Virios Therapeutics, Inc. (NASDAQ:VIRI) Q2 2023 Earnings Call Transcript

Virios Therapeutics, Inc. (NASDAQ:VIRI) Q2 2023 Earnings Call Transcript August 10, 2023

Virios Therapeutics, Inc. misses on earnings expectations. Reported EPS is $-0.08 EPS, expectations were $-0.07.

Operator: Good day, and welcome to the Virios Therapeutics, Inc. Q2 2023 Earnings Update. At this time, all participants have been placed in a listen-only mode. Please be advised that, today’s call being recorded at the company’s request. At this time, I would like to turn the call over to Angela Walsh, Senior Vice President, Finance and Treasurer of Virios Therapeutics Inc. Please proceed, Angela.

Angela Walsh: Thank you. Good morning, everyone, and thank you for joining us on today’s conference call. We are pleased to be with you today to discuss Virios Therapeutics second quarter financial results and corporate update. Please note that our financial results press release is now available on our website. Before we begin, I’d like to remind everyone that statements made during this conference call will include forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which involves risks and uncertainties that can cause actual results to differ materially from the information expressed or implied by these forward looking statements. For more information regarding such risks and uncertainties, please see the risk factors outlined in the company’s filings with the SEC.

Any forward-looking statements are made only as of today. And we disclaim any obligation to update these forward looking statements other than as required by law. Please see the forward looking statements section in our financial results press release issued this morning for more information. It is now my pleasure to turn the call over to our CEO, Greg Duncan.

Greg Duncan: Thank you, Angela. And good morning to all of you joining us on today’s quarter two 2023 earnings update. We have three specific topics to cover on today’s call. First, I will begin with an update on our submission to the Food and Drug Administration or FDA as you know it to progress our lead development candidate, IMC-1, into Phase 3development as a possible treatment for the millions of patients who suffer from the consequences of fibromyalgia. Second, we are very pleased to have our Chief Medical Officer, Dr. Mike Gendreau, on the call today to review the recently announced, very encouraging results we received from our exploratory long COVID study sponsored by Virios Therapeutics and conducted by the Bateman Horne Center in Salt Lake City, Utah.

And finally, Angela Walsh will provide you with a summary of our quarter two financials. Following the review of these topics, we will open up the call to questions. Let me start with an update on our IMC-1 Phase 3 submission to the FDA. As announced just yesterday, the Food and Drug Administration communicated that following their initial review of the Virios Therapeutics chronic toxicology program, the program studies appear adequate to support the safety of the IMC-1 dosage proposed by the company for chronic use to treat patients with fibromyalgia. With this critical feedback in hand, our goal is to initiate our proposed pharmacokinetic and food effects study later this year, while concurrently submitting an updated Phase 3 program outline and all of the associated study protocols for final FDA review.

This planned pK and food effects study in males and females will be executed as a precursor to the fibromyalgia studies with an updated IMC-1 dose and formulation, which is intended to enable the company to take full advantage of all of the efficiencies afforded with the utilization of the 505 B2 regulatory pathway. The forthcoming Phase 3 Fibromyalgia Program proposal consists of three main study components. The plan is to execute two adequate and well-controlled studies. One is a head-to-head study comparing IMC-1 and placebo, and the second trial will be a full factorial design with each of the individual components of IMC-1, valacyclovir and celecoxiv, as separate comparator arms and a long-term extension study. Based on data from the recently completed FORTRESS Phase 2b trial, we have proposed a Phase 3 development program targeting community-based fibromyalgia patients who have not participated in prior fibromyalgia research trials.

Alternatively stated, we plan to exclude or more formally screen out fibromyalgia patients who have participated in recent fibromyalgia research studies over the past several years. Following completion of the aforementioned PK study, the goal will be to begin enrollment in the first fibromyalgia Phase 3 safety and efficacy study in mid-2024. I would be happy to answer questions about the Phase 3 plan during the question and answer session of today’s call. It is now my pleasure to turn the discussion over to our Chief Medical Officer, Dr. Gendro, to share what we have learned from the recently completed Long COVID study. The data from this exploratory study underpins our belief that IMC-2, a fixed dose combination of valacyclovir and celecoxiv has potential to improve the symptoms or sequelae, as they are more formally known, associated with a diagnosis of long COVID.

Take it away, Mike.

Mike Gendreau: All right. Thank you, Greg, and good morning. Before we dig into the long COVID data and the company’s additional thoughts on our development plan, let me convey that the team and I look forward to initiating our PK study with an updated formulation of IMC-1 for fibromyalgia while finalizing the protocols and procedures required for the Phase 3 development program as a treatment for fibromyalgia. We believe the safety and efficacy results from our previous FORTRESS trial along with the chronic toxicology program results have enabled us to define a fibromyalgia clinical trial program and a formulation and dose of IMC-1 to enhance our chances for Phase 3 success. Now switching to long COVID, I would like to highlight the study design and the encouraging open label long COVID data we announced in July.

