ATOS

Good morning, everyone, and welcome to the Atossa Therapeutics Fourth Quarter and Full Year 2024 Earnings Conference Call. My name is Joelle, and I will be your conference operator today. All participants will be in a listen-only mode. [Operator Instructions] A replay of this call will be available on the Investor Relations section of the Atossa Therapeutics website after its conclusion. I will now turn the call over to Michael Parks, Vice President of Investor Relations at Atossa Therapeutics. Michael, please proceed.

Thank you, Joelle. Good morning, everyone, and welcome to Atossa Therapeutics conference call to discuss our year-end 2024 financial results and business update. The press release on these financial results was issued this morning and can be found in our Investors section of the corporate website at atossatherapeutics.com. On this morning's call, a team will provide a business overview of our progress in 2024 and recent events. Before we begin, I want to remind you that today's webcast contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements represent management's judgment as of today and may involve risks and uncertainties that could cause actual results to differ materially from those expressed and or implied by these statements. For more information on such risks and uncertainties, you are strongly encouraged to refer to our filings with the SEC, which are available from the SEC website or our corporate website. Any forward-looking statements represent our views as of today, March 25, 2025. Joining me today on the call are Dr. Steven Quay, Atossa’s Chairman, Chief Executive and President; as well as Heather Rees, our Chief Financial Officer. I will now turn the call over to Dr. Steven Quay for our business update. Dr. Quay?

