Ladies and gentlemen, thank you for standing by, and welcome to the Q1, 2020 Salarius Pharmaceutical Earnings Webcast and Conference Call. At this time, all participants are in a listen-only mode. After the speakers presentation there will be a question-and-answer session.

[Operator Instructions]I would now like to hand the conference over to your speaker today, Mr. Jason Rando. Thank you. Please go ahead, sir..

Good afternoon, everyone. And thank you, for joining Salarius Pharmaceuticals 2020 first quarter financial and corporate results call. Earlier this afternoon, Salarius issued a press release detailing its financial results for the three months ended March 31, 2020, which we encourage listeners to read.

The press release can be found in the news and events section of salariuspharma.com. Salarius also filed a 10-Q this afternoon which is available on salariuspharma.com and sec.gov.Before beginning today's call, I would like to make the following statement.

Today we'll be making certain forward-looking statements about future expectations, plan events and circumstances, including statements about our strategy, future operations, and the development of our lead investigational drug candidate, seclidemstat, and our expectations regarding our capital allocation and cash resources.These statements are based on our current expectations and you should not place undue reliance on these statements.

Actual results may differ materially due to our risks and uncertainties, including those detailed in the risk factors section of Salarius Pharmaceuticals annual report on Form 10-K for the 2019 year and the quarterly report on Form 10-Q for the first quarter of 2020, which are filed with the SEC and other filings we make with the SEC from time to time.

Salarius Pharmaceutical disclaims any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events, or otherwise.Joining me on today's call is David Arthur, President and Chief Executive Officer of Salarius Pharmaceuticals, who’ll provide an update on Salarius’s corporate and clinical achievements during the first quarter, and Mark Rosenblum, Chief Financial Officer, who’ll review Salarius’s first quarter 2020 financial results.

After David and Mark have provided their updates, they will take questions.And now I'll pass the call to David. David, please go ahead..

Thank you, Jason, and thank you to everyone, for joining our 2020 first quarter results conference call.

For those of you who are familiar with Salarius, welcome back and for those of you who are new to Salarius, let me take a moment to introduce the company.Salarius is an emerging clinical stage biotechnology company developing potential treatments for cancers caused by the dysregulation of gene expression, or stated another way, cancers that hijack the cells machinery to incorrectly turn genes on or off in a way, that helps some cancer survive and grow.

This area of research is referred to as epigenetics.Our lead drug candidate, seclidemstat is a non-cytotoxic agent making it different from classic chemotherapy.

Seclidemstat is an oral treatment that inhibits the LSD1 enzyme, which is believed to play a key role in regulating gene expression in many cancers, including Ewing and other sarcomas, cancers of the prostate, breast, colon, ovaries, and melanomas.Our lead indication, Ewing sarcoma is a rare but devastating bone and soft tissue cancer, primarily affecting children and young adults.

These children and young adults rely on a standard-of-care treatment, including chemotherapy, frequently intense multi-agent chemotherapy, and often radiation and/or potentially disfiguring surgeries.Unfortunately, many Ewing's patients fail to respond or relapse and face five-year mortality rates reaching 70% to 80%.

In addition, many patients that do not respond to standard-of-care often experience long-term complications resulting from their treatment.

All these patients need better treatment options, and we believe seclidemstat has the potential to be a better option.Now, Salarius is coming off a transformative year in 2019, highlighted by our merger with Flex Pharma and our listing as a publicly traded company on the NASDAQ capital market.

We believe these events elevated our visibility among investors, and helped us access the resources necessary to evaluate seclidemstat as a potential treatment for Ewing sarcoma, and other hard to treat cancers.

Looking forward, we anticipate multiple clinical trial data disclosures and potential value building events, throughout 2020 and beyond.With this background, let's now review the first quarter of 2020.

Since January, we have achieved a great deal, including a dose escalation advancement in our ongoing Phase 1, Phase 2 Ewing sarcoma clinical trial, the completion of an $11 million public offering and the strengthening of our intellectual property portfolio protecting seclidemstat.Most recently, Salarius Board of Directors named Dr.

