Vyant Bio, Inc. (NASDAQ:VYNT) Q2 2022 Results Earnings Conference Call August 22, 2022 4:30 PM ET
Company Participants
Jay Roberts – President and Chief Executive Officer
Andrew LaFrence – Chief Financial Officer
Robert Fremeau – Chief Scientific Officer
Conference Call Participants
Operator
Thank you for standing by. And welcome to the Vyant Bio Second Quarter 2022 Earnings Conference Call and Webcast.
Today, August 22, 2022, the company issued a press release summarizing the results for the second quarter of 2022. Today’s discussion will provide an overview of activities in the second quarter and first half of 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 Water Infrastructure.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’d like to turn the conference over to Jay Roberts, Chief Executive Officer of Vyant Bio. Please go ahead.
Jay Roberts
Thank you, operator, and thank you all for joining us today. We spent the first half of 2022 fully focused on progressing our scientific research and development business plan and working through the divestiture of our preclinical CRO services business vivoPharm.
We’re delighted to speak with you today to share our enthusiasm, to give you some insight into how we envision the near term future of Vyant, while providing our financial results for the second quarter and first half 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 update on recent scientific achievements made in the first half of the year and the vision ahead. And finally, Andy LaFrence will take us through a brief financial update and discuss key accounting matters from the second quarter and the first half of 2022. I will make some closing remarks. And then, we will go to questions.
I’ll now turn the call over to our CFO, Andy LaFrence.
Andrew LaFrence
Thank you, Jay. And welcome to all. We would like to remind everyone that various comments about future expectations, plans, prospects, constitute forward-looking statements for purposes of 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, Monday, August 22, 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 at Vyant Bio’s website at www.vyantbio.com.
With that, I’ll turn the call back over to Jay Roberts. Jay?
Jay Roberts
Thank you, Andy. As we begin the call, I would like to remind everyone, we committed to our shareholders during the first half of 2022 to focus Vyant Bio on discovering novel therapeutics to treat patients suffering from debilitating 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 into our pipeline, we strive to enhance value for our shareholders.
For those new to the Vyant Bio story, as a reminder to those who have been following us, I’d like to start with our mission, which is uniting human biology, engineering, data science, and our passion to transform lives.
The acceleration of the drug discovery sector of our industry is rapid, disrupting the underperformance of widely used models for predicting drug efficacy and safety, human iPSC modeling, 3D printing, CRISPR, artificial intelligence, big data. New technologies are radically transforming the way that we treat patients and cure diseases. There has never been a more exciting time to work in life sciences.
Our CNS drug discovery platform is combining human patient derived organoid models of brain disease, biology at scale, and machine learning to elucidate disease, pathophysiology and identify and validate drug targets for rare CNS genetic disorders.
Using patient derived induced pluripotent stem cells, our homogeneous cortical organoid platform can efficiently screen large compound libraries in a highly reproducible fashion. Our proprietary human organoid platform employs the functional network activity readout that exhibits a robust and reproducible phenotypic signature across multiple distinct differentiations, thus providing a stable foundation for recovery-based screening. This means identifying and ranking those compounds that will be most effective in a human disease setting much earlier in the drug discovery lifecycle, allowing us to select derisked therapeutics that are demonstrating a higher likelihood of patient benefit in clinical trial patients in clinical trials.
Our approach is unique in drug discovery. The traditional target-based approach to discover and develop treatments for neurologic diseases is broken. It is expensive, inefficient, and almost always unsuccessful.
What differentiates Vyant Bio is our disease-centric approach that brings human understanding into the lab, providing a greater level of certainty in neurological drug discovery and development and allows both high throughput phenotypic screening and target-based approaches in a human relevant environment. Bob will talk more about the specific R&D work we’re doing in a minute.
The opportunity that we are presenting is significant. The total addressable markets in two rare disease categories, where we are currently focused, is approximately $2 billion worldwide, while the familial Parkinson’s area, the addressable market is over $5 billion globally. We are developing a pipeline of candidates that don’t just treat the symptoms of neurological diseases, but are truly disease modifying. And we think our positioning in the competitive landscape in CNS disorders is highly favorable.
Turning to our recent highlights. As we’re executing on our strategic decision to further focus our business and our people on drug discovery and moving away from preclinical CRO services, we continue to make very positive strides forward and hope to announce the details of a definitive agreement with a select purchaser to acquire our vivoPharm preclinical services business.
Our exit from the preclinical CRO services and product sales businesses will allow us to put all our human and capital resources into our R&D efforts to discover and develop therapeutic assets for CNS diseases.