Thank you, Michael, and good day to everyone joining us. We appreciate your time and continued support of Atossa during today's call, I'll provide an overview of our recent corporate developments and strategic priorities, as well as clinical progress updates on our lead program (Z)-endoxifen. Then Heather will discuss our full year 2024 financial results, and we will conclude with a Q&A session. However, before we provide those updates I just want to take a moment to talk about the critical challenges practitioners face with endocrine therapy and breast cancer and the significant unmet needs that remain in this treatment landscape. First, we all know that endocrine therapy has been a cornerstone of treatment for hormone receptor-positive breast cancer. However, despite being a [mean-state](ph) therapy, there are still major gaps and areas for improvement. One of the biggest issues we see is patient adherence. 30% to 50% of patients stop taking their adjuvant endocrine therapy before they're supposed to. This could be caused by side effects, daily pill fatigue or other quality-of-life factors, all of which underscore the need for more tolerable and patient-friendly options. Another point to consider is efficacy, while endocrine therapy can be highly effective for many women not all patients get the long-term benefits they need. We're looking to develop a treatment that not only prevents recurrence, but also improves overall outcomes, especially for those with tougher disease profiles. Resistance to endocrine therapy remains a serious hurdle, ultimately leading to disease progression in many cases. There is a pressing need for therapies that can circumvent or delay the onset of resistance to extend the window of effective treatment. We also need strategies that can effectively induce apoptosis or programmed cell death in the tumor cells, a therapy that reliably triggers tumor-specific cell death could significantly enhance treatment results and patient survival. Finally, beyond these points, the broader breast cancer community is calling our treatments with fewer side effects, better tolerability and higher patient adherence. Meeting these needs could greatly improve both patient's quality of life and the clinical efficacy of endocrine therapy. Now that we've identified the high unmet needs in endocrine therapy for breast cancer, ranging from early patient discontinuation to drug resistance. Let's turn our focus to what we believe is a very promising solution (Z)-endoxifen. This is an innovative next-generation anti-estrogen therapy that we believe could address many of the gaps we just discussed. [(Z)-endoxifen] (ph) stands apart from current endocrine therapies due to its potent anti-estrogenic activity. It not only targets estrogen receptors very effectively but may also help overcome issues related to patient metabolism and drug resistance, challenges clinicians often face with existing treatments like tamoxifen, the pro-drug form from which (Z)-endoxifen drives. Several factors set (Z)-endoxifen apart. First, there's enhanced potency compared to older agents, the (Z)-endoxifen is able to achieve higher, more consistent blood levels, resistant mitigation. Its unique mode of action may help delay or reduce development of resistance. And finally, tumor cell apoptosis. Laboratory research suggests (Z)-endoxifen can induce robust apoptosis in breast cancer cells, a key goal in stopping disease progression. One of the most exciting aspects of (Z)-endoxifen is its flexibility. We believe it could play a role across the spectrum of breast cancer care from early prevention treatment to more advanced metastatic disease. This versatility may also offer a valuable backbone for combination therapies particularly in settings where common mutations like PIK3CA, AKT1, and PTEN are factors in driving tumor growth. With a more tolerable safety profile and a dosing strategy designed to minimize side effects, we believe that (Z)-endoxifen could also improve patient adherence. By addressing some of the quality of life challenges that often lead to early discontinuation of endocrine therapy, we hope this agent will help more patients complete their full course. So in summary (Z)-endoxifen aims to tackle the exact issues we discussed on the third slide enhancing efficacy, reducing resistance, inducing meaningful tumor cell apoptosis and improving overall adherence and tolerability. This is precisely why we view it as a next-generation anti-estrogen with the potential to set a new benchmark in breast cancer treatment. Our goal is simple but ambitious to deliver a best-in-class therapy that significantly improves patient outcomes. So the question is, how do we get from where we are today to delivering a treatment that tens or hundreds of thousands of women they benefit from tomorrow. Let me begin by elaborating on our recent decision to advance our lead program, (Z)-endoxifen in metastatic breast cancer. We are incredibly excited to advance this indication and confident in our impact that we can have for patients at this stage. It is a clinical setting of high unmet need marked by limited durability of response and significant side effects from existing treatment options. We believe there is a compelling rationale to prioritize this area first, potentially leading to a more streamlined path to regulatory approval and faster time to market, not only in metastatic, but for earlier disease as well. Importantly, our confidence in (Z)-endoxifen for metastatic breast cancer is supported by compelling clinical investigations. First, in a Phase I study by Dr. Matthew Goetz, the lead investigator of the Evangeline trial, (Z)-endoxifen demonstrated robust plasma concentration, unaffected by cytochrome genotypes and showed clinically meaningful activity in women, endocrine refractory ER-positive HER2-negative metastatic breast cancer is a remarkable ability for a drug. Next, notably the study observed a clinical benefit rate of approximately 26% in patients who had already progressed on multiple prior therapies, underscoring the agent's potential in difficult-to-treat settings. And additionally, a related Phase II study further suggested that (Z)-endoxifen can prolong progression-free survival relative tamoxifen in certain subgroups such as those who have not been treated previously with CDK4/6 inhibitors with nearly a five-month greater progression-free survival. These data are very encouraging and by pursuing a metastatic indication first, we believe we can expedite patient access to (Z)-endoxifen, especially for those who urgently need new therapeutic approaches. More information on our registrational path will be forthcoming, including our target subpopulation trial design and the potential for a combination therapy. We are excited about this path and look forward to keeping you updated. We also announced our commitment to continue an active dialogue with the FDA regarding the potential for (Z)-endoxifen in earlier disease settings like breast cancer prevention and neoadjuvant therapy, which generally require larger and longer clinical trials. Importantly, we believe the metastatic indication first approach will help us with this goal. Late last year, we presented five abstracts, three of which were EVANGELINE focused at the San Antonio Breast Cancer Symposium. These presentations outlined strong pharmacokinetic and tolerability data for our Phase II Evangeline trial in premenopausal women with ER-positive HER2-negative breast cancer. Substantial tumor suppression was observed with (Z)-endoxifen at multiple dose levels and the four-week Ki-67 was less than 10%, generally above 85% of the women. Moreover, (Z)-endoxifen was very well tolerated with no significant grade 3 or 4 toxicities. The previously disclosed gynecological events at the 80-milligram dose we plan to continue under an amended protocol that compares a 40-milligram per day regimen of (Z)-endoxifen plus ovarian function suppression to exemestane plus OFS. Using the four-week Ki67 reduction as the primary endpoint will also include a single-arm cohort of (Z)-endoxifen monotherapy at 40 milligrams per day over 24 weeks to gather additional safety and efficacy data. Additionally, the San Antonio data from our Phase II KARISMA-Endoxifen study showed that low doses of (Z)-endoxifen significantly reduced mammographic breast density, a key marker in breast cancer. A 1-milligram dose lowered MBD by 17.3 percentage points while a 2-milligram dose achieved a 23.5% reduction, both highly significant when compared to the placebo group. Importantly, the 1-milligram dose exhibited no meaningful difference in adverse events relative to placebo, suggesting (Z)-endoxifen favorable safety and tolerability profile. Our focus on metastatic breast cancer first is driven by both clinical urgency for patients and a potential pathway to expedited approval. We believe this approach can enable a quicker route to market and paved the way for future label expansions into prevention and neoadjuvant settings, which as I said, are larger and longer trials in any case. We remain steadfast in executing our research and regulatory strategies confident that (Z)-endoxifen can transform how we treat and ultimately prevent various stages of breast cancer. I'll now hand the call over to our Chief Financial Officer, Heather Rees, to walk us through our financial results for the full year 2024. Please go ahead, Heather Rees.

