Biora Therapeutics, Inc.

Welcome to the Progenity Second Quarter 2021 Earnings Call. At this time, all participants are in listen-only mode. After the speaker presentation, there will be a question and answer session. Now, to ask a question during this time, you will need to press star 1 on your telephone keypad. And if you require any further assistance, please press star 0. I will now turn the call over to Robert Uhl. Managing Director with Westwick ICR, Progenity's investor relations firm. Thank you. Please go ahead.

Thank you, Operator. Good afternoon and welcome to Progenity's second quarter 2021 financial results conference call. Joining me on the call are Dr. Harry Stiley, Chairman and Chief Executive Officer, and Eric Desparves, Chief Financial Officer. Before I turn the call over to Dr. Stiley, I would like to remind you that today's call will include forward-looking statements within the meaning of the federal securities laws, including but not limited to the types of statements identified as forward-looking in our quarterly report on Form 10Q that we will file later today and our subsequent periodic reports filed with the SEC, which will all be available on our website in the investor section. These forward-looking statements represent our views only as of the date of this call and involve substantial risks and uncertainties, including many that are beyond our control. Please note that the actual results could differ materially from those projected in any forward-looking statement. For a further description of the risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements, as well as risks related to our business, please see our periodic reports filed with the SEC. A slide deck with some supplemental information is also now on the website, but it will not be directly referenced by the speakers on the call today. With that, I will now turn the call over to Dr. Harry Stiley, Chairman and CEO of Progenity.

Thank you, Robert, and thank you all for joining us this afternoon. In the second quarter, the company initiated a transformation directed at materially reducing its burn rate whilst accelerating the transition to an innovation-led biotech company focused on its oral delivery of biomolecules and its GI-IBD platforms. Progenity also successfully completed the PRO-1 and 4 validation study for its precludia assay. In parallel, advanced our single molecule detection platform and is committed to making technical and commercial progress with these programs, including with partners. We also continue to explore various financing options, including generating non-valuative capital. Eric, our CFO, will shortly elaborate on our financial operating performance. First, we recently announced the successful completion of the validation study, Probe 104, for our precludio rule-out test for preeclampsia. As noted previously, precludia achieved the primary hazard ratio endpoint of the study protocol and demonstrated strong performance. The results of our validation study are currently being drafted by the independent principal investigators for submission to a peer-reviewed journal. As a result, we are limited in our ability to provide more detail regarding specific results here. However, I can assure you that we are really pleased that the test performance as intended to be used clinically, was consistent with what we observed in our PRO-129 verification and pre-validation set. The performance gives Precludia the potential to transform patient management globally by enabling physicians to worry about preeclampsia in women with signs and symptoms of preeclampsia. Further, Progenity just recently received an important PAN allowance for one of the key assays in our novel Precludia test. This constitutes further strengthening of our growing Precludia IP portfolio. The Precludia test is a multi-analyte immunodiagnostic laboratory developed test that is operationally ready for commercialization. As a reminder, preeclampsia is the second most common cause of maternal mortality in the U.S. with more than 700,000 women presenting each year with signs and symptoms of possible preeclampsia. The most effective treatment for preeclampsia is typically delivery that is most often premature. Preeclampsia is a global challenge and an effective operator-independent test that aids in the management of this complex disorder is simply not currently available. Precruzia also has potential as an IBD immunodiagnostic kit which can better serve the global community. Our preference is to identify commercial partners that can facilitate physician-patient access and reimbursement in partnership with us in the U.S. market and do the same for the CEIVD for the global markets. I could not be more excited about the potential for this test to positively change clinical practice in the management of preeclampsia and to generate economic benefit to the health system. I want to take this opportunity to congratulate the team and our other stakeholders for a successful Precludia validation study. Whilst we continue to support the Precludia test development, at this stage of our transformation, we are prioritizing our capital allocation to advancing our complementary oral biotherapeutic drug system, or OBDS, followed by a drug delivery system, or DDS, platforms. We expect this year to generate key preclinical and clinical feasibility data, especially for our drug pipeline, primarily with our prototype autonomous devices, and to further advance our platform technology. As a reminder, we have effectively contracted the manufacturer of our APIs, including Adilimibab. Let's start with our oral biotherapeutics program. The goal of this program is to achieve oral delivery and to maximize systemic distribution of biotherapeutics. especially