Quoin Pharmaceuticals Ltd

NASDAQ:QNRX

Earnings Call Transcript 2023-Q3

[Operator]

Good day and welcome to the Quoin Pharmaceuticals Third Quarter Financial Results and Business Update Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Gordon Dunn, Chief Financial Officer. Please go ahead.

[Gordon Dunn, executive]

Thank you, and good morning. We appreciate you joining us on today's conference call. With me on the call are Dr. Michael Myers, CEO; and Denise Carter, COO. We're pleased to provide an update on our progress for the third quarter of 2023 as well as discussing our Q3 2023 financial results. Please note that our operations and financial results press release is now available on Quoin's website.

In keeping with our normal procedure, Michael will first provide an operations update, following which I will review our financial results. I'll then hand the call back to Michael for closing comments before we open the phone lines for questions. 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 involve 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 and our financial results release issued this morning for more information.

It is now my pleasure to turn the call over to our CEO, Michael Myers.

[Michael Myers, executive]

Thank you, Gordon, and good morning, everyone. During this past quarter, we continued to make significant progress across multiple fronts culminating in the release of additional positive clinical data for QRX003 from our ongoing open-label clinical trial in Netizen syndrome after the quarter ended on October 24. I will spend some time discussing this data as well as our newly updated and optimized clinical plans for QRX003, which we are now pursuing as a result of this positive development. We believe that these planned protocol amendments will result in an even more robust clinical data set and potentially need to a faster and possibly wider initial regulatory approval for the product.

During the quarter, we entered into our ninth commercial partnership for QRX003 with the signing of an agreement with FarmaMondo for Singapore. This new agreement increases the number of countries that we have entered into commercial partnerships for the product to 61. Furthermore, we are currently in late-stage discussions to enter into similar partnerships for additional countries in Southeast Asia and Latin America. This diligent and systematic approach to entering into commercial partnerships is entirely in keeping with our spoken mission to ensure that QRX003 will be made available to as many patients in as many countries as possible once approved.

As noted previously, these partnerships, along with our own planned commercial infrastructure for the U.S. and Europe will facilitate what will effectively amount to a global launch of the product once approved and also lay the foundation for similar global launches of our pipeline products once they also receive regulatory approval. We firmly believe that this global commercial network is unprecedented for a company our size and represents highly differentiated and perhaps somewhat underappreciated advantage for Quoin. The potential incremental revenue-generating opportunity that this global commercial partnership network represents for our company all of which will effectively fall to the bottom line could ultimately be highly significant for the company and have a materially positive impact on our future profitability.

During our last call, I also updated everyone on our M&A strategy. As discussed, given our strong balance sheet and potential access to additional capital we have been acutely focused on expanding our product portfolio via acquisition, licensing or other needs. Following an extensive and broad-based process throughout this year, where we assessed well over 20 different opportunities. During the past quarter, we successfully narrowed that list down to 3 specific products for which we ultimately reached agreement on all key financial terms.

As we have stated previously, while there can be no guarantees that the transaction will be consummated as there were external impacting factors, in particular, current market conditions, which to say the least, are decisively unfavorable we are actively working towards closing out at least one transaction as expeditiously as possible. While I'm not in a position to provide any specific details I can tell you that all 3 assets are rare disease products that would strongly complement and enhance our current product portfolio. We hope to provide additional information on these opportunities in due course.

I do want to make one key point clear, however. We do not intend to close out any such transaction unless and until we have clear visibility on our ability to raise the necessary funds to fully support the clinical development of these assets. The last thing that we will do as a company is to acquire our license assets for which we cannot fund the clinical development of.

As we have now stated on previous calls, another company has filed an IND with the FDA and received a "Study May Proceed" letter to initiate the clinical development of their product as a potential treatment for Netherton syndrome. As of this morning, following a review of the clinicaltrials.gov website, it appears that this study still has not been initiated and Quoin remains the only company to be actively conducting clinical studies in Netherton syndrome under an open investigation of new drug application or IND.

