Vyant Bio, Inc. (NASDAQ:VYNT) Q3 2022 Earnings Call Transcript

Vyant Bio, Inc. (NASDAQ:VYNT) Q3 2022 Earnings Call Transcript November 17, 2022

Operator: Thank you for standing by. And welcome to the Vyant Bio’s Third Quarter 2022 Earnings Conference Call and Webcast. Yesterday, Tuesday, November 15, 2022, the company issued a press release summarizing the results for the third quarter of 2022. Today’s discussion will provide an overview of activities in the third quarter and nine-month period ended September 30, 2022. Today’s call is being recorded and a replay of the webcast will be available on the Vyant Bio website following today’s call at www.vyantbio.com. Alternatively, the link can be sent to you by contacting ir@vyantbio.com. All participants on this call will be in a listen-only mode during the presentation. The presentation will be followed by a question-and-answer session. At this time, I will now turn the call over to Jay Roberts, Chief Executive Officer of Vyant Bio. Please go ahead, sir.

Photo by National Cancer Institute on Unsplash

Jay Roberts: Thank you, Operator. Thanks to all of you for joining us today. Since our second quarter call, we have been very active progressing our scientific research and development activities, while recently completed the divestiture of our U.S. operations of vivoPharm. We are delighted to speak with you today to show enthusiasm and to talk about some recent accomplishments and awards, we are interested in telling to how we envision the midterm future of Vyant Bio, while providing our financial results in the third quarter and the nine months of 2022. As such, on the call with me today is Vyant Bio’s Chief Financial Officer, Andy LaFrence; and our Chief Scientific Officer, Dr. Robert Fremeau. Following the Safe Harbor statement, I will start out with a brief overview of Vyant Bio and describe the corporate initiatives we have accomplished so far this year.

Then, Dr. Fremeau will provide an overview and an update on recent scientific achievements made this year and the vision ahead. Finally, Andy LaFrence will take us through a brief financial update and discuss key accounting matters for the reporting period. I will make some closing remarks and then we will open up the line to answer your questions. I will now turn the call over to our CFO, Andy LaFrence.

Andy LaFrence: Thank you, Jay, and welcome to all. We would like to remind everyone that various comments about future expectations, plans and prospects constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Vyant Bio cautions that these forward-looking statements are subject to risks and uncertainties that may cause our actual results to differ materially from those indicated including risks described in the company’s filings with the Securities and Exchange Commission. Any forward-looking statements made on this conference call speak only as of today’s date, Wednesday, November 16, 2022, and Vyant Bio does not intend to update any of these forward-looking statements to reflect events or circumstances that would occur after today’s date.

This conference call is also being recorded for audio rebroadcast on Vyant Bio’s website at www.vyantbio.com. With that, I would like to turn the call back over to Jay Roberts. Jay?

Jay Roberts: Thank you, Andy. At the beginning of the call, I’d like to remind everyone we committed to our shareholders during the first half of 2022, the focus of Vyant Bio on discovering novel therapeutics to treat patients suffering from neurodevelopmental and neurodegenerative brain disorders. We believe that as we execute our focused strategy on demonstrating the power of our drug discovery platform and bringing important therapeutic assets onto our pipeline, we strive to enhance value for our shareholders. As a reminder to those of you who have been following us, I’d like to start by reiterating our mission, which is uniting human biology, engineering, data science and our passion to transform lives. We have attended various scientific meetings over the last several weeks.

We continue to remind you that the acceleration in the drug discovery sector of our industry continues to be rapid, notwithstanding the headwinds we are feeling in the biotechnology industry, disrupting the underperformance of widely used models for predicting drug efficacy and safety. Our approach to use human cells in IPSC disease modeling and applying artificial intelligence and machine learning to convert digital images into useful data, thereby providing meaningful insights to our scientists will transform the way we treat patients and cure diseases. It has never been a more exciting time to work in this industry. Our approach is innovative, and I believe we are amongst the leaders, focused on transforming drug discovery. Our disease centric approach that brings human understanding into the lab, providing a greater level of certainty to neurological drug discovery and development will allow us to bring disease modifying therapeutics to patients.

