Virios Therapeutics, Inc. (NASDAQ:VIRI) Q3 2023 Earnings Call Transcript

Virios Therapeutics, Inc. (NASDAQ:VIRI) Q3 2023 Earnings Call Transcript November 13, 2023

Virios Therapeutics, Inc. beats earnings expectations. Reported EPS is $-0.06, expectations were $-0.1.

Operator: Good day, and welcome to the Virios Therapeutics, Inc. Third Quarter 2023 Earnings Update. At this time, all participants have been placed on a listen-only mode. Please be advised that today’s call is being recorded at the company’s request. At this time, I’d like to turn the call over to Angela Walsh, Senior Vice President, Finance and Treasurer for 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’ third quarter financial results and to give you a 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. Now, it is my pleasure to turn the call over to our CEO, Greg Duncan. Greg?

Greg Duncan: Thank you very much, Angela, and good morning, everybody, and thank you for joining today’s quarter 3 2023 earnings update. We’ll be going through several slides over the course of the next 15 or 20 minutes, and then we’ll open it up to questions and answer. If we go to Slide 2, please. You’ll note, during the course of today’s presentation, we’ll be making several forward-looking statements that are subject to risks and uncertainties. You should read the documents that we have filed with the SEC for more complete information about Virios. Next slide, please. The first thing I’d like to mention relative to the past quarter is one of our absolutely key achievements, and that is securing FDA guidance and agreement on our plan to progress IMC-1 to Phase 3 development as a potential treatment for patients with fibromyalgia.

As you may recall, the Phase 2b study clearly identified the patients that are most likely to respond to IMC-1 therapy, and as such, will be enriching the Phase 3 program to target new to fibromyalgia research patients only. That said, these patients represent the vast majority of the opportunity in the US territory. The proposed Phase 3 program is comprised of four parts. We’ll start off with a pharmacokinetic and food effect study as a precursor to the 301, 302, and 309 studies. This pharmacokinetic and food effects study will be focused on the dose formulation we’ll be using to commercialize IMC-1, presuming success in Phase 3. The second key component of the program is the 301 study. This is a head-to-head study comparing IMC-1 to placebo, with patients randomized one to one in groups of 160 for a total of 320 patients treated over 12 weeks.

The primary endpoint for this study will be the same endpoint we used in Phase 2a, the Phase 2b, and is consistent with the endpoint required by FDA to gain approval for a new fibromyalgia treatment. The second program we’ll be effecting will be the 302 study. This is a multifactorial trial. This is comparing IMC-1 and placebo again, but in this study, we’ll be adding in the independent components of Famciclovir reference drug and Celecoxib reference drug. These patients will be randomized into one of the four groups, again targeting 160 per group for a total of 640 patients in this multifactorial trial. Very consistent with the 301 study, the primary endpoint in this trial is reduction in pain, again using the key endpoint required for approval.

Patients will be assessed at 12 weeks of therapy. Patients in both the 301 and 302 study have the opportunity to be enrolled in our long-term extension. This is a requirement of the Phase 3 program. Patients completing 301 or 302 have the opportunity to roll into this long-term safety extension. These will be patients treated for up to one year. Effectively, the requirements we’ve agreed with FDA are 300 patients will be treated in the 309 study for six months, and a total of 100 or more will be treated at one year. Data from the 301, 302, and 309 study will be rolled into the NDA or new drug application that will be submitted to the FDA at the end of the Phase 3 program. We’ll be happy to discuss this proposal in further detail during the question and answer.

Next slide, please. As you can see on Slide 4, the Virios research team has worked diligently over the third quarter to submit the briefing materials to the Food and Drug Administration for our proposed investigation on the drug application, or IND as it’s called, for IMC-2 as a treatment for long COVID. IMC-2 is a little different than IMC-1. It contains Valacyclovir and Celecoxib, whereas IMC-1 is Famciclovir and Celecoxib. This is a very exciting program. Recent Center for Disease Control prevalence estimates suggest somewhere between 7.5% and upwards of 41% of patients non-hospitalized adults who have COVID go on to develop long COVID sequelae or symptoms. There is very significant disability associated with long COVID. In fact, a study in Australia in 2021 and 2022 found that 74% of total disability associated with SARS-CoV-2 or the COVID virus, is actually attributed to long COVID.

