Good day, and welcome to the Virios Therapeutics Inc Q3 earnings update. At this time, all participants have been placed on a listen-only mode. The floor will be open for questions and comments after the company presentation. It is now my pleasure to turn the proceedings over to Angela Walsh, SVP, Finance and Treasurer, Virios Therapeutics Inc Angela, the floor is yours.
Thank you. Good morning, everyone, and thank you for joining us on today's conference call. We are pleased to be with you today to discuss Virios Therapeutics' third quarter financial results, as well as to provide a summary of our ongoing analysis of the results from our recently completed phase IIB fibromyalgia trial, also known as the FORTRESS Study. Please note that our financial results press release is now available on our website. We'll start today's call with our CEO, Greg Duncan, providing you with a brief update on our corporate progress during the past quarter. He will turn the call over to our Chief Medical Officer, Dr. Mike Gendreau, who will provide an update on our FORTRESS study analysis. I will return to review our third quarter financial results.
In addition, Ralph Grosswald, our Senior Vice President of Operations, is with us for the question and answer portion of the call. Before we begin, I'd like to remind everyone that statements made during this conference call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, which involves risks and uncertainties that can cause actual results to differ materially from the information expressed or implied by these forward-looking statements. For more information regarding such risks and uncertainties, please see the risk factors outlined in the company's filings with the SEC. Any forward-looking statements are made only as of today, and we disclaim any obligation to update these forward-looking statements other than as required by law. Please see the forward-looking statement section in our financial results press release issued this morning for more information.
It is now my pleasure to turn the call over to our CEO, Greg Duncan.
Thank you, Angela, and good morning to all of you joining us on today's quarter three earnings update. Our goals for today's discussion are threefold. First, following our announcement of the top-line results in mid-September, we will provide you with a summary of what we have learned so far from our detailed examination, the FORTRESS phase IIB Fibromyalgia Study data. Second, we will outline our proposed plan and projected IMC-1 development milestones for the balance of this year and into 2023. And finally, we'll provide a summary of our quarter three financials before opening up the call to receive participants' questions. On September 19th, we reported that the FORTRESS study demonstrated that IMC-1 was safe and very well tolerated, but did not achieve statistical significance on the pre-specified primary endpoint of pain reduction.
The results were confounding, particularly when viewed in the context of both mechanistic data highlighting the role of active replicating herpes infection in patients diagnosed with fibromyalgia, as well as the results of our previously successful phase IIA fibromyalgia trial. Recall, this prior phase IIA trial clearly demonstrated IMC-1's potential as a novel approach to treat the pain, fatigue, and other symptoms associated with a fibromyalgia diagnosis. In mid-September, we discussed that our preliminary top-line analysis of the data suggested an unusual bifurcation of response based on the timing of patient enrollment in the FORTRESS trial. By way of background, enrollment of the first 50% of patients took place from June 2021 to early November 2021.
For context, this was when the Delta variant of COVID-19 was the dominant strain here in the U.S., full vaccination rates were far below the levels we enjoy today, and probably most importantly, extensive quarantining was still in place in most geographies. The patients enrolled and treated with IMC-1 in the first half of the study did not demonstrate a statistically significant reduction in pain when compared with patients treated with placebo during the same time period. Conversely, during the second half of the trial, which took place from November 2021 to April of this year, we enrolled the second 50% of patients into the FORTRESS study. This was the time period when vaccination rates had substantially improved, the less severe Omicron variant of COVID-19 became the dominant U.S. strain, and quarantining restrictions were lessening or fully removed across many geographies here in the U.S.
Essentially, we were getting back to a more normal day-to-day lifestyle. In stark contrast to the first half study enrollees, the IMC-1-treated patients enrolled during the second half of the trial, which totaled 214 patients, demonstrated a statistically significant improvement on the primary pain reduction endpoint at week 14, as well as statistically significant improvements in fatigue and fibromyalgia symptoms. The Virios management team believed that the likelihood of such a substantial differential response based on the timing of patient enrollment was highly unlikely to be a random occurrence. Alternatively stated, we as a team believe the positive outcomes demonstrated in the patients recruited during the second half of the FORTRESS study, a sample of patients that is roughly 1.5. The size we believe was required to demonstrate statistically significant pain reduction over the full trial required deeper exploration.
