TFF Pharmaceuticals, Inc.
Q2 2020 Earnings Call Transcript

Published: 13 Aug 2020

[Operator:]

Good afternoon, ladies and gentlemen, and welcome to the TFF Pharmaceuticals’ Second 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.

[Paul Sagan:]

Thank you, operator. Hello everyone, and welcome to TFF Pharmaceuticals second quarter 2020 financial and business results conference call. With me today is Glenn Mattes, President and CEO of TFF; Kirk Coleman, Chief Financial Officer; Dr. Bill Williams of the University of Texas at Austin; and Chris Cano, Vice President of Business Development.

[Glenn Mattes:]

Good afternoon and thank you for joining us today to review the company's second quarter operations and recent highlights. During this call I will provide an update of our clinical and corporate progress and then I will ask our Chief Financial Officer Kirk Coleman to review the company's financials. We're also happy to have Dr. Bill Williams from the University of Texas at Austin who will talk about some of the exciting progress we're making in applying our Thin Film Freezing technology to biologics and Chris Cano our Vice President of business development will also update us on that key aspect of the company and then we'll open up the lines for your questions. Well, as you have seen from this afternoon's press releases we've had an enormously productive and active second quarter and this activity has continued on into the recent weeks culminating just today with the announcement of a strategic licensing deal with Union Therapeutics. I will discuss this very significant development in more detail shortly. And in another important development earlier this week we announced the closing of a $25.9 million private financing, supporting by some of the premier life sciences investors in the country. This funding will enable the company to accelerate development projects which will continue to focus on compounds that we can bring to market via the 505(b)(2) regulatory pathway. We believe this funding is a strong validation of our Thin Film Freezing technology platform and reflective of our track record in meeting our business and clinical milestones. Nowhere is this more evident than in the progress being made with our two internal development programs which have maintained momentum despite the most challenging clinical environment and generations due to the COVID-19 pandemic. A lead program for a Conazole Inhalation Powder successfully completed phase 1 trials and our Tacrolimus Inhalation Powder program is enrolling patients in Australia in the phase 1 trial. The start of this program was unavoidably delayed in Australia due to concerns about the spread of COVID-19 on that continent but subsequently proceeded on pace. TFF Tacrolimus also received the important and valuable orphan drug designation from the U.S. FDA.

[Kirk Coleman:]

Thank you very much, Glenn. For the quarter ended June 30, 2020 research and development expenses for the company were $2.6 million compared to $1.3 million in the second 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 2019. The ramp up includes our preliminary analysis and testing of dry powder formulations of other certain drugs and vaccines we believe have the potential to become product candidates. General, administrative expenses for the second quarter of 2020 were $1.3 million compared to $889,000 in 2019. The company reported net loss to the second quarter of $3.8 million compared to a net loss of $2.2 million in 2019. As of June 30, 2020 we had total assets of approximately $22.5 million and working capital of approximately $21.8 million. At the end of the quarter our liquidity included approximately $21.9 million of cash and cash equivalents. And with that I'd like to turn the call back to Glenn.

[Glenn Mattes:]

Thanks Kirk and now I want to turn the call over to Dr. Bill Williams who will talk about some of the groundbreaking work we're doing using our Thin Film Freezing platform in the broad field of biologics including mRNA, siRNA, microphages and other platforms. This is an area where our technology is unique in and its ability to reformulate these biologics into inhalable dry powder. Bill?

[Bill Williams:]

Thanks Glenn and good afternoon everyone. This is indeed a very exciting and groundbreaking area of research and development for us to apply our Thin Film Freezing platform to the delivery of biologics. Biologics which include monoclonal antibodies messenger RNA, small interfering RNA, plasma DNA as well as live organisms including bacterial phages, viruses and bacteria are increasingly being used as active ingredients in pharmaceutical drug development especially highlighted by the hunt for a COVID-19 vaccine and other therapeutics to treat COVID-19.

