Novan, Inc.

Hello, and welcome to the NOVAN, Inc. Second Quarter 2021 Financial Results Webcast. As a brief reminder, all participants are currently in a listen-only mode. If anyone requires operator assistance during the event, please press star zero on your telephone keypad. Following the presentation, there will be a question and answer session with the company's covering analysts. Note that this webcast is being recorded at the company's request and a replay will be made available on the company's webcast following the end of the event. At this time, I'd like to remind our listeners that remarks made during this webcast may state management's intentions, beliefs, expectations, or future projections. These are forward-looking statements and involve risk and uncertainties. Forward-looking statements on this call are made pursuant to the Safe Harbor provisions of the federal securities laws and are based on Novant's current expectations and actual results could differ materially. As a result, you should not place undue reliance on any forward-looking statements. Some of the factors that could cause actual results to differ materially from these contemplated by such forward-looking statements are discussed in the periodic reports Novant files with the Securities and Exchange Commission. These documents are available in the investor section of the company's website and on Securities and Exchange Commission's website. We encourage you to review these documents carefully. I would now like to turn the call over to Ms. Paula Brown-Stafford, Chairman, President, and Chief Executive Officer of Novant. Please proceed.

Paula Brown- Thank you, Misty. And good morning, everyone. Thank you for joining our first quarterly business update. The first half of 2021 has been transformational for Novan. I remain delighted with what we have been able to report. It is the first time in the company's history where we have clinical data that provide a pathway towards an NDA submission for one of our product candidates. At the beginning of the year, We said we would deliver results from our three priority programs in the second quarter of 2021. And we did just that. And it just so happened that it was in the same work week in June. Not necessarily planned, but that's how it happened. We were delighted to report positive results from our SB 206 lead product candidate for molluscum. our SB019 product candidate as a potential antiviral therapy for COVID-19, and our NVN4100NCE targeting companion animal health. I'll say the results from our B-simple trial have, in essence, validated our nitrosil platform technology, showing that both clinically and statistically, meaningful results that can impact patients' lives. While we are laser-focused on getting SB206 through the regulatory submission and approval process for Molluscum, we're also excited about the future of our proprietary platform technology, as you know, Nitrosil, and the potential that we have to advance other product candidates and other indications. So also in June, we raised additional capital, as you know, through a public offering, and therefore strengthened our balance sheet. So now as a quick reminder, molluscum contagiosum is a contagious virus that is shared primarily among children ages 2 to 14. The prevalence exceeds 3 million and the annual incidence exceeds one million lives. Today, there is no FDA-approved treatment for in-home use, and the only course of action today is via an in-office procedure or off-label use of prescription therapies that have no proven efficacy against molluscum. Our SB206 product candidate is for in-home use Self or caregiver administered. So let's talk about our pivotal phase three trial that we named Be Simple For. We actually completed the trial in July, just a few weeks ago. And as you know, in June, we reported top line efficacy and safety results from the 12-week treatment period. The trial randomized 891 patients to one of two treatment groups, SB206 or vehicle, with a one-to-one randomization, across 55 investigator sites in the U.S. The primary endpoint is complete clearance. And complete clearance is defined, I like to say, as clearing all lesions visible at baseline and any lesions that erupted post-baseline. at or before week 12. I'm pleased to reiterate that SB 206 demonstrated clinical evidence of efficacy by achieving statistical significance when compared to vehicle at week 12. As I mentioned, the last week 24 visit occurred in July for our last patient in the trial and we will now report out our week 24 safety results before the end of September. Then we'll be laser focused on our NDA preparation with an intent to submit no later than the third quarter of 2022. So now just to recap those results that I am so, so delighted with, which is why we used the color green, because we're ready to go now. As I shared in June, our top-line results from B-simple 4, specifically across the primary endpoint and these three secondary endpoints, SB206 demonstrated that statistical significance, and we believe clinically meaningful treatment difference for each of these endpoints. So for complete clearance at week 12, we saw a nearly 13 percentage point difference with a p-value of less than .0001. And that's showing that 32.4% of the patients on our product had complete clearance at week 12. The next one, end point, for the proportion of patients achieving complete clearance, as I just mentioned, or clearing all but one. So that's to say these patients would have one or zero lesions at week 12. And here you saw 43.5% of the patients on our product had completely cleared or only one lesion, and that was a 19 percentage point difference with a p-value also of .0001. The third, measuring the proportion of patients achieving greater than 90% complete clearance at week 12. Very similar, you know, 