Virios' management team has spent the past few weeks deeply analyzing the FORTRESS data to better understand the factors driving the top-line results. This understanding will help the team design an IMC-1 development program that targets the patients who are most likely to respond to IMC-1 treatment. The team has identified several factors that have both positive and negative impacts on our final study results. We have vetted these findings with multiple highly recognized fibromyalgia research thought leaders who corroborated our view that the FORTRESS study results were unlikely due to chance, and that the positive results we observed in the FORTRESS trial do support the potential of IMC-1. These experts supported our proposed plan to continue the development of IMC-1 as a treatment for patients diagnosed with fibromyalgia.
We will shortly be requesting a live meeting with FDA with the goal of progressing IMC-1 development to phase III next year. It is now my distinct pleasure to turn the discussion over to our Chief Medical Officer, Dr. R. Michael Gendreau, to share what we have learned that underpins our continued belief that IMC-1 can improve the treatment of fibromyalgia. Mike will also share our thoughts on the broad parameters of the plan we will propose to FDA to advance the development of IMC-1 moving forward. Take it away, Mike.
Thank you, Greg, and good morning. As Greg referenced, the Virios research team has spent the past several weeks analyzing the FORTRESS data in detail to better understand the factors and patient demographics that led to responses that were not consistent with our prior research or with the design goals of the study, particularly with respect to the rate of placebo improvement in the trial. However, as Greg mentioned, responses of patients enrolled in the second half of the trial from November to April 2022 were consistent with the expected efficacy profile for IMC-1, and at all time points, the safety and tolerability of IMC-1 was outstanding. In the original post hoc first half, second half analysis that Greg mentioned, the subgroup of patients recruited from November to April demonstrated statistically and clinically significant improvements with half the original plan sample size.
Our efforts over the last few weeks have been directed at achieving a better understanding of the factors that led to this different response over time, as well as identifying populations and characteristics that were more responsive overall to IMC-1 treatment. I am now pleased to share with you a summary of what the research team has learned to date. As you might imagine, a full understanding of the factors impacting the FORTRESS results had to be conducted in a careful manner, considering the impact of enrollment timing that we shared back in September. Many demographic variables and subpopulations were analyzed to understand why the FORTRESS results differed from our original design goal. So far, we have learned the following.
First observation is that post hoc analysis of the FORTRESS trial results indicate that FM patients who were new or naive to clinical research studies, which we will call new patients, demonstrated clinically and statistically significant reductions in pain, fatigue, fibromyalgia symptoms, anxiety, and depression symptoms. Improvements in this population were statistically significant for the entire study time frame, so results in this population were far less impacted by the enrollment timing as compared to other subpopulations. In contrast, enrolled patients who were prior fibromyalgia trial participants and/or study site database patients, who we will call experienced patients, now appeared to represent a more treatment refractory or treatment-resistant cohort of patients, and they did not exhibit a meaningful treatment benefit in this study in either time frame.
Historically, we've used a combination of dedicated research sites as well as sites that both recruit patients for clinical trials and provide general medical care for patients in their communities. Our data indicates that the dedicated clinical research sites that were less likely to experience staff turnover in the pandemic delivered more consistent results, including better placebo response management as compared to the clinical practice sites. Our plan moving forward will be to execute future IMC-1 trials with a focus on dedicated research sites. While we were pleased to be able to successfully recruit the FORTRESS study in the midst of the extraordinary circumstances associated with the pandemic, it remains clear that this environment had unintended impacts on our overall FORTRESS trial results.
While we can't guarantee that future research will be conducted in a COVID-free environment, we are confident in IMC-1's potential when targeting new patients who we believe represent our optimal patient target moving forward, given that they demonstrated lower placebo response rates and the expected drug response rates irrespective of which half of the study they were recruited in. On a related note, we may now be reaching a saturation point in the United States fibromyalgia research patient community, whereby experienced trial subjects and those presently being treated for fibromyalgia may be characterized as becoming more refractory to treatment. This trend has been observed in several other research categories, such as depression, where more time and energy must be expended to recruit newer, more treatment-naive patients for trials. We expect this to be our plan moving forward with IMC-1 development.
It is important to remember that as with the case in our successful phase IIA study.
