VBIO

Welcome to Valion Bio Inc's conference call to discuss first quarter 2026 financial results. This call has been pre-recorded. The call is being webcast, and the replay will be available on the investors section of the company's website for 90 days. Before we begin, please note that during today's call, management will make various forward-looking statements. Investors are cautioned that these forward-looking statements are based on current expectations and are subject to risks and uncertainties that could cause actual results or outcomes to differ materially from those indicated in the forward-looking statements.

Forward-looking statements include, without limitation, statements regarding the FDA's Animal Rule pathway and the development of entolimod and Entolasta, the company's engagement with BARDA, NIAID, the Department of War, and other U.S. and allied government agencies, the activation, scale up, and customer development plans of Velocity Bioworks, the company's continued listing on Nasdaq, the company's working capital and ability to access additional financing, and the consummation of any strategic transactions.

Please read the safe harbor statement contained in the press release that Valion Bio, Inc. issued today, as well as the risk factors contained in the company's filings with the Securities and Exchange Commission, including its annual report on Form 10-K for the year ended December 31st, 2025, filed with the SEC on March 30th, 2026, and its quarterly report on Form 10-Q for the quarter ended March 31st, 2026, which is being filed concurrently with today's earning release. On today's call, we have Valion Bio, Inc.'s Chief Executive Officer, Michael K. Handley, and Chief Financial Officer, Lisa Wolf. It is now my pleasure to turn the call over to Michael.

Thank you. Welcome, everyone. This is the first quarterly call I'm privileged to address you under our new identity, Valion Bio. Effective April 28th, we completed our transition from Tivic Health Systems to Valion Bio, with our common stock now trading on the Nasdaq Capital Market under the ticker symbol VBIO. The name change is more than a rebrand. It formalizes the company we have built since the start of 2025, a clinical stage biopharmaceutical company anchored by entolimod, which we believe is the most advanced TLR5 agonist in the world, being the only one in active U.S. FDA development. In addition, we have a wholly owned domestic biomanufacturing subsidiary in Velocity Bioworks and a clearly differentiated role in both commercial oncology supportive care and national medical countermeasures, potentially leveraging our ability to modulate the innate immune system. We believe entolimod is a de-risk asset.

More than $140 million has been invested to date in its development, and more than 300 humans have been dosed. The asset arrives at Valion Bio with two active INDs, FDA Fast Track designation, and Orphan Drug Designation. This foundation is more advanced than where most clinical assets sit, and it shapes how we think about capital allocation, regulatory pathway, and time to market. 2025 was a year of fundamental transformation for us. Now that we have the foundation in place, we are focused on execution in our long-term multi-pronged strategy. Let me walk you through that strategy. Substantial progress has been made with the U.S. and allied government stakeholders, and we continue to advance the entolimod and Entolasta development programs and our manufacturing opportunity through Velocity Bioworks, which we view as our most immediate revenue opportunity.

I'll turn it over to Lisa to discuss our financial results. I'd like to discuss our government engagement. On March 26th, we secured and signed a non-clinical evaluation agreement with the National Institute of Allergy and Infectious Diseases, or NIAID. This targets gastrointestinal acute radiation syndrome. On May 5th, we took the engagement materially forward. We announced the receipt of the first FDA precedent gastrointestinal study protocol from NIAID for entolimod. Under this protocol, NIAID will fully fund the BLA enabling in vivo programs and will support the FDA submission process with us. This is a very significant milestone for the company.

It moves our Animal Rule pathway from a company-funded development effort to a federally funded, federally supported program, a structurally different posture and one that we believe is meaningful, de-risks the regulatory pathway, and it also builds on the $35.6 million in previous federal funding contracts that have supported Entolimod's development across BARDA, NIAID, DTRA, NASA, and the U.S. Army. On April 28th, we announced that we had briefed senior leadership at the U.S. Department of War for entolimod for acute radiation syndrome. In the briefing, facilitated by American Defense International, we provided the Deputy Assistant Secretary of Defense for Nuclear, Chemical, and Biological Defense Programs and his team at the Pentagon. The substance of that meeting was entolimod's differentiation. We believe that it is one of the only agents in development that delivers simultaneous bone marrow and gastrointestinal protection.

