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spk07: Good afternoon. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to COBAR's first quarter 2022 financial results conference call. All lines have been placed on mute to eliminate background noise. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. And now I would like to turn the call over to Jeff Beuno, Chief Financial Officer at COBAR. Thank you, sir.
spk04: Thank you, John, and thank you, everyone, for joining COBAR's first quarter 2022 financial results conference call. Joining me on today's call is Dr. Joe Surrett, COBAR's chief executive officer, Dr. Nick Vlahakis, COBAR's acting chief medical officer, and Dr. Kent Grindstaff, senior vice president of research. Following our collective remarks, we will conclude with Q&A. COBAR's financial results press release was issued earlier today and may be downloaded from our website at www.cobar.com. Before we begin, I'd like to take a moment to remind listeners that except for statements of historical fact, remarks on today's conference call may include forward-looking statements within the meaning of the securities laws. Forward-looking statements are based on current expectations, projections, and interpretations that involve a number of risks and uncertainties that could cause actual results to differ materially from those anticipated by COBAR. These risks and uncertainties are described in our registration statements, reports, and other filings with the Securities and Exchange Commission and applicable Canadian securities regulators, which are available on our website at cobar.com, sec.gov, and cdar.com, as well as in the Safe Harbor Statement included with today's press release. You are cautioned that such statements are not guarantees of future performance and that our actual results may differ materially from those set forth in the forward-looking statements. COBAR does not undertake any obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events, or otherwise. Now I'd like to turn the call over to Joe Surrett, COBAR's Chief Executive Officer. Joe?
spk01: Thank you, Jeff, and thank you, everyone, for joining us this afternoon. In the first quarter of 2022, we made steady progress that we believe positions COBAR for an exciting several years ahead. On our last call, we communicated several important updates about the direction and focus for the company. And during this past quarter, we focused our efforts on execution in those areas. We aligned our pipeline strategy to prioritize the advancement of CB5138-3, our IPF program, towards the clinic. Notably, our I&D enabling studies for this program remain on track, and our reformulation efforts are well underway. We invested further in our novel MITO Plus platform to identify new product candidates. We continued to explore potential partnerships for our CB4211 program, and we hired significant talent to our team, which we believe will enhance our ability to achieve long-term success. On today's call, after my introductory remarks, We will share commentary from Kent and Nick, the most recent additions to our leadership team, who bring unique perspectives and extensive expertise in their functional areas. Kent will provide an overview of our science and our MITO Plus platform, and Nick will provide a recap of our IPF program. Jeff will then review our Q1 2022 financials and summarize our upcoming proxy vote and NASDAQ listing requirements. I'm very excited about where we stand at COBAR. and we remain on track to hit our important upcoming milestones. As we think about where we are headed, I would like to put the intriguing opportunity we have to mine the mitochondrial genome into perspective. While researchers have been looking at the nuclear genome as a source of novel therapeutics for quite some time, the mitochondria has been largely overlooked. We think this is due to a couple of factors. First, the utility of mitochondria has historically been viewed solely through the lens of ATP and energy production. But it turns out the function of mitochondria is much broader than that, and they play important roles in regulating a variety of different biological pathways, as well as impacting a wide range of diseases. Second, I think there is an inherent assumption that the peptides encoded in the mitochondrial genome would be acting locally within the mitochondria, and some of them certainly do that. But it turns out that many of these peptides are secreted and circulate systemically, mediating important effects on organs and tissues quite distant from where they are produced. And so with these two insights about the breadth of the impacts of mitochondria on the body and the fact that peptides encoded in the mitochondrial genome are acting systemically, that really led to the formation of COBAR. And that's the rationale underpinning our approach to drug discovery using our MitoPlus platform that Kent will talk about in a few minutes. Additionally, by targeting analogs or modifications of natural peptides, we expect to have fewer off-target effects, which may translate into better safety and tolerability profiles for our product candidates. And this is a true platform in the sense that the commonality here is the mitochondrial origin of these peptides. As you may recall, we have identified over 100 peptides. And when you look at the individual compounds in our library, they are structurally quite