Good day and thank you for standing by. Welcome to Q4 2021 Salarius Pharmaceuticals Earnings Webcast and Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. I would now like to hand the conference over to Jason Rando of Tiberend Strategic Advisors.

Please go ahead..

Good morning and thank you for joining Salarius Pharmaceuticals 2021 fourth quarter and full year financial and corporate results call. This afternoon, Salarius Pharmaceuticals issued a press release detailing its financial results for the 3 months and full year ended December 31, 2021, which we encourage listeners to read.

The press release can be found in the News section of salariuspharma.com. Before beginning today’s call, I would like to make the following statement.

Today, we will be making certain forward-looking statements about operating metrics, future expectations, plans, events and circumstances, including statements about our strategy, future operations, the development and effectiveness of our investigational drug candidate, seclidemstat and SP-3164 as well as our targeted protein degradation program and 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 year ended 2021 and subsequent Quarterly Reports on Form 10-Q, which had been filed with the SEC as well as in other filings we make with the SEC from time-to-time.

Salarius Pharmaceuticals disclaims any obligation to update information contained in these forward-looking statements, whether as a result of new information, future events or otherwise.

With us on today’s call is David Arthur, Director and CEO of Salarius Pharmaceuticals, who will provide an update on Salarius’ corporate and clinical achievements during the fourth quarter and its vision for the future and Mark Rosenblum, CFO, who will review Salarius’ fourth quarter financial results. With that, David, please go ahead..

Thank you, Jason and thank you to everyone dialing in to our conference call, particularly all of you joining us for the first time. Last year in recent weeks were an exciting time for Salarius, highlighted by the continuing progress developing seclidemstat and the expansion of our development pipeline.

In January, we acquired a portfolio of assets from DeuteRx, LLC, which included the drug candidate 3164, SP-3164, a related intellectual property portfolio and the opportunity to develop additional cancer fighting assets.

This acquisition formed the basis of our new cancer drug development program focused on targeted protein degradation, a fast growing field of cancer drug research.

With this one transaction, Salarius has grown from a company with a single clinical program into a company with an internal pipeline consisting of multiple drug development programs built around two exciting approaches to cancer drug development, protein inhibition and protein degradation.

This acquisition marks a significant step forward for Salarius and provides a bookend for what was a busy 2021, where in addition to advancing seclidemstat, we completed financial transactions that strengthened our financial position, completed the dose escalation portion of our sarcoma trial, added two additional patient treatment groups to our sarcoma trial, added numerous clinical trial sites to enroll patients in our sarcoma trial, activated an investigator-initiated clinical trial in hematologic cancers at MD Anderson Cancer Center, closed our advanced solid tumor trial, which supported our sarcoma trial expansion, and initiated a number of research collaborations.

We believe 2021 was a successful year. But now, I’d like to spend some time talking about the future. Our priorities for 2022 are clear. We believe that we are well-positioned and I’d like to tell you what we plan to achieve both with seclidemstat and with SP-3164. I think you will understand why we are Salarius are excited about the future.

For a long time I’ve talked to you almost exclusively about seclidemstat. Seclidemstat, as you know, is a reversible protein inhibitor that targets LSD1, an enzyme that is overexpressed in many types of cancer and is a promising target for any cancer drug therapies.

As I have discussed in previous calls, seclidemstat is currently the subject of two separate Phase 1/2 clinical trials.

The first trial is exploring its potential as a monotherapy treatment in two groups of sarcoma patients, myxoid liposarcoma and FET-rearranged sarcomas and also exploring its potential in chemotherapy combination treatment in a third type of sarcoma, Ewing sarcoma.

The second trial is exploring its potential in patients with two aggressive forms of hematologic or blood cancers. Seclidemstat continues to advance in the clinic with patients enrolling across both clinical trials. And as we have discussed previously, we are looking forward to providing updates later this year.

With that said I’d like to take the opportunity to discuss our recent acquisition involving SP-3164 and how this acquisition adds additional potential above and beyond our protein inhibition program led by seclidemstat.

As mentioned earlier, the assets acquired through our transaction with DeuteRx formed the basis of our new cancer drug development program. This program is focused on targeted protein degradation, a fast growing field of cancer drug research.

