TFF Pharmaceuticals, Inc.
Q1 2020 Earnings Call Transcript

Published: 14 May 2020

[Operator:]

Good afternoon, ladies and gentlemen, and welcome to the TFF Pharmaceuticals’ First Quarter 2020 Financial Results Conference Call. As a reminder, this conference call is being recorded. I would now like to turn the call over to your host, Mr. Paul Sagan of TFF Pharmaceuticals, Investor Relations. You may begin your conference call.

[Paul Sagan:]

Thank you, operator. Hello everyone, and welcome to TFF Pharmaceuticals first quarter 2020 financial and business results conference call. With me today is Glenn Mattes, President and CEO of TFF; Kirk Coleman, Chief Financial Officer; and Chris Cano, Vice President of Business Development.

[Glenn Mattes:]

Thank you, Paul. Good afternoon and thank you for joining us today to review the company’s first quarter operations and recent highlights. During this call, I will provide an update on our clinical and corporate progress, then I’ll ask our Chief Financial Officer, Kirk Coleman to review the company’s financials. I’m also happy to have Chris Cano with us today on the call. Chris is our Vice President of Business Development and responsible for our outreach to potential partners for our technology. And Chris will update us on that key aspect of the company. And then we’ll open up the lines for your questions. Today, I’m very happy to say that this has been another quarter of major accomplishments for TFF Pharmaceuticals. We’ve been able to maintain the clinical momentum of our two lead programs Voriconazole Inhalation Powder and Tacrolimus Inhalation Powder, despite a challenging clinical trial environment due to the COVID-19 pandemic. I will talk more about these two internal development programs in a moment. But perhaps most importantly, this quarter we’ve demonstrated and validated the tremendous potential of our Thin Film Freezing platform technology in ways we could not have imagined even just a few months ago. We were actively engaged with some of the world’s leading research institutions, as well as some of the largest biopharmaceutical companies to develop products that will have more effective real world delivery capabilities. And we have recently seen strong scientific validation for our technology from two leading research institutions. The University of Georgia Center for Vaccines and Immunology, one of the nation’s premier vaccine research centers and the United States Army Medical Research Institute of Infectious Diseases, USAMRIID, the world’s premier biodefense research facility. Both have done extensive due diligence on our technology. And Chris will discuss these important partnerships later in the call. And in a very exciting development that we’re able to announce today, we have entered into a license agreement for the use of our TFF technology in the cannabis market. More on this in a few moments.

[Kirk Coleman:]

Thank you very much, Glenn. For the quarter ended March 31, 2020, research and development expenses for the company were $2.2 million compared to $1.7 million in the first quarter of 2019. The increase in research and development expenses during 2020 was due to the ramp up of research and development activities following the completion of our IPO in October of 2019. General and administrative expenses for the first quarter of 2020 were $1.6 million compared to $532,000 in 2019. The company reported net loss for the first quarter of $3.8 million compared to a net loss of $2.2 million in 2019. As of March 31, 2020, we had total assets of approximately $26.6 million and working capital of approximately $25.4 million. At the end of the quarter, our liquidity included approximately $25.7 million of cash and cash equivalents. We believe that our cash on hand, as of the date of this report is sufficient to fund our proposed operating plan for at least the next 12 months. And with that, I’d like to turn the call back to Glenn.

[Glenn Mattes:]

Thanks, Kirk. One of the unique features of our companies are do focus on internal development. For example, our voriconazole and tacrolimus inhalation powder candidates that we discussed earlier. And our efforts at partnering are disruptive Thin Film Freezing technology with pharmaceutical and biopharmaceutical companies, as well as with some of the world’s leading research organizations for potentially groundbreaking therapeutics. We’ve had some very exciting developments during the past quarter and Chris Cano, our Vice President of Business Development has been involved in all of them.

[Chris Cano:]