On that note, Dr. Fremeau will talk more about some of the very promising data and recent news about our pipeline and upcoming proof-of-concept clinical trial work in just a few minutes. As we close on the third quarter, a number of subsequent events transpired that are consistent with several corporate goals that we set for this year. So today we will share those highlights with you. At a high level on November 6, 2022, we announced the closing of the sale of our U.S. operations of vivoPharm to Reaction Biology. We are continuing to work through a strategic process for our Australian CRO business, as well as the product sales business operating under our StemoniX sub. Andy will take us through some of these details and related cash impacts.

Our exit from the preclinical CRO services business and our product sales businesses anticipated to be completed in the coming months will allow us to put all of our human and capital resources into our R&D efforts to discover and develop therapeutic assets for CNS diseases. We have been at the podium during two recent scientific meetings, including the 2022 CDKL5 Forum hosted by the Loulou Foundation and the Rett symposium at the Annual Meeting of the Society for Neuroscience in San Diego, which is concluding today. I will now turn the call over to our Chief Scientific Officer, Dr. Robert Fremeau, who will talk to you a little more about the scientific meetings and take us through some of the compelling data that we have generated from our R&D work on our discovery platform, as well as details of the collaboration with the International Rett Syndrome Foundation to advance VYNT-0126 into a proof-of-concept clinical trial in Australia.

Dr. Fremeau?

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Dr. Robert Fremeau: Thank you, Jay. I am delighted for the opportunity to share some key recent advances we have made over the past several months that highlight the promise and potential of our human-first CNS drug discovery platform to drive the discovery of therapeutic candidates for CNS genetic disorders. As we have discussed previously, a key element of our strategy is obtaining a deep understanding of human disease biology at the cellular level through the application of innovative enabling technologies to allow us to identify and interrogate target specific disease biology and drive positive drug discovery efforts. Our current drug discovery programs are targeting two rare CNS genetic neurodevelopmental disorders, Rett Syndrome and CDKL5 deficiency disorder and Parkinson’s disease, the second most common neurogenic disorder.

As you may recall, Rett Syndrome is a rare genetic early onset neurodevelopmental disorder resulting in severe mental or physical disability, affecting nearly every aspect of a child’s life, including their ability to speak, walk, eat and even breath easily, cognitive dysfunction, autistic-like behaviors and seizures are prominent neurological features of the disease. Rett is usually recognized in children between six months to 18 months of age as they begin to miss developmental milestones or lose the ability they have gained. Rett is primarily caused by mutations in a gene called MECP2 on the X chromosome. One of the challenges developing therapeutics to Rett has been a lack of a streaming system that recapitulates the underlying human disease pathophysiology.

Vyant Bio has developed an in vitro human Rett cortical organoid platform that exhibits abnormal functional neuronal network activity that can be recorded in a high throughput way, providing a stable foundation for drug screening. We conduct a functional screening of a targeted compound library developed for Rett by the International Rett Syndrome Foundation called the smart library and identified several known inhibitors of acetylcholinesterase and histone deacetylases that rescued the functional Rett disease phenotype. We chose to further explore rescue potential of donepezil, the generic version of Aricept. The FDA approved compound for treating Alzheimer’s disease that we prioritize as a potential repurposing candidate for Rett, which we refer to as VYNT-0126.

We found that donepezil rescue the Rett disease phenotype at concentrations that are known to be achieved in the human brain after chronic treatment correlating with near complete inhibition of the acetylcholinesterase enzyme. Interestingly, there is strong literature support for cholinergic deficits in Rett patients, as well as donepezil-based rescue of electrophysiological behavioral deficits in a mouse Rett models. We were especially intrigue to find that donepezil appears to exhibit a distinct mechanism of action from the most advanced Rett clinical development candidates, Trofinetide and blarcamesine, also known as Anavex2-73. These molecules do not rescue the disease phenotype in our Rett patient derived organoids. And we think that’s because the cell types to Rett’s disease other compounds work are missing in our assurance.