In published studies, treated subjects were nearly 3 times more likely to survive than untreated controls. entolimod retains efficacy when administered up to a full day after exposure, a critical attribute because casualties in a mass exposure event will not be reached in the first minutes after the event. On May 7th, we presented netolimod in our oral transmucosal program to the Department of War. This presentation expanded the partnership opportunity beyond injectable entolimod to a needle-free, rapidly administered oral formulation uniquely suited for mass casualty and warfighter scenarios. We will provide additional updates on the formulation development partnership as the program advances. Internationally, on March 31st, we announced we received a request for information from the Ministry of Health of Ukraine regarding the potential inclusion of entolimod in Ukraine's national stockpile reserves as a medical countermeasure for acute radiation syndrome.

The engagement was at the request of Ukraine, and it reflects the kind of allied government interest that follows from the differentiation of entolimod. Taken together, these are not a series of disconnected meetings. They are a coordinated movement of entolimod from a traditional clinical pathway toward a federally supported medical countermeasure program with active interest from both U.S. and allied government stockholders. ARS is a $5.5 billion market for strategic national stockpile procurement. This gives us a non-dilutive pathway to first revenue with entolimod without building a commercial sales force. Next, I'll move on to pipeline and clinical strategy. While we believe ARS is a valuable indication that can drive shareholder value, our intended primary value driver over the long term is the oncology supportive care market. This is a multi-double-digit billion-dollar market. It is dominated today by bone marrow stimulating agents called NEUPOGEN, Neulasta, and LEUKINE.

Up to 50% of patients on myelosuppressive chemoradiation therapy develop neutropenia, and a substantial larger number experience gastrointestinal toxicity that the current standard of care does not address. entolimod is differentiated by simultaneous protection of both bone marrow, gastrointestinal tissue, and a single-dose protocol, and the ability to administer prophylactically, which none of the other drugs on the market currently have. We believe no other approved or investigational agent in the category delivers these particular combinations. In the second half of 2026, we expect to initiate physician-sponsored studies for neutropenia, our oncology supportive care indication. Six institutional sites have shown interest in our program. The data from these studies are predicted to form the basis of a phase IIB program that follows for neutropenia. In parallel, our second-generation molecule, Entolasta, advanced through internal program planning during the first quarter of this year.

Entolasta is structurally re-engineered with a 23 amino acid deletion variant to reduce the antibody formation that limits entolimod's use for long-term applications, particularly over two weeks. Published animal data shows that this amino acid change reduces the patient's immune system's negative response against entolimod, the drug. We expect to advance entolimod through IND-enabling studies during the 2026 and 2027 years. Next, organizational build-out. On May 4th, we announced the appointment of Melinda Lackey, our General Counsel and Senior Vice President of Legal Affairs. Melinda joins us from Alaunos Therapeutics in Texas, where she served as Senior Vice President of Legal and Administration.

With prior roles spanning clinical stage biopharmaceutical development, intellectual property strategy, Nasdaq public company governance, as we advance entolimod toward an Animal Rule BLA and scale Velocity Bioworks and execute on a broader strategic plan, having in-house General Counsel of Melinda's depth and caliber is the right structural step for the company at this stage. Before Lisa walks you through the financials, our CFO, I want to spend a few minutes on Velocity Bioworks, which we believe Valion Bio has its most immediate revenue opportunity. Where are we with Velocity Bioworks? On May 6th, we celebrated the formal grand opening of our facility in San Antonio, Texas. The innovative campus in San Antonio, Texas was where the ceremony was attended by representatives from the office of U.S. Senator John Cornyn, San Antonio Mayor Gina Ortiz Jones, and by our Velocity Bioworks team. That milestone is more than ceremonial.