Thanks, Glenn and good afternoon, everyone. The business development group at TFF has been focused on creating an awareness in educating potential partners of the beneficial characteristics and potential uses of our Thin Film Freezing technology. We have been planting the seeds with potential partners. Well, we have been making tremendous strides with our delivery technology and our business development efforts are now starting to bear fruit. Our business development initiatives and goals focus on three key areas. First, we are focused on our internal pipeline. Growing our pipeline, developing new and innovative products that benefit from the characteristics of our enabling technology, and developing these products to defined value inflection points with the goal of partnering these products with large commercial organizations. As we continue to successfully progress our pipeline products through development, the level of interest by potential partners continues to grow. We have engaged with multiple companies in partnering discussions and these discussions are fluid and ongoing. The second area of focus is collaborations with pharma partners, both large and small, taking their proprietary products, formulating these products in our technology and making these products new and improved either through a new route of administration, better absorption and/or removing the costs and expense of cold-chain handling just to name a few. As previously disclosed on prior updates, we entered into a feasibility agreement with an undisclosed leading worldwide biopharmaceutical company to explore using our Thin Film Freezing technology to formulate, perform testing and optimization work on two of their proprietary compounds, both of which are new chemical entities or NCEs for delivery of these compounds directly to the lung for the treatment of respiratory elements. This work is still ongoing. Also as previously disclosed, we are collaborating with a large multinational pharma company to explore using our technology platform to formulate the partner’s Phase 2 antiviral liquid vaccine into a dry powder formulation for reconstitution. We have performed internal testing and the partner has completed their animal testing, which has confirmed that the TFF dry powder formulation is the same specifications as the liquid vaccine currently in development. Ongoing formulation, optimization and additional testing is ongoing. We continue to work with numerous pharma partners on feasibility work, formulating their proprietary mRNA, siRNA, plasmid DNA, bacteria, bacteriophage, and vaccines into the TFF dry powder for inhalation delivery directly to the lungs. We are very hopeful that this feasibility and formulation work with our partners will bear fruit in the near future.

[Glenn Mattes:]

Thanks very much, Chris. This has been quite a quarter of activity and progress for TFF. Our team has faced the challenge of a lifetime with the global pandemic and they’ve responded well beyond my expectations. I’m very proud of them all. As always, we appreciate the support of our investors and partners as we look to further the potential of our technology and our company, and we look forward to updating you on the progress in the coming quarters. And with that, I’d like to turn the call back to the operator and then open it up to your questions. Operator?

[Operator:]

I show our first question comes from Jonathan Aschoff from ROTH Capital Partners. Please go ahead.

[Jonathan Aschoff:]

Thank you. Hi guys. I’d like to start off with the big congrats for executing on your promised events at the pretty much across the board, clinical when you just squeaked in here at the 11th hour. So that’s looks really good to me. My first question, it’s a BD question for Chris. Can you give us a sense of the number of potential deals and diseases targeted by your BD product projects, the ones that are not yet public, and whether you’re net soliciting them or a net proceeding then as inbounding of interest?

[Glenn Mattes:]

Go ahead Chris, please.

[Chris Cano:]

Sure. Thanks, Jonathan for the question. So, it’s really hard to quantify Jonathan, how many, because they’re in various stages, right? So, we’ve really focused on what kind of give you a little background. So, with the partnership at the University of Texas at Austin, and some of the formulation work and proof-of-concept work, we’ve really focused on, as we mentioned in our call that mRNA, siRNA and plasma DNA, and we’ve really targeted companies to engage them in discussions based on our proof-of-concept work. Our goal is to enter into feasibilities, receive their proprietary materials and do the formulation work. So, from a quantity perspective, we’re across the board. It’s really hard to say. I’m real glad if you want to put a number on it.

[Glenn Mattes:]

Yes. So, yes, I can tell you, Jonathan, it’s well north of in terms of MTAs and active programs, keep a cab and well north of, at least I would say a dozen. To the point, we’re actually building a second feasibility lab at the university to keep track. The other phenomenon, I think it’s important for all of you to understand is that the USAMRIID agreement, as well as the University of Georgia agreement were given to us after extensive scientific diligence, I would say at least six months of back and forth with both institutions. And after we announced those two agreements, our inbound calls for business development and partnerships has really increased. I think we’re getting more inbound calls now than even the calls that Chris is making, the companies that we’ve been chatting with. So, we’re really inundated with people, who are interested all across the board, Chris mentioned this DARPA agreement we’re even looking at applying the technology now for intraocular preparations, topical preparations. So, what I said in my narrative that we’re in areas now that we never would have even anticipated being in six months ago, the – it comes in, we send it off to the university. We do the formulation as Chris described, and then it’s off to the races.

[Jonathan Aschoff:]

With the assumption that these potential partners are looking at other technologies as well. What aspects of TFF would the two or three closest competitors points you as being less competitive, less advantageous, I guess, then their technology, how did they move to usefully counter detail against you guys to try and win that business?

[Glenn Mattes:]

It’s really – I don’t want to make it sound easy, because it’s not. And but if you think about our technology, the secret sauces, if you will, is that because you rapidly freeze the active component in the process? Our powder, our powder is highly concentrated in API. So even if you can formulate with other modalities for dry powder creation, environmental is impacts, like she has stress, he wanted denaturation air makes those preparations not very concentrated. Now, that’s not to say that you can’t do it in other complex, but when you think about it, and I don’t want to get too technical here, just the fact that we can get macrophages, active bacteria into a dry powder is remarkable, absolutely remarkable. And the more companies we talk to in this macrophage space, a little bit doubt at first, but now, Bill’s working on it. As Chris described, we send the compounds back. We’re in, again, it’s areas that no one would ever anticipate and you couldn’t get there with other dry powder modalities, and it’s all around, not going through all the process here, the rapid freezing the ability to use the different temperatures to get the right concentrations in different excipients. really, Bill’s got it down. And it goes pretty smoothly. And we’re really here on the precipice of, I think, many important development agreements with a number of different companies and a number of technologies in the therapeutic areas.

