Salarius Pharmaceuticals, Inc. (NASDAQ:SLRX) Q2 2022 Earnings Conference Call August 8, 2022 11:00 AM ET
Company Participants
Kim Golodetz – Senior Vice President, Principal, LHA Investor Relations
David Arthur – Director and CEO
Mark Rosenblum – Chief Financial Officer
Dr. Daniela Santiesteban – Director, Protein Degradation, Development
Conference Call Participants
Ahu Demir – Ladenburg
Operator
Welcome to the Salarius Pharmaceuticals Second Quarter 2022 Financial Results and Business Update Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]
Please note, this event is being recorded. I would now like to turn the conference over to Kim Golodetz with LHA Investor Relations. Kim, please go ahead.
Kim Golodetz
Thank you. This is Kim Golodetz, Senior Vice President, Principal with LHA Investor Relations. Thank you all for participating in today’s call. Joining me from Salarius Pharmaceuticals are David Arthur, Director and Chief Executive Officer; and Mark Rosenblum, Chief Financial Officer. In addition, Dr. Daniela Santiesteban, Director of Protein Degradation, Development, will be available for Q&A.
During this call, Salarius will be making forward-looking statements about operating metrics, future expectations, plans, events and circumstances, including statements about its strategy, future operations, the development and effectiveness of its investigational drug candidates, seclidemstat and SP-3164, as well as its targeted protein degradation program and expectations regarding its capital allocation and cash resources.
These statements are based on Salarius’ current expectations and you should not place undue reliance on these statements. Actual results may differ materially due to risks and uncertainties, including those detailed in the Risk Factors section of the company’s annual report on Form 10-K for the year ended December 31, 2021 and subsequent quarterly reports on Form 10-Q, as well as other periodic SEC filings.
Except as required by law, Salarius disclaims any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events or otherwise.
With that said, I’d like to turn the call over to David Arthur, CEO of Salarius Pharmaceuticals. David?
David Arthur
Thank you, Kim. And thank you to all of you for joining this call and for your interest in Salarius, particularly for all of you joining us for your first Salarius earnings and business call update.
The second quarter and recent weeks were once again very productive for Salarius, as we continue to advance both of our lead programs towards multiple near-term milestones. We are making excellent progress in pursuit of our vision of treating patients fighting cancer with either seclidemstat or SP-3164, while providing investors with potential value creating inflection points later this year. Indeed, based on the progress we made in the first half of this year, we expect a busy second half of 2022.
I will first talk about seclidemstat, our reversible LSD1 protein inhibitor, and although, seclidemstat program is furthest along the development path that does not in any way diminish the excitement we have for 3164, our targeted protein degrader, where we plan to submit an investigational new drug application to the FDA and begin human trials next year.
Enrollment in our Phase 1/2 study with seclidemstat in Ewing’s and other FET-rearranged sarcomas is progressing well. Last week, we announced the addition of several prestigious sites to the study.
The Seattle Cancer Care Alliance, which is comprised of the Fred Hutchinson Cancer Research Center, Seattle Children’s Hospital and the University of Washington Medical Center, all well-known names in cancer research.
We also added Oregon Health & Sciences University, another well-known name, which brings us to 15 total clinical sites, representing 23 separate locations around the country enrolling patients.
We also plan to add a few more sites in the coming weeks and plan to make an announcement once those sites are active. We remain on track to report interim data later this year with additional data being available as patients continue to enroll and continue on seclidemstat treatment.
As a reminder, Ewing’s and FET-rearranged sarcomas are rare with limited treatment options and poor prognosis, which makes the work we do extremely important. All of us at Salarius, and hopefully you as investors and interested parties are motivated by the prospect of making a difference in the treatment of these cancers with high unmet need.
We are also excited to announce last week a collaboration with Volition Rx to advance rapid epigenetic profiling utilizing their Nu.Q technology. This profiling will support further development of seclidemstat by studying biomarkers to allow for a noninvasive method of determining target engagement.
In other words, is the drug reaching and having activity in patient’s cancer cells? So this exciting research collaboration provides us another tool to aid in the development of seclidemstat to treat patients in the clinic and beyond.
The study of seclidemstat is also progressing at the MD Anderson Cancer Center in an investigator -initiated hematologic or blood cancer clinical trial. As a reminder, the cost of investigator-initiated clinical trials is usually significantly subsidized by the sponsoring institution, which in this case is MD Anderson, which markedly reduces the cost to generate key proof-of-concept patient data. We continue to expect interim clinical updates from this trial before the end of the year.