monoclonal antibodies, but also other proteins, peptides, duclases, and potentially vaccines, as the GI tract is the host to the majority of the immune system. In total, we're targeting a vast $250 billion market that is primed for these oral delivery solutions. During the second quarter of 2021, we initiated preclinical studies of our lead candidates, PGN, OB1, adilumab, and monoclonal, which is subject to the BLA pathway and PGNOB2. They're a glutide, a peptide, likely the 505B2 pathway. Utilizing for the first time our prototype autonomous OBDS in a swine model of our own design. The goal of these studies is to demonstrate bioavailability of our lead cellulose drug candidates with an autonomous OBDS and define its operating parameters and that of the preclinical models. Initial data with the prototype OBDS is very promising and supports the potential for the OBDS to achieve industry-leading bioavailability for proteins, peptides, and other biomolecules. Despite expected normal performance variability at this stage, early stage of development. We recently demonstrated in our swine model a significant drug was detected in approximately half the animals in the test group, achieving an average viability of approximately 15% to a maximum of 44% of IV for adilumab following a single dose, highlighting the vast potential for this program. This is unprecedented performance for a monoclonal antibody. We continue to make rapid progress in tweaking the prototype delivery platform, including formulations, refining our animal models, and developing our understanding of likely performance in humans. We believe that an average bioavailability of around 10% to 15% of IV with repeat dosing will prove satisfactory for a large number of biomolecules. We anticipate that we will meet or most likely exceed this range. We believe the OBDS platform can, number one, help improve patient compliance and lower IV infusion costs. Two, help expand the market for GLP agonists and other drugs across a range of chronic use indications. Three, help biotherapeutic such monoclonals become more competitive with small molecule substitutes. And finally, we have the potential to target and treat a range of pathologies, especially liver diseases. Our strategy is to advance our own pipeline while continuing to partner with third parties, leveraging their drug candidates and resources to make the OBDS a leader in the oral delivery of biotherapeutics. As we are using known drugs with established safety and efficacy profiles, we believe we should be able to generate compelling bioavailability data in animal models and provide clinical proof of concept with first-in-man studies. In parallel, our first two OBDS partnerships with major pharma are advancing as expected. While the OBDS is designed to achieve oral delivery and to maximize systemic distribution of biotherapeutics, the DDS is designed to treat GI localized disease with minimal systemic breakthrough. The goal of this program is to deliver solubilized high-dose pharmaceuticals to specific locations along the GI tract, initially to treat inflammatory bowel disease, or IBD. We are developing drug-device combination products that deliver proprietary cellulose formulations of drugs directly to the site of disease in the GI tract, thereby maximizing the available dose in tissue and achieving pan-colonic distribution. We are first targeting the estimated $15 billion IVD market with our two lead drugs, PGN001, adilumab, a monoclonal antibody, and PGN600, tofacitamib, a small molecule normally absorbed in the stomach and the upper GI tract, with our initial focus being ulcerative colitis, or UC. Whilst the novel route of administration for adilumab is through the BLA regulatory pathway, We believe our tofacitamide device combination can exploit the 505 pathway and allow us to take advantage of the primary's data and potentially benefit from a relatively short path to a commercial asset. We continue to believe we have the potential with this platform to achieve rapid induction, superior clinical remission rates, and reduce safety events for the treatment of IBD and colitis. As a reminder, during the first quarter, we completed our first clinical study with the prototype autonomous DDS, successfully evaluating capsule safety, targeting, and tolerability in the gastrointestinal tract of 12 normal healthy volunteers. No safety issues were reported. By specifically targeting the second of the GI tract with disease burden, we have the potential to maximize drug exposure at the disease site. and minimize systemic exposure and off-target organ effects. We also completed during that period a preclinical study evaluating the safety, tolerability, and PKPD effects of a seven-day administration in dogs of PGN600, solubilized tofacitamib delivered by DDS. at doses of 25 mgs or 10 mgs per day with direct comparison to a standard orally administered tofacitamide tablet at 10 milligrams per day over a week. We were able to show that the DDS can function as intended in the majority of cases and achieve tissue tofacitamide levels and tissue to plasma ratios of tofacitamide along the length of the colon. And these were at least 25 to 50 times higher respectively with PGN600 at 10 milligrams daily compared to the standard oral tablet formulation at the same dose. These results demonstrate that PGN600's proprietary liquid formulation and targeted delivery can achieve pan-colonic distribution and facilitate eukosal penetration. We made further progress during the second quarter in an ongoing clinical feasibility study in patients with ulcerative colitis using the monoclonal biotherapeutic Humira delivered by Anima, which are both proxies for our PGN001 adilumumab and our DDS platform. The first four subjects