Furthermore, while other companies have also spoken for some time either about filing INDs or initiating Netherton syndrome clinical studies under open INDs, we continue to see a consistent pattern of those timelines pushed further and further out or indeed being abandoned completely. As we continue to make significant progress on the clinical front ourselves, we and are now 9 global marketing partners are more excited than ever by the potential commercial opportunity that of what could be the first regulatory approved product for this horrendous disease.

As we have consistently stated, Quoin, unlike many of our biotech peers, focuses not only on the clinical aspects of product development, but also on the CMC side of development as well. I'm pleased to announce today that our contract manufacturer, our CMO for the active ingredient in QRX003 has successfully developed and scaled up a new and fully GMP manufacturing process for the drug substance. You may recall that the active ingredient in QRX003, although a very well-characterized molecule, has never been approved as a drug for any indication and that there has been no source of GMP quality material previously available.

As a result of the successful collaboration with our CMO, that is no longer the case and the availability of fully GMP material from a scaled-up manufacturing process for the active ingredient represents yet another positive step forward in the development of our product. Bear in mind that this source of GMP material is exclusively contractually available to Quoin only. We are also actively exploring where the new intellectual property may be developed from this exciting development.

Turning now to our ongoing clinical studies in Netherton syndrome patients. On October 24, we announced the release of positive clinical data from our single-arm open-label study. This data was from the first 6 evaluable subjects in the study.

As outlined in our press release on that date, the data was positive across several measured endpoints. Recall that in this open-label study, subjects are currently receiving off-label systemic treatment and will continue to do so in conjunction with QRX003 for the duration of the study. It is worth noting that all subjects in this study have been treated with this off-label systemic therapy for at least one year and in a number of cases for multiple years, notwithstanding this ongoing and long-term systemic therapy treatment, all patients recruited into the study exhibited clear signs of Netherton syndrome at the point of entry into the study, including compromised skin and significant pruritus or itch.

As a result of this long-term systemic therapy, subjects recruited into the study provided a natural baseline for us to assess, if treatment with QRX003 over a duration of 12 weeks would lead to any therapeutic improvement across a number of clinical end points. As reported, for 5 of the 6 subjects, their pruritus or itch was either absent or negligible according to the standardized scoring system after treatment with QRX003. Absent are negligible pruritus is defined as 0 or very low single-digit score in a 0 to 10 scoring range.

For the sixth subject, their pruritus was effectively unchanged from baseline on completion of the study, possibly reflecting a not uncommon refractory nature of the pruritus associated with this disease in their particular case. We are extremely pleased with these results as pruritus can be extremely distressing and debilitating for Netherton patients. What is particularly noteworthy is that despite receiving long-term off-label systemic therapy, all 6 subjects were experiencing significant pruritus baseline and for 5 of those 6, that pruritus had largely disappeared following treatment with QRX003.

In addition, all 6 subjects evaluated demonstrated an improvement in skin appearance according to the investigator scoring system. For 3 of the 6 patients, there was a well-defined improvement in skin appearance according to this endpoint on completion of dosing with QRX003, while for the other 3 subjects there were signs of improvement in skin appearance at various points throughout the study, though not necessarily on completion of testing. This is potentially further important evidence of the possible efficacy of QRX003 as a treatment for NS.

Importantly also, all 6 subjects expressed satisfaction with QRX003 across a number of assessed metrics leading to a positive overall experience with the product. As you know, QRX003 is an easily applied and user-friendly topical notion, which makes it attractive to use for patients and caregivers.

Finally, and also importantly, there were no significant adverse events reported throughout the study and the overall safety profile of QRX003 to date is extremely favorable and highly suggestive of a potentially safe treatment for this disease. Taking together, the body of clinical evidence generated to date from both an efficacy and a safety perspective has led to a number of exciting developments for our two ongoing clinical studies, enabling us to move into an optimization phase, which we believe may ultimately result in an even more robust and diverse data set and potentially to a faster approvals for the product.

These new developments have been submitted to our open IND for QRX003, and I will now provide some details of these planned protocol amendments. One such amendment is the elimination of the lower 2% dose from our double-blinded study. This decision was based on the very clean safety profile observed to date for the higher 4% dose across both studies.