IMC-1 was very well tolerated by all study subjects, as evidenced by a discontinuation rate due to adverse events that was lower than placebo. This is a feature of IMC-1 that we believe supports progression to phase III development, and if successful, could be a highly differentiated feature of IMC-1 treatment versus other available therapies. In summary, while there are factors impacting our trial that we will likely never fully understand, such as the impact of COVID dynamics on our results over time, there are many factors we can conclude had a material impact on the FORTRESS results. Importantly, we believe with this understanding, we can design future trials that will help us better manage many of these factors. We will shortly be requesting a guidance meeting with FDA to review our results and present our plans for advancing IMC-1 into full phase III development.
Given the observed excellent safety profile obtained in FORTRESS, we plan to propose a comprehensive phase III development program to FDA at that meeting. We understand that FDA is not granting any further live meetings this year. Hence, we are likely to receive our FDA feedback sometime in the first half of 2023. I would be happy to answer any further questions about our data analysis and our plans moving forward during the Q&A session. Let me welcome back our Senior Vice President of Finance and Treasurer, Angela Walsh, to discuss our quarter three financials. Angela.
Thank you, Mike. As discussed during our second quarter earnings update, at that time, the company had cash to get through 2022. In this context, and based on the aforementioned bifurcation of response data, we made the decision to raise additional capital following the reporting of our FORTRESS top-line results in September. This additional capital provides the company with approximately 12 months of new operational runway and has allowed the engagement of external consultancy resources required to review the FORTRESS data in greater depth. The capital also provides us time to discuss both the FORTRESS data and our proposed forthcoming IMC-1 development plans with the FDA. We project those discussions will most likely occur in 2023, albeit timing will be dependent upon the FDA's current workload, especially related to requests for live meetings, which we plan to do.
As of September 30th, 2022, we had $9.8 million in cash as compared to $14 million as of December 31st, 2021. We expect our current cash to be sufficient to fund the company's operations through the end of 2023, but note that any future IMC-1 development, including phase III studies, will require additional capital. With respect to our income statement as a development stage biotechnology company, we did not generate revenue during the 3 months ended September 30th, 2022, or during the 3 months ended September 30th, 2021. We reported research and development expenses of $1.6 million for the third quarter ended September 30th, 2022, as compared to $3.1 million for the year-ago quarter.
The decrease in research and development expenses quarter-over-quarter was primarily due to a decrease in clinical trial expenses for our FORTRESS study of $0.9 million, a decrease in expenses related to our chronic toxicology program of $0.4 million, and a decrease in drug development and manufacturing costs of $0.1 million. We reported general and administrative expenses of $0.9 million for the third quarter of 2022 as compared to $1.1 million for the year ago quarter. The decrease quarter-over-quarter was primarily related to a decrease in salaries and related costs. Finally, we reported a net loss of $2.6 million for the third quarter of 2022 as compared to a net loss of $4.1 million for the year ago quarter.
A lower net loss was primarily due to the lower research and development costs I just mentioned. Let me turn the discussion back to Greg Duncan to wrap up and moderate the question and answer portion of the call. Greg?
Thanks once again, Angela. The extensive data analysis of the FORTRESS study conducted by Mike and our research team has uncovered several key insights into which patients are most likely to respond to IMC-1, irrespective of external factors, including COVID-related dynamics. This includes recruiting patients new to fibromyalgia research with additional emphasis on screening out fibromyalgia patients with a recent history of treatment failure or patients who have previously participated in fibromyalgia clinical trials. This proposed approach is supported by data gleaned from the analysis of the FORTRESS study. We believe these insights will enable us to design a phase III program to be discussed with FDA over the coming months. We hope to reach alignment with FDA in the first half of 2023, subject to FDA availability for live engagement, and to commence the next phase of our IMC-1 research program in the second half of 2023.
As Angela referenced in her remarks, we have capital to support operations into the end of 2023, but future research will require additional capital and/or partnership support. In addition to engaging with the FDA, we will also commence discussions with both current and new investors and prospective partners to determine the optimal path forward for funding and executing IMC-1 development. Our ultimate goal remains the same, getting IMC-1 to market.
To enhance the standard of care for hundreds of millions of fibromyalgia patients not presently satisfied with current treatment options. Operator, we are now ready for questions.