Thank you, Dr. Quay, and good morning, everyone. I will discuss our financial results for the full year 2024 period, which ended on December 31. On the next slide, I'll emphasize a few key financial highlights from the quarter, but I encourage you to consider those remarks in the context of the full disclosures covered in our Annual Report on Form 10-K. In looking at our income statement, total operating expenses for the year were $27.6 million, down from $31.4 million in 2023, a decrease of $3.8 million. This reduction reflects disciplined spending in both R&D and G&A. R&D expenses declined by $3.2 million from $17.3 million in 2023 to $14.1 million in 2024. The key drivers were a reduction of $2.6 million in clinical and preclinical spending on our (Z)-endoxifen trials and drug development program. R&D compensation also decreased by $500,000, mainly reflecting lower non-cash stock-based compensation expense year-over-year. G&A expenses totaled $13.5 million in 2024 versus $14.0 million in the prior year, a $500,000 decrease. Compensation expense was down $1.9 million due to lower non-cash stock-based compensation expense year-over-year and lower salary, bonus and benefits due to the payment of severance costs to our previous CFO in 2023. Professional fees increased by $1.8 million year-over-year, primarily stemming from higher legal and investor relation costs along with accounting fees tied to public company expenses incurred in 2024. Insurance expense was down by $400,000, reflecting successfully renegotiated premiums. Interest income was $4.1 million for the year, a slight decrease in 2023 due to a lower average invested balance in 2024. As previously disclosed, we wrote off our remaining investment in dynamic cell therapies of $1.7 million as they ceased operations in the fourth quarter of 2024. Our net loss for 2024 was $25.5 million or $0.20 per share versus $30.1 million or $0.24 per share in 2023. We closed the year with $71.1 million in cash and cash equivalents providing a healthy runway to advance (Z)-endoxifen and other research initiatives. Overall, from a cash and operating standpoint, we are well positioned to keep hitting clinical milestones. We'll continue to focus our resources on programs that we believe have the biggest potential for patient impact and shareholder return. With that, I'll turn the call back to Dr. Quay for closing remarks.

Thank you, Heather. We remain encouraged by our clinical progress and the broader potential of (Z)-endoxifen to address critical gaps in breast cancer treatment, especially in metastatic disease where new options are urgently needed. We are grateful for the support of our shareholders and clinical partners and most importantly, the patients who inspire our missions. We appreciate your attention today. Operator, we are now ready to open the call for questions.

Thank you. We will now begin the question-and-answer portion of today’s call for analyst. [Operator Instructions] Your first question comes from Emily Bodnar with H.C. Wainwright. Your line is now open.

Hello, good morning. Thanks for taking my questions. I have a couple, but maybe just to start this one -- can you provide us some timing around when you'd be able to initiate a study in the metastatic setting and whether you are thinking about and starting with the Phase II study? Or is this going to be a Phase III study? Thank you.

Thanks for the question, Emily. Let me go ahead and take it, Michael and Heather. We are in the process now of consulting with a set of key opinion leaders will advise us on some of the nuances, some of the details in the metastatic setting. And then we will transition to discussions with the FDA in which some of these parameters were worked out. So it's a little premature to be talking about some of those details, but over the next, let's say, four months to six months, that will be the plan. So the KOL folks will weigh-in, and then we'll talk to the FDA.

Okay. Great. And then maybe on the EVANGELINE trial, could you just provide an update on where you are with enrollment of the trial and when we may see additional data from the 40 mg dose? And then separately, a question on the primary endpoint. So for the monotherapy, you said you're looking at [24-week 67] (ph) but in combo, only 4 weeks, so maybe just comment on why the discrepancy? Thank you.

Yes. So we'll be giving updates at some upcoming meetings with respect to enrollment and the interim data results. The primary endpoint difference has to do with the requirements around getting an early look at Ki-67 values at four weeks. And so that's why there is that difference in that particular arm of the trial.

Okay, great. Thanks for taking the questions.

Thank you.

[Operator Instructions] Your next question comes from Ed Woo with Ascendiant Capital. Your line is now open.

Yeah. Congratulations on the progress. As you continue or you pursue your metastatic breast cancer, do you anticipate pursuing it globally? Will you be also talking to European or Australian FDA counterparts?

