Protagenic Therapeutics, Inc. (NASDAQ:PTIX) Q4 2023 Earnings Call Transcript

Protagenic Therapeutics, Inc. (NASDAQ:PTIX) Q4 2023 Earnings Call Transcript April 1, 2024

Protagenic Therapeutics, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Greetings. Welcome to the Protagenic Therapeutics’ Fourth Quarter and Fiscal Year 2023 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Alex Arrow. You may begin.

Alex Arrow: Thank you very much. Good afternoon everyone. I’d like to welcome you to Protagenic Therapeutics’ earnings call to review our fourth quarter and fiscal year 2023 year-end operating results. Participating on the call today with me is our Executive Chairman, Dr. Garo Armen; our Chief Operating Officer, Dr. Andrew Slee; and our Chief Medical Officer, Dr. Bob Stein. I’d like to thank them and each one of you for your time and commitment to Protagenic Therapeutics. I’m the company’s Chief Financial Officer, Alexandre Arrow. 2023 was a pivotal year in the history of our company. During 2023, we began our first-ever clinical trial of our lead product known as PT00114, a drug candidate that has the potential to benefit millions of patients suffering from depression, chronic anxiety, PTSD, or drug addiction.

On today’s call, we’ll be providing a detailed discussion about the significance of this clinical trial and an outlook for what to expect specifically in 2024. Before we begin those remarks, I’d like to note that the following commentary will include some forward-looking statements that are subject to risks and uncertainties that may cause actual results to differ materially from those that we forecast. Forward-looking statements include statements regarding the field of neuroactive peptides and the potential for therapies that have a quantifiable effect on anxiety, depression, PTSD, or addiction; the expectation that TCAPs will become accepted treatment regimens for neurologic disease conditions and potentially replace less effective antidepressant, antianxiety, or anti-addiction therapies as the standard-of-care; the development, regulatory, and commercialization efforts and the timeliness of the company’s PT00114 drug candidate or any licensees or partners; the potential for our single neuropeptide drug candidate to reduce the severity of disorders that is being targeted to treat; the potential for the company to bring in funding either by monetizing some of its potential future royalty streams or executing a new strategic collaboration or by selling stock at a price per share that is higher than current levels; and other forecasts of future events.

These risks and uncertainties include, but are not limited to, those identified under the heading Risk Factors in our annual report on Form 10-K for the year ended December 31st, 2023, which is filed — being filed today with the SEC. And now I’d like to introduce you to Dr. Garo Armen, the company’s Executive Chairman, to make opening remarks and frame today’s discussion. After the discussion of our clinical progress and outlook, I will come back and review our financial performance in Q4 and fiscal year 2023. And then Garo will open the call up to your questions. Garo?

Garo Armen: Thank you very much, Alex. I’m excited to share with you the progress that we’ve made with Protagenic Therapeutics in 2023 as we transform the company into a clinical stage company with the initiation of our first in-human trial of PT00114. This drug candidate, which is an analog of the naturally-occurring neuropeptide, Teneurin C-terminal associated peptide, otherwise known as TCAP, works through a novel mechanism of action, distinct from currently available treatments for neuropsychiatric disorders. PT00114 precisely targets specific neuronal peptides or pathways involved in the stress response and emotional processing, with the potential to restore heavily brain — healthy brain function and provide relief to patients suffering from anxiety, possibly depression, PTSD, and addiction.

By working in harmony with the brand’s innate regulatory systems, PT00114 may deliver meaningful improvements in symptoms and quality of life with fewer side-effects compared to existing medications. And of course, the field knows a lot of the limitations of existing medications. As you will hear in more detail from Dr. Stein and Dr. Slee, our extensive preclinical research provides a robust foundation for the clinical development of our agent. We believe this groundbreaking therapy could transform the treatment of landscape and bring new hope to millions of people, as Alex alluded to, living with the burden of undertreated and debilitating mental health conditions. I’d now like to introduce Dr. Bob Stein, the company’s Chief Medical Officer, to share with you more details.

Bob?

A – Bob Stein: Hello everyone. In the quest to address the complexities of neuropsychiatric disorders, our focus at Protagenic Therapeutics has been to delve deeply into the mechanisms that underpin our responses to stress and its profound impact on mental health. Central to our efforts is PT00114, a synthesized analog of Teneurin C-terminal associated peptide or TCAP, discovered through the pioneering work of our Scientific Founder, Dr. David Lovejoy. This groundbreaking therapy acts broadly in the brain with notable effects in the amygdala, a critical brain region involved in emotional processing and stress response, marking a significant advance over alternative therapies. Our journey has been guided by a rigorous scientific inquiry, revealing that the stress-induced mal adaptations in brain function extend beyond mere symptoms to the very core of neuropsychiatric conditions.