Thank you, ladies and gentlemen. The floor is now open for questions. If you have any questions or comments, please press star one on your phone at this time. We ask that while posing your question, you please pick up your handset if listening on speakerphone to provide optimum sound quality. Please hold while we poll for questions. Thank you. Our first question is coming from Sean Lee with H.C. Wainwright. Sir, please go ahead.
Good morning, guys, and thanks for taking my questions. I would like to understand better the rationale behind the analysis. Could you explain, based on the mechanism of action of the drug, why is it that some of the newer patients would have a better response rate than the experienced fibromyalgia patients?
Hey, Sean, this is Greg Duncan. Let me take that one. As you know, the whole ethos of the program is a fundamentally new approach to treating patients with fibromyalgia by trying to get to a potential root cause. That is, in fact, why we recruited both treatment-naive patients into the program as well as those that had been participating in other trials because of the novelty of this mechanism. As Mike mentioned in his earlier comments, we may be hitting a point where that second group, those experienced trial participants, may represent a more refractory patient population. We may be hitting that tipping point, and that was actually validated by the three key opinion leaders we spoke to as you know, we re-reviewed the data that we're discussing today.
We don't have a clear reason as to why some patients may not have responded in that refractory group. It may represent just a more refractory treatment population, which is what we've seen in depression or other areas. There is a potential that the active replicating virus was not as consistent in that group as we saw on the new and naive patients, but that's just a guess. We really don't have a clear view as to why that would have happened other than the fact that most of those prior trial participants were representing a group of patients that, in the majority, had been previously treated and/or experienced other new therapies and not responded, which is why they were candidates for our trial. I suspect it's just a general overall more refractory nature of the patients.
I see. Thanks for that. In terms of the classification of patients, do you know whether these new or experienced classification has been used in any other clinical study in fibromyalgia or whether that's a standard classification for patients in this setting?
The way we defined the new patients were patients who were recruited through advertising. These were patients that had not identified as prior clinical participants, clinical trial participants, nor were they patients that were on physicians' lists. Why I referenced that second group is because, while a patient may not have recently participated in a trial, by definition, particularly in the purely research centers that we used, those patients likely were in a trial sometime in the distant past. The goal going forward will be to make sure that we do not use that kinda tried and true recruiting mechanism.
You know, the way you run these trials is you go out and you say, "Okay, let's get all the patients off your list that you've been in prior clinical trials." You exhaust that patient pool, then you move to the newer patients, excuse me, who we know in this particular analysis were not prior clinical trial participants. They may have been previously treated, but they were not previously in clinical trials. Those patients are a little bit harder to find, but it is relatively manageable. We did this in depression back in the day. You can use differential screening requirements here in the U.S. so that you recruit only those new patients.
We can also consider going to other geographies, which we think actually makes sense anyway as we consider moving to phase III, 'cause that's really starting to saturate other markets, get them some experience with IMC-1 through clinical research as a precursor to launch. We do think it's manageable through better screening, and we think it's the wise way to go here based exactly on the data we just shared with you today.
I see. My last question is on a potential phase III study. In terms of size and things you mentioned a bit on the geographies, what can we expect, like, what would you be proposing to the FDA?
We're in the process of finalizing that recommendation, but our general approach will include the following, again, subject to FDA feedback. We'll likely do one multifactorial trial, which is an FDA regulation, so that's IMC-1, placebo, and it probably will include two arms, one Celebrex, one famciclovir as independent components. We can certainly argue there's probably no reason to test famciclovir, but FDA may have a different view on that. Think of that as probably a three or four-arm study. We will make the case that we should do one head-to-head, again, a second head-to-head of IMC-1 and placebo. That may be a two-arm trial.
FDA may come back and say, "We would like you to do two multifactorial trials." Then the third key component of the program that we would be proposing would be an open label extension to glean the safety data that are required as part of the overall package to support an eventual NDA if we continue to be successful. It's probably three studies. Hopefully one multifactorial and one head-to-head with the caveat that it may be two multifactorials depending on FDA feedback and an open label extension. Three particular trials, then there'll probably be some other kinda classic trials of food effect, et cetera, that are standard part of a phase III.
Thanks for the additional color. That's all the questions I have, and thanks again for taking my questions.
Thank you for participating, Sean. Appreciate the questions.
Once again, if there are any remaining questions or comments, please press star one on your phone at this time. Our next question is coming from David Bautz with Zacks. Please go ahead.
