Good morning, and welcome to Auris Medical's Conference Call. On today's call are Thomas Meyer, Auris Medical's Chairman and Chief Executive Officer; and Elmar Schaerli, Auris Medical's Chief Financial Officer, who will present the company's Financial Results for the First Half of 2020 and provide a Business Update.

The accompanying slides can be found on our website in the Investors section. Earlier today, Auris Medical issued a news release with the first half 2020 financial results as well as a business update. The release is available on the company's website, aurismedical.com and filed with the SEC.

During today's call, we'll be making forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These include statements that address future operating, financial or business performance or our strategies or expectations.

Forward-looking statements are based on management's current expectations and beliefs and involve significant risks and uncertainties that could cause actual results developments and business decisions to differ materially from those contemplated by these statements.

These risks and uncertainties include, but are not limited to, the timing and conduct of our clinical trials, the clinical utility of our product candidates, the timing or likelihood of regulatory filings and approvals, our intellectual property position and our financial position as well as those described in the Risk Factors section in our annual report on Form 20-F and future filings with the Securities and Exchange Commission.

In addition, any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any subsequent date. While we may elect to update these forward-looking statements at some point in the future, we specifically disclaim any obligation to do so even if our views change.

With that, I will hand the call over to Thomas Meyer..

Thank you, Elaine. Hello, everyone, and thank you for taking the time to join Auris Medical's first half 2020 earnings and business update call. On the call, I will provide an update on our various development projects, as well as an overview of recent corporate developments.

Following my update, our CFO, Elmar Schaerli, will provide an overview of our first half financials. Finally, I will discuss key milestones for 2020 and leading into 2021. We will then open the call for any questions.

In the past few months, we continue to make significant progress with our clinicals to each intranasal betahistine program, announcing positive results in our two main projects AM-125 and AM-201.

In terms of some key highlights, we announced that we will be advancing our Phase two trial with AM-125 for acute vertigo, following the positive interim data that we recently announced. And we reported positive outcomes in our Phase 1b trial with AM-201 for the reduction of antipsychotic-induced weight gain.

We are also happy to report that betahistine administered intranasally showed good safety and tolerability in both programs. I'll discuss the exciting data from these trials shortly. In addition to our betahistine programs, we recently established a new program, AM-301, a drug-free nasal spray for protection against airborne pathogens and allergens.

This spray has the potential to protect against a wide variety of pathogens and allergens, and we are pleased to report that we have already seen positive indications in SARS-CoV-2 in vitro assay. We will be conducting more studies throughout the rest of the year.

Finally, from an operational and financial standpoint, we continue to reduce our operating expenditures and cash burn rate. I'm pleased to say that we managed to align our spending with the temporarily reduced activity levels in our key clinical trial during the main COVID-19 lockdown phase in Europe.

On the other hand, we used that lockdown to come up with some fresh ideas on how to self protect against airborne pathogens and allergens, leading to the establishment of a new subsidiary Altamira Medica, which is dedicated solely to the development of AM-301.

We are pleased to have secured a convertible loan in order to kick off AM-301's development. Lastly, we recently initiated a strategic review to explore, review and evaluate a broad range of potential strategic alternatives for the company with the aim of unlocking the potential of our various assets.

I will discuss this in a bit more detail, following the program updates. Moving to Slide 3, I will now provide an update on each of our betahistine development projects. On to Slide 4. I will start the program update with AM-125 intranasal betahistine for the treatment of acute vertigo.

As a reminder, oral betahistine is the standard of care treatment for vertigo in many countries around the world. But its therapeutic potential is limited due to its low bioavailability. AM-125 is currently being assessed in our TRAVERS Phase 2 trial, which is conducted in several European countries, and hopefully soon also in Canada and Australia.

The trial is to recruit 118 patients suffering from acute vertigo, following certain types of neurosurgery. In the trial, we treat patients 3x daily for 4 weeks with AM-125 or placebo. The objective is to allow patients to regain control of their balance sooner and to improve their quality of life.

