Quoin Pharmaceuticals Ltd

NASDAQ:QNRX

Earnings Call Analysis

Company progresses towards Netherton syndrome treatment

The company has commenced 2024 on a strong note, optimistic about building on the positive initial data for its lead asset targeting Netherton syndrome, a rare genetic disorder. With the age eligibility for clinical studies now lowered to 14, the company expects a diverse study population and plans to enroll as many eligible pediatric patients as possible. Despite the challenges, the balance sheet remains robust after a successful capital raise and a strategic equity line of credit (ELOC) arrangement, placing the company in a robust position to complete clinical testing. Top-line results from the blinded study are anticipated early in 2025, with further data from the open-label study expected to be released throughout the year.

Transformative Progress and Encouraging Clinical Data

Quoin Pharmaceuticals has had a transformative year in 2023, reporting significant achievements in its clinical studies. CEO Michael Myers highlighted the first-ever clinical data released from a trial in subjects with Netherton syndrome under an open IND with the FDA, which showed positive results across clinical endpoints and no safety concerns. To strengthen these findings, Quoin submitted and got clearance for several protocol amendments to ongoing clinical trials. These amendments involve an increase in study sizes, a change to twice-daily dosing, and a reduction in eligibility age to include subjects 14 years and older — a groundbreaking step for the Netherton community which may accelerate recruitment and facilitate a more robust data set for the potential approval of their treatment.

Financial Stability and Future Funding

On the financial front, Quoin reported a cash and securities balance of approximately $10.7 million as of December 31, down from $14 million at the end of the prior quarter. However, they enhanced their cash position with a successful $6.5 million public offering and have secured an $8 million equity line of credit, extending their operational funding into the second half of 2026. While the net loss for the year ending December 31, 2023, was recorded at $8.7 million, it reflects a decrease from the $9.4 million loss in 2022, attributable to higher interest income and lower general and administrative costs, even with increased R&D expenditures due to the progression of their clinical studies.

Promising Clinical Trials and Strategic M&A Focus

Looking forward to 2024, Quoin is set to continue its clinical trials with amended protocols, including pediatric patient inclusion. They anticipate further data readouts throughout the year and an early 2025 readout for the randomized control segment of their trial. The company remains open to M&A opportunities, focusing on late-stage orphan assets with clinical data within the realm of rare and orphan diseases. They will continue exploration with disciplined due diligence and may consider additional financial raises to support any prospective acquisitions.

Earnings Call Transcript 2023-Q4

[Operator]

Good day, and welcome to the Quoin Pharmaceuticals Fourth Quarter Financial Results and Business Update Conference Call. [Operator Instructions].

Please note, today's event is being recorded. I would now like to turn the conference over to Gordon Dunn, Chief Financial Officer. Please go ahead, sir.

[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 fourth quarter of 2023 as well as discussing our Q4 and full year 2023 financial results. Please note that our operations and financial results press release is now available on our website.

In keeping with normal procedure, Michael will first provide an operations update, following which I will review our financial results. I will 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, which 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 and any forward-looking statements are made only as of today.

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 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. Good morning, everyone, and welcome to today's call. We are pleased to have the opportunity to report on Quoin's progress in the past quarter and throughout the year as a whole. 2023 was quite simply a truly transformational year for Quoin. During that year, we released the first ever clinical data generated from a trial in Netherton syndrome subjects being conducted under an open investigational new drug application, or IND, with the U.S. FDA.

This was a significant and important milestone not just for Quoin, but for a Netherton community as a whole. I'm pleased to say that this initial data was encouraging and overall positive across a number of clinical end points. And crucially, there was also a complete absence of any safety signals whatsoever. On the strength of the combination of both this initial efficacy and safety data that had been generated, we submitted to our open IND a number of proposed protocol amendments to both ongoing clinical trials. These included increasing the size of both studies, changing the dosing frequency from once daily to twice daily and eliminating the lower 2% dose from our blinded study.

