TFF Pharmaceuticals, Inc.

Thank you for standing by. This is the conference operator. Welcome to the TFF Pharmaceuticals second quarter 2022 earnings conference call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Corey Davis from LifeSci Advisors. Please go ahead.

Thank you, operator. Hello, everyone, and welcome to TFF Pharmaceutical's second quarter financial and business results conference call. With me on the line today is Glenn Mattis, president and CEO of TFF, Kirk Coleman, chief financial officer, Dr. Dale Christensen, TFF's Director of Clinical Development, Dr. Bill Williams of the University of Texas at Austin, and Chris Cano, TFF's Chief Operating Officer. The press release announcing our second quarter results is available on the TFF Pharmaceuticals website. Please take a moment to read the disclaimer about forward-looking statements in the release. The earnings release and this teleconference both include forward-looking statements, and these forward-looking statements are subject to known and unknown risk and uncertainties that may cause actual results to differ materially from the statements made. Factors that could cause actual results to differ are described in the disclaimer in our filings with the U.S. Securities and Exchange Commission, including the risk factor section of our 2022 quarterly report on Form 10-Q filed with the SEC. And now, it's my pleasure to turn the call over to Mr. Glenn Mattis. Go ahead, Glenn.

Thank you, Corey. Good afternoon and thank you for joining us today to review TFS second quarter operations and recent highlights. During this call, I will provide an update on our overall financial progress, then ask our Chief Financial Officer, Kirk Coleman, to review our second quarter financials. We appreciate all of the positive feedback from many of you on the format we used in our first quarter call. So, we will take a similar approach today. Kirk and I will provide the formal commentary and then open up the call for questions to the entire team. Please note that we are joined by Bill Williams, Dale Christensen, and Chris Cano, who will be available for the Q&A. The second quarter was another period of significant progress for the company. It is important to take a few minutes to focus on our thin-film freezing technology and how much we continue to learn about its potential. As we have discussed, TFF continues to increase the number of productive partnerships with pharma companies, academic institutions, and the government. I am happy to say that the number of open material transfer agreements grew significantly in the second quarter, and we added three additional top 20 pharma companies to our portfolio of active collaborations. As we continue to advance these engagements beyond the initial formulation stage, into advanced in vitro or animal testing, stability and production stages, the new data continues to support why we are so enthusiastic about the creation of shareholder value. There is absolutely no question that the growing demand for our technology reflects the versatility of thin film freezing. We continue to successfully conduct numerous new feasibility studies across a broad range of experimental, and approved drugs with an ever-increasing focus on biologics and complex macromolecules. These include monoclonal antibodies, fusion proteins, mRNA, bacteriophages, siRNA, peptides and peptoids, in addition to small molecules and others. The work we're doing in the vaccine space is particularly exciting and continues to expand. You have no doubt seen the recent news about the need to develop vaccines that can be administered directly to the nasal mucosa and the lung. I've always said that a major opportunity for the TFF technology is in the second and third generation vaccines. The TFF technology is uniquely positioned to enable this to happen. These vaccines are not limited to providing alternatives for COVID-19 vaccines. We are doing work in flu and many other types of infections, including viral, bacterial, and fungal. Let me take a few minutes to remind everyone about the specific advantages of thin-film freezing and why it is highly differentiated over other technologies. Dr. Bill Williams, co-inventor of thin-film freezing, recently published an article in BioPharm International titled improved formulations to enable stable delivery of biologics. The article provides a concise summary explaining the unique advantages of thin-film freezing over other dry powder technologies, including freeze-drying processes, differences that largely account for our success in forging partnerships at every level of the industry, academia, and government. Many of these statements of work start with a comparison of thin-film freezing to other dry powder technologies. It's essential that a manufacturing process does not change the molecular structure or properties of a drug so that its therapeutic activity is maintained, and that is particularly true when creating a dry powder formulation for biologics. As noted in Dr. Williams' review article, conventional dry powder formulation techniques, such as shelf freeze-drying, spray freeze drying, and spray drying are not well suitable for many biologics due to their tendency to result in the protein clumping into larger or inactive structures, a process that's known as aggregation. In addition, many biologics are quite fragile and cannot withstand the harsh impact of shear and stress. Aggregation can negatively impact the activity of the biologic. By contrast, thin-film freezing results in particles which are highly porous with a large surface area and low density, attributes that help reduce the tendency towards aggregation and ensure optimal bioactivity of the molecule. In addition to avoiding aggregation, thin-film freezing also doesn't rely on elevated temperatures during the drying process. That is a stark contrast to other dry powder