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spk06: Good afternoon. My name is Ryan, and I will be your conference operator for today. At this time, I would like to welcome everyone to COBAR's second quarter 2022 financial results conference call. All lines have been placed on mute to eliminate background noise. 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. Now, I would like to turn the call over to Ms. Jordan Tarazi, Director of Investor Relations at Cobar. Please go ahead.
spk02: Thank you, Ryan, and thank you, everyone, for joining Cobar's second quarter 2022 financial results conference call. Joining me on today's call is Dr. Joe Surrett, Cobar's Chief Executive Officer, Jeff Beuno, Cobar's Chief Financial Officer, Dr. Nick Vlahakis, COBAR's Acting Chief Medical Officer, and Dr. Kent Greinstaff, 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 cobar.com. Before we begin, I'd like to take a moment to remind listeners that except for statements of historical facts, the remarks on today's conference calls 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, COBRA's Chief Executive Officer. Joe?
spk00: Thank you, Jordan, and thank you, everyone, for joining us this afternoon. On today's call, after my introductory remarks, Kent will review our ongoing preclinical activities for CB5138-3, our novel peptide for the treatment of idiopathic pulmonary fibrosis, or IPF, as well as our ongoing discovery efforts. Nick will then provide some additional context about the approach to our initial clinical trials, for our IPF program, and Jeff will review our Q2 2022 financials. Cobar is a leader in harnessing the power of the mitochondrial genome to develop a novel class of peptide therapeutics. While people tend to think of mitochondria primarily in terms of energy production, in fact, they also play an important role in the regulation of a variety of biological pathways. This regulation is partially mediated through the systemic effects of certain peptides encoded in the mitochondrial genome. that are secreted and have distal effects on other cells, tissues, or organs. We believe that tapping into the intrinsic activities of these mitochondrial peptides has the potential to lead to powerful new therapies to treat a wide range of conditions. Additionally, by focusing our development on analogs of naturally occurring peptides, we expect our product candidates to have fewer off-target effects, ideally translating to improved safety and tolerability profiles that can provide further benefits to patients and physicians. we have already demonstrated clinical proof of concept for our approach with the release last year of positive top-line data from our first clinical trial. As we have discussed previously, 2022 is a year of execution for the company, and in the second quarter, we made further progress in our key areas of focus. One of our primary objectives for the year is to advance CB51383 towards the clinic, and we remain on track to file our IND for this program in the second half of next year. Our ongoing IND enabling studies continue to show that this peptide is well tolerated, and we have not seen any notable systemic toxicity in animal testing. We've also made significant progress in developing improved formulations for CB5138-3, and Kent and the team have identified some promising new approaches that we hope may provide further clarity on target engagement for this peptide, which, while not essential for moving the program forward, may help inform biomarker selection for our clinical studies. Based on the significant antifibrotic effects of CB5138-3 in preclinical animal models of IPF, we believe this product candidate has the potential to offer significant value to patients. While current standard of care can slow the rate of loss of lung function, there continues to be significant unmet medical need in this patient population. IPF remains a devastating disease with substantial morbidity. Patients experience chronic and increasing shortness of breath, frequently requiring supplemental oxygen, and quality of life is poor. Mortality rates also remain unacceptably high. Additionally, the available therapeutics are not well tolerated due to frequent gastrointestinal side effects and, in the case of prophenidone, photosensitivity issues. In fact, in our discussion with pulmonologists, a common theme is that tolerability issues have a significant impact on their ability to effectively treat this patient population. Despite the limitations of the available IPF therapies, both FDA-approved drugs have done well commercially, with combined annual sales in 2021 exceeding $3.5 billion. While the broader capital markets for biotech remain challenging, recent activity shows that positive clinical data in IPF, even relatively early Phase II data, has translated into substantial enthusiasm from investors. Additionally, Multiple big pharma companies have prioritized fibrosis generally, and IPF specifically, as an area of focus, reinforcing our view that IPF and the broader fibrosis and inflammation market are attractive commercial opportunities for COBAR. Looking beyond our IPF program, we continue to seek to advance the development of CB4211 through a potential partnership. I will now turn things over to Kent Greinstaff, our Senior Vice President of Research, to provide some additional color on our preclinical and discovery activities. Kent?
