OPERATOR: Welcome to the Moleculin Biotech, Inc.'s Conference Call to provide a general corporate update and to discuss positive developments regarding Annamycin. First - let me introduce Jonathan P. Foster, Executive Vi

OPERATOR: Welcome to the Moleculin Biotech, Inc.'s

Conference Call to provide a general corporate update and to discuss positive developments regarding Annamycin. First - let

me introduce Jonathan P. Foster, Executive Vice President and Chief Financial Officer.

JON: Thank you, Operator. Let me get some administrative

matters out of the way. First - this is a conference call only. There will be no Q&A at the end as we are nearing release

of our third quarter Form 10Q. Second - let me read the following statement:

Some of the statements in this conference call will be forward-looking

statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934

and the Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties. Forward-looking statements in

this conference call include, without limitation, the ability of the agreement with Dermin to reduce the expenditures required

of Moleculin for clinical trial drug production and to shorten the time required to produce clinical supplies and the ability of

Moleculin to increase the maximum tolerable dose of and begin expanded clinical trials on Annamycin by the first half of 2017.

These statements relate to future events, future expectations, plans and prospects. Although Moleculin Biotech believes that the

expectations reflected in such forward-looking statements are reasonable as of the date made, expectations may prove to have been

materially different from the results expressed or implied by such forward-looking statements. Moleculin Biotech has attempted

to identify forward-looking statements by terminology including ''believes,'' ''estimates,'' ''anticipates,'' ''expects,'' ''plans,''

''projects,'' ''intends,'' ''potential,'' ''may,'' ''could,'' ''might,'' ''will,'' ''should,'' ''approximately'' or other words

that convey uncertainty of future events or outcomes to identify these forward-looking statements. These statements are only predictions

and involve known and unknown risks, uncertainties, and other factors, including those discussed under the heading "Risk Factors"

in our Registration Statement on Form S-1 originally filed with the Securities and Exchange Commission on February 1, 2016, as

amended (Registration No. 333-209323) and updated from time to time via the Company's filings with the SEC. Any forward-looking

statements contained in this release speak only as of its date. We undertake no obligation to update any forward-looking statements

contained in this release to reflect events or circumstances occurring after its date or to reflect the occurrence of unanticipated

With that out of the way, let me introduce to you Moleculin's

Chairman and Chief Executive Officer, Wally Klemp.

WALLY: Thanks, Jon and good evening everyone. I am very

pleased to welcome you to the Corporate Update Call for Moleculin Biotech, Inc. The purpose of this call is not just to provide

a general corporate update, but it's also to discuss some important positive news. As a broad overview: Moleculin is making

good progress against its stated goals and remains on track for the milestones set forth in our S-1 for the IPO this past May.

What's more, we now have some significantly positive findings from our detailed review of the last clinical trial for Annamycin.

The recent negative trend in our stock price has caused a number

of shareholders to ask for an update on Moleculin directly from the Company. While part of this call may do just that, I need to

be clear that, as management of a public company, it's not appropriate for us to speculate as to why our stock price moves

up or down. Regardless, however, we can say that the fundamentals of our business and our plan remain intact and, as such (and

in our opinion), do not justify a precipitous loss in perceived company value as compared with our IPO.

So, let me start this update by reviewing what our plan has

been and what the key milestones were for measuring progress. As we set forth in our S-1 for the IPO, a prior developer had conducted

a clinical trial with Annamycin, but then they subsequently failed to maintain their Investigational New Drug status (or, IND)

with the FDA. Our stated plan was to conduct a detailed review of the clinical results generated by that prior developer. We would

then use those results to reestablish an IND in order to continue clinical trials of Annamycin. With a new IND in place and after

production of Annamycin for clinical trials and approval from the appropriate Institutional Review Boards, we would then be in

a position to begin expanded clinical trials of this important drug.

Although no specific timeline was given for these activities

or for the beginning of the next clinical trial, we did provide guidance that we believed our IPO proceeds were sufficient for

approximately 16 months of operations from the date of the IPO. We further believed this was sufficient time to begin generating

Phase II data indicating whether Annamycin was capable of repeating the impressive results that were produced in that last clinical

So, where are we now? Well, first of all, all of the guidance

I've just recounted from our S-1 continues to be reasonable and appropriate. We continue to be on track for accomplishing

just what we set out to do and expect to begin our expanded clinical trials on Annamycin by the first

half of next year. Furthermore, several positive developments have recently occurred that we believe may put us in a better

position than we had hoped.