43% versus almost 24%. So again, a 19 percentage point difference with, again, a p-value of 0.0001. And then finally, we measured complete clearance at week 8, seeing how early we had cleared. And you can see that there was total clearance for 20% of the patients on our lead product candidate here. So we also there had an eight percentage point treatment difference, which is also a p-value of .001. So all of these are statistically, highly statistically significant, and we believe the robustness of the data across all of these endpoints demonstrate the clinical evidence of efficacy. So following these tremendous results, our next steps are to finalize the analysis of safety following the week 24 visit where we only collected safety data. So there's no more efficacy data that was collected. This is to be complete before the end of the third quarter or before the end of September. And then we will compile and finalize the final study report in the fourth quarter. Per our meeting with the FDA in April of 2020, we will prepare the NDA for SB206 and molluscum with the B-simple 4 trial as the pivotal phase 3 study and the previously conducted B-simple 2 trial as the confirmatory trial. We're targeting that NDA submission no later than the third quarter of next year, 2022. In parallel, we will continue to evaluate our commercialization options, including a no-van-led solution or with a partner or partners. Now, moving on to our SB019 product candidate and its potential use to inhibit the viral replication of SARS-CoV-2 that's impacting all of us, thanks to the Delta variant. We have conducted a number of in vitro and in vivo assessments of SB019, and in June, we also reported our latest positive results. So specifically, that we observed dose-dependent, statistically significant reduction, and that was another p-value of less than 0.0001, in the amount of virus in the lungs of the Syrian hamsters that were treated with SB019. We're currently conducting an intranasal IND-enabling safety study in the potential final formulation, which we believe is the last step now before submitting a pre-IND request to the agency, the FDA, seeking regulatory guidance and support to potentially move forward with a Phase I study. Now, with regard to our NVN 4100 in CE we are targeting skin conditions in dogs. We conducted in vitro and in vivo investigations of NVN 4100 during the past 12 months. And also in June, we reported results of the in vitro assessments, which suggest efficacy against a wide variety of antibiotic-resistant and non-resistant strains and support bactericidal mode of action. and the in vivo assessments, which have informed us regarding a model that will allow for refinement of formulations or execution of further screening activities. We're currently speaking with a number of interested third parties regarding potential next steps. Now, our pipeline goes beyond these in vivo assessments Sorry, I think I skipped a slide in my own mind here. So the no-ban strategy moving forward. In terms of now, where do we go from here? We have the three positive results. We have robust SB 206 clinical evidence. We now have options. We have optionality for a path forward. We're completing a thorough strategic review across our platform and evaluating with input from our board and external experts that best path, which we intend to share in the third quarter, sharing our commercialization strategy and our pipeline prioritization of the remaining products in our portfolio. We will identify the best path to maximize shareholder value, and we're going through that process now, and I'm excited to share that with you before the end of the quarter. So as I mentioned, we have other options, and those other options here go beyond those three assets that I've just spoken of. The assets for ACNI, SB204, for women's health or EGW, external genital warts, or SB414 for atopic dermatitis. They are what I would call the most advanced opportunities outside of the previous three, and we believe that in this ongoing in-depth review for our prioritization, we need to look at all three of those as well as others for how best to use the funds available. So I'm going to turn it to John Gay, our Chief Financial Officer, to highlight our financial results for the second quarter. John.

Thank you, Paula. Good morning, everyone, and thank you for joining our first quarterly update call. I'll touch on a few remarks with regards to our financial position and our current plans forward. For the six months into June 21, We had net cash provided by financing activities of $44.2 million, including the public offering that we did in June of $37.6 million. We ended the quarter with a cash balance of $65.8 million and positive working capital of $57.2 million. At the end of the quarter, we believe that our existing cash balance plus payments that we expect to receive in connection with our current licensing agreements should provide us liquidity to fund our current operating needs into the first quarter of 2023. This includes through the NDA submission for SB 206 and beyond, as Paula noted. Included in this cash forecast are anticipated costs related to the Be Simple 4 trial and its completion, costs associated with preparing for and seeking regulatory approval of SB 206, our continued build-out of our new headquarters and manufacturing capability, certain drug manufacturing capability transfer activities or tech transfer related to our third-party CMOs, development activities in certain priority therapeutic areas such as SB019 and SB204, and initial efforts to support potential commercialization of SB206. I'll refer you to our 10-Q filing and our press release regarding the specifics of our operating results for the quarter. including our R&D spend primarily on SB 206 and other supportive costs. With that, I'll turn it back to Paula.