First, I think it would be useful to provide some background on the illness itself. This includes the criteria by which a patient is diagnosed with long COVID and the symptoms underpinning the significant morbidity associated with this illness. Long COVID is also referred to as post-acute sequelae of COVID-19 or PASC. PASC symptoms may include severe fatigue, post-exertional malaise, brain fog, dizziness, sleep disruption, loss of smell or taste and orthostatic intolerance. Prevalence estimates suggest as many as 65 million people worldwide suffer from PASC. It’s more common in females and in patients with pre-existing conditions such as asthma, chronic obstructive pulmonary disease, hypertension and depression. The World Health Organization diagnostic criteria are based on a continuation of or development of new symptoms three months after the acute COVID infection has resolved and lasting at least another two months without another explanation.

We know that COVID acute infections can activate an immune response. In some cases, severe COVID infections can lead to an exhausted immune response. In cases where the immune system is now exhausted or ineffective, we believe the lack of routine immune surveillance functions can lead to reactivation of latent herpes viruses that the patient was previously infected with. Our hypothesis is that late viral reactivation leads to further disregulation of the immune system, persistent inflammation in what we refer to as the PASC symptoms or long COVID. This hypothesis is consistent with what has been suggested by the mechanistic task force working on the recovery initiative at the NIH. Recovery stands for researching, COVID to enhance recovery. This hypothesis that reactivated herpes viruses are involved and at least some of the symptomatology associated with long COVID served as a genesis for an open label single center, investigator-initiated study conducted by the Bateman Horne Center under an unrestricted investigational grant provided by Virios.

Bateman Horne is a nonprofit interdisciplinary center of excellence, advancing the diagnosis and treatment of chronic fatigue disorders, including ME/CFS, fibromyalgia, post viral syndromes and related illnesses. Now given that, let me walk through some of the data showing the results from this Bateman Horne study. Slide 2 shows what’s known as a consort diagram for the study that is the flow of patients through the study. So the Bateman Horne Center recruited patients for the study. They screened 46 potentially eligible long-COVID patients that were recruited either from their own internal cohort of patients they are monitoring or they had advertised from other treatment centers in the Salt Lake City area. Of those 46 were screened 39 were eligible for the study and enrolled into the clinical trial.

22 of those patients were assigned to receive treatment with valacyclovir and celecoxib. Those are known as the science — the treatment group. And 17, were assigned to a match control group that is the patients were matched for age, gender and duration of disease, but did not receive the Val-Cele combination. The treatment group 20 patients completed the 14 weeks of treatment. One patient withdrew the study due to adverse events that are possibly related to treatment and one was terminated from the study by the investigator for noncompliance with the protocol, all 17 control patients completed the study. Slide three, please. The primary endpoint in this study was a reduction in fatigue over 14 weeks. The fatigue was measured with something known as the NIH promise fatigue instrument.

The Promise fatigue is an instrument that is developed by the NIH to measure various aspects of fatigue in patients. It measures physical fatigue, mental fatigue. It’s a self-report that patients complete these at clinic visits and provide feedback on overall how they believe their fatigue is doing over time. And we look at the change from their starting point or their baseline value. And what we saw after 14 weeks of treatment was that the patients receiving the Val-Cele combination had a statistically and clinically meaningful reduction in their fatigue of 7.2 points on the scale on the promised fatigue scale, a change of three to four units is considered to be clinically meaningful. So they had a better than seven point reduction in their fatigue level, whereas the control group or the standard of care group had a pretty much no real change in their fatigue level over the 14 14 weeks.

That was statistically significant at 0.008, and as I said previously, it’s also clinically meaningful. So this is something patients really could experience and realize they were getting some benefit from. Next slide. Another important outcome measure we used in the study was this orthostatic intolerance. Orthostatic intolerance is a common finding in long COVID patients and in ME/CFS patients, that is related to autonomic dysfunction, a normal event when a patient goes from sitting to standing or lying down to standing is your body compensates for changes in blood pressure to maintain blood flow to the brain. And when we have autonomic dysfunction, sometimes those reflexes are not — don’t work quite right and you get symptoms as if you’re going to faint.

You can get tunnel vision, you can get changes in blood pressure and heart rate, you get sweating, you just don’t feel right. These are related to orthostatic dysfunction. And so since we see this as a common side effect in patients with long COVID, we measured, we used an instrument that measures orthostatic symptoms. And there’s two domains this measure, there’s orthostatic symptoms domain, which really directly measure these symptoms, and there’s an activity limitation domain, which looks at what you can or can’t do or what are impacted by these symptoms. And on the scale that was applied to all the patients in this study, we saw a statistically significant improvement in symptoms shown on the left — this graph on the left of over nine points on the Val/Cel combination.