distinct. and operating through a variety of different mechanisms, which we believe de-risks our overall approach. Importantly, last year, we demonstrated clinical proof of principle for this mitochondrial biology from the first human study of a peptide derived from the mitochondrial genome. The positive top-line data from our CB4211 program was an important validation, not just of that program, but of our overall platform and approach. As you can imagine, We've spent a lot of effort identifying and sequencing these peptide families to carve out a broad patent portfolio, which we firmly believe is the leading portfolio in this space. We recently received notification regarding the issuance of two additional patents that further expand our IP position on CB4211. The U.S. Patent and Trademark Office has informed us that tomorrow it plans to issue the second U.S. patent for this program. This most recent patent is expected to be eligible for listing in the FDA Orange Book upon approval of CB4211 as therapeutic for obesity in the United States. At the same time, we have also progressed our international patent prosecution strategy with the issuance of a Japanese patent covering CB4211 and related compositions, as well as medicines comprised of CB4211 and related peptides for treating NASH. We believe this IP expansion will strengthen the overall CB4211 package as we seek to advance its development with a partner. With that, it is my pleasure to now turn the call over to Kent Greinstaff, our Senior Vice President of Research, who will review our platform approach and progress. Kent?
spk05: Thanks, Joe, and good afternoon, everyone. As Joe mentioned, we are uniquely positioned at COBAR to capitalize on a largely untapped area of scientific research. And the breadth of what we expect to be able to achieve through the power of the mitochondrial genome is tremendous. When we first tell the story of our science, there's sometimes a perception that we're targeting relatively rare mitochondrial dysfunctions, which is not our area of focus. Rather, we are pursuing broad systemic conditions, typically chronic diseases that have a large inflammatory, fibrotic, and or metabolic component. So native mitochondrial peptides play critical roles in the maintenance of normal homeostasis. In many chronic disease states, this normal homeostasis is disrupted, which we believe can be restored by our novel peptides. I'd like to point out that this field has been steadily growing. To date, there are over 40,000 publications on the role of mitochondria in disease, of which nearly 400 cover mitochondrial-derived peptides. or MDPs with known systemic effects, demonstrating the level of interest in this space and the potential for further discoveries. One recent paper of note is a review that addresses a broad range of properties of some of the most widely studied MDPs, humanin, MOTC, and schleps. This peer-reviewed paper was published just last year and emphasizes the well-established cytoprotective, anti-inflammatory, and metabolic properties of these MDPs. as well as the strong correlation between MDPs and a wide range of important biological processes, such as atherosclerosis, hyperlipidemia, insulin resistance, and aging, thus highlighting the potential value of MDPs as both novel biomarkers and therapeutic targets in disease development and progression. This paper provides a good example of how the evidence for the role of mitochondria in complex multifactorial diseases continues to build. while simultaneously demonstrating that the area of mitochondrial-derived peptides and their systemic roles is still relatively untapped, emphasizing both the opportunity and the need for further investigation. At COBAR, we've developed a robust proprietary development engine called MitoPlus that aligns with our strategy to pursue broad systemic conditions. Our platform enables us to leverage the power of the mitochondria and the long-standing evolutionary pressures on peptides encoded in the mitochondrial genome. Our approach begins with a focus on understanding the inherent properties of mitochondrial peptides that have been developed through evolutionary processes. And our clinical candidates are improved versions of these natural sequences that have been optimized to enhance both biological activity and drug-like properties. So beyond IPF and fibrosis, we're continuing to interrogate the mitochondrial genome and our library of peptides to identify high-value expansion opportunities for the platform and therapeutic indications where mitochondria play significant roles in disease processes, such as inflammation. Our screening processes are designed to detect peptides that interact with cell surface receptors and have activity in important systemic biological pathways. resulting in product candidates with the potential to impact multiple biological pathways that are driving complex, multifactorial diseases. Our goal is to create first-in-class drugs that are truly disease-modifying, which is really exciting and why we look forward to working in the lab each day. So to summarize, I'm really pleased with what our discovery team is doing, and we've only begun to scratch the surface of the potential of our peptide library. We look forward to providing additional information as we make progress with our discovery efforts. Now I'll turn the call over to Nick to provide a brief overview on CB5138-3. Nick?
