Good morning, ladies and gentlemen, thank you for standing by and welcome to the Atossa Therapeutics Q2 2023 Conference Call. Please be advised today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Eric Van Zanten, Vice President of Investor and Public Relations. Mr. Van Zanten, you may begin.

Thank you, Kevin. Good morning, everyone, and welcome to Atossa's second quarter 2023 corporate and financial update conference call. Earlier this morning, we issued a press release providing an overview of our recent corporate highlights and financial results for the quarter ended June 30, 2023. The press release can be accessed on the Investor portion of our website at investors.atossatherapeutics.com. Joining me on the call today are Dr. Steven Quay, Atossa's President and Chief Executive Officer, and Greg Weaver, our Executive Vice President and Chief Financial Officer. During today's call, we will be making certain forward-looking statements which are subject to risks and uncertainties that may cause actual results to differ materially from the anticipated or estimated future results. These forward-looking statements are based on current information, assumptions, and expectations that are subject to change. A description of potential risks can be found in our latest SEC disclosure documents and our press release. You're cautioned not to place undue reliance on these forward-looking statements and Atossa disclaims any obligation to update these statements. I'll now turn the call over to Dr. Quay.

Thank you, Eric, and thank you to everyone who joined the call today. I'm very proud of the progress we've made in Q2. From a clinical perspective, each of the three ongoing Phase 2 trials investigating our proprietary (Z)-endoxifen reached important milestones. I'll start with the Karisma-Endoxifen trial, which is a randomized double-blind, placebo-controlled efficacy study of oral endoxifen in premenopausal women with measurable breast density. This is a single site trial at the Karolinska Institute in Stockholm led by Dr. Per Hall, one of the world's foremost authorities in breast cancer epidemiology. Participants in the study are randomized into one of three cohorts to receive placebo, 1 milligram or 2 milligrams of endoxifen daily. Participants will take endoxifen for six months over the course of which mammograms are conducted to measure reduction in breast density. Patients will also have a mammogram at 24 months to assess the durability of density changes. Last month, we announced that 70% or 170 of the anticipated 240 patients have been enrolled in the trial. We expect the study to fully enroll in the fourth quarter of this year and data to be available in mid-2024. Mammographic breast density is a growing health crisis. Between 40% and 50% of all women are estimated to have mammographically dense breasts, and there are currently no approved treatments. Cancer and dense breast tissue both appear white on a mammogram, which makes mammography less sensitive and more difficult to interpret. As a result, cancers are often larger, more advanced, and more difficult to treat when found in women with dense breast tissue. Additionally, mammographic breast density is a strong independent predictor of breast cancer risk and women with the highest density are 4 to 6 times more likely to develop breast cancer compared to women with the least…

Thank you, Steve. And thank you to everyone for joining today's call. As this is our first earnings call, as we reinvigorate our communications with investors, and these quarterly calls will be an important pillar of that going forward. From my perspective as an investor in Atossa, it's a pivotal time for the company. With Phase 2 trials in multiple settings, (Z)-endoxifen is positioned to read out data over the next 12 to 18 months, providing investors with the opportunity to join in the value creation and innovation for breast cancer patients. And looking ahead, strategically, our clinical development strategy for the breast density and the neoadjuvant breast cancer indications includes forming alliances for future Phase 3 development and commercialization. So as the clinical data continues to mature, one of the key objectives we have is to build relationships with prospective partners and brokering alliances is something I've done previously in my career and look forward to leveraging that experience here at Atossa. Okay. Let's turn to the financial update. Beginning with cash, the end of Q2 total cash position was $99.4 million, as compared to $104 million at March 31st and $111 million at year end 2022. The six month year-to-date change in cash was $11.5 million, $4.5 million used in Q2, $7 million in Q1. So as we model our cash runway going forward, you can clearly see the multi-year resources available to drive our multiple Phase 2 clinical programs to their next significant value and inflection points, and through to completion. The strong cash position we have is also strategically important longer-term, as we position ourselves to invest in the Phase 3 registration trials and potentially to consider adding to the pipeline. Let's move to the comparison of the three month numbers ended June 30 with total…

Steve, you're on mute.

I'm sorry. Can you hear me?

You're good now.

Thank you, Greg. And from a clinical development perspective, we expect to see data from all three of our ongoing Phase 2 trials over the next 12 to 24 months. This data, along with feedback from the FDA, will allow us to design Phase 3 protocols, which will support strategic business development alliances. Short-term, you can expect to hear from us with enrollment updates and other developments. You should also expect these quarterly update calls to continue with our next one being our Q3 call in November. I would now like to ask the operator to open the call for Q&A. Thank you, operator.

[Operator Instructions] First question comes from Jason McCarthy with Maxim Group. Your line is open.

This is Michael Okunewitch on the line for Jason. Thank you so much for taking my questions today. All right. So, I guess, first off, I'd just like to see with the Karisma-Endoxifen trial approaching full enrollment by year end and completion in 2024, could you just remind us -- is there a certain level of density reduction or some upper threshold you need to cross in order to consider it a meaningful result where you will get an improvement in early detection or reduction in incidence of breast cancer. I'm trying to get at how you evaluate a meaningful reduction in breast density.