The primary end points were defined as improvement in how long patients maintain balance in the Tandem Romberg and Standing on Foam tests from baseline to 14 days post-surgery.

We just finished Part A of the trial, which serve for those finding and are currently enrolling patients for open-label treatment with oral betahistine to generate additional reference data. The trial will conclude with Part B. On to Slide 5.

Part A of the trial demonstrated a dose-dependent improvement in balance as well as good safety and tolerability of ascending doses of AM-125. At the highest dose of 20 milligram, AM-125 treated patients improved their performance on the Tandem Romberg and the Standing on Foam balance tests.

You see some pictures of those tests on the slide, on average, 1.9x to 2.4x more than placebo treated patients, though that's 6 versus 3.1 seconds and 10.5 versus 4.3 seconds. So at the beginning at baseline these patients are unable to walk or stand in the vast majority of cases.

In contrast to placebo, the improvement from baseline was statistically significant for AM-125, 20 milligram in the Tandem Romberg test with a P value of 0.02. And for all active dose groups in the Standing on Foam test with P values ranging between less than 0.01 and less than 0.05.

These positive results were supported by similar improvements in additional efficacy measures, including additional objective, as well as clinician and patient reported outcomes. In terms of next steps, we will be testing the 10 and 20 milligram doses of AM-125 against placebo in 72 patients in Part B of the trial.

The improvement in the Standing on Foam test to day 14 will remain the primary efficacy endpoint. The improvement in the more challenging Tandem Romberg test will be assessed as key secondary endpoint at day 45. We are aiming to complete enrollment by the end of Q1, 2021, provided that there are no new COVID-19 restrictions on enrollment.

On to Slide 6 and AM-201. A few months before the positive interim results with AM-125, we reported positive outcomes already from our second intranasal betahistine project AM-201. With this project, we are seeking to prevent major side effects of second generation antipsychotics, such as olanzapine, in particular weight gain and somnolence.

These side effects arise from the antagonistic effect of the antipsychotic drugs at histamine 1 receptors in the brain. It is well-known that histamine plays a key role in the brain's regulation of food intake and wakefulness.

The Phase 1b trial demonstrated good safety and tolerability of ascending doses of AM-201 as well as a dose-dependent reduction in weight gain in healthy volunteers treated with oral olanzapine at 10 milligrams for 4 weeks.

At the highest AM-201 dose of 30 milligram, the mean weight gain from baseline to the end of the treatment period was 2.8 kilograms compared against 3.7 kilogram in control subjects. The primary efficacy endpoint of mean reduction in weight gain was 0.9 kilogram and statistically significant with a P value of less than 0.02.

In the next step following additional preclinical testing, the company intends to file for an IND in 2021. Moving to Slide 7. I will now discuss our newly established program [technical difficulty] for protection against airborne pathogens and allergens. On to Slide 8.

Last week we announced the initiation of a new development program where we are aiming to develop a drug-free nasal spray for personal protection against airborne pathogens and allergens. The current worldwide pandemic have further highlighted the risks associated with airborne pathogens.

The nose is the main port of entry for airborne viruses and bacteria. On normal conditions, human beings take in approximately 90% of air through their noses. Another risk is exposure to allergens such as those from pollen animal hair or house dust mite, which affect many people.

Close to 8% of the adult U.S population and 9% of children suffer from allergic rhinitis. The nasal mucosa is the body's first line of defense, as it helps to clear particles from the nose by discharge into the pharynx and elimination through the gastrointestinal tract.

AM-301 is a gel, which works by forming a protective layer on the nasal mucosa, acting as a physical barrier against airborne pathogens and allergens. The thin protective form formed by AM-301 helps to prevent the contact of such pathogens and allergens with cells.

In addition, the composition serves to trap or bind such particles and help with the discharge. Together, this is designed to reduce the risk of infection and promote alleviation of allergic symptoms.

With 301, we are seeking to provide a simple and effective means for personal protection in settings or places with increased risk of exposure to airborne pathogens, such as public transportation, flights, cruises, sports events, concerts, university lectures.