Bill McVicar as the new Chairman of our Board of Directors. Bill is a seasoned pharmaceutical industry executive with more than 30 years of clinical development experience.

He recently served as the Chief Executive Officer of Flex Pharma, and previously served as the Chief Scientific Officer and President of Intertek Pharmaceuticals.In addition, our founding scientists Dr.

Sunil Sharma and his team at the Translational Genomic Institute or TGen in Phoenix, Arizona, in February, published a scientific paper highlighting the potential of combining seclidemstat with cancer immunotherapies, such as checkpoint inhibitors.

I'll discuss this more in a few minutes.Before I review Salarius's first quarter accomplishments in more detail, I would like to address a topic that is forefront in everyone's thoughts these past several months, the coronavirus outbreak. Coronavirus, or COVID-19 is a global health crisis that has impacted all aspects of society and business.

Salarius like all businesses is not immune, but we have worked with to the unexpected and challenging circumstances resulting from the COVID-19 pandemic, and at this time, I am pleased to report that we have experienced minimal COVID-19-related disruptions in our ongoing clinical trials or our manufacturing capabilities.Due to the COVID-19 outbreak, many clinical trials have been placed on hold.

Fortunately, the Salarius trials in Ewing sarcoma and advanced solid tumors have been prioritized within our clinical trial sites remain active and continue to enroll patients. As such, Salarius is continuing with plans to release clinical data from both trials, as previously disclosed during 2020 and 2021.

I believe the prioritization and commitment to our clinical trials is indicative of the true unmet medical needs facing the patient populations, in which are investigating seclidemstat treatment.Relative to Salarius, in mid-March, we initiated a work from home policy for employees in our Houston headquarters, and suspended non-essential business travel.

Having said this, the impact of COVID-19 changes daily, and we will continue to monitor the situation and take corrective actions, where possible to mitigate the impact on operations.Before moving on, I would like to say that the teamwork, the resilience and the commitment demonstrated by the personnel at our various clinical trial sites, these are hospitals, so there's much going on in our clinical trial sites.

But the personnel in our various clinical trial sites, our contract research organizations and our manufacturing partners, have been truly remarkable. And it's allowed us to continue advancing our ongoing clinical trials during the COVID-19 situation. I want to publicly thank all of these individuals.

Thank you.Now, I would like to move on to the first quarter of 2020 operational update. As I mentioned earlier, Salarius is an emerging clinical stage biotechnology company developing potential treatments that address cancers, caused by the dysregulation of gene expression.

Under normal circumstances, a series of enzymes called epigenetic enzymes are responsible for maintaining proper gene expression in the human body.However, when these epigenetic enzymes become dysregulated, they can cause the body to incorrectly turn genes on and off, which can support the development and progression of cancer, rather than supporting normal cellular function.

These dysregulated epigenetic enzymes represent attractive points for therapeutic intervention in several cancers. This approach forms the basis of our proprietary lead drug candidate seclidemstat.Seclidemstat, however, stands apart from this crowd, as it is one of only two reversible LSD1 inhibitors we know of to be in clinical development.

Reversibility is an important distinction that may offer real therapeutic benefits, and we believe that because our molecule does not permanently bind to the LSD1 enzyme seclidemstat may provide improved safety and a wider therapeutic window than the reversible LSD1 inhibitor.

Seclidemstat safety profile is currently being evaluated in our ongoing Phase 1, Phase 2 trials.First generation LSD1 inhibitors focus primarily on inhibiting the enzymatic function of LSD1 and a limited number of LSD1 protein interactions.

Seclidemstat is unique in its ability to not only inhibit the enzymatic function of LSD1, but also inhibit a broader range of LSD protein interactions.

