VYNE Therapeutics Inc.

Greetings and welcome to the Vine Therapeutics second quarter 2021 earnings call. During the presentation, all participants will be in a listen-only mode. Afterwards, we will conduct a question and answer session. At that time, if you have a question, please press the 1 followed by the 4 on your telephone. If any time during the conference you need to reach an operator, please press star 0. As a reminder, this conference is being recorded Thursday, August 12, 2021. I would now like to turn the conference over to Chase Oswald from LifeSci Advisors. Please go ahead.

Good morning, everyone, and thank you for joining us. Before we begin formal remarks, let me remind you that some of the information in the press release issued this morning and on this conference call contain forward-looking statements that involve risks, uncertainties, and assumptions that are difficult to predict, including statements, forecasts, and observations on financial and operating performance, impacts of the COVID-19 pandemic on Vine, and observations regarding ongoing operating expenses and net revenues. These statements will include observations associated with the commercialization of Amzeek and Zilxie in the United States. They will also include plans and expectations regarding strategic transactions and the success, timing, and cost of clinical trials. Words that express and reflect optimism, satisfaction with current progress, prospects, or projections, as well as words such as believe, intend, expect, plan, anticipate, and similar variations identify forward-looking statements. but their absence does not mean that statement is not forward-looking. Such forward-looking statements are not a guarantee of performance, and a company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in Vine Therapeutics' filings with the SEC. These forward-looking statements speak only as of the date of today's press release and conference call. and the company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this call. In addition, the financial portion of this call will include certain non-GAAP financial information. For additional disclosures relating to these non-GAAP financial measures, including a reconciliation to the most directly comparable GAAP measures, please see today's press release, which is posted on the Investor Relations section of our website. Participating in this morning's call are Dave Domzalski, Vines President and Chief Executive Officer, and Tyler Zaranda, Vines Chief Financial Officer. Dr. Ian Stewart, the company's Chief Scientific Officer, and Mutia Harsh, the company's General Counsel and Chief Legal Officer, will also be online and will be available during the Q&A session. At this time, I would like to turn the call over to Dave Domzalski. Dave, please go ahead.

Thank you, Chase, and good morning to everyone. Hopefully, you'll have had a chance to read the two press releases that we issued this morning related to our second quarter earnings and announcing our new license agreement with Infraderm. On today's call, we will be going through our second quarter financials. However, I want to spend the majority of my time this morning talking about the change to our corporate strategy and our focus on R&D and advancing our proprietary pipeline. This morning, we released our earnings. Revenue for the quarter was flat compared to last quarter as we continue to face headwinds commercializing our products in this environment. We have been evaluating our commercial and R&D assets for some time in order to determine how to optimally deploy capital and drive shareholder value. During the course of this process, we carefully consider the revenues received from the commercialization of Amzeek and Zilxy and the associated costs to drive those revenues. The protracted negative impact of the COVID-19 pandemic over the past 18 months during the commercial launches of both Amzeek and Zilksy and the current payer landscape has made this an incredibly challenging environment. Throughout this process, we explored several strategic options, including the acquisition of marketed assets, outlicensing our approved products outside of the United States, and possible partnering or co-development relationships with interested parties. As you all are aware, we've had to make considerable cuts to our operating expenses over the past 18 months in light of COVID-19 in order to preserve our commercial operation. We have kept our sales force intact throughout this time and our efforts to educate healthcare providers and increase awareness of both Amzeek and Zilksie. While we have had to balance our cash expenditures for commercial operations throughout these periods of unpredictability, and customer access restrictions since the COVID-19 pandemic began last March. Important consumer, digital, and e-commerce initiatives that we would have sequenced during a normal launch cycle have unfortunately needed to be sidelined. Launching new products bring a variety of challenges in any environment, particularly for a company of our size. There is a roadmap to maximize the potential of our minicycling franchise. We know we have excellent products and responses from patients and the healthcare providers continues to be very positive. The issue for us is ultimately one of time and money. Though we remain optimistic about the potential of