Based on these findings and with the support and encouragement of the clinical trial committee of the International Rett Syndrome Foundation, I am pleased to announce that on November 14, 2022, we submitted a clinical trial application with the Alfred Hospital Human Research Ethics Committee to conduct a Phase 2 proof-of-concept clinical trial for donepezil in adult Rett patients in Australia. In addition, we received acknowledgment that the FDA accepted our request for a pre-IND meeting to provide the feedback and guidance for our clinical development plan for this program and they expect to give us our feedback by December 27th of this year. For me, these recent events really represent important milestones for Rett Vyant Bio as we strive to establish the value of our proprietary CNS drug discovery platform to discover novel therapeutics for CNS genetic diseases that could potentially halt disease progression or perhaps even cure disease.

We are also making promising progress on the identification of new chemical entities or NCEs for Rett Syndrome. In collaboration with our joint venture partner, Atomwise, we have identified small molecules directed against two discrete biological targets but also rescue the Rett phenotype in a differentiated manner and are the basis for our NCE discovery efforts for Rett Syndrome. Finally, our ongoing work of CDKL5 deficiency disorder and familial Parkinson’s disease has further established that our patient-derived discovery platforms represent a robust model for human-first CNS drug discoveries. Vyant Bio is honored to participate in the 2022 CDKL5 Forum hosted by the Loulou Foundation on November 7th and 8th in Boston, Massachusetts. Matt Green, our senior scientist at our Maple Grove site in Minnesota presenting the results of phenotypic and target-based screening of our proprietary patient derived CDKL5 organoids.

Matt and the team established a CDKL5 organoids exhibit a hyperexcitable functional phenotype that is robust, reproducible and suitable for high throughput screening. Matt and the team identified several promising novel drug targets and small molecules that rescued the disease phenotype including potential new chemical entity and repurposing candidates. Vyant Bio is proud that we have been formally recognized on the CDKL5 Forum 2022 company making a difference preclinical, an award that was presented by the CEO for the Loulou Foundation, Majid and Lynn Jafar, Loulou Foundation at the award ceremony during CDKL5 Forum dinner on November 7, 2022. And finally, our Parkinson’s disease program has identified a disease relevant biomarker and the human induced pluripotent stem cell derived from familial model of Parkinson’s disease that we are optimizing for conducting a high throughput drug stream.

We are on track to submit an SBIR grant to NINDS on a familial PD work for the January 5, 2023, deadline. Thank you and I will now turn the call back over to Andy.

Andy LaFrence: Thank you, Bob. Hello, everyone. Thank you again for joining our call. I will have a brief overview of our financial cash position and other elements that impacted our cash positions in the fourth quarter. First and foremost, we ended the third quarter with $9.4 million of cash on hand. As previously reported, we implemented two new financing vehicles in the first half of 2022 to facilitate the raising of additional equity capital at the company’s option with our Lincoln Park Equity line of credit allowing us to access up to $15 million of capital, as well as on a $14.5 million at-the-market or ATM offering with Canaccord Genuity. As of September 30, 2022, we have not tapped into these financing facilities. As noted in Jay’s and Bob’s remarks, we have completed several stated goals over the past several months.

Notably, we completed our sale of the vivoPharm LLC operations based in the United States. We received $5.5 million from the sale, which is expected to net $4.4 million in net proceeds after tax and transaction costs. Further, we expect to incur approximately $600,000 of exit costs related to this transaction. We continue to work on potential transaction partners with our vivoPharm Australian operations during this quarter. Further, we have also signed a clinical research agreement to start our Rett adult clinical trial in Australia in early 2023. We are leveraging infrastructure already in place in Australia to effectively deploy capital for this trial. We also completed a 1-for-5 reverse stock split in early November to regain compliance with the NASDAQ listing requirements.

We issued a separate press release within the last several minutes noting that earlier today, the company received a letter from the NASDAQ Stock Market LLC, stating that the company’s shares of common stock had a closing bid price at or above $1 per share for a minimum of 10 consecutive days. As such, the company’s common stock has regained compliance with the minimum bid price requirement of $1 per share for continued listing on the NASDAQ Capital Market. For the nine months ended September 30, 2022, we used $10 million of cash to fund operating activities. The company’s current cash balance and funding resources are adequate to fund the company’s operations until the fourth quarter of 2023. I will close for now and hand the presentation over to Jay Roberts for closing remarks.

Jay?