The preclinical data on PT00114 offer compelling evidence of its capacity to directly modulate brain responses to stress, including modulating limbic and amygdala activity. This targeted approach not only promises to mitigate the symptoms of anxiety, depression, PTSD, and addiction, but also aims to address the underlying causes of these conditions by restoring neuronal and behavioral balance. Unlike broad spectrum therapies that affect the brain in a more generalized manner, PT00114’s precise action on specific neural pathways represents a refined strategy. It holds the potential to improve therapeutic outcomes by engaging with the brain’s and natural mechanisms for managing stress responses and emotion. This specificity suggests greater efficacy with fewer side effects, aligning closely with the evolving needs of patient care and mental health.

Now that we have advanced PT00114 into clinical development, the exciting path forward presents a wide range of opportunities. Our preclinical data support the potential of PT00114 to treat anxiety, depression, post-traumatic stress disorder, drug addiction, and even conditions such as neurodegeneration. Our challenge has been to focus and prioritize the indications we explore. The depth of our preclinical insights, underscored by a nuanced understanding of TCAP’s role in stress regulation, sets a solid foundation for our clinical trials. Collaborating with experts like Dr. Maurizio Fava, Harvard University’s Psychiatrists and Chief and leveraging robust pharmacological and safety profiles, we have initiated clinical trials that are poised to explore PT00114’s potential in selected neuropsychiatric disorders.

The implications of our work extend beyond the immediate horizon of drug development. They invite a reevaluation of how we understand and treat neuropsychiatric disorders, emphasizing the need for interventions that tap into and amplify the body’s own regulatory systems. In closing, our commitment to uncovering the therapeutic potential PT00114 is unwavering. This venture is not just about advancing a promising drug candidates. It’s about fostering a deeper understanding of mental health and offering hope to the many people affected by stress-related conditions. Thank you for your attention. I will be happy to take any questions you might have about our work at the end of the formal session. Now, I’d like to introduce you to my colleague, Dr. Andy Slee, Protagenic’s Chief Operating Officer.

Andy?

Andrew Slee: Thank you very much, Bob. I’m here today as part of the team deeply committed to transforming the way we approach mental health treatment. Our work with PT00114 provides an unprecedented opportunity to bring best-in-class treatment to people suffering from a broad range of mental disorders. We have demonstrated preclinically that TCAP is both potent and safe and that it has beneficial effects to combat the negative effects of stress. It also has, unlike other CNS acting agents, a very rapid onset and also has a long duration even after a single dose. We have shown that TCAP is effective after injection, either subcutaneously or intravenously, and that it can be used after placement under the tongue or delivered intranasally.

Unlike benzodiazepine, such as Valium, it doesn’t cause sedation. Furthermore, it does not seem to impact weight gain or impact [Indiscernible]. And we have demonstrated with other classic agents that it does not have the addictive potential of fentanyl or other type agents, and that was carried out by an independent CRO. In unstressed animals, it can be delivered by a whole variety of routes, as I said. And this gives us an opportunity to ensure that we have compliance with patients. Our synthetic analog PT00114 actually represents a convergence of nature’s wisdom and along with or take some a little bit of scientific innovation. This peptide is actually conserved across a vast evolutionary landscape, spanning from nematodes to humans. And this suggests it’s an integral — it plays an integral role in the CNS function potentially without eliciting toxicities as seen with other agents that are commonly given for mental disorders.

Our approach has been grounded in an extensive GLP toxicological study as well as preclinical studies, and we have used both rodents and non-human primates and we have found that we have a very broad therapeutic window. This provides us a solid foundation for moving our application into humans. As we prepare to test this agent in patients, we are focused on understanding its pharmacology, particularly with focus on developing useful transitional approaches to facilitate movement from bench to bedside. We have evaluated the effects required for an efficacious dose given by various routes and different dosing schedules, so that we can optimize our clinical development path. The operational challenge and our solution has been to navigate the complex transitional landscape from bench to bedside.