spk05: Thank you, Joe. Today I'll review our activities regarding formulation work, IND enabling studies, and MOA for our IPF program. I will also discuss our ongoing discovery effort for novel classes of mitochondrial-derived peptides. We recently completed the initial round of new formulation work for CB5138-3. We now have a better understanding of the key physical properties of this peptide and have identified interim formulations that we're moving forward to the next stage of testing and further development. These initial results are encouraging and indicate we're making substantial progress towards identifying a formulation suitable to advance into the clinic. Our IND enabling studies for CB51383 are also progressing well. In the safety and pharmacology work completed to date, except for the injection site reactions we previously reported, we've not observed any signals of concern, and the systemic safety profile looks clean. This gives us additional confidence as we move forward with testing new CB5138-3 formulations. Our team is working diligently to ensure that we are well positioned to expeditiously perform any additional studies that may be required once the final phase one clinical formulation is selected. Finally, the discovery team, with input from Nick and our outside experts, has recently initiated several new approaches to enhance our understanding of CB51383 target engagement, as well as its impact on molecular fibrosis pathways. We believe this work will significantly expand our understanding of this peptide's activity and its biological role. These approaches may also allow us to identify relevant biomarkers that can be incorporated into our Phase II clinical trial design. In addition to ongoing work in our IPF program, our discovery efforts continue to progress. We remain focused on growing and diversifying our pipeline to address diseases with high unmet medical need with this novel class of therapeutics. We recently expanded our library of natural mitochondrial-derived peptide sequences. This will provide us with additional opportunities to identify novel therapeutic leads as we work through our discovery platform. Building on our expertise, we are broadening our screening format to focus on disease areas with strong translational correlation. We are working closely with Nick to focus our efforts in areas where our product candidates can provide the greatest benefit to patients' lives. Now I'll turn the call over to Nick to highlight certain aspects of our clinical plans for CB5138-3. Nick? Thanks, Ken.
spk04: As we move closer to filing the CB5138-3 IND, integrating the clinical strategy and development plans with the preclinical and IND-enabling activity remains a cornerstone of CoVAR's approach to developing this product candidate for IPF. A good example of this are the preclinical studies that inform our dosing strategy for the first in human trial and in turn for dose selection for our initial IPF study. With the progress being made in our IND enabling studies, we are ramping up our plans on operationalizing our clinical, regulatory, and study conduct strategy in support of the clinical programs. This will position us well to initiate our first in-human study with CB5138-3 soon after IMD clearance. Given the clear ongoing unmet medical need for patients with this debilitating lung disease, we remain strongly committed to the IPF space. Furthermore, the significant value of a program targeting lung fibrosis is highlighted by the continued clinical development activity in IPF. We're working with our strong group of both U.S. and international clinical IPF thought leaders to incorporate the most recent developments and thinking on IPF clinical study design and conduct. Recent reports on Phase II IPF studies of other molecules have highlighted changes in the IPF drug development paradigm, supporting our clinical development approach for streamlining Phase II study design to speed the time to early proof of concept readout. Overall, our timelines are progressing according to plan, and we expect to kick off the clinical program quickly after IMD approval. Now I'll turn the call over to Jeff to review our Q2 2022 numbers. Jeff? Thank you, Nick.
spk03: We continued to be in a solid financial position at the end of Q2 2022 with $20.1 million in cash and investments. Our quarterly burn was approximately $3.5 million and we have no debt. Research and development expenses were $1.2 million in Q2 2022 compared to $2.6 million in the prior year period, a decrease of approximately $1.4 million. The decrease in research and development expenses was primarily due to lower clinical trial and preclinical costs due to the timing of such expenses. General administrative expenses were $1.6 million in Q2 2022 compared to $2.6 million in the prior year period. A decrease that was primarily due to lower compensation costs and stock-based compensation costs, primarily related to the departure of our former CEO in the prior year period. For the quarter ended June 30, 2022, COBAR reported a net loss of $2.7 million or 3 cents per basic and diluted share compared to a net loss for the quarter ended June 30, 2021 of $5.2 million or 8 cents per basic and diluted share. Net loss included non-cash expenses of approximately $500,000 for the quarter ended June 30, 2022 and approximately $1 million for the quarter ended June 30, 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. At our annual meeting on June 15, 2022, our stockholders approved, among other things, an amendment to our certificate of incorporation to affect a reverse stock split by ratio not to exceed one for 30. The approval for the reverse stock split was important to help ensure the financial health of COBAR. With the ability to implement a reverse split, we expect to be able to maintain our listing on the NASDAQ exchange, which will afford us greater access to capital to further fund our pipeline and an increased chance of attracting high-quality institutional investors and commercial partners. Now I'll turn things back over to Joe. Joe?