spk06: Thanks, Kent, and good afternoon to everyone. As we've discussed previously, we believe the preclinical data demonstrating the anti-fibrotic effects of CB5138-3 in models of IPF is compelling. and we are optimistic that this program could provide important clinical advances for patients and commercial advantages over current standard of care. As a pulmonologist, I've taken care of many people with lung fibrosis, both in the clinic and intensive care unit, and have witnessed up close the devastating reality of IPF and the burden of disease that is carried by these patients and their families. As a result, I'm particularly excited about the potential of our CB5138-3 program to address the significant unmet need in this area. We continue to make progress with our INV-enabling studies. In our ongoing toxicology work, the systemic safety profile of CB5138-3 continues to look quite clean. This is particularly encouraging as we prepare for clinical studies to assess safety and tolerability in human subjects. As additional preclinical data becomes available for this program, it increases our understanding of the molecule and how we expect it to behave in humans, enabling us to make further refinements to our clinical development programs. As I mentioned in our last call, we expect that our initial clinical study will be a phase one single ascending dose and multiple ascending dose study in healthy volunteers performed at a phase one clinical research unit. We plan to quickly follow this study with a multi-center phase two study in IPF patients. The clinical team continues to plan ahead to be well prepared for initiating the clinical program when the IND is cleared. The clinical development path for development in IPF has been laid out and refinements to the Phase II study design are ongoing. Kent and I are collaborating closely and along with the rest of the COBAR team are working hard to further clarify the most relevant mechanism and IPF-specific biomarkers for use as exploratory endpoints in our initial IPF study. Our timelines for the program remain on track. and we continue to expect to file our INV in the second half of next year. Now I'll turn the call over to Jeff to review our Q1 2022 numbers. Jeff?
spk04: Thank you, Nick. We continue to be in a solid financial position at the end of Q1 2022 with $23.5 million in cash and investments. In addition, our quarterly burn rate was approximately $3.1 million last And after repaying our last promissory note during the quarter, we have no debt. Research and development expenses were $1.5 million in Q1 2022 compared to $2.7 million in the prior year period, a decrease of approximately $1.2 million. The decrease in research and development expenses was primarily due to lower clinical trial and preclinical costs due to the timing of those expenses. In terms of G&A, Our general administrative expenses were $1.7 million in Q1 2022, compared to $1.4 million in the prior year period, an increase that was primarily due to higher stock-based compensation costs and legal fees associated with our IP portfolio. For the quarter ended March 31, 2022, COBOR reported a net loss of $3.3 million, or $0.04 per basic and diluted share, compared to a net loss for the quarter ended March 31, 2021 of $4 million, or 7 cents per basic and diluted share. Net loss included non-cash expenses of approximately $500,000 for the quarter ended March 31, 2022, and $370,000 for the quarter ended March 31, 2021. Overall, we are pleased with our financial performance, and we continue to estimate that we have sufficient capital to finance our operations into the second half of 2023. As you may have seen, we issued a press release last week announcing that NASDAQ has granted us an extension until November 7th of this year to regain compliance with NASDAQ's $1 minimum bid requirement. I'd like to take a moment to highlight the fact that our board has included a proposal to authorize a reverse stock split in this year's proxy statement. which is specifically designed to enable us to regain NASDAQ compliance. By continuing as a NASDAQ-listed company, we expect to have greater access to capital to further fund our pipeline, improve liquidity for our stockholders, and a higher likelihood of attracting high-quality institutional investors and commercial partners. On behalf of the board, I ask that you vote in favor of this proposal to help build long-term value. Now I'll turn things back over to Joe. Joe?