Actually, excuse me, it's Richard Hantke calling for David. Hi, Greg. Hey, Angela. How are you?
Hey, Richard. Good morning.
Hey. Good morning. Yeah, David, I'm sure he's gonna follow up shortly. He just couldn't be on the call this morning. He gave me a few questions to ask you guys. I think you've been very clear about, you know, what happened with IMC-1 and the FORTRESS trial and things like that, so I'm sure he'll wanna dive in and dig a little bit deeper. I think it's encouraging you're gonna take it into phase III with the new FM patients, so that's great. Maybe. I'm sure you've given a timeline. I'm sure you can't give me any more than that.
As I understand it's gonna be, you know, shortly, you know, getting with the FDA, hopefully a live meeting the first half of next year and then hopefully approval first half of next year and then moving into phase III, second half of next year, if I understood you correctly. In the interim, there's going to be additional funding required. My question is simply, what are the factors that would accelerate that whole process? What are the factors that would delay it? And can you give a range on the kind of funding required.
Okay. Thank you, Richard. There's a lot in there, so let me try and address that. Number one, our goal would be to go to phase III. That's obviously subject to FDA feedback. You know, I think it's important to mention that that is our goal. We can't guarantee that, but we think the totality of the data, the safety data, the efficacy data in this population, support progression to phase III. The timeline we gave you is our best guess at this point. It is our understanding, based on our interaction with our regulatory consultants, that FDA live meetings requests are not being scheduled for the balance of this year. They are now targeting, at latest intelligence, sometime in the middle of quarter one to the end of quarter one. That is our best guess at this point.
The goal would be to have that live meeting. The FDA then has 30 days for formal feedback. Our goal would be to glean that feedback and obviously report that out to the external community here as an entity. The best guess we can give you right now is if we're successful in those discussions, which we hope to be, that we could commence recruitment in that program sometime in the second half of 2023. Probably needless to say, but for completeness, we have good relationships with the research sites. We will continue to nurture those relationships so that we are ready to go, subject to funding, financing, et cetera, and an FDA feedback.
That's one of the benefits of the team having some such experience in the space is that we have very good relationships, Mike, Ralph, etc., with the sites to start as soon as possible. The best guess on capital required at this point would be a general guess. You're probably talking in the range of $65 million-$70 million for the phase III program in totality plus operations. If we are successful in finding a partner, that may be a lesser amount. At this point, I think it's probably a little bit early to get too refined in an estimate as to what phase III would cost because it is subject to FDA feedback.
Got it. Okay. Thank you for that. Just a couple more questions. I wanna swing over to IMC. David Bautz wanted to swing over to IMC-2. We haven't talked about that. Have you ever considered testing IMC-2 in FM? Is that something that's ever been considered?
We think the data really do support IMC-1 progression to phase III. IMC-2, as you may know. Let me back up just for completeness. IMC-1 is a combination of famciclovir and celecoxib. IMC-2 is valacyclovir and celecoxib. We selected IMC-2, the combination of valacyclovir and celecoxib for the Long- COVID trial, for one reason and one reason only. It's a little bit more selective based on our perusal of the data on Epstein-Barr, which we think is the bad actor. The activation of secondary herpes viruses, including Epstein-Barr, which is the bad actor leading to the fatigue, brain fog, etc., that's associated with Long- COVID sequelae. That's the test. That's the valacyclovir plus celecoxib in that trial, which we hope to finish recruitment up by the end of this year and report out results sometime in the first half of next year.
That's the program that's supported through an investigational grant to the Bateman Horne Center, who is conducting the trial. We can't guarantee the timelines, but we do talk to them frequently and think that is the rough timeline here for the Long- COVID program. Famciclovir has very good activity against a number of herpes viruses. We have great formulation. We know how to manufacture it relatively efficiently. The goal would be to move IMC-1 forward for fibromyalgia, and we'll explore what to do with IMC-2, pending the results of the Long- COVID program.
Okay. Just so I'm clear, David had mentioned there's an IBS program that was put on the back burner. Is that, is that something else? Is that what you're referring to 'cause you're focused on Long- COVID with IMC-2?