And the control group actually got a little bit worse over time. So that was highly statistically significant. And the scale on the right is the orthostatic activity limitation that is things you can no longer do because you’re worried about the symptoms or you feel like you’re going to fall down, lose consciousness, whatever. And again, we had an over a seven point improvement on Val/Cel on this domain versus, again, the control group got worse, and that was statistically significant as well. So both of these measures that are hallmarks of both ME/CFS and long COVID patients were approved by the Val/Cel combination, which was — this was new to us. We hadn’t seen this before, and we found that was quite an important finding with this treatment.

Slide 5, please. So here’s a summary of all the outcome measures that showed some effect in this small clinical trial. And this is comparing the Val/Cel combination to the control group at week 14 we’ve already showed that the NIH PROMIS fatigue T-score was improved. So the primary endpoint of fatigue was statistically improved even with these small numbers. We also measured fatigue on a zero to 10 scale. That’s where zero was, I have no fatigue anymore and 10 onwards, its worst possible fatigue. The patients completed this at home every week through a survey, and what we saw over 14 weeks as they also reported improvement on this scale, as well as on the PROMIS scale. At the same time, they were doing the zero to 10 fatigue scale. They were doing a zero to 10 pain scale at home weekly, and well, not a predominant effect as the fatigue.

We also did see statistical improvement in their pain, self-rated pain on a weekly basis as well. Patients completed two different patient global impression scale, patient global impression is asking them how they think, they’re doing overall since beginning the study that is general overall health. We had two different scales, one was a one to seven scale, where seven say, I’m doing really well and one means I’m doing really poorly, and also zero to 10 that with the opposite direction intentionally, where zero means, I’ve got the best possible health, and 10 men my health is the worst it could be. And on both of those scales completed at clinic visits, patients reported statistically better results on treatment than on the control group.

We showed you the two orthostatic intolerance scale, so are statistically significant at end point. And we also had something called the hospital anxiety and depression scale in this study, so it has a domain for depression symptoms and a domain for anxiety symptoms, depression symptoms trended towards statistical significance, but certainly went in the right direction. And the anxiety cele actually was statistically significant at week 14 as well in the treatment group versus control. So that was all very encouraging that we have all the study endpoints going in the right direction and statistically significant in most cases. From a safety standpoint, treatment with valacyclovir combination was generally well tolerated. And what we saw in terms of safety profile and any adverse events was really consistent with what we already know about valacyclovir and celecoxib.

It doesn’t look like there’s any combination toxicity of them. And nausea was far and away the most common adverse event, which is a known effect of celecoxib in particular. Most common adverse event in the routine care or the control group was headaches and muscle pain. There were no serious adverse events in the study, and we only had, as I mentioned, one treated patient discontinued due to adverse events, which were possibly related to valacyclovir treatment. So with that summary, let me go to Slide 6 and outline the next steps. So we have filed a provisional method of use patent for treating long-COVID with this combination. Focusing on fatigue and orthostatic intolerance. And if that should issue, we would have very good patent coverage for quite a while.

We are proposing a follow-on study with the Bateman Horne Center to essentially replicate these results using a double-blinded, placebo-controlled design. And we also are preparing a pre-IND meeting request to meet with the FDA and ask for their guidance on a development plan for a long-COVID indication with an anticipated meeting with the FDA later this year. So with that, I would like to say in summary that female patients who were diagnosed with long-COVID and who were treated open label with the combination of valacyclovir and celecoxib for 14 weeks exhibited clinically and statistically significant improvements in fatigue, pain, general well-being and symptoms related to autonomic dysfunction as compared to a control cohort of female long-COVID patients matched by age, gender, length of illness, who were then treated with routine care.

The statistically significant improvements in long-COVID symptoms and general health status were particularly encouraging given that the main duration of long-COVID-related symptoms was two years for both the treated and controlled cohort prior to enrollment in this study. I would be happy to answer further questions about our data analysis and our development plans during the Q&A session. Let me turn the program back to our SVP of Finance and Treasurer, Angela Walsh, to discuss our Q2 2023 financials. Angela?

Angela Walsh: Thank you, Mike. With respect to our income statement, as a development stage by technology company, we did not generate revenue during the three months ended June 30, 2023, or during the year ago quarter. We reported research and development expenses of $0.6 million for the second quarter ended June 30, 2023, as compared to $2.4 million for the year ago quarter. The decrease in research and development expenses from the year ago quarter was primarily due to a decrease in clinical trial expenses of $1.7 million related to our completed FORTRESS study, and a decrease in expenses related to our chronic toxicology program of $0.2 million, which was offset by an increase in drug development and manufacturing costs of $0.1 million.