Administration routes are meticulously selected, as I said, to enhance compliance and accessibility, ensuring that the therapeutic potential of TCAP is fully realized. We’re excited to explore the effects of PT00114 in patients, anticipating that we will be able to recapitulate the very promising activities we have seen in our preclinical models. In the realm of clinical development, we are currently under evaluation in SAD, which is single ascending dose and MAD, multiple ascending dose studies, involving normal healthy volunteers. These studies are crucial as they help us delineate the efficacious dosing regimen that will be required in humans. Unlike many current drugs that treat mental illness, the dose response of PT00114 is actually well-defined and the drug is very safe.

Therefore, the challenges in navigating the delicate balance between efficacy and safety, as seen with other treatment, appears out to be that problematic with PT00114. The progress in these clinical trials is not just measured by its potential, but a testament to our rigorous approach and a patient-centric development. Our insights into the molecule’s performance in both acute and chronic model to stress underscore a significantly over traditional small molecule CRF antagonist. Unlike these antagonists with CRF Sunny for Corticotropin releasing factor, PT00114 maintains its activity across a range of stress-induced conditions that are relevant in animal models. And whereas the normal — the small molecule CRF antagonists do not perform in chronic models, PT00114 does.

It blocks — we found that both PT00104 and direct CRF blockers work in animal models, as I said. But the distinction is that we work in a chronic-distressed model. And in patients, it’s the chronic stress conditions, not necessarily the acute stress condition that drives the disorders of mental health like anxiety and depression. This important difference that we have discovered in the efficacy of PT00114 compared with direct CRF blocking has reassured us that we’re bringing forward a very important new medicine. As we continue on this path, the strides we make in clinical characterization of the effect of this agent in selected mental disorders are pivotal. They represent our commitment to reshaping the landscape of the treatment of anxiety, depression, PTSD, as well as addiction.

We thank you for your support and belief in our mission. And together, we are stepping into a new era of mental health treatment marked by innovation, compassion, and an unwavering commitment to improving patients’ lives. With that, I thank you and turn it over to Alex Arrow.

Alex Arrow: Thank you very much, Andy. As you can see from our clinical trial status, the company made operational progress towards its primary objective of developing and commercializing PT00114 during fiscal year 2023, particularly during the fourth quarter. Our financial results reflect an increase in R&D spending to pursue that goal. In the fourth quarter of 2023, we spent $1.0 million in R&D, which is an increase of 301% over the $258,000 R&D that we spent in the fourth quarter of 2022. This significant increase in R&D expenditures was entirely due to the clinical trial that is now in progress, which commenced just as Q4 was starting. Our general and administrative spend for the fourth quarter of 2023 was just $201,000, which is down 50% from our R&D spend in the comparable quarter a year ago, primarily because we issued no stock options during the quarter, and we had no non-cash compensation or minimal non-cash compensation expense during this quarter as we previously had in the fourth quarter of 2022.

As for sales and marketing, we spent none in either the fourth quarter of 2030 or — nor the fourth quarter of 2022 as we’re not in the market yet. Overall, our net loss for Q4 was $1.2 million compared to a net loss of $656,000 in year ago quarter. For the full year of 2023, we spent $3.3 million in R&D, which is a bit more than double, up 109% from the $1.6 million we spent on R&D in the full year 2022. Our full year G&A of $1.2 million was similar to the quarter, down almost 40% from the amount we spent in the year ago period, again, primarily because we had only minimal stock-based compensation expense as nearly all of the issued stock options were fully vested at that point. For the full year net income, we lost $4.5 million, which is 27% more than we had lost in 2022, driven primarily by our higher R&D spend because of our clinical trial activities.

As for our cash, we ended the year with $4.1 million in cash and cash equivalents, which is down from the $8.0 million that we had as of December 31st, 2022. We believe that our current cash reserves are sufficient to fund all of our Phase 1 clinical trial. With that, I would like to turn the call back over to Garo.

Garo Armen: Thank you very much, Bob, Andy, and Alex. In closing, I want to underscore the importance of having transitioned Protagenic into a clinical stage biotech company. The novel mechanism of action of PT00114, which Bob and Andy described very nicely, coupled with the promising pharmacological and safety profile seen in preclinical studies, gives us a great deal of confidence in its potential therapeutic activity. As we look ahead to 2024, our focus will be on efficiently executing the Phase 1 program and preparing for proof-of-concept efficacy studies in anxiety, depression, and other stress-related conditions. As you heard from Bob and Andy, we are committed to bringing this potential breakthrough treatment to patients as expeditiously as possible.