[Chris Cano:]

Thanks Bill and good afternoon everyone. Last earnings call I shared with everyone a high level perspective of the ongoing efforts of the TFF business development team and are laser focused on three key areas of growth for the company. These are, one, growing the TFF pipeline internal development programs. Two, our pharma partnering efforts and three, our government contracting and foundation efforts. We continue to make great strides in each of these key areas. For today's call I will focus on our pharma partnering efforts, the process we use and provide everyone with a few exciting updates. The BD process as we define it at TFF includes the following steps. First we enter into a confidentiality agreement with the partner. Then we collaborate and agree on a compound for testing. Next, we enter into a material transfer agreement, a statement of work and upon receipt of the partner's proprietary materials we perform initial formulation work, perform some characterization work, do some aerosol testing, optimization work and collaborate with the partner on the selection of an optimal formulation and/or formulations. We then run a batch of dry powder samples, deliver the dry powder samples to the partner, the partner then performs in-vitro or cell culture knock down testing to confirm the activity, immunogenicity and/or transfection as the case may be for their compound in our dry powder technology. To give you a flavor of the work we have been performing and the status of our BD process with some of our partners here are a few examples. Just earlier this week we delivered TFF dry powder samples of to our partner. We were able to successfully formulate our partners proprietary phage product candidate into a dry powder which showed superior aerosol properties. We eagerly await the results of our partners ongoing viability testing to confirm the activity of the before and after the TFF process.

[Glenn Mattes:]

Thanks very much Chris and thanks Bill as well. This has been quite a quarter of activity in progress for TFF. Our team continues to respond remarkably well to the challenge of the global pandemic in ways that can have a real impact on society. I'm so proud of everyone's efforts. As always we appreciate the support of our investors and our partners as we look to further the potential of our technology and our company and we look forward to updating you on our progress in the coming quarters. And with that I'd like to turn the call back to the operator and open it up to questions. Operator?

[Operator:]

Thank you. Our first question comes from Jonathan Aschoff with ROTH Capital Partners. Your line is now open.

[Jonathan Aschoff:]

Thank you. Hi guys. Congrats on the Union deal and overall progress. I've got a couple of questions. What do you intend to do with the capital raised specifically as it relates to new internal projects?

[Glenn Mattes:]

Hi Jonathan this is Glenn. Thanks for the question. So Jonathan the plan has always been to try and capitalize on the technology to do more internal development following the same strategy that we've had looking for compounds that could be advantaged with the technology and also following the 505(b)(2) platform. So plan would be to take this capital and start to invest in some prioritized projects that we've been sort of have a list of and do more Voriconazole, Techrolimus work in the TFF technology. So that's the plan. So we've gotten pretty good at knowing how to bring these products along. So we'll certainly invest a fair portion of that capital into doing more internal development.

[Jonathan Aschoff:]

Okay. Thanks. Secondly what must Union only apply your technology to COVID-19 or do they have the freedom to pursue niclosamide more broadly and if yes what pathogens might Union also pursue and I guess in conjunction with that question are all the potential payments to TFF related only to COVID-19 successes?

[Glenn Mattes:]

Thanks again for that question. So now we have in the license the ability to expand beyond COVID-19. So the niclosamide we believe has a lot of different applications for example as other viruses like Zika. There is some other thoughts around looking at niclosamide in some oncology applications and Union actually is probably the most accomplished company in experience with niclosamide. They've got some pretty advanced work in the dermatologic space. So for us to partner with Union is really a real plus for us. They're a great company. They've got a lot of expertise and this is one of those situations where one and one equals much more than two. So this partnership can go well beyond just the application of the technology for niclosamide in the COVID-19 space.

[Jonathan Aschoff:]

And the milestones of the 210 is that covenanting success only or that can be paid to you for other successes?

[Glenn Mattes:]

It goes beyond COVID-19 and we don't get specific on the metrics but now there is into the agreement you can go beyond just the just the COVID-19 application.

[Jonathan Aschoff:]

Okay. And I was curious about the PLUS Products. Are the excipients that you will use or that PLUS will use for the cannabis applications genuinely safer than current vaping excipients? Basically how aggressive are you being with developing? Actually scratch that question. Given the absence of vaping or combustion that's in your press release about this deal actually it's back in the first Q on the lease can I assume that you're starting with a THC that's already been subjected to some sort of heat to decarboxylate it and therefore to make it psychoactive?