We reported general and administrative expenses of $0.9 million for the second quarter of 2023 as compared to $1.3 million for the year ago quarter. The decrease from the year ago quarter was primarily due to decreases in expenses associated with being a public company of $0.2 million; legal and accounting fees of $0.1 million; and salaries and related costs of $0.1 million. Finally, we reported a net loss of $1.4 million for the second quarter of 2023 as compared to a net loss of $3.7 million for the year ago quarter. The lower net loss was primarily due to lower research and development costs as well as operational costs that I just mentioned. In July 2023, we entered into a capital on-demand sales agreement with the Jones Trading. This type of agreement often referred to as an at-the-market or ATM agreement provides a public company with the ability to raise capital as needed at the prevailing market stock price.

It is a common practice for biotechnology companies to have this type of agreement in place since compared to alternative financing methods, it typically provides a lower cost of capital, less dilution over time and flexibility as there is no specific requirement or obligation to raise any amount of funds. As of June 30th, 2023, we had $4.6 million in cash as compared to $7 million as of December 31st, 2022. We expect that the company’s cash balance at June 30th plus the additional amount raised under the ATM agreement with Jones Trading to be sufficient to fund operating expenses and capital requirements for at least the next 12 months. I will now turn the discussion back to Greg to wrap-up and moderate the Q&A session. Greg?

Greg Duncan: Thanks again, Angela. Operator, we are now ready for questions.

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Q&A Session

Operator: Thank you. At this time, we will be conducting a question-and-answer session. [Operator Instructions] And the first question today is coming from David Bautz from Zacks Small Cap Research. David, your line is live.

David Bautz: Hey, good morning everybody. Greg, I was wondering if you could start talking about the fibromyalgia market a little bit. And I think how it relates to the patient population that you’re going to be targeting in the Phase 3 trial, were you going to be limiting it to patients who haven’t been in prior fibromyalgia studies? And do you foresee any effect on a potential label for the drug by limiting that patient population if IMC-1 ends up to be approved?

Greg Duncan: Hi, David, good morning and thank you for the question. I think it’s a very good question. The short answer is the number of patients who’ve been involved in prior clinical studies is actually a very small fraction of the total universe, probably low single-digits. So I don’t think this materially impacts or commercial opportunity if for some reason, we were labeled that hasn’t been studied in patients with tire research experience, so to speak. We believe the overrepresentation of these patients in our previous FORTRESS Phase 2b trial was largely a function of the COVID quarantine environment. And under normal conditions, we should be able to recruit the study using both classic advertising, social media outreach without undue delay.

So I think there’s going to be very minimal impact on the overall commercial opportunity. I would also say, as you probably heard through the course of today’s discussion, we will be advancing the pharmacokinetic study in both males and females with the potential presuming FDA buyoff, that we can actually study both genders moving forward. So in fact, I think there’s probably a net positive relative to the broad label, potentially if we progress with both males and females in the Phase 2. Does that answer your question, David?

David Bautz: Yes. Thank you. And speaking of the pK and food effects study. And just a couple of quick questions about that.

Greg Duncan: Sure.

David Bautz: What outcomes are you looking for there? Do you foresee any type of food effect on IMC-1? And then did I hear correct, is this a new formulation that you’re going to be studying in that study also

Greg Duncan: Yes. So that’s two questions there. So let me start with the second question first. So the revised IMC-1 formulation is, again, a single combination tablet. We are progressing with this new tablet in Phase 3 because that is a tablet that will conform to commercial requirements. We are removing some excipients from the research formulation, small stuff, but small requests from FDA. So that new formulation is ready for both Phase 3, as well as for commercial launch, presuming success in the Phase 3. The reason we’re progressing this new formulation with a new dose, which is closer to the Phase 2a dose is because we want to take advantage of all of the efficiencies under the 505(b)(2) regulatory pathway, as I mentioned in my earlier remarks, this avoids a whole host of other ancillary Phase 3 programs that nobody cares about, but are costly and increased time, et cetera.

So as you probably know, the treatment effect size in the Phase 2b and the Phase 2a was largely similar between the two doses. The Phase 2b dose was about three times larger than the Phase 2a dose. And effectively, what we’re going to do is progress with the dose that’s in line with those reference doses of famciclovir and celecoxib, a dose very close to the Phase 2a dose to be most efficient as we progress into the Phase 3. So two reasons for it. One, the efficiency. Two, to make sure we’re locked and loaded on a formulation that is ready for commercial scale up, presuming success in the Phase 3