Unlike our betahistine nasal sprays also under development, AM-301 does not contain any active substance. We believe that it will be regulated, marketed as an over-the-counter medical device. As we move to Slide 9, I'll run through our development plan for this new product.

A key feature of AM-301's development will be the use of well-established and safe components and of a classic nasal pump spray what a gel delivery in order to achieve optimal safety and reduce development risks. We are seeing a high medical need for this type of product and are therefore eager to move the product expeditiously for it.

We have already done some efficacy testing and seeing positive protective effects with AM-301's key component in a SARS-CoV-2 assay. In this experiment, the substance was added in various concentrations, the suspension of the virus for various time periods.

Virus particles were then collected from the suspension and transferred onto cell cultures for incubation, allowing for viral replication and infection of adjacent cells. The experiment showed that after only 5 minutes of contact between AM-301's key component and the virus suspension, the viral infectious load was reduced by up to 99%.

This is very encouraging. We are currently preparing for the performance tests involving other pathogens and allergens and standard by comfortability test. We expect to conduct two relatively short clinical trials. We plan to advance and complete the development of AM-301 through our new Altamira Medica subsidiary.

We are targeting submission of regulatory applications to the US Food and Drug Administration and regulatory authorities in other jurisdictions in 2021. We are currently mapping out the required regulatory pathways and assessing the choice of predicate devices. Last but not least, we have already filed a provisional patent application.

While we are still in the early stages of this development program, I'm very excited by AM-301's potential and by the pace at which the program is moving. We are committed to get a product to market as soon as possible. And I look forward to providing updates as we continue to work towards this goal.

Moving to Slide 10, I will now provide some corporate updates and on to Slide 11. So the company's Board of Directors has started a process to explore, review and evaluate a broad range of potential strategic alternatives.

These alternatives include, but are not limited to the partnering of its various clinical and preclinical programs, or a sale or merger of the company, in an effort to unlock the potential of those assets and maximize shareholder value.

With four clinical stage programs and several preclinical projects, Auris Medical has a broad pipeline in therapeutic areas with high unmet medical needs.

It is our mission to progress these innovative products through development and make them available to the many people worldwide who are suffering from inner ear disorders or who are seeking protection against antipsychotic-induced weight gain, or who seek protection from airborne pathogens or allergens.

At the same time, we look to create value to our shareholders, while securing the funding for our development programs. We expect that the strategic review process will facilitate our efforts to achieve these goals. At this point, there can be no assurance the company's strategic review will result in the completion of any particular course of action.

There is no defined timeline for completion of the review process and the company does not intend to comment further unless a specific initiative is approved by the Board of Directors. The review process has concluded, or it is otherwise determined that other disclosure is appropriate.

In addition, as mentioned, we are excited to have recently established Altamira Medica, a subsidiary of Auris Medical, entirely focused on the development of AM-301. Altamira is currently a 100% subsidiary of Auris Medical Holding Limited.

Going forward, the company expect its ownership in Altamira to decrease, as financial strategic investors will be invited to join as shareholders as additional financing will be required. In the first transaction, FiveT Capital Holding Ltd, a Swiss long-only investment management provided a convertible loan to Altamira.

The loan has a principal amount of CHF1.5 million. And under the terms of the agreement, FiveT will have the right to convert a loan or parts thereof into common shares of either Altamira or Auris Medical Holding Limited, subject to additional provisions and certain restrictions.

Altamira will be looking to collaborate with one or more third parties in order to successfully commercialize the AM-301 product. I would now like to hand the call over to our Chief Financial Officer, Elmar Schaerli, to run through our first half 2020 financial results..

Thank you, Thomas. Before reviewing our financial results for the first half of 2020, I would like to note that the financial statements are presented in Swiss francs. To help you with interpreting the financials, please consider that CHF1 is the equivalent of about US$1.1. Now moving to Slide 13.

The first half of 2020 saw a reduction in net loss to CHF2.7 million or CHF0.58 per share from CHF3.6 million or CHF1.66 per share in the first half of 2019. We therefore continued to reduce operating expenditures and the cash burn rate.