The ability to inhibit both of these functions of LSD1 may allow seclidemstat to impact a wide variety of tumor types.As I mentioned earlier, Salarius is conducting two Phase 1/2 clinical trials for seclidemstat, but first within patients with relapsed or refractory Ewing sarcoma, a disease of high-unmet need requiring potential new treatment options, such as seclidemstat.

The second Phase 1/2 clinical trial is evaluating seclidemstat in patients with advanced solid tumors, which includes prostate, breast, ovarian, melanoma, colorectal, non-Ewing sarcomas, and other cancers where seclidemstat has demonstrated single agent activity in preclinical studies.Both trials are designed as open-label dose escalation trials to demonstrate the maximum tolerated dose or MTD and the initial safety profile of seclidemstat.

Once each trial establishes MTD, a dose expansion phase begins at the MTD or recommended Phase 2 dose.

A larger group of patients will be treated at this phase to expand the safety profile for seclidemstat, capture additional pharmacokinetic data and potentially provide preliminary efficacy data.As I mentioned earlier, Salarius plans to begin releasing clinical data in 2020, and continue with clinical data releases from these two clinical trials throughout this year and into next year.

We are pleased to report that in the first quarter of this year, the safety review committee overseeing the Ewing sarcoma clinical trial approved the advancement of the trial into the six of seven dosing cohorts, and patients are now enrolling at the 1200 mg BID daily dose.

We are also pleased that to-date we have not seen dose limiting toxicities that would prevent further dose escalation.Thus far, pharmacokinetic data from the trial suggests the plasma drug levels are increasing in a dose proportional manner, with no evidence of plateau in drug exposure levels.

This is positive news, as we are now seeing seclidemstat levels in patients, at or above the levels where we noted pharmacological activity in our pre-clinical program.Dose escalation also continues in our advanced solid tumor trials, which is now in the fourth of seven dosing cohorts and is enrolling patients at the 600 mg BID daily dose.

Salarius believes both clinical trials are on track to reach maximum tolerated dose in 2020, triggering the dose escalation studies of each trial.With Ewing sarcoma, there's a tremendous unmet therapeutic need, and we believe that the potential to address this need offers seclidemstat the possibility of a more rapid FDA review process.In fact, the FDA has previously granted seclidemstat Fast Track designation, as well as Orphan Drug designation, and Rare Pediatric Disease designation.

We feel very well-positioned to take advantage of the FDA's expedited programs for drug development and review.

Also, if approved by the FDA, seclidemstat's Rare Pediatric Disease designation means Salarius could qualify to receive a priority review voucher, which is an extremely valuable and monetizable asset, which we can potentially sell for $80 million to $130 million.The advanced solid tumor clinical trial is allowing us to better establish the seclidemstat safety profile while more fully developing our future advanced solid tumor clinical strategy.

Now, third party research has demonstrated that cancers with mutations and other epigenetic enzymes or mutations in epigenetic complexes, may have increased sensitivity to LSD1 inhibition, anti-proliferative and/or immunomodulatory effects.These include mutations in methyltransferase or acetyltransferase enzymes, and mutations in the SWI/SNF complex, which occur in roughly 20% of solid tumors.

Many of these tumors can be identified through already established and commercially available genetic screens.

By using these genetic screens, we believe we can identify and enrich our advanced solid tumor expansion cohort, with patients that harbor these sensitizing mutations, and therefore increase the likelihood of patients responding to seclidemstat treatment.Since these genetic screens already exist and are common across standard testing platforms, it is possible to implement these enriching strategies in the clinic, and if approved in a commercial setting.

This type of tumor targeting is becoming more common, as reflected in the recent FDA approval of Lilly drug selpercatinib for three different types of cancers, all driven by the same gene alteration.

We believe this approach could represent a significant opportunity Salarius.Further, we are exploring the use of seclidemstat in combination with a type of cancer immunotherapy, commonly known as checkpoint inhibitors.

Checkpoint inhibitors, which have estimated global annual sales of $15 billion, were designed to expose cancer cells to attack by the patient's own immune system. However, these therapies only work in about 30% of cancer patients.