So, effectively three quarters of all of the disability in this patient cohort is due to long COVID, whereas only a quarter of it was due to the acute infection, highlighting the very significant morbidity associated with this particular illness. I will tell you, there are no treatments presently approved by the FDA to treat long COVID sequelae. Our goal for this IMD submission is to identify with the FDA’s alignment, the regulatory requirements for this potential first-in-class medicine. We have filed new provisional method of use intellectual property protection associated with this particular combination, which if granted, provides coverage to at least 2043 before extensions. We’ll provide feedback on this potential first-in-class research opportunity in what we project is the next four to eight weeks.

What makes this program so exciting? If we can transition to the next slide, to Slide number 5, you’ll note that the RECOVER Mechanistic Pathways Task Force has identified activation of secondary viruses as a potential cause for long COVID sequelae. Just to back up a second, you may know that the RECOVER initiative was created to address the widespread and very diverse impacts of both COVID and long COVID. This work is done under the umbrella of the National Institute of Health, and one of the working groups within this broader RECOVER initiatives is the Recover Mechanistic Pathways Task Force. They are really looking for what is the etiology or the catalyst for developing both COVID and long COVID. COVID acute infection, they have determined, activates a very significant immune response, which I think we all know.

Importantly, severe COVID infections can lead to an exhaustion of the immune response, which in turn, because of the debilitated nature of the immune response, can lead to reactivation of latent herpes viruses. Recall, latent herpes viruses and the activation of those viruses are the target of both IMC-1 and IMC-2. Latent viral reactivation can lead to further dysregulation of the immune system, very significant inflammation, and the development of long COVID symptoms. Importantly, for our purposes, COVID patients exhibit significant Epstein-Barr reactivation as compared to non-COVID patients. Why is that important? Well, not everybody knows, but we’re here to tell you, Epstein-Barr is actually a herpes virus and is a target specifically of Valacyclovir.

And that is very important because data generated by the Bateman Horne Center actually identify this as a potential cause of long COVID sequelae. If we can go to the next slide, please, Slide number 6, you’ll see data that were generated via an unrestricted investigational grant to the Bateman Horne Center. Dr. Bateman requested a grant to assess the potential combination of Valacyclovir and Celecoxib as a treatment for long COVID sequelae. In this open-label exploratory long COVID trial, we compared patients that were treated with Valacyclovir and those who were controlled patients. These were patients matched for gender, age, and in particular, the level of fatigue that they were exhibiting as a result of their long COVID, and assess those patients after 14 weeks of treatment.

As you can see from each one of the rows demonstrated on the table on Page 6, the Valacyclovir-Celecoxib treatment group delivered very statistically significant improvements and a whole host of different disease sequelae. Specifically, the primary endpoint, the NIH PROMIS-Fatigue score, this is a validated instrument generated through NIH, showed statistically significant reductions in fatigue at a P value of 0.008, highly statistically and clinically relevant. The several other assessments in this study, pain, patient’s global impression of change, which is an overall health status, and then measures of orthostatic intolerance, and both depression and anxiety, were also assessed. And if you take a look at the P values for virtually every one of those particular disease sequelae, you see highly statistically and clinically relevant improvement for those patients treated with Valacyclovir-Celecoxib combination versus those matched controls.

In fact, every one of these measures is statistically significant, including anxiety, including orthostatic intolerance, with the exception of depression. This particular assessment was only statistically significant at 0.059 level. So, we think this was moving in the direction of significance and a larger sample size may be able to ferret out a very statistically significant impact with a larger sample size. These data are particularly compelling because first, Valacyclovir and Celecoxib in combination with generally very well tolerated. There were no serious adverse events in this particular trial, and the most common adverse events in both the Routine Care Group and in the Valacyclovir-Celecoxib group were headaches and muscle pain. We’re particularly encouraged by these data because these patients on average in both the treatment and match control group, had long COVID for a period of two years.

