Fresh Tracks Therapeutics, Inc. (NASDAQ:FRTX) Q3 2022 Earnings Conference Call November 10, 2022 4:30 PM ET
Company Participants
Garth Russell – LifeSci Advisors
Robert Brown – CEO
Monica Luchi – Chief Medical Officer
Albert Marchio – CFO
Conference Call Participants
Tim Lugo – William Blair
Thomas Flaten – Lake Street Capital
Operator
Welcome everyone, to the Fresh Tracks Therapeutics Third Quarter 2022 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded.
I would now like to turn the call over to Garth Russell from LifeSci Advisors. Garth?
Garth Russell
Thank you, and good afternoon, everyone. Joining me on today’s call are Fresh Tracks’ Chief Executive Officer, Rob Brown; President, Andy Sklawer; Chief Financial Officer, Bert Marchio; Chief Medical Officer, Dr. Monica Luchi; Chief R&D Officer and Chief Operating Officer, Deepak Chadha.
Before we begin, I would like to remind everyone that this conference call and webcast will contain forward-looking statements about the company. These statements are subject to risks and uncertainties that could cause actual results to differ. Please note that these forward-looking statements reflect our opinions only as of the date of this call. We will not undertake obligation to revise or publicly release the results of any revisions to these forward-looking statements in light of new information or future events. Factors that could cause actual results or outcomes to differ materially from those expressed or implied by such forward-looking statements are discussed in greater detail in our most recent filings on Form 10-K and our other periodic reports on Forms 10-Q and 8-K filed with the SEC.
It is now my pleasure to turn the call over to the company’s Chief Executive Officer, Rob Brown. Rob, the floor is yours.
Robert Brown
Thanks, Garth. Good afternoon, everyone, and thank you for joining our call today. This is the first quarterly update since we completed our corporate rebranding this summer, which included the introduction of our new company name Fresh Tracks Therapeutics, along with a new logo, website and brand. We believe this rebranding represents the fundamental shift we’ve made over the past year in our corporate mission and strategy. Driving these changes were the acquisitions of a promising pipeline of NCEs, targeting novel mechanisms of actions for the treatment of a wide array of autoimmune and inflammatory diseases.
This is highlighted by FRTX-02, formerly BBI-02, a potential first-in-class DYRK1A inhibitor that is currently being evaluated in a Phase I clinical trial, FRTX — Phase I clinical trial, FRTX-10, formerly BBI-10, a novel STING inhibitor and a platform of next-generation kinase inhibitors. These programs highlight our commitment to shift treatment paradigms by developing targeted, science-driven and potentially first-in-class therapies that could transform patients’ lives while generating meaningful value for our shareholders.
During the third quarter, we continued to progress the Phase I clinical trial of FRTX-02. This includes completion of all cohorts of the Single Ascending Dose, S-A-D, or SAD part of the study and initiation of the Multiple Ascending Dose, M-A-D or MAD part of the study. Currently, we remain on track to report SAD and MAD top line results by early 2023. As a reminder, this study marks the first time a DYRK1A inhibitor intended for patients with autoimmune diseases has been orally administered in humans. In addition, we continue to advance the non-clinical development program for FRTX-02 in parallel with the ongoing Phase I study, as well as preclinical development activities for FRTX-10, which is our lead STING inhibitor candidate that we acquired earlier this year.
Finally, I’d like to provide a brief update on sofpironium bromide or SB for short, which we sold to Botanix this past May. As Botanix recently announced in September a new drug application, or NDA, for SB gel, 15% was submitted to the FDA. We are excited to share this progress. As a reminder, under the terms of our sale of SB to Botanix, Fresh Tracks is eligible to receive various regulatory and sales-based milestone payments as well as tiered earn-out payments ranging from high single digits to mid-teen digits on net sales of SB gel. We look forward to sharing any additional updates regarding this program as they become available.
Now I’ll pass it over to Monica to provide an update on our ongoing pipeline development activities. Monica?