And in patients who do show an initial response, many suffer a return of the disease.As I mentioned earlier, Salarius founder Dr.

Sunil Sharma and his team at TGen published data from two in vitro studies, investigating the ability of seclidemstat to promote anti-tumor immunity and T effector cell infiltration in two types of ovarian cancer, that both carry a specific mutation.

In that study, seclidemstat modulated the tumor microenvironment to increase immune cell infiltration into tumor organoids. Organoids are clumps of tumor cells growing in culture.

This is significant because checkpoint inhibitors are often ineffective due to a lack of effector immune cells within the tumor.In other words, seclidemstat may turn cold tumors hidden from a person's immune system into hot tumors, that can be identified by the immune system and which could then respond to checkpoint inhibitor treatment.

We believe this is a significant potential opportunity, and we're currently researching the best ways to advance into clinical trials. There's a lot to be excited about with seclidemstat and a lot to be excited about in our development programs.

We look forward to providing updates on our progress throughout the year.With that, I'd like to pass the call to Mark Rosenblum, Salarius’s Chief Financial Officer, who will provide a brief review of our first quarter financial report. Mark, please go ahead..

Yes. Thank you, David. For the quarter ended March 31, 2020, Salarius reported a net loss of $2.08 million or $0.22 per basic and diluted share, compared to a net loss of $1.52 million or $0.64 per basic and diluted share for the same period in 2019.

The loss before other income for the three months ended March 31, 2020, increased by $0.84 million compared to the same period a year ago, which was primarily due to an increase of $0.94 million in research and development expenses, resulting from increased clinical trial expenses and drug manufacturing costs.We also reported a net increase of $0.37 million in general and administrative costs, resulting from our transformation into a public company and increased personnel expenses during the current quarter, somewhat offset by lower professional fees and legal costs, compared to the same period in 2019.As of March 31, 2020, our total cash and cash equivalents were $9.65 million, compared to $5.77 million on March 31, 2019, and $3.74 million at yearend 2019.

The increase in our cash position stems from an underwritten public offering completed in February of this year. Gross proceeds totaled approximately $11 million prior to deducting underwriting conditions and offering expenses.

We intend to use the net proceeds from this offering for general corporate purposes, including working capital.But this is not Salarius's only source of capital. One of the genuinely interesting aspects of the Salarius story is the amount of non-dilutive capital we have at our disposal.

In 2016, we received an $18.7 million grant from the Cancer Prevention and Research Institute of Texas, also known as CPRIT, of which we still have $9.1 million available to drawdown.On top of that non-dilutive support from the National Pediatric Cancer Foundation, covers roughly half of the costs of our Ewing sarcoma trials, by sending funds directly to our clinical trial sites.

And as a result of these various funding sources, we believe Salarius has the financial capital to advance our Ewing sarcoma and advance solid tumor clinical trial programs into the second-half of 2021.With that, I’d like to return the call to David..

Thank you, Mark. As we have discussed today, Salarius is on strong footing operationally, developmentally and financially. And we are maintaining our momentum in 2020, despite the coronavirus outbreak.

None of this would be possible without the diligent efforts of our Salarius team.I’d like to close by thanking our shareholders for their continued support as we've worked to bring hope to patients, and hope to their families battling Ewing sarcoma and other cancers.With that, I’ll now open the call to your questions..

[Operator Instructions] And we have our first question from Mr. Hunter..

Go ahead, Mr. Hunter..

Hi.

Just you touched on it a little bit, can you guys provide an update on developments related to immunotherapy, synergies with chemotherapy or anything investors should be watching for those next 12 months?.

Yes, I will provide a brief overview and then ask Daniela Santiesteban, Director of Business Development and Research to provide a little more color.As mentioned, we're actively reviewing not only external third-party publications and scientific research in area of immunotherapy and possible combination therapies, with seclidemstat and other drugs, but we're also performing internal work to help us best understand how to bring seclidemstat forward into the clinic in these various scenarios.