It marks the formal activation of our clinical stage affiliated biomanufacturing facilities with end-to-end domestic capability for biological assets. Three operational facts give Valion Bio a credible commercial story today. First, we are staffed and operating approximately 45 scientists, engineers, and operators on the site in San Antonio. Second, we have completed a 200-fold manufacturing scale-up of entolimod at a 50-liter fermentation bioreactor on time and within budget, meeting all purity and potency specifications. Third, we plan to offer a full end-to-end service stack for potential clients. Bioprocess development, GMP manufacturing, analytical method development, fill and finish, and regulatory and quality support will be some of the things that we offer. This is a service profile early-stage biological companies actually need from a CDMO player. Why is this the nearest term revenue catalyst? First off, Valion Bio has three planned parallel routes to revenue.

Two of them, government procurement for strategic national stockpile use and commercial oncology supportive care, i.e. neutropenia, are real and large, but they are gated by regulatory and clinical milestones that play out over the coming years. The third route, Velocity Bioworks, a standalone CDMO in Texas, serving third-party biotech clients, is operationally active today for non-GMP activity and is producing revenue and is independent of any single clinical outcome. The market opportunity is structurally favorable. The largest contract development and manufacturing organizations are built to serve large pharma at scale. They are typically not built for the flexibility, the timeline compression, and the program-level engineer engagement that phase I and phase II biotechs need. The gap is our value proposition. We estimate Velocity Bioworks has the capacity to generate significant annual revenue for Valion Bio once it's at full third-party utilization. CDMO sales cycles are inherently long.

Clients plan their manufacturing capacity 12 to 18 months in advance. During the first quarter, we've brought on commercial development leadership and begun customer development conversations that build the pipeline of clients that we need to generate revenue. We expect early-stage commercial engagement and qualified pipeline development to be the relevant near-term metrics. The revenue will follow. How we lead first quarter operating expense profile. I want to be direct on the cost side because Lisa will walk you through the operational expense step up in a moment. The bulk of that increase comes from Velocity Bioworks. The dollars we are spending at Velocity Bioworks are not carrying costs. They're deliberate, front-loaded investments in revenue capability. The acquisition closed in December of last year. We brought the facility from acquisition to operational status in approximately 5 months.

We have made substantial progress in equipment recommissioning, qualification, staffing build, and customer readiness work that must be completed before any third-party client and CDMO contract can be signed. As we move through 2026, we now have a path forward to shift our focus to revenue generation. With that, I'll turn the call over to Lisa Wolf, our financial officer, to walk you through the first quarter financial results. Lisa Wolf?

Thank you, Michael. For ease of listening, all of the financial metrics I'll be reporting today compare the 3 months ended March 31, 2026 to the 3 months ended March 31, 2025. Our quarterly report on Form 10-Q is being filed concurrently with today's earnings release and contains the complete financial statements and accompanying notes. As Michael noted, the first quarter of 2026 is the first reporting period to reflect the combined operating footprint following our December 2025 formation of Velocity Bioworks. The legacy ClearUP consumer device business has been presented as discontinued operations in our financial statements consistent with our prior reporting. Total operating expenses for the first quarter of 2026 were $5.6 million, compared with $1.4 million in the first quarter of 2025.

The year-over-year increase reflects the additional Velocity Bioworks operating cost base, which was not part of the company in the prior year period. Together with the continued advancement of our entolimod and Entolasta programs and the build-out of regulatory, manufacturing, and corporate functions following our pivot to the biopharmaceutical model in 2025. Research and development expense for the quarter was $1.9 million, compared with $0.3 million in the first quarter of 2025. The increase reflects approximately $1 million from the Velocity Bioworks operating cost base, additional headcount-related expenses, and the team expanded beyond the prior period baseline, and external biopharma development consulting that was not present a year ago. Selling general and administrative expense was $3.8 million, compared with $1 million a year ago.

