inhibitor BBI-10, which has shown strong proof of mechanism resulting in significant reduction of key pro-inflammatory cytokines and a favorable initial PK tox and safety pharmacology profile. We expect to continue to conduct these activities throughout the rest of this year to enable starting IND enabling studies for BBI-10 in 2023. Before I hand the call over to Bert to review the financials, I would like to briefly touch on our library of next-generation kinase inhibitors, which includes hundreds of new chemical entities that inhibit the DERK, LRRK2, TTK, and CLK kinases. Importantly, inhibiting these kinases has shown promising outcomes in numerous models designed to mimic a broad range of different conditions within the autoimmune, neuroinflammatory, oncology, and rare disease spaces. We are conducting research to identify, characterize, and optimize these novel kinase inhibitors with the goal of progressing them as potential treatment options for debilitating diseases within some of these high-impacted fields. I'd now like to pass the call over to Bert to provide a financial overview.

Bert? Bert, we can't hear you.

Hello, Bert. We can hear you. Your line is unanswered.

Please go ahead. Okay. Thanks, Monica. And good day to everyone on the call. Before I provide a summary of the first quarter 2022 financial results, I want to encourage you to read our full consolidated financial statements and MD&A contained in our report on Form 10-Q. which can be accessed through the investor section of our website once filed with the SEC. Starting with cash, the company reported $17.3 million in cash and cash equivalents as of March 31, 2022. Earlier this month, Brickell received $3 million in upfront fees related to the purchase agreement with Botanics for SB, as well as reimbursement for certain development expenses incurred by BRICL relating to SB. We expect our cash and cash equivalents as of March 31, combined with upfront fees we received from Botanics and other potential near-term regulatory milestone payments related to the purchase agreement, will support our operations for at least the next 12 months. Revenue for the first quarter of 2022 was approximately $92,000 compared to $17,000 for the first quarter of the prior year, both of which consisted of royalty revenue we recognized from the sales of eClock or SBGEL 5% in Japan by our partner Kaken. R&D expenses were $6 million for the first quarter of 2022 compared to $6.1 million for the first quarter of 2021. During the first quarter of 22, we incurred a $3.3 million reduction in clinical costs related to the U.S. Phase III Pivotal Clinical Program for SVGEL 15%, which was completed in the fourth quarter of 2021. This decrease was almost fully offset by increases of $2 million in upfront costs related to Rickles acquisition of the Sting inhibitor platform from Karna, 0.7 million in development costs related to BBI 02, and 0.4 million related to personnel and other expenses. G&A totaled 3.5 million for the first quarter of this year, compared to 3 million for the first quarter of the prior year. This increase was primarily due to higher compensation related expenses, professional fees, insurance, and other miscellaneous expenses. Our net loss for the first quarter was $9.4 million compared to $9 million for the same period last year. And with that, I'll turn the call back to Rob for closing remarks.

Rob? Thanks for the financial recap and update, Bert. This past year was a defining one in our company's evolution. as we executed on our new business strategy by acquiring and now developing a pipeline of novel drug candidates with broad potential in the field of immunology and inflammation. Looking forward, we have several important near-term milestones over the next few quarters and beyond that we believe present a significant opportunity to create value for our shareholders. This includes the SADMAD top-line results from the 101 study of BBI-02, and further development and characterization of the sting inhibitor program, including BBI-10 and our next-generation kinase inhibitor platform. This concludes the prepared remarks. Now I'd like to ask the operator to open the call up for questions. Operator?

Thank you. At this time, we will 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 a 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. So the first question comes from the line of Team Lugo. with William Blair. Thank you and please go ahead.

Hey guys, this is Lachlan on for Tim. Thanks for taking the questions. So I noticed the language change around the phase one readout from late this year or around year end to early, by early 2023 and just wanted to get any more color on if something is slipped in the timelines a little or maybe just what's behind the change in the language there. And then second, On the manufacturing of BBI-02, can you just maybe remind us some of the details there where it's made, how the supply chain is, and how much you have, or I guess if you already have it manufactured for the phase one?

Yeah, sure. Thank you for the questions. Yeah, we had been guiding to you know, the end of the year. And we've broadened that just a little bit. And it's primarily because of the study starting a few weeks later than we had initially intended. We've always guided to start in Q2, but our hope had been to get it started in early, earlier, or earlier, a little end of April. And that really has been a challenge because of supply change challenge with the product, you know, given some of the things that are going on. In terms of the supply chain for this product, we really haven't provided that guidance, but We do have all the materials made for the study. They're in Canada now, and we're just going through the process of getting that study ready. So there shouldn't be any more problems with that. Our goal is certainly to get this study done by the end of the year, but with the few weeks we lost in the supply chain, we've decided to give that guidance a little more breathing room.

There you go. Thanks. Thank you.

The next question comes from the line of Trevor Aldred with Oppenheimer. Please go ahead.

Hey, guys. Good afternoon. Thanks for taking the question. A couple quick ones from me. So do you have any idea if R&D and SGA are going to move down for the rest of the year? Do you have any expectation now that SBE is kind of off the books? And then two, Do you know how you're going to evaluate the preliminary efficacy measures with the Part 2 of the Bbio2 study? Thanks.

Let me do the first part of that, and I'll ask Monica to answer the second part of that. On the R&D and the SG&A, clearly the first quarter, the R&D was higher than it will be in the coming quarters. We had a $2 million fee for the CARNA acquisition. so that's BBI 10. In addition, there are some upfront payments we made to get started with the BBI 02 Phase 1 program. So we would anticipate that the R&D expenses would reduce quite substantially over the next few quarters. The SG&A, there will be some things, probably not as significant as you see in the R&D line given those one-time events in the first quarter, as well as obviously we now have some softening bromide expenses that would show up in R&D off our books and being covered by botanics at this stage of the game. In terms of the evaluation of the efficacy, first off, let me just say that, remember, this is a safety study and it's a 28-day window. So we are going to be doing some efficacy measures, but it is not the primary purpose of that part of the study. But we certainly hope to see some results. And with that, let me turn it over to Monica to answer the question more specifically.

All right, thanks, Rob. And thanks for pointing out that this is a safety study. We're really excited to learn about the PK also with this drug during all phases of this part one. During the part two, which you specifically asked about, that's why we chose a patient population which has ongoing inflammation. So we're able to assess the impact of DERK1A on multiple measures of inflammation. So not only will we be looking at clinical endpoints for atopic dermatitis, which you're probably familiar with, such as the composite endpoint of EC and body surface area involvement and things as such. We'll also be looking at PD markers on cells, measuring different markers ex vivo. We'll be looking at the activity on the targets themselves, DERK1A in particular. We'll also look at the insight to inflammatory cell populations that will be assessed by biopsy. And we'll also be looking at results from tape stripping so we can see any impact on RNA. Does that help?

Okay, great. Yeah, thank you.

Yeah, thanks for taking the question. Appreciate it.

Yeah, and Trevor, one other last comment on that one. Remember, it's only 28 days, so we're not necessarily trying to see optimal efficacy. but rather we're trying to see signals and early indications of efficacy during that part two of the phase one.

Sure. Thanks.

Thank you. Ladies and gentlemen, we have reached the end of question and answer session, and I would like to turn the call back to Rob Brown, Chief Executive Officer, for closing remarks. Thank you.

Thanks for taking the time this afternoon to listen to our update. We're enthused about what the future holds for Brickell as a biotech exploring cutting-edge treatment alternatives for patients suffering from debilitating autoimmune and inflammatory conditions. We look forward to sharing additional updates on our development progress moving forward. As always, please feel free to reach out to us at any time with further questions.

Have a great day.

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