Altimmune, Inc. (NASDAQ:ALT) Q2 2019 Earnings Conference Call August 14, 2019 8:30 AM ET
Monique Kosse - LifeSci Advisors
Vipin Garg - President & CEO
Scot Roberts - Chief Scientific Officer
Will Brown - CFO
John Nestor - Founder, Spirfire Pharma, Inc.
Conference Call Participants
Jim Molloy - Alliance Global Group
Jay Olson - Oppenheimer
Greetings and welcome to the Altimmune, Inc. second-quarter 2019 earnings conference call. [Operator Instructions]. Please note this conference is being recorded. I would now like to turn the conference over to your host, Monique Kosse of LifeSci Advisors. Please proceed with -- you may begin.
Thank you, Operator, and thank you, everyone, for participating in today's second-quarter 2019 earnings conference call. Leading the call today will be Vipin Garg, Chief Executive Officer of Altimmune. Also participating on the call today is Will Brown, Chief Financial Officer, and Scot Roberts, Chief Scientific Officer.
After the prepared remarks we will open up the call for a question-and-answer session during which John Nestor, inventor of ALT-801, will also be available. A press release with the second-quarter 2019 financial results was issued yesterday after the close of market and can be found on the Investors page of the Company's website.
Before we begin I would like to remind everyone that remarks about future expectations, plans and prospects constitute forward-looking statements for the purposes of the Safe Harbor provision under the Private Securities Litigation Reform Act of 1995. Altimmune cautions that these forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those indicated.
For a discussion of some of the risks and factors that could affect the Company's future results, please see the Risk Factors and other cautionary statements contained in the Company's filings with the Securities and Exchange Commission.
I would also direct you to read the forward-looking statement disclaimer in our earnings release issued last night and now available on our website. Any statements made on this conference call speak only as of today's date, Wednesday, August 14, 2019. And the Company does not undertake any obligation to update any of these forward-looking statements to reflect events or circumstances that occur on or after today's date.
As a reminder, this conference call is being recorded and will be available for audio rebroadcast on Altimmune's website at www.Altimmune.com. With that I will now turn the call over to Vipin Garg, Chief Executive Officer of Altimmune. Vipin, please go ahead.
Thank you, Monique, and good morning, everyone. Thank you for joining us today. We are pleased to be here to provide you with our second-quarter 2019 financial results and business update. Joining me on the call today will be Bill Brown, our Chief Financial Officer, who will review our second-quarter financial results; and Scot Roberts, our Chief Scientific Officer, who will provide an update on ALT-702 and NasoShield. After our discussions we will open the call for Q&A. We have been very active on a number of fronts this year and I'm pleased to report continued progress across multiple strategic initiatives during the second quarter of 2019. As you know, in December 2018 we announced our plans for pipeline expansion beyond our historical focus on development of intranasal vaccines.
During the first half of 2019 we spent considerable amount of time and energy analyzing and evaluating potential acquisitions and in-licensing candidates. During this process we identified Spitfire Pharma and their proprietary mass drug candidate. In July 2019, we were very excited to close the acquisition of Spitfire and begin the development of ALT-801, a highly potent GLP-1/Glucagon dual agonist for the treatment of NASH. ALT-801 is a peptide-based therapeutic candidate with balanced agonist activity on the GLP-1 and glucagon receptors and a differentiated PK profile. This is intended to allow for once-a-week administration for the treatment of NASH. In preclinical studies ALT-801 has shown compelling results in reducing NASH disease markers including total body fat, NAFLD activity score and, importantly, fibrosis.
This is a transformative transaction for the Company, providing a candidate with a differentiated approach to treating this pervasive disease for which no approved therapy is currently available. This acquisition also solidifies Altimmune's position in the liver space and provides important synergies which we believe will benefit our development effort. We are working diligently on GMP manufacturing and IND enabling toxicity studies with the goal of filing an IND in the second half of 2020 with a Phase 1 clinical trial to follow and data readout in 2021. We continue to advance HepTCell, our hepatitis B candidate, and have made important strides during the second quarter. We strengthened our IP position with the brand off a US patent that provides protection through 2035. This is in addition to our patents in other important markets throughout the world including Europe, Japan and China.
We successfully completed a pre-IND meeting with the FDA in June and now have a clear path to filing an IND in the first half of 2020 with a Phase 2 clinical trial to follow and data readout in 2021. In addition to our liver franchise, we have some exciting developments in our preclinical program, ALT-702, and our Phase 1 NasoShield program. Here to give an update on these programs is Scot Roberts, our Chief Scientific Officer. Scot?