[Jonathan Aschoff:]

Thank you, Glenn. My last question is seeing that the R&D dropped $1 million from the fourth quarter to the first quarter of 2020, is that pretty much the quarterly R&D? Is that what the quarterly R&D line is pretty much going to look like for the rest of the year?

[Kirk Coleman:]

That’s a fair question. It was there a – it’s a good catch on the drop. There was a drop, it’s – I would blend it. It is just purely timing of when some things were paid and that’s it.

[Jonathan Aschoff:]

Okay. Thank you very much, guys.

[Glenn Mattes:]

Thanks, Jonathan. Appreciate the questions.

[Operator:]

Thank you. Our next question comes from Douglas Russell from Brown Harris Stevens. Please go ahead.

[Douglas Russell:]

Glenn, great quarter. We really appreciate it. What I know you are doing work in South Korea with your niclosamide testing was that live testing and when do you expect to get from it?

[Glenn Mattes:]

Yes, again, Chris’s kudos to Dr. Williams here. He’s got a relationship with a lab that has an animal COVID-19 model consists of his former student of Bill’s. We did ship our product there. The last time I checked, they were just worked – waiting on lab animals. It’s possible that they’ve already received them and testing oral. It’s an oral prep as well as the powder prep in their animal model there. So, it’s either happening as we speak or imminent.

[Douglas Russell:]

Thank you, Glenn. I appreciate it.

[Glenn Mattes:]

Thanks. Be well, Doug. Thank you.

[Operator:]

Thank you. Our next question comes from . Please go ahead.

[Unidentified Analyst:]

Hi, Glenn. congratulations on a great quarter.

[Glenn Mattes:]

Thank you.

[Unidentified Analyst:]

Can I get a little clarity you’re going to have on DARPA? I’m kind of close if you filed February 20, wouldn’t this be roughly like day eight, five in the process and the review?

[Glenn Mattes:]

Yes. So Keith, we did, we are within the 90-day window, there has been some activity between DARPA and the partner company we’re working with. The process has multi sort of steps to it, where you get initial feedback and then there’s some negotiation, but we’re still within that window, but we’re getting pretty close to knowing where we stand there. But that’s about all I can say at this point.

[Unidentified Analyst:]

No problem. If I may do they tell you after 90 days? Yes or no, or it’s not communicated to, then you can assume, it’s no.

[Glenn Mattes:]

You do get communication. And as I said, there’s a step to it, where you can get a, you get feedback. There’s a sort of give and take back and forth on what they’re going to –what they say they’ll give you perhaps sources versus what you requested. Our specific submission has a few levels to it. So, either you get it all or you get nothing or you get something in the middle, but after this negotiation period, you have a definitive outcome. And then once that happens, Keith you have to submit to DARPA any potential announcements you’d make about the outcomes. So, even if it’s – if it gets past the 90-day clock and don’t assume, no, it just means that, hey, it’s happened already and you have to wait for their approval on the release. And similar process to the CRADA, I want to comment about that process with USAMRIID, we got the CRADA signed off and the release signed off very quickly, which frankly surprised us since USAMRIID is so involved in the COVID-19 work. We were even surprised that we got a non-COVID-19 CRADA at this time. And I think that’s also a real supportive of how highly they thought of the technology, the diligence that they did so free to come out in these COVID-19 days. It takes a lot to surprise us, but that one surprised us positively.

[Unidentified Analyst:]

Okay. So, then if I’m correct, and if it’s reviewed, it is awarded data have to approve a news release that you would put out. Is that correct?

[Glenn Mattes:]

That’s correct. We have to have their approval on a release.

[Unidentified Analyst:]

And just one follow-up to the previous question from Doug, regarding South Korea, if it’s successful with the lab animals, what’s the next step?

[Glenn Mattes:]

So, we have a couple of decisions to make Keith, we would obviously want to move forward to file an IND our assumption that would be hopefully, would – that would be funded through grants or government contracts. But we’re opportunistic as you know, and if we’ll see how it all plays out, we won’t walk away from an opportunity. Let’s put it that way, but it’d be nice to get non-dilutive funding to take us at least through filing IND and then hopefully an accelerated development program.

[Unidentified Analyst:]

And with that, you would expect perhaps in the next block, two to four weeks to get the results from South Korea?