Monica Luchi
Thanks, Rob, and good afternoon, everyone. We’ve had a very productive third quarter of 2022, which built on the momentum from the first half of this year. As Rob just mentioned, during the second quarter, we initiated and are continuing to progress the Phase I clinical trial of FRTX-02, a potent, highly selective and orally bioavailable DYRK1A inhibitor. This randomized, double-blind, placebo-controlled study is designed to evaluate the safety, tolerability, pharmacokinetics and pharmacodynamics of FRTX-02 capsules in both healthy volunteers and subjects with atopic dermatitis or AD for short.
As a reminder, based on the scientifically robust data package and promising preclinical validation that’s been observed with this compound to date, we believe that FRTX’s dual mode of action modulating both the adaptive and innate immune systems could represent a paradigm shift in the way we currently treat these debilitating diseases. Part 1A of the Phase I study, which has been completed, is a SAD assessment, which has enrolled a total of 56 healthy volunteers at 1 study center across 7 cohorts, each of which included 6 subjects receiving a single dose of FRTX-02 and 2 subjects receiving a placebo.
Based on the profile of FRTX-02 observed in the SAD part of the study, in September, we initiated Part 1B of the study, which is a MAD assessment of FRTX-02 capsules or placebo administered once daily over 14 days and up to 33 healthy volunteers. We look forward to reporting top line results from both the SAD and the MAD part of the study by early next year. After completing the SAD and MAD parts of the study, we intend to initiate Part 2 of the study, which will compare the FRTX-02 to placebo in approximately 40 patients with moderate to severe atopic dermatitis over 28 days of dosing. This part of the study is expected to include a preliminary assessment of efficacy, which will serve as an initial model for the treatment of FRTX-02 in immune-mediated disease. This design fits with our broader strategy for this program, considering the potential to develop FRTX-02 for the treatment of a wide range of autoimmune and inflammatory diseases.
Turning to our STING inhibitor program, FRTX-10, which is a novel, potent and orally bioavailable STING inhibitor. FRTX-10 has shown strong proof of mechanism, resulting in significant reduction in key pro-inflammatory cytokines and a favorable initial pharmacokinetic toxicology and safety pharmacology profile. We continue to advance the preclinical development activities for this program to support starting IND-enabling studies thereafter.
I’d also like to briefly touch on our library of next-generation kinase inhibitors, which includes hundreds of new chemical entities that inhibit DYRK1, LRRK2, TTK and CLK kinases. Importantly, inhibiting these kinases has shown promising outcomes in numerous models designed to mimic a range of different conditions within the autoimmune, neuroinflammatory, oncology and rare disease spaces. We’re planning to identify, characterize and optimize both brain penetrant and non-brain penetrant novel kinase inhibitors from this platform with the goal of progressing one or more as programs for the potential treatment of debilitating diseases within some of these high-impact field.
Before I hand the call over to Bert to review the financials, I’d like to highlight the recent information of our Scientific Advisory Board, or SAB, which consists of 5 scientists and clinicians with decades of hands-on experience in the fields of immunology and inflammation. This includes Doctors Kate Fitzgerald, Bernard Khor, Pui Lee, Peter Nigrovic, and Bridget Wagner. We are honored to welcome this team of world-renowned thought leaders to our newly established SAB whose input and guidance will be invaluable as we develop our novel pipeline of differentiated therapies.
I’d now like to pass the call over to Bert to provide a financial overview for the quarter. Bert?
Albert Marchio
Thanks, Monica, and good day to everyone on the call. Before I provide a summary of the third quarter 2022 financial results, I want to encourage you to read our full consolidated financial statements and MD&A contained in our report on Form 10-Q, which can be accessed through the Investors section of our website once filed with the SEC.
Starting with cash, the company reported $11.3 million in cash and cash equivalents as of September 30, 2022. We expect that our cash and cash equivalents, combined with up to $6 million from the expected near-term payments under the asset purchase agreement or APA with Botanix will be sufficient to fund our operations for at least the next 12 months.