Thank you, Vipin, and good morning. The preclinical development of our cancer immunostimulant product candidate ALT-702 is continuing with initial experiments showing clear evidence of antitumor immune response and, importantly, without systemic toxicity. We are excited that this initial data is confirming our early expectations for this candidate and we believe that our synthetic peptide conjugate technology has the potential for high impact in the immuno-oncology space as it can work alone and in combination with other approaches to treat cancer.
As previously reported, we received a Notice of Allowance from the US Patent and Trademark Office during the second quarter for the second patent covering the product. We are continuing to evaluate ALT-702 in several tumor models and will provide a more complete update in the fourth quarter of this year. Now turning to the intranasal anthrax vaccine candidate NasoShield, as discussed last quarter, we performed an investigation into the lower than expected immunogenicity observed in the Phase 1 trial of NasoShield. We are happy to report that the results of that investigation have uncovered a significant finding that appears to explain the disparate results obtained from the previous preclinical and the more recent clinical study.
Key to the investigation was the finding that the induction of rapid and robust immunity was significantly impacted by altering the dosing position. When vaccinated in the standard supine position with the nose up, approximately 80% of the vaccinated animals survived anthrax challenge compared to 0% survival following administration in a sitting position with the nose facing downward, similar to the dosing position used in the Phase 1 study. Based on these results we believe that a simple adjustment to the dosing position in humans will result in significantly higher immunogenicity similar to what was observed during the preclinical development of NasoShield. We are currently discussing next steps for the program with BARDA and we have filed a provisional patent application protecting the use of this invention. I will now turn the call back over to Vipin. Vipin?
Let me now turn over to our intranasal influenza vaccine NasoVAX. We believe that our recent understanding of the importance of dosing position may have important implications for our NasoVAX program as well, by reducing the amount of antigen required in each dose which could have positive impact on manufacturing economics, as well as the potential to improve upon the already outstanding efficacy results observed in our Phase 2 trials. We are committed to finding a partner for NasoVAX and will keep our investors apprised of our progress. But know that we are being patient and deliberate in our efforts to find the right partner to continue the development of NasoVAX. With that I would like to turn the call over to Will Brown for an update on our financials.
Thank you, Vipin, and good morning, everyone. For today's call I will be providing an update regarding our second-quarter 2019 financial results. We ended the quarter with $41.7 million in cash on hand. We continue to have a strong emphasis on cost management to minimize cash burn and maximize our resources towards R&D efforts.
To that end, we've reduced our G&A expenses by $700,000 on a quarter-over-quarter basis and more than $1 million when you compare year-to-date 2019 to year-to-date 2018. The decrease is primarily due to our cost management efforts related to labor, legal and professional costs. We received non-diluted funding from the US government on our anthrax vaccine contracts. These contracts cover the direct program costs, including labor, with a margin we use to offset overhead costs. Revenues under these contracts for the second quarter 2019 were $1.6 million, which is a reduction of $790,000 compared to 2018. The decrease is attributable to the timing of development costs incurred for these programs.
In addition to our cost management efforts, we closely monitor cash collections under these programs and, since the quarter end, we have received $1.5 million in accounts receivable collections representing invoices from Q2. Research and development expenses were $2.9 million compared to $4.9 million in the same period last year. The decrease was primarily the result of a decrease in NasoVAX and HepTCell expenses as the prior-year saw heavy cash burn while those programs were incurring significant clinical trial and manufacturing costs.
Offsetting these decreases is approximately $600,000 of transaction costs associated with the acquisition of Spitfire, which were expensed through R&D in Q2 as it relates to acquired IP R&D. As disclosed in the 10-Q we will expense the upfront consideration for this transaction in Q3 in accordance with GAAP for a transaction of this type. Net loss attributed to common stockholders for the second quarter was $3.4 million compared to $9.8 million in the same period last year with net loss per share equaling $0.26 per share in Q2 2019 versus $10.29 per share for Q2 2018. The lower net loss quarter-over-quarter is primarily attributable to expenses incurred to retire warrants in 2018. Now I will turn the call back over to Vipin. Vipin?
Thank you, Will. We are pleased to have the opportunity to share our progress with you and with that I would like to open the call now for Q&A. Operator?
[Operator Instructions]. Our first question comes from Jim Molloy with Alliance Global. Please proceed with your question.
I had a question about ALT-702, the TLR7/8 agonist. You mentioned similarities between Aldara cream. Can you talk about the similarities and the AEs and the mechanism of action -- sort of the differences and benefits of 702 versus the cream formulation? Thank you.