Now turning to our protein degrades — degrader asset SP-3164. Recall that in January of this year, we acquired an intellectual property portfolio from DeuteRx, LLC, including the drug candidate SP-3164.
3164 now forms the basis of our targeted protein degradation or TPD drug development program. TPD is the subject of heightened interest in the pharmaceutical community, because of its potential to develop medicines that target cancer promoting proteins that have historically been considered undruggable. In addition, we believe this is a validated area of cancer research with a class of early protein degraders called molecular glues, showing considerable therapeutic and commercial success.
Let’s not forget, the Bristol-Myers Squibb reported in their fourth quarter and full year financial results for 2021 that the first-generation molecular glues, Revlimid and Pomalyst generated over $16 billion in global sales in 2021. As I just mentioned, we believe this helps explain heightened interest in protein degradation among the pharmaceutical community.
What we believe makes 3164 unique or differentiated from other molecular glues is that it is the preferred half or preferred enantiomer of the widely studied drug of avadomide with the potential for increased efficacy and improved safety versus avadomide and potentially other molecular glues.
Since its acquisition at the beginning of the year, we have made good progress in advancing 3164 and have already completed the pre-IND meeting process with the FDA. That meeting process provided valuable input and clarity on preclinical, clinical and other regulatory matters for preparing and submitting our IND.
We are currently implementing IND enabling studies and other development activities and we believe we remain on track for an IND submission in the first half of next year with the start of clinical studies soon thereafter.
Included in our IND enabling work are studies evaluating 3164 as single agent treatment used in combination with other common anticancer treatments and compared to other molecular glues, and we continue to look forward to providing updates later this year.
Many large pharma companies are partnering with development stage protein degrader companies, likely catalyzed by the commercial success of first molecular glues Revlimid — like Revlimid and Pomalyst, which as I mentioned earlier had 2021 global sales of more than $16 billion.
As a reminder, we have seen a large number of partnerships for both preclinical and early clinical stage drugs, including most recently in February, when Amgen signed a development deal for Plexium’s protein degrader, valued at more than $100 million.
We were interested in hearing from pharmaceutical leaders with respect to both 3164 and seclidemstat, and with that in mind, we attended the 2022 BIO International Conference in San Diego, California.
With over 15,000 attendees, Bio provided members of the Salarius team with multiple opportunities to provide updates not only on both programs, but to capture input on what type of preclinical and clinical data a number of those pharmaceutical companies would like us to generate. We have taken that advice, so we consider BIO a success.
Before I turn the call over to Mark to review our second quarter and year-to-date financial results, I want to add that we have managed our expenses very well while progressing towards our 2022 milestones. Each day draws us closer to achieving those milestones and potentially having two anticancer medicines to treat patients who have failed existing therapies.
Mark, over to you.
Mark Rosenblum
Thank you, David. Our net loss for the second quarter of 2022 was $4.7 million or $0.09 per share and this compares to a net loss of $3.1 million or $0.07 per share for the second quarter of 2021. The increase in net loss was due to higher operating expenses and the absence of grant revenue in the 2022 quarter.
Research and development expenses were $2.9 million for the second quarter of 2022, compared with $2.1 million a year ago. The $800,000 increase was primarily from spending on our targeted protein degradation technology purchased in January of this year. Overall spending for seclidemstat was unchanged compared to the prior year.
General and administrative expenses increased to $1.8 million during Q2 of 2022 from $1.6 million last year, due to higher personnel costs and proxy solicitation services for our Annual Meeting of Stockholders held in June of this year.
Net cash used for operating activities during the second quarter of 2022 was $3.6 million and this compares to $3.2 million a year ago.
Turning to our year-to-date financial results, net loss for the first half of 2022 was $10.8 million or $0.22 per share, compared to a net loss of $4.9 million or $0.13 per share for the first half 2021. The increased loss was primarily due to higher research and development expenses, including a $2 million one-time non-recurring purchase of our targeted protein degradation portfolio and other spending for this technology.
Seclidemstat costs for the six-month period increased almost all of which occurred in the first quarter, resulting from higher development and clinical trial expenses and higher personnel costs, offset by lower manufacturing costs.
We incurred higher general and administrative expenses resulting from higher personnel costs and public company costs. We recorded no grant revenue for the six-month period, whereas we reported grant revenue of $1.8 million for the first half of 2021.