spk01: Thanks, Jeff. Before we take your questions, I'd like to provide a summary of our recent progress and review our upcoming timelines. During the first quarter of the year, we made steady progress across the key areas of our business, and the year ahead will be focused on execution. First and foremost, we continue to advance CB5138-3 through IND-enabling studies. We think IPF is a significant opportunity where CB5138-3 could make a real difference for patients. we have successfully scaled the manufacturing necessary to support the initial clinical study. And as we progress our IND enabling studies, we continue to demonstrate systemic tolerability of CB5138-3 in animal models. In parallel, we look forward to finalizing our formulation work as we move closer to clinical development in the second half of 2023. And as you heard from Kent today, we continue to mine our extensive library of peptides derived from the mitochondrial genome to identify those peptide families that show the most promise for further development. We're also evaluating the commercial and competitive landscape to pursue disease areas where we think we have a clinical advantage. We are not focused on Me Too opportunities in drug development, as we aim to create disease-modifying therapies that will make a real difference in people's lives. We believe CB4211 has that potential. and we are working to secure a partner to enable further clinical development of that program. We look forward to providing updates throughout the year as we continue to make progress on these initiatives. In summary, 2022 is off to a good start. We have an exciting scientific platform based on the mitochondrial genome that we believe offers a breadth of untapped therapeutic opportunities. We have a clear and focused strategy to develop therapies for difficult-to-treat multifactorial diseases like IPF And we have the right team in place to advance our science and pipeline. John, can you please open the line for questions?
spk07: Yes, 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 that your line is in the queue. You may press star 2 if you would like to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing any star keys.
spk03: One moment, please, while we poll for any questions. Our first question comes from the line of Kristin Kluska with Cantor Fitzgerald.
spk07: Please proceed with your question.
spk02: Good afternoon. This is Rick on for Kristin. Thank you for taking our questions. We've got two for you here. When you think about potentially optimizing CB5138-3 for delivery in IPF, could you give us an idea of the delivery modalities that you're potentially exploring and think make the most sense for the indication given previous experience in IPF? Is there anything special about this particular molecule's chemical or drug properties that makes it either good or bad as a candidate for any of these delivery methods?
spk01: Hi, Rick. Thanks for the question. So our approach generally involves delivery of peptides. And so peptides, for the most part, require delivery either subcutaneously or intravenously. And so our general approach here is to deliver this subcutaneously. But, Nick, I think you probably have the most familiarity with this patient population, so maybe you can talk a little bit about delivery methodologies and their acceptance by this group of patients.
spk06: Yeah, great. Thanks, Joe. And, Rick, thanks for the question. Yeah, it's a good question. I think as you've stated, Joe, for us and the peptides that we have, the plan is certainly for non-oral therapy. So, subcutaneously certainly is the main goal. There's always a question of inhaled delivery for a lot of pulmonary diseases. I think IPF is a complicated disease, and certainly from where we stand at this point in early development, sort of taking that approach is currently not something that we're looking at, but given the disease population, subcutaneous delivery is certainly something that would be acceptable to the patient population, and we think is actually a very effective way to deliver mitochondrial peptides.
spk02: Great. Okay. And I'll just ask one more here. You talked about the expanded patent coverage for CB4211. Could you give us a sense for how we should be thinking about the potential patent lifespan now for this candidate? Thanks.
spk01: Sure. So, as I mentioned in the This is the second U.S. patent that we had issued on this program. So just to remind everyone, the first patent was issued last fall. That patent covered composition of matter of CB4211 and related peptides, as well as the method of use for the treatment of NASH. And so the new patent, the new U.S. patent, expands that now to also include methods of use to treat obesity and Both patents have expected terms that would expire in 2037. And then the Japanese patent that we talked about earlier is essentially the foreign counterpart to that initial patent that issued last fall. And so we've got existing patents sort of pending from that family in multiple other jurisdictions outside the U.S. But for most of those patents, are also expected to have a 2037 expiration date.
spk03: Okay, that's it. Thank you.