Approximately $1.7 million of the increase came from the Velocity Bioworks operating footprint, primarily the recurring facility costs associated with operating a domestic biomanufacturing site, together with related headcount and professional fees. The quarter also included approximately $0.4 million of executive severance, which we're calling out separately so that the underlying run rate is clear. The remainder reflects increases in headcount and professional fees in support of the broader corporate build-out. Other expense net was $0.6 million for the quarter, primarily reflecting approximately $0.7 million of interest expense and amortization related to our $16.3 million convertible note payable, partially offset by interest income and a non-cash adjustment to the fair value of an associated derivative liability.

Income from discontinued operations for the first quarter of 2026 was income of approximately $23,000, compared with a loss of approximately $0.1 million in the prior year period. This reflects residual ClearUP consumer device sales during the first 2 months of the year before our Shopify storefront was closed. Net loss for the quarter was $6.2 million, compared with a net loss of $1.5 million a year ago. Net loss per share, basic and diluted, was $2.23, compared with $2.52 for the prior year period, an improvement on a per-share basis despite the higher absolute loss, reflecting the meaningfully larger weighted average share count following the equity issuances we have executed since early 2025.

Cash and cash equivalents at March 31, 2026 were $7.2 million, compared with $12.6 million at December 31, 2025. Cash used in operating activities during the first quarter of 2026 was $5 million, compared with $0.9 million in the first quarter of 2025. The increase in operating cash use reflects the addition of the Velocity Bioworks operating footprint and the continued advancement of our pipeline programs. With that, I'll turn the call back over to Michael for closing remarks.

Thank you, Lisa. Let me close with how we are thinking about catalyst sequence ahead. Our priorities for the balance of the 2026 year are clear. First, in the second half, we expect to initiate physician-sponsored studies in neutropenia, a supportive care indication, as I mentioned. We already have six institutional sites that have expressed interest in the program. Second, in the third quarter, we will initiate entolimod GMP manufacturing validation, which is required for the BLA submission for the FDA. We're targeting completion of the entolimod GMP manufacturing validation by the end of 2026 at Velocity Bioworks. Third, in our fourth quarter, Entolasta manufacturing and entolimod pre-BLA meetings will occur. We expect to advance Entolasta into non-GMP manufacturing and request an entolimod pre-BLA meeting with the FDA. Fourth, throughout 2026, NIAID-funded BLA enabling testing.

We plan to execute against the NIAID-funded testing for gastrointestinal radiation syndrome and continue our active engagement with the U.S. and allied government stakeholders. Throughout 2026, Velocity Bioworks customer activation. We plan to scale Velocity Bioworks toward a third-party CDMO customer engagement, and if successful, we expect we may be able to generate additional revenue in the near future. Ongoing, balance sheet discipline. We will continue to manage our balance sheet and our financing operations with discipline, with the objective of executing on our plans while protecting the long-term interests of our shareholders. As we have disclosed, the company is actively evaluating financial opportunities to continue to support the execution of its strategic plan. We will provide additional disclosures as appropriate in the accordance with our SEC obligations in the coming future. The foundation we have built supports each of these work streams.

A late-stage asset worth over $140 million in prior development investment, a 300-plus human dosed database, 2 near-term value drivers in oncology supportive care and gastro acute radiation syndrome, addressing a combined multi-billion dollar market opportunity globally. Specifically, some other points I'd like to address. A federally supported regulatory pathway, highly unusual. We have the ability and the backing of the federal government to see this drug through. Domestically vertically integrated manufacturing. We have allied government interest and a second-generation molecule in Entolasta that extends the platform into chronic indications that entolimod currently cannot serve. Lastly, building institutional engagement. Before I close, a word on how we are thinking about investor engagement going forward. Today's call is prerecorded and does not include a live question and answer session. Our remarks are delivered without accompanying slide deck.

Beginning with our second quarter call in the next several months, we will intend to host a live management Q&A and support our remarks with a presentation. Both changes are deliberate. They reflect the recognition that direct two-way engagement with our investors is not a peripheral activity. It is a foundational activity to build shareholder value over time. I wanna thank our employees for their dedication, our partners for their collaboration, and our shareholders for their continued confidence and support. We look forward to further updates as we reach out with our upcoming milestones. Thank you.

This concludes today's conference call. You may now disconnect your line.