[Glenn Mattes:]

Bill can you answer that question about what you think the formulation ultimately will look like in the THC containing product. If not I could give you what I can what I can contribute here.

[Bill Williams:]

Yes. So we've tested in the laboratory in a series of exploratory formulations different and held dry pattern held and then we've tested them in animals and accumulated quite a bit of data. So that's what I believe it'll be in the dry powder insulation form of these pretty difficult to deliver cannabinoids.

[Jonathan Aschoff:]

Okay. But I mean they have to be subject to some source of heat before they're psychoactive. So if you're just inhaling them I'm assuming that you're dealing with some sort of THC they've already decarboxylated. Is that true?

[Glenn Mattes:]

Well the theory here Jonathan is that you won't need heat there. So yes I guess from a formulation standpoint it would be as you've described.

[Jonathan Aschoff:]

Okay. Can you work with anyone else in the space or is PLUS Products exclusive deal.

[Glenn Mattes:]

That is not an exclusive deal.

[Jonathan Aschoff:]

Okay. One little weird question now without having bought back shares which I do not think you did how can you possibly have 19.1 shares as an average over the second quarter but fewer shares as of August 8 than your 10-K?

[Glenn Mattes:]

Kirk?

[Jonathan Aschoff:]

How is that possible?

[Kirk Coleman:]

Wait. Repeat, that's a good question Jonathan. Repeat the question again.

[Jonathan Aschoff:]

Yes. The first page of your 10-Q says 18.7 million shares as of August 8 but your average over the second quarter is 19.1. This is kind of .

[Kirk Coleman:]

Let me, let me get back with you on that and I can address that offline. Never mind.

[Jonathan Aschoff:]

Okay and then lastly what's the actual net you raised and how long will that cash last?

[Kirk Coleman:]

The net we're not providing guidance yet on this point with regards to the net and the cash will last us well beyond the next year.

[Jonathan Aschoff:]

Okay. So into 2022 would that be.

[Glenn Mattes:]

Yes. Well I mean again Jonathan the intent here is to invest the capital into further development projects which really accelerates the growth of the company. We're doing well and we're going to get a lot of revenue in through these business development transactions but being able to accelerate our internal development ideas just catapults the company so much forward now that we really our process is just going so well on Vori and Tac , Voriconazole and Tacrolimus the team is executing flawlessly. So we're going to keep throwing the coals on the fire to do more projects internally. So those will be identified and communicated as those projects are launched.

[Jonathan Aschoff:]

Okay. Thank you very much guys. Congrats again.

[Glenn Mattes:]

Thanks Jonathan, thanks for the questions.

[Operator:]

Thank you. Our next question comes from Daniel Carlson from Tailwinds Research. Your line is now open.

[Daniel Carlson:]

Thanks guys for taking my questions and congrats on all the progress. It's quite compelling from my perspective. There is a couple of questions. First off a real quick one regarding Union. I see they have an option. I was wondering if there's any upfront payment involved in this contract that you can talk about?

[Glenn Mattes:]

Yes. So we don't again Daniel we don't disclose specific terms. So the options are tied to some very near-term milestones that we feel will be able to be executed against fairly quickly.

[Daniel Carlson:]

Okay. That's great. And then you haven't talked too much this call on vaccines but that's one area where I really am excited about the potential of TFF. So I was wondering if you could maybe talk about the work being done with the specifically and Georgia and also any part of the phase two vaccines for COVID that you might be involved with if you could talk about anything going on there?

[Glenn Mattes:]

So Chris I'll let you talk about USAMRIID and University of Georgia and I'll come back and talk about some future thoughts.

[Chris Cano:]

Sure. Thanks Stan for the question. So when it comes to USAMRIID and working with John Dye’s research group there, things are moving very-very well. We're working with John’s and so we are going to be delivering back the to us for some in vitro testing and we're going to be partnering with you USAMRIID to try and get additional funding for the next set of studies. So we're very excited how that is going. We haven't started undo USAMRIID the vaccine work yet. We haven't received the materials yet, so we expect to be receiving those materials in the next few weeks. With the university of Georgia and Ted Ross's group things are going very well. We formulated their proteins and the adjuvants. We've delivered them to Ted Ross's group that I think on our last call we described there is a mouse study that's being done. So we expect to receive results from that mouse study by the end of this month. So we'll have some results in the beginning of September. So both projects are on track going extremely well and we're very pleased with those relationships.