I’ll now highlight the key business accomplishments for the second quarter and actions we are taking as we head into the second half of 2022. First, we continue to make progress in our efforts to license our iPSC technology manufacturing to transition key product sales customers to a qualified and prominent distributor.
Second, based on our compelling preclinical data from VYNT-0126 with our proprietary human Rett cortical organoid model, we’re engaging with the International Rett Syndrome Foundation and their clinical trial committee to help guide our plans to commence a proof of concept clinical trial in adult Rett patients.
We plan on submitting an application with the ethics committee in Australia to open an adult population clinical trial to further validate our drug discovery platform and to evaluate the effectiveness of the repurposed drug, VYNT-0126, to treat Rett syndrome.
We have also initiated a collaboration with the International Rett Syndrome Foundation to advance VYNT-0126 into a proof of concept clinical trial in pediatric Rett patients in the US and anticipate filing an IND with the FDA in 2023.
Third, we’re progressing our NCE work in Rett, with a goal to have lead series of candidates by the end of Q4 2022.
And finally, we will be holding several presentations in the second half of 2022. We will be presenting at the Investor Summit Group’s Q3 virtual conference tomorrow at 2pm Eastern. We will also be presenting at the H.C. Wainwright Global Investor Conference in New York City from September 12 to the 14th.
We’re also excited to announce that we will be sharing our human preclinical efficacy data for VYNT-0126 in two invited talks at the Rett Symposium at the Annual Meeting of the Society for Neuroscience in San Diego on November 16, 2022.
I hope that you can join us during these events. We remain committed to additional shareholder engagement during the coming months to communicate our strategy to both retail and institutional investors.
With that, I now turn the call over to our Chief Scientific Officer, Robert Fremeau. Bob?
Robert Fremeau
Thank you, Jay. I have some exciting data to share with you today, which is the validation we have been working on to support the identification of our lead clinical compound, VYNT-0126, for the treatment of Rett syndrome.
As you may recall, Rett syndrome is a rare genetic, early onset, neurodevelopmental disorder, resulting in severe mental and physical disability, affecting nearly every aspect of the child’s life, including their ability to speak, walk, eat, and even breathe easily. Cognitive dysfunction, autistic-like behaviors and seizures are prominent neurological features of the disease.
Rett is usually recognized in children between 6 to 18 months as they begin to miss developmental milestones or lose the abilities they had gained. Rett is primarily caused by mutations in a gene called MECP2 on the X chromosome
We developed a homogeneous Rett patient derived cortical organoid platform that exhibits a robust and reproducible functional disease phenotype that provides a stable foundation for recovery based screening.
As shown on this slide, our data science team developed proprietary algorithms to identify and quantify the disease specific signal and to quantify the ability of molecules to reverse the Rett disease phenotype to a non-disease normal phenotype. We refer to this compound mediated reversal of the disease phenotype as rescuing the Rett phenotype.
The next slide shows that the Rett disease phenotype is robust and reproducible across multiple experiments over many, many months, which is a key attribute to provide a consistent model to test and compare the effectiveness of different compounds to rescue the Rett disease phenotype.
We screened International Rett Syndrome Foundation smart library and identified several known inhibitors of acetylcholine esterase and histone deacetylases that rescue the Rett cortical organoid phenotype. From this screening, we chose to focus on the rescue potential of VYNT-0126 because it is an FDA approved medicine for neurological indication with a strong safety track record. And therefore, it’s a promising repurposing candidate for Rett syndrome with a streamlined drug development timeline and considerably reduced R&D and development costs.
We found that chronic treatment with VYNT-0126 rescued the Rett phenotype at relevant estimated brain concentrations and target engagement. As shown on the panel on the right, further analysis revealed that the dose dependent rescue of specific waveform parameters created tenfold lower levels of drug that do not appear to require full target inhibition.
The next slide shows that VYNT-0126 appears to rescue the Rett disease phenotype by a distinct mechanism of action compared to two advanced [indiscernible] candidates, which don’t rescue the disease phenotype in our Rett patient derived cortical organoids.
Finally, our ongoing work with CDKL5 and familial Parkinson’s disease has further established that our drug discovery platforms represent a robust model for human first CNS drug discovery.
As shown on this slide, phenotypic and target-based screening of our patient-derived CDKL5 organoids has identified several novel small molecule hits and targets that rescue the hyperexcitability phenotype and represent promising starting points for identification of disease modifying therapeutics for CDKL5 calcified disorder.