Jay Roberts: Thanks, Andy. As we come to the final part of today’s call, I’d like to conclude by reiterating our intense focus on meeting key milestones initially with our programs to further validate our drug discovery platform through the work we are doing in the two rare diseases for Rett and CDKL5 deficiency disorder and the subsequent R&D investments we are making to the identification of novel therapeutics to address these diseases. Stay tune as we continue to make progress. As news and information becomes available, we will be communicating updates via press releases, LinkedIn, our Vyant Bio website and other social media channels. Interested parties are invited to sign up the press release distribution list. Please visit our website. With that, we will go to the question-and-answer session and thank you to everyone who has submitted questions.

Q&A Session

Operator: Certainly. Your first question is coming from Ed White from H.C. Wainwright. Your line is live.

Ed White: Good evening. Thanks for taking my questions. So, perhaps, I could start with a question for Andy, you sold the U.S. operations for vivoPharm, how should we be thinking about any sales to your quarterly income statement for the fourth quarter of this year and also would the sales be generated in 2023?

Andy LaFrence: Good question, Ed. So the operations related to vivoPharm has been classified as discontinued operations. So their sales will not end up in our sales line from continuing operations for 2022. We are winding down. As we have noted earlier, our manufacturing operations in Maple Grove to focus solely on our internal R&D revenue and we would expect the revenues from those operations to be insignificant for the fourth quarter and should pretty much tail off by the end of the fourth quarter.

Ed White: Okay. Thanks, Andy. And perhaps just a couple of questions on the pipeline. So the protocol for 0126, is there anything — for the trial in Australia. Is there anything that you can tell us about what you are planning to do, the number of patients, endpoints, anything at all that you could help us with?

Jay Roberts: Yeah. Ed, look — I think, Bob, can take that, but, yeah, a few data points.

Dr. Robert Fremeau: Yeah. So we are planning a trial with some 48 patients — a double-blind placebo-controlled trial with these 48 patients and we are going to obviously measuring adverse events. And the RSBQ, the Rett Syndrome Behavior Questionnaire will be the primary endpoints and then we will also be doing evoke potential and EEG activity as secondary endpoints to try to assess the electrophysiological recovery.

Ed White: Great. Thanks, Bob.

Dr. Robert Fremeau: And these endpoints have been vetted for us by Jeff Neul on the Clinical Trial Committee at the International Rett Syndrome Foundation. Jeff was the lead PI on the lavender study, which is leading to on the NDA submitted for Trofinetide. So we think we have designed a clinical trial that meets the highest standards.

Ed White: Fantastic. Thank you. And my last question is just on the other potential products in your pipeline. The proprietary Rett lead series, you had said you would identify it by the end of 2022. I am just wondering if that’s still on track and then it could be IND ready for 2024. And then also the timing of the CDD and Parkinson’s programs, you had prior — previously mentioned CDD could be IND ready in 2024 and Parkinson’s in 2025. So is there any update there?

Dr. Robert Fremeau: So with regard to the NCEs for Rett, we are on track to identify lead series/scaffolds by the end of the year. We have had a very productive last few months establishing the relevant target engagement assays for the actual model targets. We have identified compounds from the — reference compounds that we are able to interact with the target and show disease-specific rescue in our phenotypes. So we have been able to validate the targets, and we have identified a couple of molecules from our — in Cyclica screening work that we are doing together with Atomwise that are able to engage the target and those molecules are currently in an experiment with measuring their rescue ability in steroids. We expect to have that data by the end of November and so assuming there aren’t any untoward laboratory science, experimental science, we think we are on track barring any disasters.

With regard to CDKL5, we have identified compounds on that interact with a novel disease specific target in the CDKL5 since we are working together with Cyclica on and we are beginning to do the — basically, what we call analog-by-catalog screening with Cyclica to identify novel scaffolds that can interact with a target muscular rescued phenotype. And we have also identified 22 novel targets and hits from a high throughput screen that we did show disease specific rescue, which we are now on Vyant. So I think realistically, we expect to have identified molecules that have a potential to begin lead optimization in the early part of Q1 of next year. With regard to Parkinson’s disease, we have just received the isogenic cell lines for our familial target that we are beginning to validate now and generate organoid platforms.

