Vyant Bio, Inc. (NASDAQ:VYNT) Q4 2021 Earnings Conference Call March 30, 2022 8:30 AM ET
Company Participants
Jay Roberts – Chief Executive Officer
Andrew LaFrence – Chief Financial Officer
Robert Fremeau – Chief Scientific Officer
Conference Call Participants
Ed White – H.C. Wainwright
Operator
Good morning and welcome to the Vyant Bio Year End 2021 Results Conference Call and Webcast. Today, March 30, 2022, the company issued a press release summarizing results for the year end 2021 and filed its Form 10-K. Today’s discussion will provide an overview of activities in the fourth quarter and full year 2021. [Audio Gap] is being recorded and a replay of the webcast will be available on the Vyant Bio website following today’s call. Alternatively, the link can be sent to you by contacting ir@vyantbio.com. All participants on this call will be in a listen-only mode during the presentation. The presentation will be followed by a question-and-answer session.
At this time, I would now like to turn the conference over to Jay Roberts, Chief Executive Officer of Vyant Bio. Please go ahead, sir.
Jay Roberts
Thank you, operator, and thank you all for joining the Vyant Bio investor conference call and webcast for the year ended December 31, 2021. While we expect to file our SEC reports and our press release sooner, the SEC system was experiencing a global connectivity issue for a short period of time this morning. So we apologize for that delay.
Now that the merger and the related integration activities are substantially complete, we spent the fourth quarter fully focused on executing our business plan. There’s also a great pleasure to speak with you today to share our enthusiasm and to give you some insight into how we envision the near term future of Vyant Bio. Additionally, we’re going to present financial results for the year ended 2021.
On the call with me today is Vyant Bio’s Chief Financial Officer, Andy LaFrence; and our Chief Science Officer, Dr. Robert Fremeau. Following the Safe Harbor statement, Dr. Fremeau and I will provide a strategic overview and update on recent scientific and corporate developments and the vision ahead. Then Andy will take us through a brief financial update to discuss key accounting matters for the 2021 periods just ended. I will make some closing remarks and then we’ll open up the lines for questions for Andy, Bob and me.
And I’ll now turn the call to our CFO, Andy LaFrence.
Andrew LaFrence
Thank you, Jay. And welcome to all. We would like to remind everyone that various comments about future expectations, plans, and prospects constitute forward-looking statements for purposes of Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Vyant Bio cautions that these forward-looking statements are subject to risks and uncertainties that may cause our actual results to differ materially from those indicated including risks described in the company’s filings with the Securities and Exchange Commission. Any forward-looking statements made on this conference call speak only as of today’s date, Wednesday, March 30, 2022, and Vyant Bio does not intend to update any of these forward-looking statements to reflect events or circumstances that would occur after today’s date. This conference call is also being recorded for audio rebroadcast on Vyant Bio’s website at www.vyantbio.com.
With that, I would like to turn the call back over to Jay Roberts. Jay?
Jay Roberts
Thank you, Andy. As we begin the call today, I think it’s important to remind everyone that the fourth quarter was a third full quarter our company has operated as Vyant Bio, and today marks the one year anniversary of the merger. Today, we will highlight the progress and accomplishments we have made over the past year. We have narrowed our focus to position Vyant Bio as an emerging global drug discovery company, pursuing the discovery and development of repurpose and novel therapeutics to treat neurodevelopmental and neurodegenerative diseases such as Rett Syndrome, CDKL5 Deficiency Disorder or CDD and Parkinson’s Disease.
We believe there are significant value creation drivers in the drug discovery sector. And we intend to use our unique approach to drive cost, savings, speed, and insightful decision making to identify unique biological targets and novel therapeutics to treat patients with these debilitating diseases. We have made promising progress, which we will highlight for you today.