This is particularly important because this is not something that just popped up and then was treated with this particular combination. These patients were suffering the morbidity, the mortality, not going to work, not getting out of bed in the morning for a two-year period. So, this is a very significant illness that’s responding quite well in this open label exploratory trial. We’re really excited because moving forward, we’re going to test this thesis again. In fact, Dr. Bateman requested a second investigational grant, an investigator-initiated unrestricted grant, to expand the research program in this particular area. And in this second trial, we are funding through this investigator-initiated grant, Dr. Bateman and her team will be targeting 60 patients in three cohorts, two doses of a Valacyclovir-Celecoxib combination, and placebo.

These patients will be assessed over the course of 12 weeks, with consistent measures for assessing both fatigue, orthostatic intolerance, et cetera, and we believe the results from this trial will help guide our planning assumptions, things like the IMC treatment effect size, what’s the overall sample size required in the next stage of development for our planned Phase 2b trial, assuming we reach alignment with FDA on the requirements for the investigation on the drug application. We’re very excited about this potential opportunity and look forward to those results sometime in the middle of 2024. And the final key topic I’d like to update you on before we turn to financial highlights for the quarter is the idea of partnerships. Next slide, please.

As you can see on Slide number 8, we are actively exploring, as we’ve communicated, partnerships for both IMC-1 for fibromyalgia, as well as IMC-2 for long COVID. Updates on long COVID will likely follow feedback from the FDA. In addition, we wanted to make it clear that we’re also assessing complementary therapeutic interventions to build Virios shareholder value. Specifically, we’re looking at opportunities in the pain and anti-infective space and/or unique opportunities that can create value under various expert research and development leadership as compliments to IMC-1 and IMC-2. As you probably know, but just for the sake of reiterating, partnership discussions include a very thorough review of a fibromyalgia Phase 2b data, timing and details for the proposed Phase 3 program, and deep analysis of the commercial opportunity.

All of these things take time. We will report material progress on any proposed partnership in a very timely manner. With that background relative to operational highlights, let me turn it over to our senior Vice President of finance, Angela Walsh, once again, to summarize our quarter three financial highlights. Angela?

Angela Walsh: Thank you, Greg. Please proceed to the next slide. First of all, we would like to express that due to our prudent management of cash, we have the capital to fund operations into the third quarter of 2024. We operate a virtual model with less than four full-time equivalents. This streamlined approach allows us to maximize the use of our capital for value-creating research. With that said, let’s turn our attention to the third quarter financial results. As you can see on Slide 8, there were no sales for the three months ended September 30, 2023, or during the year ago quarter. We reported research and development expenses of $0.4 million for the third quarter of 2023, as compared to $1.6 million for the third quarter of 2022.

The $1.2 million decrease was primarily due to a decrease in clinical trial expenses of $1.1 million associated with our FORTRESS Study in Q3 of 2022, and a decrease in drug development and manufacturing costs of $0.1 million. In addition, we reported general and administrative expenses of $0.9 million for the third quarter of 2023, as compared to $1 million for the third quarter of 2022. The $0.1 million decrease quarter-over-quarter was attributable to a decrease in expenses associated with being a public company. Finally, we reported a net loss of $1.2 million for the third quarter of 2023, as compared to a net loss of $2.6 million for the year ago quarter. The lower net loss was primarily due to the decreases in R&D and operating costs that I just discussed.

As of September 30, 2023, we had $4.8 million in cash as compared to $7 million as of December 31, 2022. As I just mentioned, we expect this cash to fund operations into the third quarter of 2024. At this time, I will turn the call back over to Greg who will moderate the Q&A session of the call. Greg,

Greg Duncan: Thank you very much, Angela. And maybe just to progress to Slide number 9 to summarize the key highlights from quarter three before we open it up to questions and answers. As we mentioned, we have secured FDA guidance and agreement to our proposed plan for IMC-1 in Phase 3 development, where we’re enriching for patients new to fibromyalgia research. We have submitted briefing materials to the Food and Drug Administration for our submission of a potential new drug application or IMD for IMC-2 as a treatment for long COVID, and look forward to the results from the second study at the Bateman Horne Center, which are due out in the early part of 2024, or latest mid 2024. We’re actively exploring partnership opportunities on three levels, IMC-1 for fibromyalgia, IMC-2 for long COVID, and then any complementary therapeutic interventions to continue to build shareholder value as complements to both IMC-1 and IMC-2.