Those amendments were cleared by the FDA and have now been fully implemented. Earlier this year, we submitted yet another protocol amendment to the FDA. On this occasion, we proposed lowering the eligibility age for recruitment into our clinical studies to 14 years and older from 18 years and older. This is another extremely important milestone for our company. And once again, for the Netherton community as it marks the very first time that nonadult Netherton subjects will be tested in a clinical study that is being conducted under an open IND. As announced on March 4, this latest protocol amendment was also cleared for implementation by the FDA. It's worth mentioning that each of those protocol amendments I just discussed were made from a position of strength on the basis of positive initial efficacy and safety data.

While there is always a temptation to not amend protocols when studies are ongoing, we took the position that while this initial data was indeed positive and encouraging, we should take advantage of the opportunity to generate an even more robust data set with a greater likelihood of approval and with a broad label. We believe, these new protocol amendments have the potential to deliver just that. The inclusion of children into our studies is especially noteworthy as it significantly increases the number of eligible subjects and could lead to a faster recruitment rate overall.

Because children will be eligible to participate in both the blinded and open-label studies, we will be able to accommodate those patients who are currently receiving off-label systemic therapy and those who are not being treated in this manner. This is a very important consideration for parents and caregivers as it eliminates the need for them to have to make the potentially agonizing decision about whether or not to discontinue their loved ones off label treatment which may be providing some symptomatic relief in order to enroll them in a clinical trial where they might end up receiving just a placebo and run the risk of their original symptoms coming rolling back.

But concurrently, running studies where QRX003 is being tested as a monotherapy and in conjunction with off-label systemic therapy, we believe we are laying the foundation for the generation of a truly broad-based data set that will give physicians the widest possible range of treatment options for people suffering from this terrible disease. With all of these protocol amendments now fully implemented, 2024 is shaping up to be a pivotal year for our company as we move forward with our mission to deliver the first approved treatment for Netherton syndrome. We look forward to providing updates on our continued progress with the clinical program throughout the year ahead.

On the commercial front, we have continued to lay the groundwork for the establishment of our own infrastructure to support our plans, to sell the product ourselves in both the U.S. and Western Europe once approved. As noted previously, we believe that given the relatively small patient population, the limited number of treatment centers and treating physicians that a small compact commercial infrastructure that is heavily weighted in medical affairs. And along with strategically placed regional sales reps could efficiently and effectively detail this product. We also plan to provide updates on these activities on subsequent calls throughout the year. Supporting our own commercial efforts. As you have heard from us in the past, we have now entered into 9 commercial partnerships for QRX003 that cover 61 countries.

And we will remain in discussions to expand that number to the few remaining unlicensed countries across the world. We continue to believe that this thoughtful diligent and systematic approach to entering into commercial partnerships will ensure that QRX003 becomes available to as many Netherton patients in as many countries as possible once it is approved. As noted previously, these partnerships, along with our own planned commercial infrastructure for the U.S. and Western 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 approval.

We firmly believe that this global commercial network is unprecedented for a company our size and represents a highly differentiated and perhaps somewhat underappreciated advantage for Quoin. The potential incremental revenue-generating opportunity that this global commercial partnership network represents for Quoin, all of which will fall directly to the bottom line could ultimately have a material positive impact on our future profitability.

During our previous calls, I have 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, in-licensing or other means. We continue to search for M&A opportunities, and it remains a priority for us, but I do want to caution that we will not execute the deal unless it really makes sense for us as a company to do so.

Last week, we completed a successful public offering, raising gross proceeds of $6.5 million. In addition, earlier this year, we entered into an $8 million equity line of credit or ELOC arrangement with Alumni Capital, which we will be able to access in the second half of this year. With the proceeds of the -- of last week's offering alone, we are now funded into the second half of 2025 and the proceeds from the equity line of credit will extend our cash runway even further.

Finally, as we have noted now on our 3 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 yesterday, following a review of the clinicaltrials.gov website it appears that this study has not yet been initiated, and Quoin remains the only pharmaceutical company actively conducting clinical studies in Netherton syndrome under an open IND.