Now we have not announced any timelines relative to that work because it is preclinical research, and as we learn we advance and we sometimes need to do more work.But, what I will do is just pause for a moment and ask Daniela to provide a brief overview of the type of work we're doing to help us better understand, how Seclidemstat can be used with immunotherapy and possibly with combinations..

Yes. Thank you, David. This is Daniela Santiesteban. Now I'll speak towards what we're doing at Salarius in this really interesting area that first was published last year, 2018 in a cell article.

And in that article they showed that LSD1 inhibition can really change the tumor microenvironment, and increase these effector T-cells, increase their infiltration into the tumor, so that these tumors can become sensitized to anti PD-1, anti PDL-1 and variety of checkpoint inhibitors.At Salarius, we're expanding upon that research both in the preclinical section.

So we're looking at different in vitro as well as in vivo models, to explore seclidemstat’s potential across a variety of indications to find that best match for us as we move forward into clinic.We're also looking at not only if seclidemstat can sensitize, but the potential of seclidemstat to resensitize tumors.

Right now, as David mentioned, only 30% of tumors respond to checkpoint inhibitors, and some of those will lose their response over time. So there's a huge market for seclidemstat’s potential in sensitizing as well as resensitizing to these types of therapies..

Right. And it makes perfect sense. And obviously if you can capture any of these markets, as you stated in the call, they're all enormous target markets in addition to Ewing. I guess my next question, just one more would I guess be for Mark, just in terms of I guess, for investors, the capitalization.

Obviously the company has access to non-dilutive capital, which is great.

I guess and there are a lot of data inflection points coming out in the second-half of the year.Just confirm with you, Mark, I guess sort of the understanding based on the cash in the latest Q and the non-dilutive funding is sort of this capital and a relatively low burn rate takes the company to the key inflection points, right? That would potentially reset it?.

Thanks Hunter. Yes, you're pretty much right on point. The capital we have available to us in our financial models going forward, allows us to, as I mentioned is into the second-half of 2021. And by that point, we should have scientific results, data readouts and the like.

And just like every biotech company, what you're looking for is to have positive scientific news advocate -- advocates [ph] to get you to the scientific news. And if the company would have to -- every biotech raises capital, somewhat frequently. And if you do, you always want to have it at a higher valuation.

And that's sort of the combination of our scientific news schedule and the cash available we have should be just fine..

Absolutely. And if it's positive is such a discrepancy between the shares and Epizyme [ph] and these other companies that obviously would be much more attractive than current levels. Okay, yes, no, that's all I have, I guess for Mr. Hunter. And just stay safe everyone, and I appreciate the update..

[Operator Instructions] And we do have our next question Mr. Li, if you would please go ahead..

Hi, thanks for taking my question.

Can you hear me okay?.

Yes, we can hear you just fine..

So maybe I missed it, but in the current trial in the Ewing sarcoma, you are kind of doing six cohort, you designed the maximum seven cohorts. But you also mentioned that so far those are professional. And so I just wondered if let's say you stepped into MTD as the seventh cohort.

Do you plan to continue or you just stop there and kind of theoretically without really MTD but just maximum dose you've tested?.

So, thanks for the question. We are at dosing cohort six in the Ewing sarcoma study. We have not observed to-date, dose limiting toxicities that would prevent continued dose escalation. So, the possibility of advancing to the seventh and final cohort, which is 1,500 mg BID is a possibility.

We won't know, if we're going to advance until we complete enrollment in the dosing cohort six, and patients have completed at least one cycle of therapy allowing the safety review committee to make the determination.If we do advance to 1,500 mg, and we complete patient's treatment at 1,500 mg, we will then have the opportunity to look at the information that is available.

That information would include the safety that we've observed.

It will allow us to look at the PK data that we've collected in all of the dosing cohorts, including 1,500 mg, and also look at the PK levels where we saw activity in our preclinical models.And with that information in hand, that's when I think we would be able to answer the question you're asking, which is, would we or would we not advance.