The main factors contributing to the decrease in 2020 were a reduction in research and development expenses from CHF1.3 million in the first half of 2019 to CHF0.9 million in the first half of 2020, primarily due to lower startup costs for clinical trials and lower headcount, and the reduction in general and administrative expenses from CHF2.8 million in the first half of 2019 to CHF1.5 million in the first half of 2020.

Administration expenditures in 2019 had included substantial external costs related to the company's redomestication to Bermuda.

Please note that in the first half of 2020, we capitalized direct costs related to our AM-125 program in accordance with International Accounting Standard 38, for a total amount of CHF0.7 million compared to CHF1.6 million for the 6 months ended June 30, 2019. Now on to Slide 14.

Cash and cash equivalent at June 30, 2020 were substantially lower than usual due to the reduction in the par value per common share from CHF0.4 to CHF0.016. Also the reduction itself was cash neutral. It prevented us temporarily from raising equity and was completed only on June 30, 2020.

Since then we have raised about US$2.1 million in gross proceeds from the issuance of stock under the equity line with LPC and through our at-the-market program. In addition, we obtained CHF1.5 million through the convertible loan to Altamira Medica.

We expect our total cash needs in 2020, including project AM-301, to be in the range of CHF7.0 million to CHF8.5 million for expected total operating expenses, or CHF4.5 million to CHF5.5 million and expected capitalized research and development expenses of CHF2.5 million to CHF3.0 million. These cash needs are below our earlier guidance.

So far we have used about 11% of the maximum amounts available under each ATM program and equity line of US$25 and US$10 million, respectively. With that, I would like to turn the call back to Thomas..

Thank you, Elmar. Concluding on Slide 16. We have had a very productive 2020 so far with key data readouts and the establishment of a new development program. We have several key project milestones in the upcoming quarters that I'd like to highlight.

The start of Part B of our Phase 2 trial was AM-125; the receipt of additional in vitro data with AM-301; following this in vitro data, the generation of clinical data with AM-301; the filing of an IND for intranasal betahistine; the completion of recruitment in Part B of our AM-125 Phase 2 trial.

In addition, we will obviously have a key focus on the strategic review. I'm proud of the immense amount of work our team has put into our exciting development programs, especially in light of the COVID-19 related challenges. I believe what we are doing will be life changing for very important patient populations.

I look forward to sharing intermittent updates as we continue to make progress. With that, I would like now to turn the call back to the operator, who will open the line for questions..

[Operator Instructions] We do have one question now, and it comes from the line of Max Jacobs from Edison Group. Please ask your question..

Hi, guys. Thanks for taking my question. So first I just wanted to ask about AM-301.

Like how long would that gel coating last? Was it -- is it just meant for like short-term use?.

Hi, Max. Well, this is a -- obviously, a very important question. So as we know, within the nose, you have those tiny little cilia that constantly remove objects, particles from the nose. And so that's a fairly quick process. Now, one of the particularities here of this gel formulation is that it's actually quite sticky.

So it's a thin film, but it's designed to stay to remain here for an extended period of time. So we are estimating that it will be up to a few hours, but we will need to perform here some additional experiments. But in any case, it's definitely more than the -- let's say, natural residence time within the nose..

Okay, great.

And then, since you are targeting the over-the-counter pathway, I was just wondering if you have any idea as to what the price might be?.

Well, we do have some ideas about the potential pricing. I think we want to make this clearly an affordable product. On the other hand, it's a little bit premature here to already talk about the pricing. I mean, it is a consumer health product, so it's a classic nasal spray.

And here was one spray, you may have enough supplies here to cover, for example, 14 days or 1 month, something like that. But that's still under consideration and while we expect in any case that it will become something that is affordable and effective and safe..

Okay, great.

And then it doesn't interfere with, I mean, it will still be breathable through the nose, like you wouldn't expect much discomfort from the use of this gel?.

Absolutely. I mean, this one of the key requirements here. And as I said, this is a very thin film that is established. And so therefore breathing, this should be absolutely normal. I mean, this is one of the advantages, obviously. We know that some people are unable to wear face masks for various reasons. Some people don't like wearing masks.