spk07: Thank you. Our next question comes from Kumar Raja with Brookline Capital Markets. Please proceed with your question.
spk08: Thanks for taking my questions. And one more on the formulation. How is the work in that area progressing? And also, how are you thinking in terms of potential frequency as well as potential to be combined with other approved drugs?
spk01: Thanks, Kumar. So as we mentioned in the remarks, the formulation work is progressing well. Everything is on track. I think we spoke about this a little bit on the last call, but the process here in terms of the formulation work is an iterative one, meaning we do certain work in the lab, looking at different types of formulations. We do some in vitro tests to sort of see how well those new formulations look. And then we test them in an in vivo setting. And depending on what the results of that are, that informs sort of the next cycle of work. So again, it's an iterative process. But so far, things are progressing quite well on the development. Our expected dosing frequency is likely to be a daily subcutaneous injection with this program, which we think, again, given this patient population, is likely to be quite acceptable given how symptomatic these patients are. So I think that answers your question. Nick, I'm not sure there's more you want to say in terms of how that works with the existing standard of care and frequency there.
spk06: Yeah, I think the one thing I would add to that, Joe, is that being so early on in the formulation part of the development for 5138-3, I think the frequency of delivery obviously will become much more clear to us as we move forward, as we begin to understand the pharmacokinetics of the reformulated drug product and after we begin our initial human studies. So I think really that's a bit of an open question, and as we gather more preclinical and then clinical data, we'll get a much better understanding of that.
spk08: Okay, thanks. And in terms of the resources being spent on MITO+, how are you guys thinking about it given the market conditions? Maybe you can just highlight how that is being utilized and what are your expectations in terms of identifying a molecule on the platform.
spk01: Sure, Kumar. Thanks. Yeah, it's a good point. And so obviously we are very much focused on resources and spend, particularly in the current sort of market environment. And so the majority, overwhelming majority of our spend is really focused on the 5138-3, the ITF program. And having said that, we are putting some additional effort, particularly compared to what we've been doing in the more recent past, on some of the discovery work that Kent was discussing early on. But certainly our focus for those efforts is really on identifying peptides with interesting activity and doing some additional characterization and early work in those efforts. But, you know, we would, you know, we're not expecting in the near term to be bringing another, you know, program forward into clinical development. until we have further visibility on future funding.
spk08: Okay. And in terms of the R&D expenses, you guys talked a little bit about the timing. So for the rest of the year, how would we think about R&D compared to how it stands at Q1?
spk01: Jeff, you want to talk about that?
spk04: Yeah, Kumar, thanks for that. You know, it's a very fluid spend cycle where it'll tend to hockey stick towards the end of the year as we start getting deeper and deeper into the programs and into the spend. So you can not think of Q1 as representative of what may happen down the road in Q3, Q4 and into 2023. So it will hockey stick a bit. We're not providing guidance specifically to percentages, but in historical it has fluctuated between, say, you know, RMD, depending on the timing, between a 45 to 47% allocation of OpEx, all the way up to 60% in the past. So that's the range, and, you know, we'll hockey stick it, and a lot of it's largely dependent on, again, timing, and what we decide in the very fluid nature that we operate the business, where to allocate more funds or less funds.
spk08: Okay, and probably we'll see a lot more early next year as you get closer to the IND filing?
spk04: Yes. Yes. Some of those IND costs obviously have been picked up since we're in the middle of them, but there still is some straggling costs that's associated with that. But yes, that's correct.
spk03: All right, Dave. Thanks so much. Absolutely. Thank you, Kumar.
spk07: Thank you. At this time, we have reached the end of the question and answer session, and I will now turn the call back over to Joe for any closing remarks.
spk01: Thank you, everyone, for joining us this afternoon. During this quarter and over the summer, we are planning to present at several investor and scientific conferences, and we look forward to keeping you updated on our progress as we move through the year. Thank you again for your continued support. John, would you please conclude the call?
spk07: Yes, thank you. This concludes today's conference call. You may now disconnect your lines at this time. Thank you for your participation and have a great day.
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