Going forward, the double-blinded study will now comprised of the higher 4% dose and a placebo and as such, would become a 2-arm study instead of the current 3-arm study that it is. In addition, with a view to maximizing the potential clinical performance of QRX003, we are modifying the dosing frequency of the product from once daily to twice daily across both studies. Again, based on the body of clinical evidence generated to date, in conjunction with a very clean safety profile observed so far, we believe the twice daily dosing of the product has the potential to deliver a more robust clinical evidence of efficacy across all measured endpoints.

Finally, the number of subjects in the open-label study will be increased from the current 10 to 20 with all new subjects being tested with QRX003 dose twice daily going forward. For the blinded study, the number of subjects to be enrolled will be increased from the original 18 to 30. And going forward, this will be a 2-leg study with QRX003 at a 4% dose tested against a placebo with both test materials now being applied twice daily. This now means that both studies will each have a cohort of subjects dosed once daily and a second cohort dosed twice daily, enabling us to evaluate if increasing the frequency of dosing does indeed lead to an incremental therapeutic benefit for subjects in the studies.

We are very excited about these new developments in our clinical programs and as discussed, we believe these protocol amendments may ultimately result in a faster approval for QRX003 in Netherton syndrome and with a more compelling data set. With that update on our operational progress, I will now ask Gordon to discuss our third quarter financial results. Gordon?

[Gordon Dunn, executive]

Thank you, Michael. As of September 30, our cash and marketable securities was approximately $14 million compared to $15.4 million as of June 30, which we expect will be sufficient to fund our operations through the end of 2024. Our operating loss for the third quarter was $2.1 million compared to $2.3 million for the third quarter of 2022. The decrease was primarily due to lower professional fees and other general and administrative costs in the quarter.

I'll now turn back the call back to Michael to make some closing remarks and begin our Q&A.

[Michael Myers, executive]

Thank you, Gordon. We are entering a very exciting period for Quoin. Based on the positive clinical data reported recently, we are making a number of protocol adjustments to our ongoing clinical studies, which we believe may lead to a more rapid approval with a broader and more robust data set. In addition, following a thorough process throughout the year, we have identified and agreed financial terms for the acquisition or licensing of a number of exciting new assets in the rare and orphan disease space that we believe could be highly complementary to our current development portfolio.

While we are diligently working on finalizing at least one transaction as soon as possible, there can be no assurances that this will actually occur as we will only close out any deal if we can raise the incremental funds required to complete the clinical development for that asset. We intend to use our current funds primarily to advance the development of QRX003 and our other pipeline products only and the development of any additional products will need to be funded by new capital.

We believe that in these highly challenging market conditions, such prudent use of our cash resources must remain a key priority for the company as we head into 2024. With that, operator, we are now ready for questions.

[Operator]

[Operator Instructions] Our first question comes from James Molloy with Alliance Global Partners.

[James Molloy, analyst]

I had a question on the changes to the Phase II/III trial through -- from 10 to 20 and from 2 arms to 1 arm and then change in the doses. I think expectations are for mid-'24 data. Does this change the expectation for being able to file potentially should the data bear up based on this trial in, say, late '24?

[Michael Myers, executive]

We don't believe there's going to be any material change to the time lines. It doesn't affect the pace at which data will be released. But overall, we believe we remain on track and possibly able to speed up the approval of the product. So these developments are positive overall.

[James Molloy, analyst]

And then on the timing of -- bringing in this -- the one transaction that you seem very close on. Can you walk through, again, presuming I know you mentioned you would only bringing in, if you could raise the funds to do so. Can you walk through in an ideal world, when you would like to bring that in? And how much you think it would take you need to raise to run, to get that through clinical trials?

[Michael Myers, executive]

Yes. So I'm not going to get into any details, James, about how much it would take to complete the clinical development of the product on this call. In an ideal world, I would like to get this closed prior to the end of the year.

We are, as you well know, we're not living in an ideal world at the moment. So I can't really give a time line. I can just say, look, we have a great financial terms that we believe are favorable to Quoin. So we're excited about that. We think this asset has the potential to be a very significant commercial product once approved.

But there are other factors at play here that are somewhat outside of our control. So we will remain diligent, but we will remain focused on ensuring that we don't put ourselves in a position where we bring in a new asset and has to sit on our shelf because we can't fund the development up. So I would ask you to be patient and hang in there as we work through the process.