This is an exciting time for our company as well as for patients. And of course, the mental health tragedy has been exacerbated with the onset of COVID and other conditions globally. On behalf of the entire leadership team, I want to thank all of you for your ongoing support of our mission. Together, I believe we can make a profound difference for patients and families affected by neuropsychiatric disorders. We look forward to further updates as we progress our programs. Our agent is progressing in the clinic as planned, and our plans for advancing this promising drug candidate remain absolutely unwavering as you heard. Thanks again for your time and your participation in today’s call. And I think now we are ready for any questions that you may have.

Operator: Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from William Wood with B. Riley Securities. Please proceed.

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Q&A Session

William Wood: Thanks very much for taking our questions and congratulations on a very nice quarter and year. Just curious about — two from us. Curious about the timeline for the readout of your SAD and MAD studies if we should be expecting those together, combined, or apart? And then what are the next regulatory steps that you have for moving forward into your Phase 2 studies?

Garo Armen: So, I’ll ask Alex to address the first question and Andy, perhaps you or Bob can address the second.

Alex Arrow: Sure. So, William, good to hear from you. So, your first question is the timeline for the readout of our SAD and MAD study. So, the SAD or single ascending dose study is in progress now. We plan to have enrollment in that study complete by the end of April. And as described in our last press release, we’re planning to have a data readout on that in — within a couple of weeks of the completion of that. So, it should be by mid-May. As for MAD, we intend to start enrolling essentially immediately as soon as SAD is complete and should have a data readout on that in early Q3. We had previously targeted July for that for the readout for MAD. So, I think that was the — did I address all of your first question?

William Wood: Yes. Yes. Thank you.

Alex Arrow: Yes, okay.

Garo Armen: And who would like to handle the second one on the additional steps we need on the regulatory front.

Alex Arrow: You’re saying the additional steps to start the Phase 2, William, is that the nature of your question?

Garo Armen: Yes, I think the second question was what are the additional milestones on the regulatory program as we advance PT00114? I think Bob, perhaps, you can–

Bob Stein: I can address that. We’re in the process of finalizing our Phase 2 protocol and we’ll have to submit that to the agency for approval. We’re confident that we will have that because the compound is very safe, and we’ve seen no safety signals so far. I think we’ll have been able to address an appropriate dose for those studies from some of the biomarker work that we are planning to conduct. And the format is very similar to studies that Dr. Fava has conducted with many other compounds in development for the treatment of anxiety and depression. He’s one of the world’s leaders in the design of such studies.

Andrew Slee: You may want to say this is called a basket trial and has a great acceptance with regulatory agencies.

Bob Stein: Yes, it’s a good point, Andy, because we do believe that the compound will have activity across a variety of neuropsychiatric disorders. And the plan is to enroll patients with examples of each of those and then track along the signals that we see for efficacy to enrich for those indications where we see the strongest signals at least initially.

William Wood: Got it. I appreciate that. And then kind of building on that, just one last question. You’re evaluating the healthy individuals in your ongoing SAD and then going into your MAD. Should we be expecting any biomarker data from these initial trials, maybe highlighting the neuroprotective effects understanding that they’re primarily safety, but just curious what additional data possibly biomarker we may be able to expect?

Garo Armen: Based on our–

Andrew Slee: We are collecting biomarker data, one of the things one really needs to understand is when you’re dealing with healthy volunteers and the way we actually treat healthy volunteers, we make sure that everything is calm and so that there’s no sort of setting up a stress or anxiety condition amongst those. But there are people who will come in and maybe a little stressed and we are making sure that we collect a sufficient amount of materials as we can actually gauge a responsive biomarker.

Alex Arrow: But as a biomarker that we plan to announce, William, we do plan to announce cortisol levels when we announced both the SAD and the MAD results. In each case, we will have measured cortisol levels and plan to include those in the disclosed results.

William Wood: Understood and thank you all. Thank you for taking our questions. I appreciate it and congratulations again on a very nice quarter and year.

Alex Arrow: Thanks William.

Garo Armen: Thank you.

Operator: [Operator Instructions] Okay, it looks like we have no further questions in queue. I’d like to turn the call back over to management for closing remarks.

Garo Armen: Thank you very much, everybody, and thank you very much for your patience and participation through this journey. If you have additional questions, you can always feel free to call Alex and get to one of us. We welcome your engagement on a continuing basis. Thanks again.

Operator: This concludes today’s conference and you may disconnect your lines at this time. Thank you for your participation.