Targeted protein degradation involves harnessing the body’s natural degradation system to selectively target and eliminate disease causing proteins, and by doing so, stop the development and progression of cancer.

This field of research has already transformed the treatment of cancer with products like BMS, Celgene’s REVLIMID and POMALYST both protein degraders, which combined for over $15 billion in global sales in 2020 and are indicated for treatment of cancers such as non-Hodgkin’s lymphoma and multiple myeloma.

We believe these early generation protein degraders are only the tip of the iceberg and the potential for protein degradation to deliver efficacious medicines that are able to overcome drug resistance and achieve a therapeutic effect with small quantities of drugs.

Perhaps the most exciting is the potential to use targeted protein degradation to pursue medicines targeting cancer promoting proteins that have historically been considered undruggable.

Other pharmaceutical companies seem to share our vision as demonstrated by recent deal-making around targeted protein degradation that reads like a who is who list of the biopharmaceutical industry.

For example, last year Pfizer inked a drug development deal with our Venus worth about $1 billion; Bayer acquired Vividion Therapeutics for $1.5 billion; and Novartis entered into a transaction with UK-based Dunad Therapeutics worth $1.3 billion. And just last month, Amgen completed a $500 million multi-year drug development deal with Plexium.

From our viewpoint, it is apparent that these drug-makers see value in targeted protein degradation, given the commercial success of the first generation molecular glues or protein degraders and the tremendous upside to developing new drugs targeting previously or historically undruggable targets.

But beyond the financial allure and multibillion dollar commercial market potential, we believe that targeted protein degradation represents an excellent strategic fit for Salarius.

We believe we can harness our existing scientific expertise in gene dysregulation and protein expression and our growing clinical infrastructure to efficiently advance 3164 into the clinic.

Building on our optimism around 3164 is our belief that the asset will have a strong clinical safety profile and the potential to be superior from an efficacy perspective versus other comparable drugs.

3164 is an oral small molecule cereblon-binding protein degrader referred to as a molecular glue, because it is designed to attract or bring disease causing proteins into proximity with an enzyme that induces targeted protein degradation, or in simpler terms, it eliminates the disease causing protein.

3164 was engineered by DeuteRx from a first generation molecular glue, avadomide, using a unique process called deuterium enabled switching, or DECS, D-E-C-S, to create a new novel molecular entity with the potential for increased efficacy and improved safety compared to Avadomide.

Why is this important? This is important, because avadomide also known as CC-122 or Celgene 122 was widely studied in over 400 patients across 10 clinical trials. It showed a promising safety profile, good pharmacokinetics and importantly, anti-tumor activity across several cancer types with what we believe is strong data in lymphomas.

So, we believe that the considerable amount of validated published data produced in the development of avadomide will significantly help us guide 3164’s development. But let’s remember that 3164 is an entirely new molecular entity with its own unique and improved characteristic and its own composition of matter of patent.

In fact, in preclinical animal studies, 3164 showed improved efficacy and increased anti-tumor activity compared to avadomide in multiple myeloma. Clearly, we can learn from the vast body of research surrounding avadomide.

To help us achieve this potential, DeuteRx work with Salarius to structure a transaction that focuses today’s resources on developing 3164 by backloading development milestones. In fact, the first 3164 milestone is not due until the initiation of a registration clinical trial.

With this in mind, we are focused on advancing 3164 into the clinic as a potential treatment for hematological cancers and solid tumors in 2023. During 2022, we will prepare for an IND submission and we look forward to providing additional preclinical data updates later this year.

While all this is happening, Salarius is continuing to advance the clinical development of seclidemstat and continuing to explore opportunities to further expand the seclidemstat development pipeline.

But before I discuss further details about Salarius’ future, I would like to ask Mark Rosenblum, Chief Financial Officer to discuss our strong financial foundation, which is enabling all of this growth.

Mark?.

Thank you, David. For the 3-month period ending December 31, 2021, Salarius reported a net loss of $4.1 million or $0.09 per basic and diluted share compared to a net loss of $1.8 million or $0.10 per basic and diluted share for the same period in 2020.

The loss for the 3-month period increased by $2.3 million compared to the loss for the same time span last year, primarily due to higher overall costs and the absence of grant revenue in the current period.