spk00: Thanks, Jeff. As the team showcased, during the past quarter we made continued progress, particularly in advancing our IPF program, where we are on track to file our IND in the second half of 2023. Additionally, we remain active on the business development front, having met with multiple potential partners during the quarter. We continue to believe that IPF is a significant opportunity where our product candidate could provide clinical advantages for patients and are encouraged by the recent investor interest in this space. The preliminary data from our new formulations for CB5138-3 are promising, and we look forward to testing those formulations in in vivo studies in the coming months. At the same time, we are investigating novel approaches to gaining further clarity on target engagement of this peptide, while also making important progress in further characterizing our library of mitochondrial peptides to identify new potential product candidates. Before we conclude our prepared remarks, I would like to welcome Dr. Effie Tozzo, who recently joined our board of directors. Effie has extensive drug discovery and early development experience, including at Merck, Roche, and BMS. Notably, she spent six years at Mitobridge, a company focused on developing therapeutics for diseases related to primary and secondary mitochondrial dysfunction, which was acquired by Astellas. Although Effie only recently joined our board, she has already made substantial contributions to our scientific programs, and her collaborative style is a great fit with the rest of the COBAR team. With a strong and high-functioning team in place, we are well-positioned to execute on our operational goals of having a second clinical stage program by moving CB51383 into the clinic and continuing to mine the potential of the mitochondrial genome for additional potential therapeutics. Ryan, can you now please open the line for questions?
spk06: Sure, sir. Thank you. Ladies and gentlemen, 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 the 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 remove your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question comes from the line of Kumar Raja from Brookline Capital Markets. Please go ahead.
spk07: Thanks for taking my questions. So first with regard to the target engagement, what can you share with regard to that? And when can we expect more details, like what targets you are seeing engagement? Yeah, I'll start with that.
spk00: Okay, sure. Kumar, thanks for the question. I might turn this one over to Kent since he's the one handling the details on this.
spk05: Sure. Thanks, Joe. Thanks for the question, Kumar. Yeah, so as both Joe and I stated, we're taking several new approaches that we haven't previously done. We've talked a bit about the readouts that we observed both in fibrotic and inflammatory space. Unfortunately, at this point, we can't really comment on initially or at this time on any new targets that we've identified. And we're actually providing a timeline as to when we'll be able to share additional information. Though as those targets come up and we're able to validate those, we expect to be able to share those plans soon.
spk07: Okay. And in terms of this new formulations that you are testing, at what time point will you decide to move forward with one and how do you plan to do the manufacturing of that?
spk00: Yeah, again, thanks for that question, Kumar. So, you know, as we talked about in the prepared remarks, you know, we've been working diligently on identifying and developing additional formulations that have better properties. And so in the studies that we've done so far, as we said, we've identified multiple formulations that look promising. And so the process for the formulation development is iterative, where we get, you know, certain data, then go back and make modifications. And so part of the further development of those formulations will be to take those into in vivo studies to confirm that the findings that we're seeing so far translate with respect to both ideally mitigating the injection site issues that we saw with the earlier formulation And then, again, ideally, at the same time, improving exposure levels. And so those studies will be taking place over the coming months, as we mentioned. And so once we have identified a formulation that hits our target parameters that we think is suitable, then we'll pick the final formulation to move forward to the clinic. And once we've sort of gone through that process, we'll be updating folks. In terms of the manufacturing, We don't expect that any of the formulations that we're looking at would require anything sort of atypical or unusual with respect to, you know, manufacturing process or complexity. So we don't expect that to be a significant hurdle on the way to moving this forward to the clinic and then ultimately commercially.
spk07: Okay, great. And finally, with regard to CB4211, any updates in that front? Thank you.
spk00: Sure. So on that front, as I mentioned, we continue to have partnering discussions. And as always with partnering discussions, there's not a lot you can really say while those discussions are ongoing. But I will note that there has been additional activity in the NASH space more broadly over the last several months. So if you look back over the last couple of years, NASH has been difficult just because there have been some late-stage changes clinical failures. But if you look more recently, both in terms of big pharma interest in the space, there have been some activity there, as well as investor interest in investing in NASH companies. And so we're certainly hopeful that that sort of general enthusiasm for the space more broadly will have an impact on the timing and nature of the discussions that we're having with other parties. There's also a couple of companies that are having late stage clinical readouts later this year. And again, our hope is that that data is positive because we believe positive news for the space is actually beneficial to COBAR given just how large of a market opportunity this is. We don't think one company is going to be the winner. And so having some momentum in the space we think is helpful for everyone in the space, including us. So we remain optimistic about about the space and about 4211 specifically as a peptide that can really make a difference for patients given the positive data that we released last year. So we remain optimistic and we'll certainly update you as we continue to make progress on that front.
spk01: Okay, great. Thanks so much. Thank you. Thank you.
spk06: Ladies and gentlemen, we have reached the end of the question and answer session. And now I would like to turn the conference over to Mr. Joe Surrett for closing comments.
spk00: Well, thank you, everyone, for joining us this afternoon. We appreciate your continued support and look forward to keeping you updated on our future progress. Ryan, would you please conclude the conference call?
spk06: Thank you, sir. The conference of COBAR, Inc. has now concluded. Thank you for your participation. You may now disconnect your lines.
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