The trial was designed, I think, very thoughtfully, to put seven cohorts into the study. And if we are able to achieve treatment safely in the seventh cohort, we will have completed what we initially set out to accomplish.Now, you did touch on one component of PK data that I do want to follow-up on.

And that is the fact that so far, we have seen an increase in dose levels to be providing dose proportional response in PK levels, which means drug levels increase, we're not seeing a plateau effect.

And we're very pleased with this fact.We're also very pleased and I'll draw a distinction to a statement I made in my update is that we are now at a level, dosing, where the levels of seclidemstat observed in patients are at or above the drug levels that we saw in animals, where we observed activity.

So we're very pleased with where we are from a dose escalation perspective. And we're very pleased from where we are in not seeing those limiting toxicities, preventing further escalation. And we're very pleased with the level of seclidemstat that we're observing in our current patients..

Got it. Maybe one more question is, if you look at the other company's data, I mean, so far, I think that the early kind of efficacy result is in the few indications, like AML, and myelofibrosis to cyberliquid indication, and also like small cell lung cancer and more data reported.

So, in theory, how do you think about those indications?Do you want to continue to pursue it? I mean, of course, it’s behind the other companies, internet data report and trials data, but potentially, and one of them may also differentiate it.

So just want to see if you have any thoughts on those indications?.

So, let me try and cover some of the questions you brought up. I thought it was a very good strategic question that you teed up. So, first, we look at the fact that there are multiple companies researching LSD1 inhibitor actively in the clinics.

And as I mentioned, during my update seclidemstat differentiates itself from that group of five that are in the clinic are being one of only two LSD1 inhibitors that we know to be in the clinic.

And reversibility, the fact that we do not permanently bind to the LSD1 inhibitor, gives us the belief that we will have the potential to demonstrate an improved safety profile and a wider therapeutic window.In addition, our differential binding site and the fact that we address both the enzymatic and the protein interaction aspects more broadly than irreversible inhibitors, we believe give us the opportunity to show efficacy in a wider range, broader range of tumors.

So, to your question, when we look at the clinical data being released from other companies, first I view this as validation that the LSD1 enzyme is a viable target for drug development, and for providing benefits to patients, fighting a number of illnesses and specifically cancers.

So there's validation of the target and there’s validation of clinical activity.Now, the third part of your question is, how do we respond. Well, right now, we believe we have a very well-thought out development strategy, and we're implementing against that strategy and it's a two part strategy. Part one is speed to market.

As I mentioned, we believe that if we can show benefit to patients suffering from Ewing sarcoma, that we are well-positioned to take advantage of expedited FDA development and review processes.Concurrently, we are also working on indications that would expand the market. And so these are some of the indications that other companies are working in.

And there are some areas where they're not working in and we touched upon them.

We touched upon our advanced solid tumor study that has the ability to enroll prostate, breast, ovarian cancers, melanoma, colorectal cancers.And as I mentioned, we are developing a strategy in advanced solid tumors, where we want to target patients with tumors with specific mutations that we believe will be more sensitive to LSD1 treatment.

And if that’s the case, then we believe we have a very good path forward to developing additional indications in much broader market, expanding the market.

And as an example, I use Eli Lilly’s recent approval for the drug that was approved for treatment in three different tumor types, all sharing the same gene alteration or mutation.So, to summarize, because you asked a very thoughtful question, we believe we’re going to have the potential for broad activity across tumors.

I look at the data being presented and released from other companies as validation of our approach. And our development strategy continues to be feed to market, while currently developing, expanding the market approaches and indications..

Okay, got it. Very helpful. Thanks a lot..

And we have no further questions at this time..

I'd like to thank everybody for attending. And please have a safe week..

And ladies and gentlemen, this concludes today's conference call. Thank you very much for participating. You may now disconnect. Presenters please hold one moment..