As you can see on this slide, we have four key discovery programs underway, which Dr. Fremeau will elaborate on in a few minutes. We enter 2022 focused on bringing a repurposed drug candidate VYNT0126 into clinical trials in the first half of next year. We are planning to provide you with more data in identification of our lead clinical compound soon once we finalize our IP efforts in the middle part of this year. Our first two novel drug candidates, which support the two rare diseases we noted are in the lead identification phase of discovery with our R&D teams. We have more work to complete on compound selection, the iterative process, including high throughput screening on our 3D microBrain platform, the application of AI technologies on the chemistry, which is being done by our partners, as well as our own analytics for interrogating the biology through our own proprietary machine learning system. We are hoping to report our lead candidates for these programs late this year as we move through the lead optimization phase early in 2023.
I’ll now highlight a few key non-financial accomplishments from last year and actions as we are now wrapping up our first quarter of 2022. First, we strengthened our management team with the addition of an accomplished drug discoverer. One of our key hires last year had been the hiring of Dr. Bob Fremeau, who joined us in October of 2021 to lead our drug discovery efforts, including lead target and candidate identification through IND submissions. Dr. Fremeau is already having a meaningful impact on our efforts in discovering other therapeutics, which he will share with you in a few minutes. We’ve made a strategic decision earlier this year to further focus our business and our people on drug discovery and move away from providing products and services to others. In December of 2021, we engaged Colliers Securities, an investment bank with significant experience in preclinical contract research organization services to assist us in the divestiture of our vivoPharm preclinical services business. We recognize that vivoPharm is a well-run operation with a skilled scientific staff. Our exit from the preclinical CRO services business will allow us to put all our human and capital resources on our R&D efforts to discover and develop therapeutic assets for CNS diseases. The intended result of this transaction will be incremental non-dilutive cash that provides fuel for our business. We’re hoping to have this transaction completed in the first half of 2022.
Further, as we noted in our September 30, 2021 Form 10-Q filing, we began replicating certain R&D activities from our La Jolla, California location to our Maple Grove, Minnesota facility. As a result of this shift and our overall focus on CNS therapeutic assets, we plan to cease substantially all broad-based external product and discovery-as-a-service revenue generation activities in the first half of 2022. In light of these changes, substantially all our Maple Grove staff will be focused on an internal CNS drug discovery pipeline.
Third, yesterday, we announced an important collaboration agreement, which we entered into with a promising company and scientific team from Organo Therapeutics, a developer of proprietary patient specific organoids that recapitulate Parkinson’s Disease pathology. We believe this collaboration will accelerate our ability to discover small molecule therapeutics to treat patients with Parkinson’s Disease. The collaboration brings together the respective team’s expertise in drug discovery using human derived cells, high throughput biology and chemistry, and machine learning based therapeutic design. Together, we’ll focus on the identification of drug candidates that rescue the Parkinson’s Disease phenotype through the development of disease-linked clinically translatable assays and biomarkers through multiple molecular, biochemical and cellular methods and applying machine learning techniques to yield unbiased results.
We know that therapies for diseases that affect CNS are difficult to discover. It requires innovation and exceptional scientific expertise to tackle. Our collaboration, like the few others we have entered is another in a series of strategic moves to focus our efforts, while accelerating our position in drug discovery, through the use of technologies that allow insight into human biology early in the discovery of CNS drugs.
I will now turn the call over to our Chief Scientific Officer, Bob Fremeau. Bob?
Robert Fremeau
Thank you, Jay. I am thrilled to have the opportunity to discuss the Vyant Bio pipeline. At Vyant Bio, we are pioneering a new way to discover medicines for complex neurodevelopmental and neurodegenerative disorders. We have developed a CNS drug discovery platform that combines human patient derived organoid models of brain disease, biology at scale and machine learning to discover novel CNS drug candidates.