Net cash used in operating activities for the first half 2022 was $7.1 million, an increase of $1.2 million from the prior period. Net cash used in investing activities $1.5 million is the cash portion of our targeted protein degradation purchase in January of this year.
And now I will review key balance sheet items. We have benefited from grant revenue from the Cancer Prevention and Research Institute of Texas or CPRIT and note that we view receipt of these grants as a vote of confidence for our seclidemstat program. At this point, we have reached the maximum amount eligible — of eligible spending that can be reimbursed from CPRIT and we have recorded a $1.6 million receivable on our balance sheet.
As of June 30, 2022, Salarius had cash, cash equivalents, restricted cash of $22.6 million, compared with $29.2 million as of December 31, 2021. Current cash and cash equivalents are expected to fund the company’s planned operations into 2023.
With that, I will turn the call back over to David.
David Arthur
Thanks, Mark. One challenge I encounter with every investor call is communicating the confidence I have in Salarius and the excitement I have for the near future. Both seclidemstat clinical trials continue to enroll patients, and MD Anderson and Salarius are both collecting clinical data.
We continue to plan to share that interim data later this year, either or both of these clinical interim data updates could be positive news for patients fighting these terrible cancers. In addition, our 3164 protein degrader program is proceeding, planned preclinical data is arriving.
We are planning to provide updates on that data later this year, we are progressing towards an investigational new drug application and I believe we will begin clinical trials next year with what could be the next-generation molecular glue.
And we recently completed a productive series of meetings with pharmaceuticals, companies at the BIO International Convention. And as Mark just mentioned, we ended the second quarter with over $22 million in cash and cash equivalents in the bank.
So a protein inhibitor in two clinical trials with interim clinical updates later this year, a protein degrader with preclinical data releases later this year with plans to enter the clinic next year and over $22 million in the bank as of June 30, 2022. This is why I am excited and these are only some of the reasons why I have confidence in Salarius and I am excited about the future.
I also want to mention that we will be presenting at the Ladenburg Thalmann Healthcare Conference being held in November — in New York City on Thursday, September 29th, and will be available — Salarius management will be available for one-on-one meetings at the conference.
Also, earlier that week, we plan to be in New York for one-on-one meetings with the investment community. Please contact LHA Investor Relations, our IR firm, if you would like to arrange a meeting.
And in addition, Dr. Daniela Santiesteban, has accepted an invitation to speak later this year at The 5th Annual Targeted Protein Degradation Summit in Boston, Massachusetts. For the Summit website, the annual TPD Summit is the world’s leading industry dedicated conference that spans the full drug development pipeline from discovery through to the clinic and they are expecting over 700 experts from pharma, biotech and leading academic labs to attend their conference from October 25th to the 28th, and we are looking forward to Daniela providing an update on our 3164 program.
Before we open the call for questions, I want to let investors know that in addition to making a difference in the lives of patients fighting cancer, one of our goals is to provide transparency to investors so they understand the development time lines and our expected milestones.
For that reason, moving forward, our conference calls are expected to be event driven rather than adhering to a predetermined schedule based on SEC financial filing deadlines. We will continue to issue earnings and business updates on the SEC schedule, but I expect our next public conference call will be held when we have interim clinical or significant preclinical data to discuss.
With those comments, I thank you for your time and attention. Joining us now for the Q&A portion of the call is Dr. Daniela Santiesteban, Director of Protein Inhibition Development.
And now, Operator, we are ready to take questions.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] The first question comes from Ahu Demir of Ladenburg. Please go ahead.
Ahu Demir
Good morning. Thank you very much for taking my question and congrats on the progress you made this quarter. My first question will be about the partnership you guys publish. I would like to get some more information on how you plan to implement that partnership with Volition Rx in the ongoing seclidemstat clinical trial and when we might see some patient epigenetic profiling data?
David Arthur
Ahu, this is David. It’s good to hear from you. Thanks for the question. I think I am going to let Daniela take this question. She was the person spearheading this partnership and she is the best one to give you the information you are looking for. Daniela, are you there?
Dr. Daniela Santiesteban
Yes. Thank you, Ahu, for the question. So, yeah, we are very excited about this collaboration with Volition. They will be taking samples from patients on our sarcoma trial and its plasma sample, so like David said, noninvasive and they are looking at methyl marks for tumor nucleosomes.