Yes, that's a great question here. We are focusing pretty razor sharp on the U.S. FDA process because it's our opinion that if we can streamline that process and get full definition around the clinical trial, the parameters of the trial, the number of patients, et cetera, then and only then is it the right time to go outside to other major markets, if I could call it that. So 2025 is going to be a U.S. FDA focused year to get all of this part of it right. And I think you should assume those other kinds of markets and regions are going to be early next year.

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

Thank you.

There are no further questions at this time. I will now turn the call over to Dr. Quay for closing remarks.

Well, thank you. I appreciate everyone's attention here and following us. 2024 was an excellent year, as you can see both clinically and financially, and 2025 looks equally exciting with a plan in metastatic breast cancer treatment with events coming up around meetings with the KOLs to define some of the parameters, the detailed parameters of a typical clinical trial concurrence with the FDA around what the proper design is and then we execute. So we thank you for your attention, and we thank you for your support for Atossa Therapeutics. And most of all, we think the patients were helping us with this path and hopefully, the patients we will help in the future. Thanks again, and we will end the call now.

Ladies and gentlemen, this concludes today's conference call. You may now disconnect. A replay will be available on our website for the next 30 days. We appreciate your participation. Have a great day.

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 dense breast. Our vision for endoxifen in the mammographic breast density setting is to both make mammograms more reliable and decrease the risk that women with dense breast tissue will develop cancer in their lifetimes. In addition to our MBD trial, there are two additional ongoing Phase 2 trials investigating endoxifen in the neoadjuvant setting, which is the window of time between the diagnosis and the primary treatment, which with estrogen sensitive breast cancer is almost always surgery plus radiation and/or chemotherapy. The intent of neoadjuvant therapy is to slow the cancer growth or even shrink the cancer prior to surgery. Doing this makes surgery more effective and with breast cancer, it may alter the surgical approach, meaning some patients could have a lumpectomy instead of a mastectomy. Neoadjuvant therapy has also been shown to reduce the likelihood that the cancer returns. The first of the two neoadjuvant trials investigating endoxifen is being conducted through the I-SPY network, which is a collaborative effort among academic investigators from major cancer research centers across the United States. The I-SPY trial is enrolling newly diagnosed pre and postmenopausal women with estrogen-receptor positive breast cancer. As a reminder, about 80% of all breast cancers are ER positive. Patients in the study received daily treatment with 10 milligrams of endoxifen for up to 24 weeks prior to surgery. This is a smaller trial with only 20 subjects expected to participate, and we announced in June that the trial was already 30% enrolled. Given the size of the I-SPY network, which includes 41 of the largest cancer centers in the United States, we expect full enrollment either later this year or in early 2024. The third Phase 2 trial is the EVANGELINE study, which was profiled at the American Society of Clinical Oncology meeting in Chicago in June. This is also a neoadjuvant study, although it differs from the I-SPY trial as only premenopausal women are being enrolled. EVANGELINE trial will enroll up to 175 women. The primary objective is to evaluate the endocrine sensitive disease rate measured by Ki-67 after four weeks of treatment with endoxifen compared to treatment with current standard-of-care, which consists of an aromatase inhibitor plus ovarian function suppression. Ki-67 is a measure of tumor cell proliferation or how fast the tumor is growing. The importance of this is that studies have shown that Ki-67 above 10% at the time of surgery confers a higher risk of recurrence and a worse survival rate in patients with early breast cancer. The EVANGELINE trial started with a six patient pharmacokinetic run-in cohort, which is -- which was designed to determine if the 40 milligram dose delivers steady state plasma levels of between 501,000 nanograms per milliliter, which is the optimal to target protein kinase C beta inhibition and enhanced endoxifen's anti-tumor mechanism of action. We already know that endoxifen binds to estrogen receptors in breast cells and stops the body's own natural estrogen from attaching to them. This cuts off the cancer's fuel source and prevents it from growing and spreading. By further targeting PKC beta, we expect endoxifen to have an even greater anti-tumor effect by both blocking the estrogen receptor and by inducing apoptosis, which is a cellular equivalent of a self-destruct button. This is where we could see not only slower progression, but also a reduction in the size of the tumor. We recently received data from the initial 40 milligrams per day PK run-in cohort. As with our previous trials, no treatment related safety or tolerability issues were identified. While the 40 milligram per day dose was well tolerated, it did not achieve optimal plasma concentrations, which means per the protocol, we are in the process of initiating a second dose level at 80 milligrams. Based on concentration levels achieved at 40 milligrams per day, we expect the 80 milligram per day dose will deliver the desired steady state plasma concentrations. Efficacy data was also captured as part of the PK run-in including Ki-67 at baseline and at four weeks and MRIs taken at diagnosis and again after 12 weeks of treatment. We are extremely encouraged by these results and we hope to share them in detail at an upcoming medical conference. Before I turn things over to Greg for a financial update, I wanted to touch on one additional project that we have recently announced, which is our research partnership with Weill Cornell Medicine in New York City, to study the potential of inducing estrogen receptor expression in triple negative breast cancer. The term triple negative breast cancer refers to the fact that the cancer cells don't have either estrogen or progesterone receptors and also don't make any of the other receptors including the Human Epidermal Growth Factor Receptor 2 or HER2 protein. The tumor cells, thus, test negative on all three tests. Triple negative breast cancer or TNBC accounts for about 10% to 15% of all breast cancers, and it differs from other types of invasive breast cancer, in that it tends to grow and spread faster, has fewer treatment options, has a higher risk of recurrence, and tends to have a worse prognosis. The goal of the research we are doing with Weill Cornell is to determine if treating TNBC with extracellular vesicles carrying the estrogen receptor will change the cancer phenotype and turn on the estrogen receptor. Converting the tumor to ER positive would make it sensitive to hormone therapy, including treatment with (Z)-endoxifen. This was fundamentally transformed the treatment approach and outlook for these patients. With that, I'll turn things over to Greg. Greg recently joined us as CFO, but he knows the company extremely well, having served on the Board for over 10 years. He is a seasoned financial executive with over 30 years of experience leading finance, operations and business development at several publicly traded biotech companies. I am thrilled to have him as part of our executive team, and will turn things over to him for a financial update. Greg, take it away.