Revenue for the third quarter of ’22 was approximately $0.5 million compared to $0.1 million for the third quarter of the prior year. Revenue for the third quarter of this year consisted of contract revenue recognized under the APA and transition services agreement or TSA, with Botanix, which includes $0.4 million of fees for consulting services the company provided to Botanix under the TSA and sublicense income under the APA of $0.1 million. Revenue for the same period last year consisted of royalty revenue we recognized from the sales of ECCLOCK, or SB gel, 5% in Japan by Kaken Pharmaceutical.
R&D expenses were $3.6 million for the third quarter of ’22 compared to $10.2 million for the third quarter of ’21. This decrease was driven primarily by lower clinical expenses related to SB, upfront license expense encouraging connection with the license agreement with Voronoi Inc., and lower regulatory and compliance fees, partially offset by increased clinical costs for FRTX-02.
G&A expenses were $3 million for the third quarter of ’22 compared to $3.3 million for the same quarter of the prior year, which decrease was primarily related to lower compensation expenses and other administrative fees. The company’s net loss for the third quarter was $6 million compared to $13.3 million for the third quarter of last year.
And with that, I’ll turn the call back over to Rob for closing remarks. Rob?
Robert Brown
Thanks for the financial recap, Bert. We are pleased with the progress over the first 9 months of 2022, and we look forward to the continuing assessment — advancement of our exciting pipeline of novel therapies. We believe this pipeline has broad potential to produce much-needed treatments within the field of immunology and inflammation. As we’ve covered on the call, there are several important milestones we expect to occur over the next few quarters, which we believe present significant opportunities to create value for our shareholders. This is highlighted by the SAD/MAD top line results from the ongoing FRTX-02 Phase I study, which remain on track to be announced in early 2023 and the continued development of our other novel therapeutic candidates, notably our lead STING inhibitor FRTX-10.
This concludes today’s prepared remarks. I’ll now ask the operator to open the call up for questions. Operator?
Question-and-Answer Session
Operator
[Operator Instructions] Our first question is from Tim Lugo of William Blair.
Tim Lugo
Congratulations on the progress. For Part 2 of the FRTX-02 trial, can you discuss kind of the therapies in the moderate AD patients which they’ve been exposed to prior to entering the trial? I assume these are going to be biologic-naive patients, but can you give us kind of a sense of how pretreated that will be?
Robert Brown
Sure. Thanks, Tim, for the question. Monica, why don’t I turn that one over to you?
Monica Luchi
Sure. Tim, actually, we’re making requirements for patients not who have received biologics such as dupilumab for a period of 6 months prior to entering the study. So for any previous biologic, we’ll make sure that it’s far beyond the half-life to make sure there’s no continued activity of that drug. But their previous uses not — does not exclude them for participating in this Part 1 piece of the study, at least a Phase I part of the study.
Tim Lugo
And any thoughts around JAK inhibitors as an exclusion or will these be probably JAK inhibitor naive patients?
Robert Brown
These will most likely be JAK inhibitor naive patients, but we do have an exclusion for the period to which they would be prohibited in advance.
Tim Lugo
Okay, great. And maybe kind of a broader question, Rob, can you just discuss your thoughts around business development of both of the 2 lead novel assets when — obviously, you want some proof-of-concept data, but in your opinion, kind of when the ideal time to seek a partner or how long do you kind of want to continue development without a partner?
Robert Brown
Yes, good question, Tim. Obviously, it’s more of an art than a certainty on when you do these things. Obviously, we’d like to have good data to talk to people about. We do get regular requests really ever since we acquired both the STING inhibitor as well as the DYRK1A. We listen to those. We share the information we can with parties. And obviously, we also are out talking to investors. So we’re kind of using a multi-pronged approach here. But I don’t know if there is an ideal time. I think it’s a combination of the drug, the data you have on the drug as well as the company’s position at that time.
Tim Lugo
There’s been obviously a major market dislocation over the past year. Can you maybe speak to that and when you’re approached by these companies in terms of a development partnership, I assume maybe even upfront could be significantly larger than what the kind of market is giving you these days?