techniques, such as spray drying, which require high temperatures in the drying process. This can lead to denaturation of the biologic and thus negatively impact the molecule's activity. The BioPharm article further notes thin-film freezing's applicability in developing novel vaccine formulations, including positive results with mRNA-based vaccines. Our work with materials and specific compounds supplied by our partners show that after withstanding repeated freezing and thawing of a dry powder vaccine containing aluminum salts, the thin-film freezing vaccine does not show aggregation following reconstitution. Importantly, the formulation also maintains drug activity after high-temperature storage with immunogenicity of the dry powder vaccine preserved to temperatures as high as 40 degrees Celsius or 104 degrees Fahrenheit. So, if the approach to immunization for COVID-19 continues to produce vaccines reliant on cold chain distribution and storage, it is clear that by demonstrating these results, we believe that TFF's thin-film freezing technology will enable manufacturers to overcome this significant hurdle. The other day, I read that COVID-19 vaccine manufacturers had to destroy over $1 billion worth of product, which underscores the need to solve cold chain supply challenges. At this point in the call, you may be wondering why I'm reviewing these new data. My purpose is to answer the many questions I get about what work we are doing with partners as we move towards finalizing agreements, and to help let you all know why we are so very optimistic about the positive direction of the business. A bit more new data before reviewing our business progress. As I touched on earlier, many of our partners are evaluating thin film freezing to improve other vaccine formulations for powder delivery to the lung or nasal mucosa. These include those formulations containing the well-known MF59 adjuvant. By way of brief background, MF59 is a liposomal-based adjuvant that enhances a patient's immune response to a vaccine through localized upregulation of cytokines, chemokines, and promoting the recruitment of venous immune cells. First approved back in 1997, MF59 is commonly used in pandemic or seasonal flu vaccines. It is generally recognized as having an excellent safety profile and is now licensed in more than 30 countries. However, vaccines containing MF59 must be stored at refrigerated temperatures and are sensitive to accidental slow freeze conditions. Dr. Williams and his team at the University of Texas at Austin just published another paper in the International Journal of Pharmaceutics demonstrating that vaccines containing MF59 or Ativax, which is a preclinical nano emulsion that has the same composition and droplet size as MF59, can be converted to dry powder form by thin film freezing. By contrast, the research showed that subjecting the save-out-of-axe composition to shelf freeze drying led to significant aggregation or fusion of the droplets, and the aggregation slash fusion was mainly due to the slow freezing required by conventional shelf freeze drying. Zoon film freezing avoids this step and therefore is much less likely to cause aggregation. Thin film freezing also continues to show significant potential for nasal delivery, which again will have significant relevance for the mandated future vaccine development. Intranasal vaccination using vaccine dry powders, an attractive non-invasive modality with better storage stability and added protection at the mucosal surfaces. Thin film freezing has proven viable in enabling the production of dry powders of a larger variety of vaccines, adjuvanted or not adjuvanted, protein-based or nucleic acid-based, for example, the mRNA vaccines and DNA vaccines, as well as live attenuated virus-based, and the vaccine powders have desirable properties for intranasal administration. One last example. Data from Dr. Williams' labs of a recent preclinical study in a rat model using partner's material showed that it is feasible to induce specific mucosal and systemic antibody responses following intranasal administration of a thin-film freeze-dried vaccine candidate. The dry powder was prepared by thin-film freezing of a model antigen absorbed on aluminum oxyhydroxide as an adjuvant. This further demonstrated the ability of the technology to work in a variety of adjuvanted vaccines. Special emphasis was placed on the characterization of the dry powder vaccine formulation that can be realistically used in humans with an intranasal dry powder delivery device. The TFF vaccine powder was found to have good aerosol properties, and the vaccine was uniformly distributed within the dry powder. An in vitro nasal deposition study using a 3D printed human nose model showed that around 90% of the vaccine powder was deposited in the nasal cavity. Intranasal immunization in animal studies with the TFF powder vaccine elicited a specific serum antibody response as well as a specific IgA response in the nose and lung secretions of the animals. Thus, intranasally administered dry powder made by thin-film freezing or vaccines has been confirmed. I repeat, it has been confirmed. Indeed, one additional publication from Dr. Williams' group and the TFF collaborators he worked with recently received second place for the Best Paper Award 2022 by the Journal of Pharmaceutics. In this paper, our team described the formulation of remdesivir and an active analog. I will stop here and say that I could share additional successful data we are producing and working with our partners. Thanks to Bill Williams and the entire team. DFF Pharmaceuticals has become a key partner for pharma and biotech companies evaluating dry powder formulations. But our superior technology is only a starting point in a long line of value creation that ultimately leads to medicines with the potential to create significant clinical benefit and outcomes. For