And finally, our Parkinson’s Disease program to identify the disease relative biomarker in a human induced pluripotent stem cell drive familial model of Parkinson’s disease that we are optimizing for conducting a high throughput screen.
With that, I’ll turn the call back over to Andy.
Andrew LaFrence
Thank you, Bob. Hello, everyone. And thank you again for joining our call. Today, I will review our financial results for the second quarter and the first half ended June 30, 2022.
First and foremost, we ended the first half of 2022 with $11.7 million in cash. 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 $14.5 million at the market or ATM offering with Canaccord Genuity.
During the first half of 2022, the company continued the process of divesting the vivoPharm business, which is expected to be completed later this year. Therefore, the vivoPharm business is classified as held for sale and its financial information as discontinuing operations.
As disclosed in our Form 10-Q filed with the Securities and Exchange Commission this afternoon, in July 2022 as part of the company’s periodic evaluation of factors that impact the company’s execution of its business, financial and research development plans, particularly in light of the current status of the overall biotech financial markets, the company is emphasizing its operational focus and capital resources on developing therapeutic candidates to treat Rett syndrome. Consistent with the company’s strategy, the company is continuing its CDKL5 and Parkinson’s disease programs, with its team of experts in both areas, although at a slower pace of internal and external spend.
Our current cash balances, the laser focus of executing our strategic plan, future proceeds from the sale of the vivoPharm business and usage of the equity line of credit and ATM are expected to fund operations over the next 18 months.
Turning to our financial results, the company’s loss from continuing operations aggregated $4.3 million in the second quarter of 2022 compared with $4.0 million in the second quarter of 2021. The company’s loss from continuing operations aggregated $8.7 million in the first half of 2022 compared with $11.3 million in the first half of 2021. The 2021 period included $2.9 million of non-cash financing related charges and $2.3 million of merger-related costs.
Total revenue from continuing operations decreased 50% or $164,00 to $165,000 for three months ended June 30, 2022 as compared with $329,000 for the three months ended June 30, 2021.
Total revenue decreased 12% or $64,000 to $468,000 for the six months period ended June 30, 2022 as compared with $532,000 for the six months ended June 30, 2021. The decrease in the current year periods were the result of our planned decrease in revenue generating activities at our Maple Grove facility as we transition its operations to an internal research and development facility in 2022.
Research and development expenses increased by 85% or $778,000 to $1.7 million for the three months ended June 30, 2022 from $910,000 for the three months ended June 30, 2021. Research and development expenses increased by 87% or $1.5 million to $3.2 million for the six months ended June 30, 2022 from $1.7 million for the six months ended June 30, 2021. This increase is principally due to a $853,000 increase in payroll related and consulting expenses, a $417,000 increase in research and development activities at our Maple Grove facility, and $230,000 related to moving to a new facility in California with a lower ongoing cost structure.
Selling, general and administrative expenses decreased by 8% or $228,000 to $2.5 million for the three months ended June 30, 2022 as compared with $2.7 million for the three months ended June 30, 2021. Selling, general administrative expenses increased by 33% or $1.3 million to $5.3 million for the six months ended June 30, 2022 as compared with $4 million for the six months ended June 30, 2021.
The 2021 period reflects the company as a privately held company during the first quarter, whereas the 2022 period reflects the company as a publicly held company.
The six months ended June 30, 2022 includes incremental $717,000 in payroll-related expenses, including one-time severance benefits for two former employees aggregating $437,000, the company incurred $418,000 of additional professional service expense in 2022 as compared with the same period in the prior year.
Net loss from discontinued operations was $1.5 million for the second quarter of 2022 compared with $232,000 for the second quarter of 2021. Net loss from discontinued operations was $6.2 million for the first half of 2022 compared with $240,000 for the first half of 2021. The increase in discontinuing operations losses in the first half of 2022 as compared with the prior year is the result of non-cash impairment charges of $1.5 million in the second quarter of 2022 based on offers we received for the vivoPharm business and a $4.3 million impairment charge during the quarter ended March 31, 2022 resulting from change marketing conditions for contract research organizations from December 31, 2021 to March 31, 2022.
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 with the following takeaways. First, I’d like to reiterate our intense focus on meeting key milestones initially with our programs to further validate our drug discovery platform to the work we’re doing on a repurposed drug for Rett syndrome and the subsequent R&D investments we are making toward identification of a novel therapeutic that will address Rett. Stay tuned as we continue to make progress.