One of these positive developments is the recent agreement we

reached with Dermin that was disclosed in our October 7th press release. As a reminder, Dermin is a licensee of Annamycin

that was able to access Polish grant funds to conduct their own parallel development efforts. Part of their process was to produce

Annamycin for use in their planned clinical trials, and there was some hope that Moleculin would be able to use that same drug

production for our own clinical trials.

It's important to understand that Annamycin is a relatively

expensive drug to produce, as are all of the currently approved anthracyclines. Back when we filed the S-1 and went public we could

not provide assurance that any of the drug Dermin had produced using Polish grant proceeds would be available for our use. Accordingly,

we budgeted as though we would have to produce all of the drug required for our planned clinical trial using our own IPO proceeds.

As we announced on the 7th, however, we were finally

able to reach an agreement with Dermin that now allows us to use their drug inventory for our clinical trials. This reduces our

planned expenditures for drug production over the coming year and improves our confidence that we will have adequate cash to achieve

Another positive that we are announcing for the first time on

this call is that our review of the prior developer's data suggests that Annamycin may, in fact, have greater potential for

efficacy than we originally believed. This has to do with the establishment of what is called the Maximum Tolerable Dose, or MTD.

Now, this gets a little detailed, but it is extremely important, so it's worth making sure everyone understands.

In previous disclosures I have explained that in the last clinical

trial, patients treated with Annamycin had failed an average of 5 prior induction therapy attempts with the standard of care first-line

therapy. This prompted justifiable speculation that, if we could treat patients sooner, say, after only 1 or 2 first-line induction

failures, we might see even better performance from Annamycin.

As a reminder, 8 patients received Annamycin in the Phase II

arm of that last trial and 3 completely cleared their bone marrow blasts, which is considered the key indicator for qualifying

for a curative bone marrow transplant. Now, to be clear, we believe Annamycin could qualify for accelerated approval on the basis

of an even lower response rate than this, however, if we match or even improve upon these results in the next trial, that could

make Annamycin even more important and valuable than we had hoped.

With this in mind, and now that we have had the opportunity

to review the prior developer's data in detail, we have made an important new discovery. Not only does it appear that patients

fare better if they receive Annamycin after fewer failed first-line attempts, it also appears that this high number of prior failures

may have caused Annamycin's MTD to be understated. This is potentially a major positive development for us, so let me explain

In the last trial, before the Phase II arm was conducted, a

Phase I arm was used to establish the MTD or Maximum Tolerable Dose. Just to clarify how this works, you typically begin a Phase

I trial by enrolling the first few patients at a relatively low dose and then determine whether they experience any unacceptable

toxic side effects. We call these Dose Limiting Toxicities or DLTs. If those first few patients have no DLTs, then the dose is

increased for the next few patients and so on until DLTs begin showing up. As soon as any DLTs are experienced, the dose is backed

down to a lower level and, if the DLTs go away, that lower level becomes the MTD.

It turns out to be important that this last clinical trial was

conducted at 4 different treatment centers, with one of those centers being much more heavily focused on experimental trials. As

a result, the patients treated at this particular facility had failed significantly more first-line therapies than the average

for the overall trial. This was quite evident when we reviewed the detailed data, and it appears to have skewed the outcome.

In particular, the 3 patients that experienced the DLTs that

led to the establishment of our current Maximum Tolerable Dose were all from the site where patients had an unusually high number

of first-line failures. And, the Dose Limiting Toxicity was the same in all 3 cases; namely: mucositis, a painful inflammation

and ulceration of the mucous membranes that line the digestive tract.

For the record, mucositis is the number 2 DLT for the currently

approved anthracyclines, like daunorubicin and doxorubicin. Importantly, their number 1 DLT is cardiotoxicity, and of course, one

of the key advantages of Annamycin is that it is non-cardiotoxic. This is one of the biggest reasons it is so important to get

this drug approved and on the market. We should never forget that even the lucky patients who beat acute leukemia by making it

to a curative bone marrow transplant will, more often than not, have their lives diminished due to the damage done to their hearts

by the anthracyclines used in their induction therapy.