We have been able to show disease specific reductions in dopamine content and TH neuron levels in organoids prepared for those familial lines, but we haven’t initiated yet on high throughput screening. Is that helpful or just

Ed White: Thank you.

Dr. Robert Fremeau: do you want to follow up on that at all?

Ed White: No. That’s helpful. Thank you very much.

Dr. Robert Fremeau: Yeah.

Ed White: Those are all the questions that I have.

Jay Roberts: Thank you very much, Ed.

Operator: Thank you. Your next question is coming from Lucas Wood from Ascendiant Capital. Your line is live.

Unidentified Analyst: Good afternoon, guys. Thanks a lot for the update. I have a couple of questions on the financial front. The first is, it looks like you had almost $1 million sequential savings in SG&A from Q2 to Q3. Could you shed some light on that and also just give us an idea if that’s like this level of $1.6 million is more of an indicative level of what you will be spending going forward?

Jay Roberts: Sure. It’s look like a high level.

Andy LaFrence: Yeah. I can

Jay Roberts: Okay. Andy, go ahead. It’s fine.

Andy LaFrence: No. Go ahead, Jay.

Jay Roberts: No. I was just going to say. So, obviously, the company has continued to find ways to reduce, particularly with a real eye towards our G&A costs. And so we are — I think a majority of that is going to be related to the continued focus of moving away from our services business and moving more toward our R&D efforts. And with that, we can, obviously, we can operate at a lower G&A costs, we have got inside with fewer people and we have got other related costs associate things like travel and so on that’s been reduced. I think that’s where you are going to see most of the savings. Andy, you can certainly jump in from there to like to add?

Andy LaFrence: Actually, you did a wonderful job of answering my question, Jay. You are spot on. So in terms of answering the question, in terms of ongoing SG&A expense, we do see right around that $6 million to $6.5 million our annual run rate has been indicative of that run rate, of which probably around $1 million to $1.2 million of that is related to stock-based compensation.

Unidentified Analyst: Okay. All right. And then sort of a related question on R&D, obviously, that went up a little bit. Is that on an upward trend or are we at a good level?

Andy LaFrence: Yeah. Yeah. Taking back to my remarks, we have signed the agreement in Australia with the CRO to commence the trial that Bob talked about. And so we do expect there to be some uptick in R&D spend later in the fourth quarter and into 2023 as we work through the clinical trial process. So you should expect there to be incremental R&D spend in 2023 as compared to 2022.

Unidentified Analyst: Okay. All right. If I could just ask a follow-up, too, on the trial, like, how much is that going to cost and what sort of burden will it put on the company? Like you mentioned that you would be leveraging assets that were already in place, could you please elaborate on that?

Andy LaFrence: Yeah. A couple of things I can comment on that. First of all is, in our 10-Q we disclosed that the CRO contract is about A$4 million. We do have a structure in place in Australia associated with our vivoPharm business to actually to use that entity as the sponsor of that clinical trial. So we do plan to not only take advantage of the current Australian dollar, U.S. dollar arbitrage, but we also plan to use the R&D tax rebate in Australia to refund some of that clinical trial costs.

Unidentified Analyst: Okay. Is vivoPharm Australia, has that also been sold off or is that still part of Vyant?

Andy LaFrence: Yeah. That’s a great question. So there’s two entities and so one is as a parent company, which we plan to retain. This is one in which has the benefit of the R&D tax rebate structure in place that we can use. And then the subsidiary company, which is the operating company there is still for sale and we are in the process of talking through an arrangement with part — with a party related to selling that so that it will continue to work our way through in the next couple of months. We are hoping to have it done by the end of the year.

Unidentified Analyst: Okay. Great. That’s all I have. Really appreciate it.

Jay Roberts: Thank you very much, Lucas.

Operator: Thank you. That concludes our Q&A session. I will now hand the conference back to Jay Roberts for closing remarks. Please go ahead.

Jay Roberts: Thank you, Robert. And thank you everybody for participating in today’s call. We are very happy with our progress so far. We look forward to keeping everyone informed of our progress along the way. Thanks again for joining the call today, stay safe and well. Good-bye.