We also invite you to become more familiar with Vyant Bio. As news and information becomes available, we’ll be communicating updates via press releases, LinkedIn, or Vyant Bio website and other social media channels. Interested parties are invited to sign up for press release distribution list, please visit our website.
And with that, we will go to question-and-answer session. Thank you everyone who have submitted questions.
Question-and-Answer Session
A – Jay Roberts
I’ll read these questions as they’re coming in. Well, the first one, I think, it’s for you. It asks, are you on track with your NCE lead series of compound for the year-end 2022?
Robert Fremeau
Yes, Jay. We are on track. Of course, it’s important to note that drug discovery is an experimental science, barring any unforeseen natural disasters, wars, etc., we are on track for NCEs in 2022.
Jay Roberts
Looks like the second question here, Bob, also for you. You said that you have a lead series of compounds for CDKL5 by year-end. Is that still on track?
Robert Fremeau
Yes. As I mentioned in the presentation, Jay, we’ve identified several novel small molecule hits and targets that rescue the hyperexcitability phenotype and represent promising starting points for the identification of disease modifying therapeutic for CDKL5 and we’re quite excited to continue pursuing these and we think we’re on track.
Jay Roberts
Why is the proof of concept clinical trial in the adult population meaningful?
Robert Fremeau
There are two main values of the study. The first is it allows us to validate our platform that we can indeed identify disease modifying therapeutic using our drug discovery platform with human brain organoids. And secondly, we have the potential now to offer a significant beneficial advantage to patients in clinical trials. The fact that our compound is differentiated from the most advanced political candidates means it’s likely to bring additional benefit to patients when they will represent a potential cotherapeutic moving forward in Rett disease.
Jay Roberts
How are your potential partnerships looking to co-develop or get non-dilutive funding to progress your programs?
So, we have a couple of ongoing discussions with possible partners. We’re looking forward to the ongoing dissemination about validation data of our platform and the rescue and differentiation data that Bob spoke about today to support these efforts.
Andy, there’s a question here for you. What is your anticipated cash runway and what plans are you making to extend your runway?
Andrew LaFrence
As I mentioned in my prepared remarks, a combination of the current cash balances, the expected proceeds associated with the vivoPharm sale, our opportunities that we have to raise capital through the Lincoln Park equity line of credit, as well as the Canaccord Genuity ATM, combined with our operational focus in terms of preserving cash and using it as effectively as possible, we have 18 months of runway with those opportunities. We’re also pursuing other activities associated with grants and other opportunities to even further extend the runway from there.
Jay Roberts
Are you planning to raise more money in the near term?
Andrew LaFrence
We really looked at our cash balances, wanting to make sure that we have no less than 12 months of cash on the balance sheet at any given time. So given that that’s a basic principle that we’d like to adhere to, we will continue to evaluate the capital markets and our two funding sources with the equity line of credit and the ATM to raise capital to ensure that we have appropriate liquidity to manage our strategic plan.
Jay Roberts
What are you going to do about the stock price trading below $1 and the potential for a NASDAQ delisting?
Andrew LaFrence
[Technical Difficulty] expectations and milestones that we have in front of us in terms of our clinical development plan. And then the vagaries of the stock market are what they are, but we do have tools in place with the approval to do a reverse stock split to get back above $1 to make sure we continue to have listing as well as, as I pointed out in some of my responses on raise questions, is that we do have tools in place to raise capital. And so, I think we’re very well positioned to make sure that we don’t go below the dollar per share price.
Jay Roberts
Do you know what the stock split ratio will be if you do choose to execute on that action?
Andrew LaFrence
That’s really going to be at that point in time that we may make that decision to do that. The board has the authorization to do that, given the shareholder vote. And as you might recall, that is a ratio somewhere between 1 to 5 and 1 to 15. So the variety of factors related to where the stock price is, market conditions, our capital, cash balances and things like that will play into that decision. But there is no decision at this point in time. And again, we’re really focused on just executing our strategic plan and then making sure that we maintain that listening.
Jay Roberts
Okay. Unfortunately, we’re out of time. So this is going to conclude our Q&A session. So thank you, everybody, for participating on today’s call. Again, we’ll reiterate that we have intense focus on our business, focusing on meeting key milestones to drive our programs forward. We are very happy with our progress so far. And we look forward to keeping everyone informed about progress along the way. Thanks again for joining today’s call. Stay safe and be well. Bye. Thank you.
Operator
Thank you, ladies and gentlemen. This concludes today’s event. You may disconnect at this time and have a wonderful day. Thank you for your participation.
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