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 operating expenses of $7.8 million for the three months ended June 30, an increase of $1.2 million from the three months ended June 30 of the prior year. R&D expense for the three months ended June 30, 2023, $3.7 million compared to $3.4 million same quarter prior year, the increase of just under $300,000, primarily due to increased spending on clinical trials and nonclinical activities. G&A expense for the three months end of June 30 was $4.1 million compared to $3.2 million for the same quarter prior year. The increase of just under $1 million due to G&A compensation expense, which increased primarily due to severance cost to our former CFO and the increase in overall compensation along with legal and professional fees, increasing due primarily to higher patent activity for (Z)-endoxifen and higher Investor Relations and accounting fees. Interest income was $1 million for the three months ended June 30, a sharp increase compared to prior year due to a higher average invested balance and higher earned interest rates. And non-cash charges in the second quarter included an impairment charge we booked for $2.9 million on an investment in Dynamic Cell Therapies or DCT and a non-cash stock compensation charge of $1.6 million. And finally on the quarterly numbers, a net loss of $9.8 million for the second quarter compared to a net loss of $6.3 million in the first quarter and $6.7 million for the comparative second quarter of last year. Pivoting to the six months end of June 30 numbers, total operating expenses of $14.9 million for the six months, which is an increase of $3.5 million from the prior year with R&D expenses for the six months of $7.2 million compared to $4.9 million for the same quarter prior year. The increase of $2.3 million is due primarily to increased spending of roughly $1.8 million related to the endoxifen clinical trial costs and increased API drug product formulation and development costs, also due to fluctuations in R&D compensation expense attributable to non-cash stock-based comp and a decrease in some year-over-year costs related to prior year payments, which were made to establish alliances with several research institutions. Pivoting to G&A expenses for the six months ended June 30, totaled $7.7 million, an increase of $1.3 million compared to the prior year's $6.4 million with the key fluctuations, again, being the compensation expense increase in part attributable to the increase in overall compensation of roughly $900,000, a decrease in non-cash stock-based comp and an increase in the severance cost for our exiting CFO. And also, again, legal and professional fees increased due to higher activity in both areas. Interest income for the six months, $1.8 million, also increased related to higher average balances invested and higher average interest rates. The non-cash charges for the six months included the Q2 impairment charge on the investment in DCT and non-cash stock compensation. The net loss for the six months of $16.1 million, and that's compared to the net loss of $11.5 million year-to-date prior year. And then one additional topic to touch on is that we announced a share repurchase program in June to purchase up to 10 million shares of our common stock. This program is authorized through the year-end 2023, and the rationale for the program is to recognize, in our view, the disconnect in the market value of Atossa shares. In Q2 2023, we purchased just under 120,000 shares of stock at a cost of approximately a $150,000. And to-date, we purchased approximately 840,000 shares for a $1 million. This activity has no material impact on our operating cash runway. Thank you for your attention. I'll turn the call back to Steve. Steve?

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.