our launch brands, the factors I have discussed coupled with our current operating costs significantly impact our ability to become a profitable enterprise within an acceptable timeframe. We believe that our existing Minocyclone franchise, including our phase three ready combination product, FCD-105, has significant value. As we assessed our current Minocyclone franchise and the costs associated with commercialization alongside our ambitions for our pipeline, including the transaction announced this morning with InfraDerm, which provides us with exclusive access to a novel Betty platform, We came to the conclusion that we cannot appropriately support both a commercial enterprise and R&D operations. After careful consideration, we have made the strategic decision to explore a sale or license of our Minocyclone franchise, including the underlying molecule stabilizing technology platform specific to our Minocyclone portfolio. We are working with the prominent investment bank to lead us through this process. We believe that the potential of this franchise could be maximized by a partner that can deploy the necessary resources to unlock its true value. Recognizing the continued pressure on our share price, we believe the best way to create value for our shareholders is to focus our resources on our existing R&D capabilities and strong partner network to advance our proprietary pipeline. As we transition our focus, and spend toward developing our pipeline, we will continue to selectively fund certain aspects of the commercial business, including our sales force, for a finite period of time while we actively work to identify a partner for our minicycling franchise. This will reduce our overall burn rates and allow us to make appropriate investments in our pipeline, which we believe will create significant value for our shareholders. Separately, in light of the strategic change, We've had a number of discussions with our lenders regarding our outstanding debt. They were very helpful in working through potential options and were willing to provide us runway to keep the debt outstanding for a period of time during the process of identifying a partner for the Minnesotan franchise. When considering the carrying costs and fees, however, associated with doing so, we believe it was more prudent to prepay the loan and use the cash that would have otherwise funded those carrying costs to invest in our pipeline projects. Tyler, our CFO, will discuss our cash and cash runway when we get to the financial discussion. Going forward, we will invest in developing therapies for the treatment of immunology and inflammatory conditions with high unmet needs. Drug development is a core competency of mine. We have a track record of successfully developing complex molecules and advancing therapeutics through the clinic and regulatory approval process. We intend to leverage those core capabilities in building an enhanced pipeline of innovated NCEs alongside our current development program for FMX114 for the potential treatment of mild to moderate atopic dermatitis. We believe this is the right direction for the company and have the unanimous support of our board of directors. This leads me now to the licensing agreement we announced this morning with Infoderm Limited, a spin-out of the University of Dundee's School of Life Sciences. Dundee is one of the four most integrated university hospital and biotechnology research institutes in Europe. We've been following the work of this group and have been impressed with their progress in developing multiple, novel, and differentiated drug discovery platforms relevant to autoimmunity and immuno-oncology disciplines. We are particularly impressed with the potential and broad applicability of their work in identifying highly potent and selective bromodomain and extra-terminal protein inhibitors, also referred to as BET inhibitors, or BETI for short. As outlined in our press release, this partnership with InfraDerm provides us exclusive worldwide rights to a novel class of BETI compounds. The BET family of proteins are epigenetic regulators that control the transcription of genes. Inhibiting BET proteins stalls the transcriptional process and therefore reduces the extent of inflammation in tissues. There's a lot of interest in BETIs as therapeutic targets for a wide range of diseases. To date, much of the clinical research, particularly by large pharma, has been focused on oncology. There is also compelling science to show that BET inhibition can play an important role in effectively treating immunoinflammatory diseases. We believe this partnership with InfraDerm is transformational for Vine as it exponentially expands our pipeline, providing us with a library of small molecule NCEs and a unique platform to develop both topical and oral Betty therapeutics. The initial candidates that we plan to develop we refer to as VINE-201 and VINE-202. The first of these, VINE-201, is a pan-bromodomain or pan-BD BET inhibitor. It is a first-in-class soft pan-BD BET inhibitor that is designed to mitigate systemic drug exposure and will be developed for topical applications. We intend to progress VINE-201 into rare neutrophilic dermatological indications such as pyoderma gangrenosum, pulmonary plantar pustulosis, and generalized pustular psoriasis, where there is significant unmet need due to a lack of indicated