Most drugs fail in the clinic due to lack of efficacy. This is especially challenging for CNS drug development, where the available animal models have poor predictive value. Our approach is designed to allow us to identify therapeutic candidates that are active in a human disease setting at the earliest stages of a program, potentially bypassing the need for animal models of efficacy. 2021 was a year when we focused on defining our strategic vision for Vyant Bio and establishing and validating our human first drug discovery platform. We chose to initially focus on applying the transformative potential of our platform to develop precision medicines for patients suffering from rare CNS genetic disorders, including Rett Syndrome, CDKL5 Deficiency Disorder and familial Parkinson’s Disease. Our scientific team has pioneered the development of organoid models of human brain disease from patient derived induced pluripotent stem cells that are sufficiently robust and reproducible to be amenable to high throughput screening.
We’re using this approach to identify both repurpose as well as novel small molecule therapeutic candidates. A key element of our strategy is the identification of relevant drug targets based upon therapeutic hypotheses that we derive from our investigation of human disease types of physiology and the use of quantitative biomarkers to provide meaningful human biology derived preclinical signals of drug efficacy to drive compound advance scope.
As we established our CNS drug discovery platform, we knew that we needed to employ the most innovative technologies to accelerate our drug discovery efforts and establish our competitive advantage. To this end, we established a proprietary technology platform AnalytiX that is purpose built for the processing, aggregation and storage of large data files containing digital images of biological activity, primarily derived from our organoids for use in our downstream data analysis and machine learning models. Our data science team has developed an efficient process to translate drug experiment designs from the lab into machine readable formats to process large data sets sourced directly from laboratory equipment and to extract unbiased quantified representations of biologically relevant features to enable the characterization of disease states, the profiling of treatment effects and the assessment of possible toxicity for adverse events.
We further pursued key collaborations with companies that employ artificial intelligence and machine learning based therapeutic creation and prediction in three areas: novel small molecule design, proteome-based target identification, and novel biologics protein design. All three arrangements have meaningfully accelerated our focused CNS therapeutic discovery efforts. Rett Syndrome is a rare genetic neurological disorder that leads to severe impairments affecting nearly every aspect of the child’s life, including their ability to speak, walk, eat, and even breathe easily. The hallmark of Rett is near constant repetitive hand movements. Rett is usually recognized in children between 6 to 18 months as they begin to miss developmental milestones or lose abilities they had gained. Rett is caused by mutations on the X chromosome in a gene called MECP2.
Our Rett tissue brain organoids exhibit a consistent and robust disease specific functional phenotypic signature that is markedly different from that of healthy controlled organoids and can be measured in a high throughput fashion using kinetic imaging systems such as FLIPR. We currently have two ongoing and promising programs focused on Rett. A repurposing candidate VYNT0126 and several novel compounds that were identified based on a phenotypic screen of the smart library provided by the International Rett Syndrome Foundation on our Rett patient derived organoids.
The VYNT0126 molecule is a promising repurposing candidate for several reasons. The compound has already been approved by the FDA as a cognition-enhancing medication for dementia related to Alzheimer’s disease and there are readily available safety data. VYNT0126 exhibits a consistent dose dependent rescue of several Rett disease phenotypes on our Rett patient-derived organoids. We intend to file an IND application for our Rett repurposing candidate in Q1 of 2022 and to request Orphan Drug Designation. We are meeting with the International Rett Syndrome Foundation Clinical Trial Committee in mid-April to prepare for a pre-IND meeting with the FDA.
We are also pursuing novel compounds for Rett directed against two additional targets in collaboration with our joint venture partner, Atomwise. We are applying machine learning to drive compound progression and are establishing in vitro binding and cell-based functional assays for these targets to examine the relationship between target potency and the degree of phenotypic rescue in our organoid models. We expect to identify potential lead candidates in 2022 and commence IND enabling studies in the first half of 2023. We are excited by recent evidence we have obtained that both our repurposing candidate VYNT0126 and our novel Rett candidates act on distinct biochemical targets and exhibit a differentiated mechanism of action from the most clinically advanced Rett therapeutic candidates.