So, as you probably know, this class of TLR7/8 agonists are quite potent in their ability to induce inflammation in a tumor and illicit an antitumor response is well-documented. The problem with them has been that, because they are small molecules, once they gain access to the systemic circulation, they can trigger very strong cytokine responses systemically leading to flulike symptoms or even a cytokine storm like of an effect.
So, the trick is to find a way to take advantage of the potency of these molecules without the systemic toxicity. And one approach, Aldara cream, was to use it topically and that has found usefulness in a number of indications including warts and some cutaneous cancers.
Our approach is to conjugate the small molecule to our proprietary peptide technology. And by doing that, when we inject it into the tumor it stays put and it increases the local concentration of the agonist. And so, we get a very profound effect in the tumor but we restrict the systemic exposure and we have a very safe product from that perspective. So, that's really the differentiator for us.
Great, thank you. And then the thinking on the next steps on timing on ALT-702?
Well, so we are continuing to move forward with our mouse models and, as I mentioned earlier, documenting some really good activity there. We have to then turn to manufacturing. We don't expect a -- significant issues with that but that has to be developed. And then GMP manufacturing and we are looking at an IND in 2021 for that product.
One thing I would like to add to that, Jim, is that ALT-702 is really a platform technology. So, while we are developing it internally for a number of candidates, we believe there is an opportunity, once the proof of concept data is available, to really do a number of partnerships around it, because there are many, many immunostimulants that people are developing out there that have similar issues where they are very, very potent but they are also very toxic. And we think this might be a solution to many different immunostimulants that people are developing. And so, this platform technology will really allow us to do multiple partnerships around these types of immunostimulants.
Okay, the one follow-up, I guess, on the NASH compound from Spitfire, I know sort of the lead horse in the race, Intercept, I believe they're having some trouble with pruritus. Can you talk a little bit about any pruritus issues you may have seen with your compound? Is it more of a class effect? Do you think that's more specific to the other company?
We have John Nestor with us who is the founder of -- the inventor of ALT-801. John, would you take this question please?
Sure. We've not seen any indications of pruritus in any of the animal studies that we've done and there's I think good reason to expect that that's associated with the intercept compound and would not extend to other mechanisms of action.
All right great. Thank you guys for taking the questions.
[Operator Instructions]. Our next question comes from Jay Olson with Oppenheimer. Please proceed with your question.
Congrats on the progress and thanks for taking my questions. I am curious about any thoughts you may have on the Phase 2 -- this is a follow-up on ALT-801, by the way. I'm curious on any thoughts you may have about the Phase 2 trial of semaglutide in NASH. It's I think going to read out at the end of this year or maybe early next year. Anything we should be looking for in that study in terms of potential read across to ALT-801 and how it may perform in a NASH population?
Excellent question. As you know, a number of these metabolic regulators are being explored in NASH and ultimately the goal here is to really reduce that insult, take away that insult that is the root cause of NASH which is weight gain or significant reduction in weight. That's what people are looking for, both body weight as well as the reduction of liver fat. So, I think there is -- clearly there is evidence that the GLP-1 agonists by themselves have utility, have potential utility in NASH. The question is how significant the effect is going to be and is that sufficient. We believe that having a dual agonist really helps with that proposition because we are not only reducing the food intake but also turning on a second mechanism here which is essentially fat burning or energy expenditure here. So really, by combining these two mechanisms we have seen a dramatic reduction in weight and that's the key to achieving success here. So we will be watching those studies very keenly and we expect them to show what they've already shown in multiple other trials, that there is weight loss by using a GLP-1 agonist by itself.
And we then hope to show that our compound is going to have significantly more weight loss -- and not just body weight reduction but also liver fat reduction, and really having an impact on all the downstream parameters of NASH.
Okay, great. That's very helpful. Thank you for that color. And are you still on track to file an IND next year and move into the clinic in 2021 or late next year?
Yes, no, that process is going extremely well. As you know, we just acquired this asset a few weeks ago. But the team is already up and running and we have already started the manufacturing process and we expect to be meeting our timelines in terms of filing an IND in 2020.
Okay, great. Thanks for taking the questions. Appreciate it.
[Operator Instructions]. There are no further questions in queue at this time. I would like to turn the call back over to management for closing comments.
Thank you, everyone, for listening in today. We look forward to speaking with you again on our next earnings call.
Thank you, ladies and gentlemen. This does conclude today's teleconference. You may disconnect your lines at this time and have a great day.