Robert Brown
Yes. We have lots of companies that have approached us in kind of small, medium and large, that are curious and interested in both of these platforms actually. I don’t think, I really want to speak to what a deal might look like because, obviously, we don’t have one that we’re ready to announce and therefore, it’s probably not appropriate to speak on that. But certainly, we’re encouraged by their interest and their curiosity and the mechanism being first-in-class with the DYRK1A is intriguing to people, they’re curious about the mechanism and understand why we acquired it and are excited to see more data as we move it forward.
Operator
Our next question is from Thomas Flaten of Lake Street Capital.
Thomas Flaten
Kind of back to the prior questions around partnership, do you have enough ability to differentiate the DYRK assets so that you can license on a compound by compound basis? Or do you think it will be more of a platform-type deal? I don’t know how much work you’ve done, I guess, that’s what I’m trying to get at?
Robert Brown
Yes. I mean, Thomas, I think it depends, right, on what type of partnership it is. Certainly, there — in this library of assets that we acquired, there are those that cross the blood-brain barrier versus those that don’t. And our belief is, at least from some of the broad research that’s out there on DYRK1A, that there may be opportunities for these kind of products in a disease like Alzheimer’s disease, for example, where you need to have that blood-brain barrier penetration. I’m not sure you’d want that otherwise. So we do see where you might be able to break these up. They’ve also — there’s also different families that are involved in this in terms of where the — how the products were originally developed. So there are a couple of different ways we could choose to do that. It all depends on the party, what they’re interested in and certainly what they might be offering.
Thomas Flaten
And then — and this is a bit of a hypothetical on hypothetical. But given how crowded and competitive the AD market is, for example, when you guys are thinking about biomarkers, are you thinking about — I’m just curious how you’re thinking about those kind of from a response recognition all the way through to something that could be used for value-based contracting. I’m just curious how comprehensive that thought process is or how you guys are factoring that into the studies because I realize you’re already collecting biomarkers in the ongoing study.
Robert Brown
Yes. A couple of things there, one is, remember, it’s important that we’ve always said that although we’re going to do this first study in patients in AD, it isn’t necessarily where we’re going to go. It’s just a really useful treatment to understand the drug and understand how it’s impacting someone with autoimmune diseases. So we’ll be able to read an awful lot in that because it’s skin, it’s easier to do that. It also — we have 4 weeks, so we think we’ll be able to potentially see efficacy easier in that first 4 weeks in atopic dermatitis patient. All that information will be what leads us to decide where we go in Phase II. And it isn’t certain that it’s going to be in AD. So the biomarkers we’re looking for are broader so that we can also have an understanding of other potential autoimmune diseases. In terms of their ability from a payer point of view, it’s a little early for that one in terms of a value message. So we’ll leave that one to rest for now.
Thomas Flaten
But Monica, was there anything else that you’d like to add to my superficial summary?
Monica Luchi
No. I think that was pretty accurate. Obviously, some of it depends on what we’re going to see from these biomarkers. At this point, we’ll be looking at markers for assuring ourselves that we have engagement of the target that we believe we’re engaging and also looking at markers within the disease. Again, I just want to stress this is a 4-week study. So it is limited. We’ve said that there is going to be assessment of preliminary efficacy intentionally because of the time allowed. So some of these biomarkers will be able to provide information within this short period, some of them will still have to study in the next study. So I think it’s going to be in evolution as we move forward.
Thomas Flaten
Thank you.
Operator
We have no further questions at this time. I would like to turn the floor back over to Robert Brown for closing comments. Please go ahead, sir.
Robert Brown
Thanks for taking the time this afternoon to listen to our update. We’re enthused about what the future holds for Fresh Tracks as a biotech exploring cutting-edge treatment alternatives for patients suffering from debilitating autoimmune and inflammatory conditions. We look forward to sharing additional updates on our development progress moving forward. As always, feel free to reach out to us any time if you have further questions. Have a great day.
Operator
That concludes today’s conference. Thank you for joining us. You may now disconnect your lines.
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