treatment options. Plan to enter this program into the clinic next year after the prerequisite non-clinical safety assessments have been completed. The second candidate, BIND202, is an orally delivered, first-in-class BET inhibitor that's highly selective for BD2. Recent research suggests that the majority of pro-inflammatory signaling from BET protein action is through the interactions with bromodomain 2. By selectively inhibiting BD2, we believe Vine 202 could have a more targeted anti-inflammatory effect with an improved benefit-risk profile. We view Vine 202 as having significant potential as a novel oral treatment for major immunoinflammatory indications, such as rheumatoid arthritis, ulcerative colitis, and multiple sclerosis. Upon final candidate selection and exercise of our option, we intend to commence an IND-enabling non-clinical safety program and enter the clinic next year as well. BET inhibition is good science, and we are enthusiastic about the potential broad utility of the BETI platform. Over the coming months, as we prepare to take these NCEs into the clinic, we will provide further details on the initial indication that we intend to pursue for each of these programs. With respect to the economics of our partnership with InfraDerm, we structured the transaction to provide us the exclusive right to develop any and all of their Betty compounds for any indication worldwide. Additionally, we have the ability to sub-license to a third party the development of any Betty program in any jurisdiction. This gives us significant optionality in how we deploy our resources and maximize the potential of the platform. In essence, this is a pay as you go or a la carte model, which provides us the ability to control costs at our discretion. For perspective, the total milestone payments to progress one topical product through approval in the United States is approximately $16 million for all indications. Similarly, The total milestone payments to progress one oral product through approval in the United States is approximately $44 million for all indications. This obviously excludes R&D costs and any royalties payable upon commercialization. In summary, we are very excited about the possibilities of the Betty platform and our collaboration with InfraDerm as we prioritize the growth of our pipeline. By coupling InfraDerm's deep expertise in rational drug design and leading-edge pharmacologies with Vine's drug development capabilities, we see a strong foundation to build real value for patients and shareholders alike. And we look forward to providing further progress through our updates. Moving to FMX114. We remain on target to enroll the first patient in our phase 2A proof of concept study in mild to moderate atopic dermatitis later this quarter. Clinical trial supplies are at our third party distributor in Australia for subsequent shipment to investigator sites pending approval of the protocol by the local ethics committee. Again, we anticipate having top line results from this study by the end of the year. Turning to commercial. For the second quarter, the Minocyclone franchise exceeded 57,000 prescriptions. This represents an approximate 10% increase over the first quarter of this year and is the highest quarterly prescription count since the launch of both Amzeek and Zilxy. Individually, Amzeek had over 47,000 prescriptions and Zilxy 10,000 prescriptions, which both represent quarterly highs. To date, roughly 9,000 unique healthcare providers have prescribed Amzeek. We have penetrated 74% of our target universe so far this year, including over 87% of our highest decile targets. Similarly, Xilxi has over 3,300 total unique prescribers since launch in October, with a 42% penetration rate of our target universe. Additionally, year to date, our sales team has executed educational speaker programs for over 1,600 healthcare practitioners on both Amzeek and Xilxi. Market access for Amzeek has remained stable as the brand continues to have coverage for approximately 72% of commercially covered lives. Market access for Xilxi has improved to approximately 68% of commercial lives, an increase of 7% from last quarter due to successful pull-through efforts by our team with downstream custom plans. We view these as positive metrics for the franchise despite our brands continuing to face pandemic related headwinds. You may recall that the sales team began the year with approximately 35 to 40% access to target positions in a live setting. This has progressed to approximately 60 to 65% recently, but it's clear that the COVID-19 pandemic continues to have an impact on the launch of both products. On the IP front, we announced on Monday that we have initiated a patent infringement lawsuit against Perigo Israel Pharmaceuticals. We filed this lawsuit in response to Perigo's ANDA filing, seeking FDA approval to manufacture and sell a generic version of Amzeek in the United States prior to 12 patents listed in the Orange Book. We are seeking an order that the effective date of any FDA approval of Perigo's ANDA be no earlier than the expiration of our list of patents. the latest of which expires on September 8th, 2037. We are confident in the strength of our patents, and we intend to vigorously defend our intellectual property rights in the United States and globally. I'll now turn the call over to Tyler to cover the financials. Tyler.