[James Molloy, analyst]

Absolutely. And maybe last question, too. Any updates, I know you're obviously focusing correctly so on Netherton-003. Any updates on 004, 07,08 for the other various early-stage programs? Are those sort of on hold for the [indiscernible]?

[Michael Myers, executive]

So 04, which you know is our program for EV remains on hold as we continue to evaluate the commercial opportunity for our product there has been developments in this space in the past year. There's been approval here in the U.S. There is a product that was approved in Europe then rejected in the U.S. And there are some other pivotal data that should come out in the next several months as well. So we remain vigilant.

We remain watchful, but not putting any resources into that at this point. 07 and 08 continue to make progress with our partnership with Queens University of Technology in Australia. As we've said, for quite some time. Now these are early stage programs. And on a different trajectory than 03 but we believe, ultimately, they could be important contributors as well. So moving forward, but as I said, at a different pace than 03.

[Operator]

The next question comes from M. Marin with Zacks.

[Marla Marin, analyst]

So the clinical data, you have done a very strong job in securing distribution. As you said, you have 9 agreements in place. The clinical data that you've reported, do you expect that this will accelerate conversations with other potential distribution partners?

[Michael Myers, executive]

Great question. So thank you for asking, Marin. Potentially, yes, look, we received a lot of inbound interest regarding this product. We've consistently said that we will commercialize ourselves in the U.S. and Europe. But still, there is a lot of interest from companies, who have an established infrastructure and like where the product is going.

So I think you're right, it will increase interest. We're hoping that interest will be in countries, where we haven't partnered, though to be honest, there aren't that many of them left at this point. So I think the short answer is yes.

[Operator]

Our next question comes from [ Dennis Panelo ] with Laven Partners.

[Unknown Analyst]

My first question, I'm sure you guys have done some back-in envelope math and figuring out some price points. Could you tell us a little bit about your total addressable market, the TAM for the NS product?

[Michael Myers, executive]

So we believe combined in U.S. and Europe, there's probably somewhere between 7,000 to 8,000 patients. And in the countries that we've partnership there's probably an additional 10,000 to 15,000. The numbers are difficult to come by, as I'm sure you know, because this is a very rare disease and diagnosis, it can be challenging. But these are numbers that we feel pretty confident with.

In terms of price point, we haven't drill down to a point, where I'm comfortable saying giving you an exact number. But the opportunity here we believe is substantially in excess of $500 million in total and could be significantly higher.

[Unknown Analyst]

That's a pretty strong number. And my last question is you were talking about acquiring some more assets or another company. Right now, with you or a company traded at $0.30 on the dollar for your cash, how will some companies not knocking your door down trying to get you guys to buy you guys up? I mean rare disease drugs aren't easy to come by, especially you're so far down the pipeline compared to your competitors?

[Michael Myers, executive]

Another great question and one I can't really provide any details on, but I think you've hit a nail on the head. People are looking at this company, see what we're doing. But look, we are just focused on what's in front of us. We believe we have a great asset. We're looking to add to that asset with additional products and we will continue to deliver whatever conversations come our way. We have a Board of Directors to address that.

[Unknown Analyst]

Okay. Which makes sense, I mean, so if or if is not coming in, you guys are aren't looking at them?

[Michael Myers, executive]

I'm not going to comment, but I think you can see where we're going.

[Unknown Analyst]

Yes. No, I appreciate and you guys are just still [ under the die ] it's ridiculous. I mean you get in the pipeline for free and like I said, he's getting all your cash, but $0.30 on the dollar makes very little sense. Anyway, thank you, and have a great day, and look forward to some updates.

[Operator]

With no questions, this concludes our question-and-answer session. I would like to turn the conference back over to Michael Myers for any closing remarks.

[Michael Myers, executive]

Yes. So just to say thanks everybody for participating here today. And as always, we are readily available by phone, e-mail. If there are any follow-up questions or concerns, we'd be happy to address them. Other than that have a great day, and thanks again.

[Operator]

The conference has now concluded. Thank you for attending today's presentation. You may all now disconnect.