CDKL5 Deficiency Disorder is a neurodevelopmental condition characterized by early onset epileptic seizures, intellectual delay, and motor dysfunction. Although crucial for proper brain development, the precise targets of CDKL5 and its pathophysiological link to patient symptoms are currently not understood. While genetic testing is currently available to identify patients that have a mutation in the CDKL5 gene, limited knowledge of the underlying pathophysiology has hindered the identification of potential therapeutic targets and the discovery of drug candidates. CDD is an ultra rare neurodevelopmental disease with a defined unmet medical need with only one recently approved therapeutic treatment.
We screened the custom library of approximately 5,200 molecules composed of FDA approved drugs, molecules that passed Phase 1 clinical trials and a panel of phenotypic screening compounds with the goal to identify both novel molecules and potential repurposing candidates. Approximately 288 compounds showed some degree of rescue of the CDD phenotype, hyperexcitability phenotype in our organoid models.
We’re conducting further confirmatory screening followed by dose response studies and pharmacologic deconvolution to identify promising lead scaffolds. In addition, in collaboration with Cyclica, we are applying a machine learning approach utilizing in silico screening to identify novel candidate molecules for 3 potential CDD targets that we will screen in our CDD organoids. We expect to identify potential lead candidates towards the end of ‘22 and commence IND enabling studies in the first half of 2023.
Parkinson’s Disease is a progressive neurodegenerative disorder that affects predominantly dopamine-producing neurons in a specific area of the brain called the substantia nigra. Parkinson’s Disease symptoms generally develop slowly over the years and include tremors, muscle rigidity, gait and balance problems, and slow, imprecise movements. The etiology of Parkinson’s Disease is poorly understood but it is widely accepted that a combination of genetics and environmental factors are the cause. About 10% to 15% of people with
Parkinson’s Disease have a family history of the condition, and indeed family-linked cases can result from genetic mutations in a handful of genes, including the glucocerebrosidase gene, GBA; and LRRK2, L-R-R-K-2, among others.
As Jay mentioned, on March 29th, we announced a collaboration with Organo Therapeutics to advance our work on the identification of lead compounds that are expected to be disease modifying in Parkinson’s Disease. Organo Therapeutics has developed several proprietary familial Parkinson’s Disease patient-specific organoids that recapitulate Parkinson’s Disease pathology. The collaboration brings together the respective team’s expertise in drug discovery using human derived cells, high throughput biology and chemistry, and machine learning based therapeutic design to gain insights in the patient-specific responses to potential Parkinson’s Disease drugs.
Scientists from both sites will utilize complex patient derived 3D organoid models, created from induced pluripotent stem cells to identify disease-linked clinically translatable assays and biomarkers through multiple molecular, biochemical and cellular approaches to identify drug candidates that rescue the PD phenotype. Our initial focus will be on the GBA and LRRK2 familial mutations. By focusing initially on these familial Parkinson’s Disease linked mutations, we expect to identify common causes and potential therapeutic approaches that can be expanded into the much larger sporadic patient population.
I will now turn the call over to Andy LaFrence, our Chief Financial Officer to discuss financial results for the year end 2021. Andy?
Andrew LaFrence
Thank you, Bob. Hello, everyone. And thank you again for joining our call. Today, I will review our cash position as of December 31, 2021 and our financial results for 2021. First and foremost, we ended the year with $20.6 million in cash. We supplemented our liquidity with Monday signing of a $10 million — $15 million equity line of credit with Lincoln Park. We believe that this equity line of credit, coupled with our cash balances and estimated proceeds from the sale of vivoPharm business will provide us cash runway into mid-2023.
Before I review the 2021 statements of operation data, a little background information will help explain results. As you will recall, StemoniX, Inc. was deemed to have acquired Cancer Genetics for accounting purposes. And the merger closed a year ago on March 30, 2021. This company’s current year financial results include the Cancer Genetics operations since the merger date and the 2020 financial results are based solely on the StemoniX operations.