So what that will tell us as, if seclidemstat is getting to the tumor and having an effect on cancer cells, we should see an increase in methyl marks and that’s what the Volition data will provide us with and we are hoping to start collecting that data towards the end of this year and into early next year. Does that answer your question?
Ahu Demir
Yes. It does. Thank you so much for that answer. I have a follow-up question on the seclidemstat program. I am curious to know what is the current enrollment status and you did mention there will be a data readout we are excitedly waiting for? Is there any determination of conferences when you would be disseminating the data then we will see the data or is it going to be a press release, any information, any color would be very helpful?
David Arthur
Yeah. Happy to provide some color, Ahu. We — as we have mentioned a number of times, we are looking to the second half of this year to be a period of time where we will have a very rich data update series of announcements, both clinical from the seclidemstat program and preclinical from the 3164 program.
Specifically about Ewing sarcoma, we don’t discuss actual enrollment numbers. But as you can see, based on the data we are generating we are continuing to get interest from clinical trial sites. We just added four prestigious names to the list and we have a couple more coming online any day now and we are looking forward to that release and that will take us up to, I think 17, maybe a few more, 17 sites to even more than possibly 23 locations across the country. So the enrollment is going well.
Now what we are looking for in this patient data and you are probably aware of this based on the recent release of the Recur [ph] data coming out of Europe is that, what’s really important according to the principal investigator of Recur is progression-free survival and that just takes a little while.
The progression-free survival data for the second — for the first and second relapse patients with Recur was sadly just terrible and I can’t remember the exact numbers as maybe 2.5 months and maybe 3.5 months or four months for the two different treatments they were releasing data on and it’s just terrible for these patients with Ewing.
So we are very fortunate that the patients we have enrolled are on drug and we are monitoring them, and by the end of the year, definitely in the second half of this year, we will have enough data on their duration of treatment, event-free survival, progression-free survival, however you want to look at it.
So we think really provides some great guidance to the marketplace and the doctors and investors on what we think we can do with this drug and we will just have to wait and see what happens, but we feel really good about sticking to that time line of being able to provide some data.
Now how will we do that? Not entirely sure yet. Once we have the information and we feel confident that it’s ready to be released. From an ethical perspective, if it’s good information, I am certainly not going to sit on it just to wait for a conference when we could be telling patients fighting this terrible disease that there might be a good option out there. And so, I think, the options of a press release or a late breaking conference submission are all on the table at this point. I gave you a long answer to a short question. Hopefully, I answered it.
Ahu Demir
Yes. Very helpful. David, thank you so much for taking my questions. I have other questions, but I would like to give it to other analysts who have the opportunity to ask and I will jump in the queue for the follow-up questions. Thank you.
David Arthur
Okay. Well, Ahu, we have a few minutes, if you would like to continue now?
Ahu Demir
Yeah. Of course. Yes. So my next — one of the questions will be on the 3164 program, what stage of the IND enabling studies are you at and if you can give some information on that, that would be very helpful as well?
David Arthur
Well, Ahu, I think, I am going to let our Director of Targeted Protein Development take that question.
Dr. Daniela Santiesteban
All right. Thank you, David, and thanks, Ahu, again for the question. So, yeah, like David mentioned during the call, we remain on track to submit an IND in the first half of next year. We kicked off the IND enabling studies last quarter. So we are going through all of the required IND enabling studies right now.
And in addition to that, the data I will be presenting at the October conference will be more mechanism of action, more in vitro and in vivo proof of concept. So, yeah, to answer your question, we remain on track to submit the IND in the first half, and then, like David said, aim to start the trial soon after that.
David Arthur
Ahu, are you there?
Ahu Demir
Yes. I am. I could not hear you for a moment. Thank you very much. Very helpful. Thank you.
David Arthur
Okay. I think with that we are going to turn it back over to the Operator.
Operator
Thank you. I am seeing no more questions in the queue. This concludes our question-and-answer question — session rather. I would like to turn the conference back over to David for closing remarks.
David Arthur
Absolutely. So, hopefully, this call has provided you with the opportunity to understand some of the confidence and excitement we feel at Salarius. We are certainly looking forward to the second half of this year and I am sure you are all as well. I hope you all are as well. Let me thank you for your time and your attention. We look forward to keeping you apprised of our progress and expect a robust schedule of announcements in the second half of the year. Be safe and have a good day everyone.
Operator
The conference has now concluded. Thank you for your participation. You may now disconnect.
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