each one of our programs, we start with a singular purpose, to enable more efficient, targeted delivery of medicine to the patient while minimizing systemic exposure. To accommodate growing demand for our technology, we recently opened a new R&D facility in Austin, Texas, which will provide us with significantly more lab space to develop larger scale production for our numerous partnered preclinical programs. Dr. Donald Owens, our Director of Product Development, will supervise the facility, supported by Dr. John Kohling, DFS Vice President of Product Development and Manufacturing. We are also expanding the product development team in Austin, which will be based at the new facility to support the growing number of partnered preclinical projects. Two additional points. First, we continue to fully partner with all of our colleagues at the University of Texas. Second, we are taking a very efficient approach to funding the new lab space. The costs will be managed within our existing budgets. In addition, we do receive funds from our partners to fund many of the experiments that are part of the expanding material transfer agreements and statements of work. Now on to key business updates. First, our two most advanced clinical stage programs, boriconazole inhalation powder and tacrolimus inhalation powder, are currently in open-label Phase II trials, and we expect initial evaluable patient data by the end of the third quarter. As previously discussed, we intend to partner these programs, and we're currently working with Torea Partners to reach out broadly to potential interested companies. I'm happy to report that this process is going well with a number of companies under CDA and or in our product data rooms. We will release evaluable patient data to those companies, under CDA. Given each program's advanced stage of development, we seek partnerships that reflect our significant investment made to date and each product's potential to improve upon the current standard of care. In addition, we are working to build out the clinical supply materials so that prospective partners can remain focused on clinical development and registration strategy. We also expect both the VORI and TAC programs to gain more visibility in the very near term. Dr. Bradley Gardner from the Royal Alfred Hospital in Melbourne, Australia, has been selected to provide a podium presentation on the ongoing compassionate youth study of our voriconazole inhalation powder at the International Congress on Lung Transplantation taking place in Paris, France on September 8th and 9th. Notably, in this lung transplant patient, we observed the expected lack of drug-drug interactions when administering voriconazole by inhalation, thus the patient did not require dose adjustment of their tacrolimus immunosuppressant, which is not possible with oral voriconazole, and demonstrates one of the safety advantages we expect to further demonstrate in our ongoing Phase II study. We remain very excited about the value these two programs are created for TFF and look forward to providing further updates. Let me now provide an update on the status of inhaled niclosamide powder. I'm happy to tell you that we very recently sent the Niclosamide Phase 1 Complete Study Report to Union. We believe this study report provides meaningful information to our partners at Union as they continue to evaluate all of the data and assess TFS niclosamide inhalation powder. I can tell you that Union is an outstanding partner and are quite impressed with the results. The union is working diligently to provide TFF with feedback on their option to license glycosamide inhalation powder and begin a Phase II clinical program in COVID-19 patients. In other updates, our partnership with Catalan is progressing well. Catalan has referred a number of their clients to TFF to begin feasibility work. In addition, we are working with multiple Catalan sites preparing to install TFF equipment for the purpose of developing and manufacturing product candidates. We also continue to think strategically about the future of Augmenta 3387. DFF and Augmenta believe there is a therapeutic opportunity for an effective monoclonal antibody potentially in combination with other antiviral therapeutic options. DFF also continues to be increasingly encouraged about the potential for our inhaled cannabinoid product opportunities. We recently produced additional product to be used in further consumer testing. The opportunity to partner with TFF on these opportunities has now been presented to Glasshouse and a broader base of cannabis companies, both in the U.S. and Canada. It is our goal to determine a specific path forward shortly. As I said earlier, the number of pharma companies with open MTAs has increased, and we added three new top 20 companies during the second quarter. Our data sets are reaching critical decision inflection points with many partners. On the legislative front, we are keenly focused on the opportunity thin-film freezing offers to the advanced development of therapeutics and vaccines. EFF is working directly with members of the Congressional Appropriations Committee and departments within Health and Human Services. We expect that opportunities will be considered for funding TFF efforts under the language written in the 2022 Omnibus Budget Bill. In addition, as our development projects increase and mature, we now have been able to file funding grants which will help us advance programs already moving forward as a part of our two craters and our academic partnerships. Finally, the work we are progressing with DARPA formulating topical and ocular preparations of countermeasures is now in year two, and the preliminary results are promising, and the feedback from Leidos is excellent. With those updates, I'd like to turn the call over to our Chief Financial Officer, Kirk Coleman, for a review of our financials. Kirk?