have completed the dosage regimen, and initial results are quite promising. Next month, we expect to finalize the design of the first human feasibility studies delivering Humira with the DDS as well as the design of the first human feasibility study with PGM600. We've both clinical feasibility studies anticipated to initiate in first half in 2022, pending IRB approvals. You'll hear more about this study likely in the September timeframe. The Crohn's and Colitis Foundation is also helping fund the development of the DDS for the treatment of IBD. and we recently published a peer-reviewed article regarding the DDS. We believe our DDS platform will materially advance the treatment of GI disease, initially for IBD and UC. Our strategy begins with transforming established drugs with known efficacy and safety profiles, but has the potential to materially enhance any compatible drug directed at treating GI localized disease, and in this instance, enable new, effective IBD treatment regimens such as rapid induction and extending to drug combination therapies. While we'll focus on a drug pipeline and delivery platforms, we have moved the RSS and PIL-Dx to primarily engineering development of second generation builds to support larger scale manufacturing. And with this focus, we have limited preclinical clinical studies at this time. We have discussed the C verification for PODX in the past and continue to be excited by its vast potential. We are also evaluating the utility of the RSS and PODX in IBD. Data from our studies and from existing literature illustrate that TNF levels in the lumen and mucosa of IBD patients may vary tremendously from patient to patient, and over time, Further, new pathways to inflammation could supersede, for example, TNF as a mediator. We believe that we can measure TNF and other cytokines in situ using the RSS or PODX. We can optimize, as a consequence, we can optimize patient selection for clinical studies, establish a more precise dosing regimen, and help with patient monitoring for disease progression. We believe that such a capability may further contribute to to a superior response rate for our drugs, and the ability for physicians to most closely monitor the patients for disease progression. Completing our innovation pipeline update with our single molecule detection platform, we recently established its coefficient of variation using genomic DNA as approximately 0.5%, which is supportive of an NIPT assay performance equivalent to next-generation sequencing. We soon intend to report our performance for detecting T21, 18, and 13 aneuploidies, and is successful at preference today is to partner the platform, especially with NIPT test providers. We continue to believe our single-molecule detection platform has the potential to reduce NIPT direct COGs by up to 50% and achieve equivalent performance to traditional next-generation sequencing. It should also be noted that this platform is expected to be capable of detecting and counting specific DNA, RNA, epigenetic, as well as protein targets with high sensitivity and low cost. As such, the platform may prove ideal for liquid biopsy applications in oncology. And now we'll discuss our progress with the operational performance of our business transformation. As we mentioned in our corporate update in June, We officially closed our Ann Arbor commercial laboratory and refocused our resources towards our innovation pipeline. Whilst business closures are difficult on a number of levels, the changes we implemented have already achieved a $97 million reduction in our annual operating expenses run rate and supports improved control of our burn rate. Eric will provide more details later on this call. As I mentioned earlier, we prioritize our capital allocation towards our drug device platform programs and secondarily towards the refinement of our precludia tests and single molecule detection platforms. As you can see, we are on track to significantly moderate our cash burn requirements. Again, gain considerable more control over our cash burn rate and we will continue to pursue partnerships and or asset divestitures that have the potential to strengthen our balance sheet or result in risk sharing. These goals, when fully realized, will extend our runway materially and reduce our dependency on the capital markets. In parallel, Averro affiliate laboratory operations continue to perform while we explore potential divestiture of that operation to generate non-dilutive capital. Averro's business is performing well in terms of volume demand, and we will update you when we have new developments We may also choose to continue to operate the Avera business and exploit its OBGYN channel for precludia and non-sequencing NIPT if that proves to be optimal. I am pleased to share that we settled our lawsuit with Natera through a cashless agreement. We are pleased to have resolved the dispute amicably and that we are able to avoid further legal costs, and diversion of resources. In summary, our GI innovation pipeline is progressing well with both the OBDS and the DDS now available as prototype autonomous devices that are enabling key studies to be performed and advance our programs and partnership opportunities. I'm also very excited about the successful outcome for the Precludia Pro 104 validation study and results. which we expect to be published as soon as practicable. We are also advancing our single-molecule platform and expect to have additional updates soon. In addition to the material reduction in operating expenses and tighter control of capital utilization, we anticipate multiple key catalysts this year and beyond. With that, I'll now turn the call over to Eric Daspargas, for a discussion of our financial results for the second quarter of 2021.