As Jay noted in his remarks, during the fourth quarter of 2021, we commenced the process to sell the vivoPharm business. As a result of this decision, we have classified the vivoPharm business as a held for sale asset and its financial information as discontinuing operations. Therefore, continuing operations as of and for the year end of December 31, 2021 consists of the Vyant Bio and StemoniX, Inc. The reclassification of the vivoPharm business as held for sale required us to assess its fair value based on its estimated selling price as compared with its carried value, which included the $22.4 million of goodwill arising from the March 30, 2021 merger. As a result of this analysis, we recorded a non-cash goodwill impairment charge of $20.2 million in the fourth quarter of 2021.
Overall, the net loss of $8.7 million in 2020 increased to $40.9 million in 2021. The 2021 net loss included total of $26 million of non-cash expenses as well as $2.3 million of merger related expenses. The net loss from continuing operations aggregated $18.6 million and included non-cash expenses of $4.8 million as well as $2.3 million of merger related costs. The net loss from continuing operations aggregated $18.6 million and included non-cash expenses of $4.8 million as well as $2.3 million of merger related costs. The net loss of $22.3 million from discontinuing operations included a $20.2 million goodwill impairment charge and non-cash expenses of approximately $1 million. Revenue from continuing operations for 2021 was $1.1 million as compared with $867,000 in 2020. This revenue is derived from our StemoniX product service revenue. As we previously reported, we plan to discontinue the StemoniX external revenue generation to focus on our resources and internal drug discovery efforts.
Costs of goods sold – service aggregates $408,000 in 2021 and $384,000 in 2020 resulting in the cost of goods sold of 61.4% and 65.3% respectively. Cost of goods sold – product aggregated $1.4 million and $717,000 for the years ended December 31, 2021 and 2020, resulting in the cost of goods sold margin deficit of $956,000 and $438,000 respectively. The increase in the product costs of sales in 2021 were employee and other products related costs.
As we move our Maple Grove facility to internal development activities in 2022, the costs for this facility will have a corresponding shift to research and development costs in 2022. Research and development costs for 2021 increased to $4.3 million as compared with $3.2 million in 2020, and was a result of increased headcount, lab and professional service costs. Selling, general and administrative expenses increased from $2.7 million in 2020 to $8.4 million in 2021. This increase was largely related to post merger public costs, including headcount, stock-based compensation, professional fees and insurance costs.
I will close for now and hand the presentation back over to Jay Roberts for closing remarks. Jay.
Jay Roberts
Thank you, Andy. As we come to the final part of today’s call, I would like to conclude with the following takeaways.
First, I’d like to reiterate how pleased we are with the progress our scientific teams are making on multiple fronts related to the existing programs we discussed today, that our activities in the fourth quarter and year end 2021 focused purely on establishing Vyant Bio’s foothold in the industry, in helping to fuel our activities into the first quarter of 2022 and beyond. Please stay tuned as we continue to make progress. We also invite new listeners to become more familiar with Vyant Bio. As news and information becomes available, we will be communicating updates via press releases, LinkedIn to new Vyant Bio website and other social media outlets. Interested parties are invited to sign up for the press release distribution list. Please visit our website.
With that, I invite Andy and Bob to join me as we open up the line for Q&A. Operator?
Question-and-Answer Session
Operator
[Operator Instructions] Our first question today is coming from Ed White at H.C. Wainwright. Your line is live. You may begin.
Ed White
Good morning, Jay, Andy and Bob. So the first question is about the divestiture of vivoPharm. Have you had any interest yet? And can you give us our thoughts maybe on the value of that divestiture? And then Andy, how should we be thinking of revenue from continuing operations with the divestiture for 2022?
Jay Roberts
So let me just start and then Andy can fill in the blanks here. So just in terms of the level of interest, Colliers Securities started marketing the opportunity several weeks ago. And so far, the interest level we think is pretty high. So we’re quite optimistic about what we’ve seen so far. And they’ve done a really good job for us, and as we’ve moved through what is a very well defined process and we’re anticipating it will stay on our schedule pretty close to it.
That being said, in terms of valuation, I think maybe the best way to think about it is the work that we did relative to the accounting for it. And Andy that’s perhaps something that you can just address real quickly if you could.