For the 12-month period ended December 31, Salarius reported a net loss of $12.8 million or $0.31 per basic and diluted share compared to a net loss of $7.4 million or $0.50 per basic and diluted share for the same period in 2020.

The loss for the 12-month period increased by $5.4 million compared to the loss for the same period last year, resulting from increased charges related to R&D personnel and higher clinical trial costs more than offsetting lower drug development costs.

Net cash used for operating activities during the 12-month period ended December 31, 2021 totaled $10.2 million essentially the same as approximately $10.3 million in the prior year. During 2021, the company collected approximately $4.1 million on its outstanding grant receivable compared to $0.8 million in the prior year.

Research and development costs increased approximately $1.6 million resulting from higher overall personnel costs and clinical trial expenditures, again more than offsetting lower drug development costs. General and administrative costs year-to-year were essentially flat.

On December 31, 2021, our balance sheet states that the company had $29.2 million in cash and cash equivalents compared to $11.1 million at year end 2020. The balance sheet this year was strengthened as the company raised more than $28.3 million in 2021, primarily driven by the sale of equity securities during the first quarter of 2021.

We believe Salarius has the financial resources to advance our ongoing clinical programs through completion and beyond. With that, I’d like to return the call to David..

Thank you, Mark. As I mentioned earlier, the clinical programs investigating seclidemstat, our most advanced product candidate, are continuing to enroll and we look forward to sharing updates from both ongoing clinical trials later this year.

As I have stated before and stated often, our aim is to maximize potential of seclidemstat by expanding its use into new and larger indications.

During our past discussions I have described Salarius’ two-pronged development strategy, speed-to-market represented by our company sponsored sarcoma program and expand the market represented by the MD Anderson Cancer Center hematologic cancer investigator-initiated trial and as well as the continued exploration into additional larger market indications.

With this in mind, we are actively researching other promising drug combinations where seclidemstat can address large unmet medical needs. We are also investigating the impact of seclidemstat scaffolding inhibition properties to identify cancer indications where the drug can improve treatment options.

And as we announced last year, helping in these efforts is the research partnership established with the Cancer Epigenetics Institute at Fox Chase Cancer Center, one of several prestigious cancer hospitals and research centers that have joined the growing list of those involved in our ongoing clinical trials or helping us search for new opportunities to expand the utility of seclidemstat.

As I said earlier today, these are exciting times for Salarius. And as Mark just informed you, we reported slightly over $25 million in cash and cash equivalents at the end of last year. And we are looking forward to building on our current momentum as we continue into 2022. I would now like to take questions.

Joining me for the Q&A portion of this call is Mark Rosenblum; Dr. Nadeem Mirza, Senior Vice President of Clinical Development; and Daniela Santiesteban, Director of our new targeted protein degradation program. With that I will now open the call to your questions..

Your first question comes from the line of Ahu Demir of Ladenburg Thalmann. Your line is open..

Good afternoon. Thank you for taking my question. My first question will be on the 3164 program, we are looking forward for this program to advance to the clinic. In the meantime, I know we are looking for some preclinical data.

I am curious if you could elaborate more on what type of data we are going to see? And then do you plan to disclose those data? Will it be around the conference, just curious if you could give a bit color on that?.

Ahu, it’s good to hear from you. This is David. Thanks for joining the call. Let me make a couple of comments and then turn it over to Daniela. We are very excited about acquiring 3164 and we really feel it’s a diamond in the rough. We partnered while we purchased the asset from DeuteRx and they had done a minimal amount of development work.

And when we took it over, we have realized that while we were convinced that the story was very sound, the work REVLIMID was there, avadomide had great comparable data to REVLIMID. And 3164 had great data compared to avadomide, we were sold.

But we also knew that the marketplace was going to want to see more preclinical data, more traditional preclinical data that looked at 3164 in combination with other drugs, in vivo models in other indications other than just multiple myeloma. And so, those are the types of studies that we are working on right now.

Daniela is deep into planning those studies and she might want to comment a little bit about where we are focusing and I will share with you that as soon as the data is available, we are looking forward to getting it out. And it will probably be – probably late third, fourth quarter this year.

But Daniela, any additional comments?.

Yes, thank you, David and thanks also for the question. Like David said, we are really excited planning a variety of different studies to show why 3164 has so much potential. And so we will be doing your traditional in vitro work looking at the profile of proteins degraded.