We do believe this mechanism has utility across a number of different potential somatic syndrome disorders. The founder, Dr. William Pridgen, was actually a gastric surgeon. He treats patients, performs surgery, but also treats patients for things like functional GI disorders like IBS. His original utilization of this combination was in an IBS population. Fantastic results. Open label, but saw really good results. He connected with a virologist at the University of Alabama, and they actually executed a very novel program where they biopsied the gut tissue of patients who had a diagnosis of fibromyalgia, patients who had a diagnosis of functional GI disorders, and compared them to control patients.
These are patients that were there for a follow-up, maybe for a prior GI bleed or some other form of follow-up care, who were what I would describe as a control patient, if you will. He demonstrated with Dr. Carol Duffy very clearly that patients with fibromyalgia had active replicating herpes infection in their gut tissue. We believe that corroborates the activity of activated herpes virus in fibromyalgia patients. What was also presented as part of those data is there was a third portion of the study, which were patients who had purely functional GI disorders and no fibromyalgia, just functional GI disorders, including IBS, is probably the dominant category there. He also noted active replicating infection in those patients in their gut tissue at a highly statistically significant level.
The trial was so important that it was actually presented by Dr. Duffy at the Digestive Disease Week meeting, last year. Sorry, this year, I believe. Those data were a late breaker analysis. The poster presentation was a late breaker. There is certainly interest in the community in the connection between herpes virus activation and IBS. That is a program that we think we could execute as a complement to fibromyalgia. The fibromyalgia program is priority one. Long- COVID right now is priority two. Presuming success over time, we do think there's a potential to expand the research pipeline into IBS, as a third potential priority. That's obviously subject to further funding, community support, FDA feedback, et cetera. The good news is, if we did an IBS program, we now have extensive safety data on IMC-1.
As you know, Mike mentioned earlier, the tolerability and safety of IMC-1 is very good, and so that safety data would be an important part of the dialogue with the FDA moving forward if we decided to pursue that particular line of research with those safety data in hand. That is our third priority right now, but we do think it is an exciting priority based on Dr. Pridgen's experience and the GI biopsy study.
Excellent. Well, thank you for that, Greg. As I mentioned, I'm sure David will be in contact shortly to follow up and things like that. Good luck. It's encouraging you guys are moving to phase III, you know, with new patients, IMC-1. That's great. We'll be looking forward to 2023. Thank you for your time.
Yeah. Thank you, Richard. Our goal is certainly to take IMC-1 to phase III. We do believe in summary that the FORTRESS data reveal that fibromyalgia patients that are new to research are an excellent target for progression of IMC-1 development, ideally to phase III, based on the demonstration of significant IMC-1 benefits, including reduction in pain, reduction in fatigue, improvement in overall fibromyalgia patient symptoms, and an improvement in overall patients' global health. We may be reaching that saturation point where those patients that were in prior clinical trials are representing a much more refractory population. It will take a little bit more time and attention, but it is certainly actionable, and doable to target those patients moving forward for IMC-1's continued development. We do believe very clearly that the safety data continue to impress.
This is the second consecutive trial where IMC-1 had a lower dropout rate due to adverse events as compared with placebo. As you probably recall, if you heard the story before, that the primary reason for dissatisfaction in the fibromyalgia patient community and amongst those doctors that treat those patients is the poor tolerability of the existing 3 approved medications. They're all good medications. They reduce pain, but tolerability is the issue that leads to less than ideal compliance. As I mentioned during Richard's question, while we can't yet see FDA will endorse going to phase III , we really do believe the totality of the data, specifically the safety data, support IMC-1's progression to phase III. As I mentioned earlier and Mike mentioned as well, we will shortly be requesting FDA feedback to advance that progression to phase III.
The Long- COVID program continues to recruit. We hope to conclude dosing by the end of this year with results in the first half of 2023. Angela, Ralph, Mike, myself, the whole team is committed to frequent and accurate communication moving forward as regards to operational progress. Full enrollment in the Long- COVID program will likely be our next key milestone. Then our goal following the meeting with FDA is to immediately communicate to you all, the external community, what the next steps are for IMC One's development in fibromyalgia, and we'll report back that at that time. Thank you for your time and attention on today's call, and this concludes our quarter three earnings update. Thank you.
Thank you, ladies and gentlemen. This does conclude today's call. You may disconnect your lines at this time and have a wonderful day, and we thank you for your participation.