Furthermore, as we have previously noted, whilst other companies have also spoken for some time either about filing INDs are initiating Netherton clinical studies, we continue to see a consistent pattern of those time lines either being pushed further out or in some cases abandon completely. As we continue to make significant progress on the clinical front, we and our 9 global marketing partners are more excited than ever by the potential commercial opportunity of what could be the first regulatory approved treatment for this horrendous disease.

I will now hand the call over to Gordon.

[Gordon Dunn, executive]

Thank you, Michael. As of December 31, our cash and marketable securities was approximately $10.7 million compared to $14 million as of September 30. As Michael highlighted, last week, we strengthened our cash position through the successful completion of a $6.5 million public offering, which we expect will be sufficient to fund our operations into the second half of 2025. And we've also entered into an $8 million equity line of credit transaction, which we'll be able to access and complete in the second half of this year. And the completion of this $8 million transaction will further extend our cash position into the second half of 2026.

Our net loss for the year ending December 31, 2023, was $8.7 million compared to $9.4 million in 2022. The decrease in 2023 was primarily due to higher interest income and lower professional fees and other G&A costs, partially offset by higher R&D expenses as we advanced our clinical studies. Our net loss was $2 million in both of the fourth quarter 2023 and the fourth quarter of 2022.

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

[Michael Myers, executive]

Thanks, Gordon. We are very pleased with the positive start the company has made to 2024. With all of the protocol amendments, we have submitted to our IND for our ongoing clinical studies, including the reduction in eligibility age to 14 now fully implemented we believe we have put ourselves in a strong position to build off of the initial positive data that has been generated so far. Our balance sheet has been strengthened as a result of the recent successful capital raise and will be further extended by the ELOC that Gordon just discussed. This strong cash position will enable us to complete the clinical testing of our lead asset for Netherton syndrome and put the company firmly in position to achieve our mission of delivering the first approved treatment to this long-neglected community.

With that, operator, we are now ready for questions.

[Operator]

[Operator Instructions] Today's first question comes from Naz Rahman with Maxim Group.

[Nazibur Rahman, analyst]

Congrats on all the progress thus far. I have a few questions, if I may. First, I want to just start on the pediatric patients. How many pediatric patients do you plan on enrolling in the randomized portion of the study. And based on your conversations with the FDA, how many pediatric patients do you need for the safety database?

[Michael Myers, executive]

Good questions. The short answer to the first part is as many as possible. Look, this is a genetic disease. So people are born with it. And what we've seen is that younger people have completed the genetic testing to accurately identify that they have the disease, whereas that's not so common among the older population. So because you have to complete the testing to enroll in our study, we think that now that the eligibility age has been reduced, then it will skew more towards a younger population in the study than the older ones. So I think we may end up with at least 50-50 mix or maybe slightly skewed more in favor of young people.

But it's difficult to tell. But as I said, look, we will recruit as many as are eligible. With regard to the number, that hasn't been discussed with the agency as of yet. As you know from previous discussions, we've had a very positive relationship with the agency around this product as we were the first company to submit an IND to them. So I don't know that they have a hard and fast number in their mind. Bear in mind the total population that they were guiding us towards for approval was 20 at the commercial dose.

And we expect that will significantly exceed that and that a good proportion of those will be pediatric patients.

[Nazibur Rahman, analyst]

Got it. That was helpful. So between your 2 studies, the open-label and the randomized portion of the study, when can we see the next data readout? And what would be included in that? And ultimately, when do you see or expect the randomized controlled portion of the trial to read out the top line results.

[Michael Myers, executive]

Yes. So there will be further readouts throughout the year from the open-label study. And what we would hope is that we'll see readout from pediatric patients dosed twice a day because that is the target now twice daily dosing. And we think it would be really beneficial if we could see the results on pediatric patients tested at twice daily level. So there will be continued readouts, we would expect that this summer, there will be a readout. I can't tell you what the mix between pediatric and adult patients will be, but we are targeting a first readout this summer from patients who have received a twice-daily dosing. With regard to the blinded study readout, as you know, we've increased the number of subjects to 30 in that study.