We will look at in vivo models, as David said, both in hematological indications and solid tumors as a single agent in combination with standard of care agents. And then we are also going to be exploring the immunomodulation that’s been recorded with these types of drugs.

So yes, like David said, looking forward to presenting the data third quarter, fourth quarter of this year. You can anticipate and maybe guess that we will be trying to present at ASH this year as we start to generate some of the preclinical data in the heme space..

Sounds great. Thank you. I have one more follow-up question. That would be I know we talked about avadomide show some data in the liver cancers, multiple myeloma. And you also mentioned some particular interest in the solid tumor arena.

Are we going to see any specific towards solid tumors for the preclinical data that will be disclosed this year?.

Yes, we are planning. David, I can take this one..

Yes, please..

So yes, we are exploring the heme space, because naturally where avadomide, which an improved version of avadomide showed great activity, but like you said, they also explore solid tumors. And we will also be doing that. We do believe 3164 is differentiated from other molecular glues. And we will have promising activity in a variety of solid tumors.

And so, we do have a shortlist that we are actively looking into and should be generating some data in that space this year as well..

Thank you. This is very helpful. I’ll hop back on the queue. Thank you..

Thank you..

Your next question comes from Hunter Diamond with Diamond Equity..

Hi, everyone. Hope everyone is doing well. So, I had a couple of questions.

The first one was can you comment more on the recently filed Form 4s?.

Hunter, this is David. Good to hear from you. Thank you for joining the call. Yes, both Mark Rosenblum and I filed Form 4s today. We were able to participate in a companywide program that allowed us to purchase stock with a portion of our annual bonus.

And as CEO of Salarius and I am sure you are aware of this I have very limited opportunities to purchase stock. There is the blackout periods. I have to wait for an open window. I have to make sure that I am not in possession of material non-public information.

And this program – programs like our employee stock purchase program, which I participate in and other activities if I have an opportunity to participate, I do. So as I have said to a number of people and I talk about in all of our calls, I am very bullish on Salarius as a company. I think the seclidemstat has potential.

I am looking forward to the readouts in the middle of the year. I couldn’t be more excited about the acquisition of 3164 when the opportunity presented itself to take the maximum opportunity available to purchase some stock at today’s prices. I jumped all over it..

Great. No, I appreciate the clarification. It makes perfect sense.

My other question was, maybe it’s more for Mark, talking about the cash burn in the runway with the new asset?.

Well, our cash burn as you can see for most every quarter, in the last year, even a little bit more is about $3.5 million to $3.8 million per quarter. The studies that are required, my understanding of the studies and David can provide a little bit of commentary here.

My understanding of the studies that we are initially performing on 3164 and the ongoing studies of course, on seclidemstat we have already budgeted for, it’s already been in our cash runway. The 3164 activities are largely in the beginning, all tolerable by our current cash flow. We can handle them.

They are not all that expensive until we get into the future a little bit more. But right now we have seen what seems as though we can fit them in.

So David, do you want to?.

Mark, I think you hit the nail on the head. You can look at it mathematically and say, we have just reported $29 million and change in cash and cash equivalents at the end of last year. And we burn $1.2 million, $1.3 million a month.

You can do the math and come up with a one number and then you can look at the fact that second half this year, we are going to get data releases on Ewing sarcoma, and that data can take us in one direction, or it can take us in another.

So, we strategically, the second half of this year, and the first half of next year is going to be exciting times for Salarius. But what we feel good about is we are sitting on enough cash runway to cover us during that period and give us some operating space..

Great, exactly. And that’s what you want to hear in this risk off environment. So, the next question was the targeted protein degradation is obviously a huge market, multi billions, and you announced some of the deals on the call.

Does that worry you in terms of how crowded it is, or are there a lot of competitors in this space?.

Hunter, let me take a crack at that first, and then I will see if Daniela wants to follow on. No, it doesn’t bother me at all. In fact it makes me feel good about our decision, let’s face it.

If we were entering a space with no competition, it would tell me that a, we made a bad choice, or b, it’s because no one wants to be there or be in such a difficult space, nobody wants to be in it. So, the fact that we are pursuing we are entering a space and we are entering it with a drug where we hope to be planned to be in the clinic next year.