So in a sense, what we want to achieve here is really reinforce the first line of defense of the nasal mucosa by adding here a protective layer, and in addition also binding or trapping these particles and helping to remove them. So it's kind of a dual action..

Okay, great.

And then just moving to the Phase 2 TRAVERS trial data, I was wondering if you could just discuss like the clinical significance of, I guess it was like a little more than a 6-second benefit on the Standing on Foam tests, and then a 3-second benefit on the Tandem Romberg?.

Yes. Okay. So we have here a continuous improvement as people start treatment over the 4 weeks of treatment, and then there is a follow-up period of 2 weeks without any treatment. And so there is a recovery in the placebo group.

And here the aim was AM-125 is, obviously to accelerate this recovery process, so to get people faster back on their feet, literally. And what we can see here is that, okay, the placebo did not differ significantly from zero. The improvement with the active groups, we already could see some nice differentiation.

It's also very important to see that not only these two tests, but additional tests also confirm, supports these results and I'm talking about other objective measures. I'm talking also about subjective feedback from patients. So we also measured on a visual analog scale the rating of their health and it all points in the same direction.

So in the end, what we will need to show demonstrate here with this product is obviously, okay, we have a significant improvement in the recovery, and we have also this recovery, this improvement translating in a subjective perception of improvement. Now to give you an idea, I mean, here this process is continuing, obviously.

I mean the maximum time is 30 seconds. Now I can tell you, I mean, doing a test here, you can maintain balance for 3 seconds, or you can maintain balance for 6 or 7 seconds.

It may sound as a small difference, but actually it is already quite an important difference because what you essentially measure here is, okay, to what extent can your peripheral system, vestibular system, maintain -- allow to maintain a balance here under the pretty challenging conditions.

So consider you close your eyes, consider you cross your arms, as you can see on the pictures and try to maintain balance on a soft surface, and you will quickly figure out that it's not that easy.

So do the test yourself and you will figure out very quickly, I guess, that a couple of seconds here can make a big difference, especially for people who start out with essentially zero just a few days after surgery, where they lose one side of their peripheral vestibular system..

Great. That's very helpful.

And then just moving to AM-201, can you give a little more clarity on what the timing would be for, I guess, the IND filing and initiation of a Phase 2?.

Yes. So since we have here quite a few common elements between 125 and 201, we are seeking here the best way forward to coordinate between these two for the IND. Now the 125 program here will complete enrollment as indicated by the end of Q1 next year and in the second quarter, we expect to have the data.

With 201, what is the particularity here, we will need specific tox data with betahistine and olanzapine given concomitantly. And so that will require here some extra testing in a tox study. So we'll need to complete that and coordinate that with our AM-125. So basically the 201 IND could happen earlier.

So we have been guiding for Q1, but we will seek to have maximum synergies between the two programs. So the plan is for both programs well to start the next year with the next study phase..

Okay, wonderful.

And then, sorry to make you guys repeat yourselves, but just I want to make sure I have it correct on the -- how much money was raised via the ATM and the equity line during this period and how much do you have remaining under those facilities?.

Okay. So as Elmar mentioned, we have so far used approximately 11% under the ATM. So the ATM, in total, that's on file for CHF25 million, and we have also about 11% of the equity line, which is CHF10 million. So there is a lot of room still left.

Now in the second half of the current year, as Elmar mentioned, we have raised CHF2.1 million under these two instruments. And in addition, we had this convertible loan from FiveT for Altamira Medica..

And is that CHF2.1 million included in that 11% figure?.

Yes..

Okay. I just want to make sure. Okay. Wonderful. That -- those are all my questions. Thank you very much for taking them..

Okay. You're welcome. Thank you, Max..

[Operator Instructions] There are no further question at this time. Please continue..

Okay. Thank you, operator, and thanks to everyone for joining today's call. As always, please remember, take care of your ears. And now I have to add, well, also of your nose. Thank you and have a great day. Bye-bye..

Thank you. That does conclude our conference for today. Thank you all for participating. You may all disconnect..