Andrew LaFrence
Yes. Thank you, Jay. And Ed what I would say about the valuation in terms of our positive cash flow is that, we’re very fortunate to have a number of market comps out there not only in terms of transaction sets, as well as potential acquirers of the company. And given those revenue multiples, you would expect to see a business like this to sell for anywhere between 1 to 2 plus times revenues. And so as we think about valuing the company, we use those sorts of parameters to get our arms around that. And there’s a number of different pieces to that, that are relative. One is obviously historical revenues, but we also think that, that business, which is very well run is on a very good revenue growth trajectory given what we see going on in terms of its signed and backlog contracts.
So right now we’ve got — and this is all within our 10-K filing. We’ve got valued somewhere north of $10 million. And our expectations are that we would continue to go through a very robust process here, and we’re looking forward to seeing some bids here in the near term.
The second piece of your question there was in terms of continuing operations revenue generation. Ed, we really expect that to be less than $0.5 million in 2022. We really are very quickly winding that down. And I think Bob is very pleased with our focus in getting our team in Maple Grove, and working good with our team in La Jolla to accelerate our drug discovery progression. So that should be your expectation for 2022 revenues.
Ed White
Okay. Thanks, Andy. And then, Bob, actually he was speaking very quickly, so I want to make sure I didn’t miss anything here. But on VYNT0126, the repurposed drug, can you just go over the timeline again as far as the timing to the IND filing and how far you’re going to bring the drug before looking to partner it?
Jay Roberts
Bob, why don’t you pick that one up and I’ll fill in on the backside of the sort of the future.
Robert Fremeau
Sure. Thanks, Jay. So first apologies Ed for talking too fast. I was pretty excited, so sorry about that. We are meeting with the International Rett Syndrome Foundation in middle April, the 16th or 17th to meet with our Clinical Trial Committee to draft the plans for our setting a date for pre-IND meeting with the FDA. We expect to request a pre-IND meeting in the May-June timeframe. And then two months later, we would have our meeting with the FDA. So we expect to have the actual IND meeting in the early to mid-part of Q4. So sometime in the September-October timeframe. First submitting the IND and then with the timeline for approval, we hope to have the approval completed by the end of the year for the IND approval.
Jay Roberts
Yes. And Ed let me just also address the second part of that question, which was, how far do we think we’re going to bring it? Obviously, being able to partner with parties that may have an interest in taking the drug all the way through to commercialization is our ideal pathway. We’re prepared to take it as far as we need to, to get to the right economics. And we’re in the very active process in terms of getting those kinds of relationships built as we speak today. And we’ll see kind of the interest. And we think that given sort of the economic dynamics of drugs that are treating rare diseases that have little to no, very high unmet medical need, we think that there’ll be a certain amount of interest.
Andrew LaFrence
All right. Jay, we’ve got a couple of questions that have come up in the online chat room here. And maybe I could — as people maybe queue up for additional questions here, I could respond to those. One of the questions came up was related to our cash burn. In our stated remarks here, the combination of cash on hand of $20.6 million, plus the Lincoln Park equity line of credit and proceeds from the vivoPharm business, and we expect that we’ve got cash into at least mid-2023 at this point in time.
And that also — at this point in time, as we talk about cash flows, this does not look at a licensing transaction at this point in time. But as Jay and Bob just articulated, we’re getting to a point where we can start to have these candidates into a clinical setting where there’s going to be a license involved. So, I think that answers a couple of questions that are currently in the chat room.
Jay Roberts
Okay. Operator, it does look that there’s no other questions. I’d just like to be able to thank everybody for joining the call today. We’re very happy with our progress so far. And we look forward to keeping everyone informed of our progress along the way. Thanks again for joining the call and have a great day.
Operator
Thank you, ladies and gentlemen. This does conclude today’s event. You may disconnect at this time, and have a wonderful day. We thank you for your participation.
Be the first to comment