And you look at the fact that the other people in this space read like who is who of the biopharmaceutical industry. I am pretty excited. I mean we are in the game with some really good players. And based on the data we have seen about 3164, I think we have a very competitive product.

And we are looking forward to getting some additional data out into the marketplace to help support that knowledge that we have..

Great, no, I appreciate the color. In terms of I guess avadomide, you discuss that a lot with 3164.

Can you just explain sort of the logic why that’s always mentioned?.

Daniela, would you like to take that and tell what was that about the 3164 and avadomide story?.

Yes, happy to. And also that to your previous question Hunter that in addition to what David said the targeted protein degradation space is still relatively new. So, if you look at where all the programs are, most of them are actually in Phase 1 development what’s actually over 70% being in pre-clinical discovery phase.

So, while there is competition, and like David said, it’s good to enter a space that others think is attractive. We are in a great position in terms of timing with 3164. So, then moving on to your next question, like David mentioned in this call, what we have with 3164 is an improved version of avadomide.

Avadomide, not to get too but it exists as a racemic mixture. So, two enantiomers, but it’s only one of those enantiomers, that’s actually the active species. And that means that it’s only one of the enantiomer that’s having that anti-cancer affect that you want in an anti-cancer drug. One half of the drug is not contributing any therapeutic activity.

And so what we have with 3164 is we purified the active species that has that anti-cancer activity. And that’s why when we go into preclinical models, we see an improved therapeutic activity when we compared to avadomide.

And this is important, because like David said avadomide already in clinics showed a nice safety profile, showed good therapeutic activity in lymphomas and in solid tumors. And so if we can show an improvement over a drug that already showed promising activity in clinic, it would be great. And that’s why we were really excited about 3164 potential.

And to your question, that’s why it’s compared to avadomide, improved version of it.

Does that help?.

Absolutely. Thank you. That’s a great color on that. So, the last question and I will open the line for other investors.

In terms of upcoming milestones, can you just kind of pinpoint what you view as the main ones and what you do investors should be monitoring the next 12 months?.

Yes. Hunter, I would be happy to. We have been talking a lot about clinical trial enrollment and in the sarcoma and in the hematologic study, and now we are talking about 3164. So, it’s a pretty full plate. So, it starts with seclidemstat, enrollment is continuing.

We have three patient populations, Ewing sarcoma, we have myxoid liposarcoma, we have FET-rearranged sarcomas. And we are looking to report out some interim data in mid-year third quarterish. We have patients that we are actively treating. We just need to see. We need to get some months under our belt.

These are diseases where the real benefit to patient is to increase their progression free survival. And to get that data, you got to get patients on treatment and let him stay on treatment for a while. So, that’s coming mid-year. And now what we have added to that list of milestones is the 3164 portfolio of data.

And as Daniela has said, we have – we brought that drug in-house. We have spent a lot of time building our early development plans. We have a list of studies that we think is exactly the type of information that not only we want to see, but that the marketplace wants to see and potentially strategic partners want to see.

And we are hoping to complete that work in late Q3, early Q4 and start getting it out, potentially conferences, potentially press releases. And so the second half of this year is going to be pretty exciting..

Great, I look forward to the continued progress. And again, thank you for taking my questions..

Thank you for taking the time to join the call. Take care..

There are no further questions..

Okay. Thank you. Yes, thank you, Ashley. So, let me make a few concluding remarks.

As you have heard from today’s discussion, we view this year as a year of optimism, given our expansion into targeted protein degradation, our continuing clinical development of seclidemstat, our continued strong financial footing, and as we discussed with Hunter’s question, the value building opportunities and data points in the future, we think it’s going to be a great year for Salarius.

I look forward to working with my management team and our Board of Directors to execute our business and clinical strategy, as I mentioned, the potential to build Salarius Pharmaceuticals into an anti-cancer drug development powerhouse. We really believe that.

Supporting all of this is the dedication of our employees and the support of our stakeholders. Without all of them Salarius would not be where it is today. We look forward to embarking on what we believe will be a productive year and we appreciate your continued support.

Thank you everyone for your time and attention today and I extend my sincerest wishes for good health to all. Thank you..

This concludes today’s conference call. You may now disconnect..