[Glenn Mattes:]

Yes. I mean, I would say between two to six weeks, perhaps again, I’m not sure of the status of the lab animals there. Once they started it, won’t take us very long.

[Unidentified Analyst:]

Are those primates or what animals?

[Glenn Mattes:]

I think it’s – I believe, Chris, correct me if I’m wrong. I think it is it rodents to start.

[Chris Cano:]

Yes. We’re starting with rodents.

[Unidentified Analyst:]

That’s my problem. Okay. Thank you. I’ll get back in queue. Thank you very much.

[Glenn Mattes:]

Thanks, Keith.

[Operator:]

Thank you. And our last question comes from Bill Morrison, please go ahead, from National Securities.

[Bill Morrison:]

Hi, guys. Great progress on the quarter.

[Glenn Mattes:]

Hi, Bill. How are you?

[Bill Morrison:]

Good, good. How are you doing? Is there any possible government funding from other organizations in the government like CEPI or BARDA or anything like that for any of your formulations for applying that to existing drugs?

[Glenn Mattes:]

Chris, do you want to take that one?

[Chris Cano:]

Certainly, thanks, Glenn. And thanks Bill for the question. We are definitely actively engaging with different government agencies. So, whether it’s BARDA or CEPI, the DoD. And so there are multiple opportunities there. And so we are constantly engaged with them in our own internal development pipeline products, as well as from a technology platform play as well. So, those discussions are always ongoing and they’re constantly putting up new opportunities on their website. And so I think based on funding we are definitely looking at all those opportunities.

[Glenn Mattes:]

And Bill, I just want to comment to it, our company philosophy is like we only – when we talk about the things that that are real. We have a lot of different discussions going on with a number of different companies, who were very, very interested in direct-to-lung application of antiviral therapeutics. A couple of them are maturing quite nicely. So, I’m not going to talk about things that potentially could happen, but we have a lot of irons in the fire here or enthusiastic about some of them, some more than others. And those relationships could take a lot of different forms. It could either come by way of our Chris just described informal development relationships, where the partner might go through for government funding, or we would, but just think about where we’re at. You’ve got a potential to reformulate or even develop new therapeutics with direct-to-lung application. And in the vaccine area, I wouldn’t say we’re going to be present in the acute development phase of vaccines, but in the second-generation, where you can avoid the cold-chain necessity if these vaccines are formulated with aluminum adjective, we’ve got tremendous potential there, about 80% of all the vaccine costs, where there is a cold-chain necessity come from the need to shift and store in refrigerated conditions. So, there’s a lot of potential, and I swear to say that the runway for TFF is really, almost limitless and the technology is ubiquitous. So, we’re – we’ve got a lot of different things we’re looking at and as soon as they become real, we’ll let you know, but we’re very enthusiastic about where this has happened.

[Bill Morrison:]

Yes. Understood. That sounds great. And then on the PLUS Products agreement with the undisclosed partner, can you walk me through how that would play out over time?

[Glenn Mattes:]

Yes. So Bill, we’ve been looking at how to do this for a while, PLUS emerged to be a really outstanding potential partner based upon their market position. So look, we’re going to license the technology to the intermediary sublicense, it’s at the PLUS. And then it’s there, it’s there – we’re not in the cannabis business when I’m touching cannabis, they’re going to use the technology to develop products. We think we can be in – and they think they could be in that market, whether they think that could be in that market quickly. They’re going to do some market testing, some product development. And at that point, once they’re in the market, we’ve got an option in the initial interim license that calls for our meaningful, upfront and very meaningful royalties.

[Bill Morrison:]

Okay. Great. Thanks. Those are my questions.

[Glenn Mattes:]

Yes. So that’s it, we’re handing it off, we’re not, we know what our core business is, no distractions, but we think that, in the light of all the problems with vaping and this is where PLUS is coming from and this technology could really be have a really interesting place in their markets and it’s just the technology play.

[Bill Morrison:]

Interesting. Thank you. Appreciate it.

[Glenn Mattes:]

Thanks, Bill. Thank you. I show no further questions in the queue. At this time, I’d like to turn the call over to Mr. Glenn Mattes, President and CEO for closing remarks.

[Glenn Mattes:]

Well, thank you, operator. Thank you all for your interest in the company, your support. I can speak for everyone that’s working here at TFF; we are getting up in the morning as the pleasure is every day is it’s full of great opportunities. We’re very pleased with where we’re at, and we can’t wait to tell you about what’s – what the second quarter looks like. I want to report back in a few months. So everyone, please be well, stay safe, and again, appreciate your time and your interest. Good evening.

[Operator:]

Ladies and gentlemen, this concludes today’s conference call. Thank you for participating. You may now disconnect.