[Daniel Carlson:]

And then Glenn.

[Glenn Mattes:]

Yes, going forward Daniel, we certainly are excited about the potential to apply to the technology for all vaccines and I think what we have to be realistic about is that companies that are developing vaccines right now for COVID-19 are doing what they need to do and what they know how to do. I think when you think about second generations of vaccines in the COVID-19 space if needed I think that's where we'll get some more involvement and some more opportunities to partner and there will be improvements certainly on the starting vaccines depending on whether they need to be boosted or not. So that's where I think we come in. We've certainly reached out and have that interest but frankly I think it's much better for these companies to get first version of the market. I think our application in the therapeutic space is a lot more initial immediately, has a lot more immediate potential for us than perhaps the COVID-19 vaccine.

[Daniel Carlson:]

Got you and then one last question for me I mean I think what really got you on a lot of radar screens with your press release about reformulating Remdesivir and I was wondering has there been any further development along the lines of that? Is that something you're pursuing actively or in any status update there?

[Glenn Mattes:]

Yes. So Bill did a nice job first of all of describing the work that went into that we've done thus far in Remdesivir and what he has planned going forward. We believe that our platform technology can certainly enhance the delivery and the efficacy and even safety related to delivery of Remdesivir and we think it will be a real potential benefit to patients in treating physicians. We really have no further update since our comments made in that release that you alluded to Daniel we don't comment on speculating on specific business development activity prior to an agreement being reached and you can see Chris on the the same, the same platform there. So that's what I can really say about that at this point.

[Daniel Carlson:]

Okay. Well thanks guys. Very great progress and congrats and I will jump back in the queue. Appreciate it.

[Glenn Mattes:]

Thank you.

[Operator:]

Thank you. Our next question comes from - a private investor. Your line is now open.

[Unidentified Analyst:]

Okay. Good afternoon Glenn. Congratulations to you and the team. Great going. Great news on that this afternoon. A curious question I’ve recently saw a video interview of Bill Gates and he was talking about inoculating almost everybody in the world for a variety of viruses and other things in corona as well and I'm just curious whether he or maybe his foundation people may have contacted TFFP for their input, their technology possibly going to use on some of his plans?

[Glenn Mattes:]

We have had a conversation with the Gates Foundation. They're aware of our technology and those conversations continue.

[Unidentified Analyst:]

Okay. They're still progressing then is what you say.

[Glenn Mattes:]

Yes. We've had some interesting on a lot of different levels, not only the COVID-19 space. There is a lot of potential interest in application there but we have no further comment in terms of the status of those conversations but we have had conversations with the Gates Foundation.

[Unidentified Analyst:]

Sure. Understandable. Okay. Thank you very much.

[Glenn Mattes:]

Thanks .

[Operator:]

Thank you. I'm not showing any further questions at this time. I would now like to turn the call back over to Glenn Mattes for closing remarks.

[Glenn Mattes:]

Thank you operator. Well, thanks to all of you for dialing in and I will tell you that we're just having a really wonderful time here at TFF. The business is moving ahead. It's just in a tremendous fashion. If you listen to the words that Chris shared and what Bill shared, we have the potential to apply this technology in so many interesting areas. It's truly ubiquitous in its application. We're just at the really beginning stages of where we think we'll have opportunities to partner and develop more assets. Internally we're very grateful to the investors that we have. We're excited about bringing on the new investors in the recent round that we just did and we really are looking forward to the next quarter and then the next call to be able to keep you up to date on the progress that we're making. So I hope you all stay well and stay safe. Enjoy the rest of the summer and we will talk to you again with third quarter results. Thank you.

[Operator:]

Ladies and gentlemen this concludes today's conference call. Thank you for participating. You may not disconnect.