And as Angela just reviewed, through continued prudent expense management, running a virtual model, the company expects to have capital to support operations into Q3 of 2024. With that background, let’s move towards the question-and-answer session. I will turn it back to the operator, Matthew, to host that particular Q&A. Matthew, back to you.

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Q&A Session

Operator: [Operator Instructions] Your first question is coming from David Bautz from Zacks Small Cap Research. Your line is live.

David Bautz: Hey, good morning, everyone. So, Greg, first about the Phase 3 program in fibro, I’m curious if you could comment why the FDA wanted a Famciclovir and a Celecoxib only arm in that study.

Greg Duncan: Thank you, David, and good morning, and I appreciate you joining. So, it’s pretty standard protocol to do a combination study from FDA guidelines to secure regulatory approval under the 505(b)(2) pathway. What is unique here is that we will be doing one multifactorial study, but we were able to negotiate a second study, which is just the head-to-head study of IMC-1 versus placebo. So, we thought that was a very good outcome because it wasn’t two multifactorial studies, but specifically this was one multifactorial plus the head-to-head. So, a little bit more efficient way to get to potential approval, presuming success clinically.

David Bautz: Okay. Now, if IMC-1 does not beat either arm in that study, does the FDA view that as a failed trial then?

Greg Duncan: So, we don’t believe we need to show statistical significance versus Famciclovir or Celecoxib as independent components. What this regulatory requirement is focused on is effectively showing the contribution of both components. As you are well aware, I’m sure, David, Celecoxib actually is used for pain in things like osteoarthritis. And so, what they’re looking to assess is, what is the relative contribution of both components as we roll up to a combination therapy versus placebo as the primary endpoint? So, the data will dictate that. Obviously, over time, if there’s not a lot of separation between IMC-1 and the independent components, I don’t think that would be viewed favorably. But we do believe if we show statistical significance versus placebo and we see replication of data that has been generated prior to our research showing NSAIDs don’t really move the needle on fibromyalgia, antivirals independently don’t really move the needle on fibromyalgia, we have a very good chance of success moving forward.

David Bautz: Okay. So, you talked about partnership opportunities this morning, and I guess is the company prepared to move ahead with the Phase 3 program in fibro on their own, or are you going to have to partner that to initiate that program?

Greg Duncan: Yes, we’re looking at both options, but we do think partnership offers us the opportunity to scale less capital. And then probably needless to say, but I’ll articulate it, if you can find the right partner with an interest that already has commercial operations, you obviate the need for scaling capital in the future to fund the commercialization of the asset. So, we think that’s probably the most efficient way to progress. And that is the primary way we think is the best way, if you will, to move forward. But obviously, if we do not secure a partnership, then we will consider scaling the capital to do this as an independent entity, but that is a secondary objective.

David Bautz: All right. And then lastly about the long COVID program, so I missed the size of the study that the Bateman Center is going to be running for the second study. Could you go over that again?

Greg Duncan: Sure. The Bateman Horne Center in the second investigator-initiated grant run via the Bateman Horne Center, so they’re in control and conducting the study, recruiting, et cetera, is targeting roughly 60 patients, 20 per arm, two doses of Valacyclovir and Celecoxib combination, and a placebo one. That is the rough draft of this study.

David Bautz: Okay, great. Appreciate you taking the questions.

Operator: Thank you. Your next question is coming from Sean Lee from H.C. Wainwright. Sean, your line is live.

Sean Lee: Good morning, guys, and thanks for taking my question. I just have a question on the long COVID plan. Would you be initiating a company-sponsored study anytime soon on that? And would you be testing additional doses and regimens in that study? Thanks.