So I certainly don't see an initial readout this year, but my hope is that it would be pretty early in 2025. That's probably as accurate guidance I can give you at this point Naz. Look, we'll refine that once the recruitment starts to ramp up, and we'll have more visibility.

[Nazibur Rahman, analyst]

Got it. That's helpful. And just on that open-label readout, 2 quick questions. One, how have you seen -- based on what you've seen so far, how have patients tolerated the twice daily dosing? And two, have you seen any patients choose to discontinue systemic therapy [indiscernible] steroids because of the potential benefits you're getting from 003?

[Michael Myers, executive]

So taking them in reverse order, Naz, as condition of the open-label study is that they remain on the systemic therapy throughout the 12-week dosing period. So there's no ability for them to discontinue if they believe that they're getting benefit from 003, so they have to stick with it. And the first part, we have not seen any changes in the safety profile since we made any of the protocol amendments, so far, so good. There's nothing that's raising any red flags or even amber flags at this point from a safety perspective.

[Nazibur Rahman, analyst]

Congrats on the progress.

[Operator]

And our next question today comes from James Molloy with Alliance Global Partners.

[James Molloy, analyst]

Just a quick question on -- I think you mentioned a little bit about M&A in the -- on the prepared remarks. Could you walk through what you guys could be looking at for M&A? I know that a ton of extra capital line around, but are there opportunities that fit with what you have currently? Or if you can -- traditional ways to get that? And what are you seeing out there, please?

[Michael Myers, executive]

Well, thanks, Jim. I appreciate you hopping on and asking the question. Look, last year, as you've heard, we focused very significantly on M&A activity, and we assessed a lot of opportunities. And let's be fair, there's quite a number of distressed assets out there that are available, but we did not get to a point where we signed any deals. There were some very interesting opportunities that we continue to look at. And we will continue to do so this year. We will remain disciplined within the remit of rare and orphan diseases. Our preference is for later stage orphan assets that have clinical data, the closer to approval and commercialization the better, but we will stay within the rare and orphan disease space and not expand beyond that. So look, we'll continue to look. We'll continue to explore what's out there.

And I would just say, look, stay tuned in terms of whether we would do an additional raise to support any M&A. That depends on what the deal structure is. So you've heard us before that we don't want to spend from our cash balance on M&A. So more than likely, we will seek to do a raise, but it really does depend.

[James Molloy, analyst]

Great. And I heard -- and one of the question before you clarified the all adult trial, looking for early '25 on the data. Is that correct on that? Do you have a timing -- updated timing, mostly children trial?

[Michael Myers, executive]

No. So that is the blinded study, Jim. And that now has both adults and children aged 14 and upwards. And as I said, from where we stand today, we think early 2025 is the most likely time frame for initial data, whereas from the open-label study, which now also does contain adults and children aged 14 and up, we have the opportunity to present data throughout the year as it becomes available.

[James Molloy, analyst]

Okay. Great. And then finally, last question. Any updates on when you talk to the FDA about rare pediatric, orphan, a priority?

[Michael Myers, executive]

Sometime this year. That's about as good as I can give you, but certainly sometime this year.

[Operator]

[Operator Instructions] Our next question comes from Dean Finley, a Private Investor.

[Unknown Attendee]

Just a quick question from the investment side. I'm just wondering if there's any relevant or valid price targets out.

[Michael Myers, executive]

I don't have anything to add to that. The analysts that cover us, they set their price targets for the share price, but so I would point you to their research reports. We don't provide that.

[Operator]

And ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to the management team for any closing remarks.

[Michael Myers, executive]

Thank you, and thanks, everybody, for participating again. As we always end with, please feel free to reach out to us, off-line, by e-mail or phone. If you have any questions or concerns, we are always available to address those. So thank you, and have a great day.

[Operator]

Thank you, sir. This concludes today's conference call. We thank you all for attending today's presentation. You may now disconnect your lines, and have a wonderful day.