Yes. That's a great question, Michael. There are two main measures of density on the mammograms themselves, and then I will discuss the concept of statistical significance and clinical significance, which comes up in every single clinical trial of any drug you would be involved with. So the first, the measurement endpoint. Radiologists have for almost two decades used a A, B, C, D, categorization of approximately quartiles where A is the lowest density and D is the highest density. There is an abundance of research results looking at those density measurements. And for example, the effect on sensitivity of finding cancers, the effect on a 5-year incidence of cancers going forward. So the long history in mammographic density is that A, B, C, D, categorization. Now we have gotten to the point where we now have 5, 10 cleared, measurements, which are quantitative. The machine does it for you with software. Those give you a score from zero to a 100. And so we have less long-term experience with those, but they do map onto what you'd expect where a radiologist calling a breast A, the machine calls at zero to 25, 26 to 50, 51 to 75, 76 to a 100. So the biggest winners are when you cross the thresholds between groups, because that's the highest level. Statistical significance will probably require a pretty small amount, perhaps 3% or 4% will be enough. The breast in these premenopausal women, the breast will be changing less than 1% per year when they get near menopause and you'll see a 5% or 6% drop over a couple years. But -- so statistical significance would be a couple of percent, clinical significance will be larger drops and perhaps changes in the A, B, C, D categorization.

And then in terms of the EVANGELINE study, I'd like to see how many sites you plan to open in Canada, and how many would that bring it to total?

Yes. I mean, we have one site in Canada, which was the requirement for getting the filing and getting permission to go forward there, and we'll continue to recruit additional trials. And we are always recruiting trials centers into this trial on an ongoing basis. So we haven't disclosed the number of centers that are open currently, but there is a website that you can go to if you have patients with premenopausal ER positive breast cancer, the EVANGELINE trial website.

Then one last one for me and I'll hop back into the queue. So you guys have a fairly impressive cash balance right now. Are there any plans to expand the earlier mid-stage pipeline with additional M&A or are you focused on deploying that capital pretty much purely to get this current set of studies through those readouts over the next 12 to 24 months?

Thanks, Michael. Great question. I'm going to let Greg weigh in on that, if you would?

Happy to Michael. A great question. We're blessed with a very strong balance sheet. And as I look at it in my first weeks here as the CFO, really strategically positions us to not only fully fund the current protocols, execute on the trials that we just discussed in full and through completion, but it appears to me that there's additional bandwidth here to seriously consider adding to the pipeline. And so as we go forward, we'll be with some discretion having a look to be honest. And I would just say, we don't have any disclosures at this time except that there's an intent to take a look at the landscape and see what might be a good strategic fit for us.

Our next question comes from Edward Woo with Ascendiant Capital.

My question is on Dynamic Cell Therapies, what drove the impairment charge this quarter?

I'll let Greg go into that. It's a financial analysis exercise.

Yes. Thank you. Ed, good morning. The Dynamic Cell Therapies investment was made into their CAR-T business as a strategic investment second half of last year. The accounting treatment for GAAP is to take a look at the fundamentals of the actual business under investment. And in this case, the accountants considered the cash runway for that investment business is less than a year. And as they looked at that, they run it through their parameters for investment carrying value on the balance sheet and recommended an impairment charge be booked against it. So it's a non-cash evaluation. We still think that there's value in that investment and they continue to carry it going forward.

Great. Then my next question is on the three trials that is going on right now. How would you characterize patient enrollment? Is it as expected, faster or slower than you expected?

Oh, it’s a good question. I have got seven approved drugs and about 30 clinical trials under my belt. And I can say, pretty definitively that there is a high correlation between good enrollment and a successful drug after FDA approval and marketing. So with respect to the I-SPY trial and neoadjuvant, we have already -- we indicated that we had 30% enrollment within a couple of months. The trial at the Karolinska Institute in breast density accruing right on schedule, despite the Swedish culture, I guess, where they take a full month off in the summer, for example, things like that. So it's enrolling very well. And there is a buzz about the trial, the EVANGELINE trial happening at the Mayo Clinic. Because, again, we are trying to see if we can step into the standard-of-care which is effective and safe, but has a quality of life issue. So it's sort of the third leg of a stool in clinical development with ovarian function suppression. So that is the standard-of-care now, but it produces an extremely strong decrement in the standard-of-care for these patients. We are seeing if our endoxifen is so strong at stopping the estrogen receptor, that it can tolerate the upregulation of estrogen that happens in women that have functioning ovaries in the presence of hormonal therapy. So if we can achieve the same equivalent efficacy, the same safety profile and an improved quality of life, it will be a game changer. So all three of the trials have the non-statistically significant edition of being really strong trials.

Great. Thanks for answering my questions, and I wish you guys good luck. Thank you.

I'm not showing any further questions at this time. I'd like to turn the call back over to Dr. Quay for any closing remarks.

I want to thank everyone for listening and to our analysts for their questions. We appreciate the support and look forward to next quarter's call with you in November. Until then, take care, and you can now disconnect.

This concludes today's conference call. Thank you for joining us. You may now disconnect your lines and have a wonderful day.