Eledon Pharmaceuticals, Inc. Q1 FY2021 Earnings Call

Greetings, all, and welcome to the Eledon Pharmaceuticals reports First Quarter 2021 Financial Results. During the presentation, all participants will be in a listen-only mode. Afterwards, we'll conduct a question-and-answer session. I'd now like to turn the call over to Jon Kuwahara, Senior VP of Finance. Please go ahead.

Good afternoon and thank you, all, for joining Eledon Pharmaceuticals' First Quarter 2021 Financial Results Conference Call. Joining me today three members of our leadership team: David-Alexandre Gros, Chief Executive Officer; Steve Perrin, President and Chief Scientific Officer; and Paul Little, Chief Financial Officer. Earlier today, Eledon issued a press release announcing financial results for the first quarter ended March 31, 2021. You may access the release under the Investors tab on our company website eledon.com.

Thank you, Jon, and good afternoon, everyone. We made good progress during the first quarter, advancing both our company and our lead molecule AT-1501. I'm excited by the promise offered to us by AT-1501 as a potential therapeutic for organ or cellular transplantation, ALS, and serious immunological diseases where patients face limited treatment options. Steve will go into details around AT-1501 program updates, but at a high level in the first quarter of this year, we continued to enroll patients into and remain on track for our ongoing ALS Phase 2 study. We reopened our Canadian site for our Phase 2 islet cell transplantation study for the treatment of Type 1 diabetes, and we received FDA feedback and updated our development strategy in renal transplantation. Operationally, we completed our evolution into Eledon Pharmaceuticals from Novus Therapeutics. We also bolstered our senior leadership team to help us execute on our plans and achieve our short and long-term goals. Regarding the team, I'm extremely pleased to introduce four new executives: Paul Little as Chief Financial Officer; Jeff Bornstein as Chief Medical Officer; David Hovland as Chief Regulatory Officer; and Bryan Smith as General Counsel, Corporate Secretary, and Chief Compliance Officer. With them on board, I’m thrilled that we’ve built out a top-tier leadership team that I believe positions us to achieve success for the benefit of patients and shareholders alike. I will now turn the call over to Steve Perrin, our President and Chief Scientific Officer, to discuss our clinical programs, after which Paul Little will provide a financial update. Steve, please go ahead.

Thank you, DA. For those of you that are new to the Eledon story, I'll start by giving a brief overview of our lead asset AT-1501 and IgG1 anti-CD40 ligand antibody lacking FC effector function. Physiologically, the interaction of CD40 ligand and CD40 results in clonal expansion, antibody production, and secretion of pro-inflammatory cytokines that amplify an immune response. The CD40 ligand pathway is an attractive drug target because the engagement of these receptors plays a pivotal role in immune system activation by mediating both antibody and cellular immune responses. We are focused in our efforts on the development of an antagonist antibody targeting the ligand rather than the receptors, and targeting the ligand has been shown to be more efficacious than preclinical models of autoimmunity, as well as in the prevention of acute and long-term allograft transplant rejection. There may be three different biological mechanisms that benefit targeting anti-CD40 ligand over targeting anti-CD40 receptor. The ligand is expressed on fewer cell types, with expression generally restricted to platelets, endothelial cells, and activated lymphocytes, whereas the receptor is more broadly expressed on antigen-presenting cells, including monocytes, macrophages, dendritic cells, and specialized antigen-presenting cells. Second, targeting both the receptor and the ligand inhibits B cell activation and class switching, as well as inhibiting the pro-inflammatory polarization of CD4-positive helper T-cells. However, blocking CD40 ligand also inhibits other integrin receptors, including CD11 receptors on antigen-presenting cells, thus blocking the pro-inflammatory polarization of CD8-positive cytotoxic T-cells as well. And third, blocking the ligand also polarizes CD4-positive lymphocytes to FoxP3-positive Tregs, thus potentially creating a more tolerogenic environment. Our current development strategy is to target four indications which I'll discuss in order of clinical development. First, amyotrophic lateral sclerosis or ALS, where we currently have a Phase 2 trial enrolling; second, islet cell transplantation as a potential functional cure for people living with Type 1 diabetes, where we currently have an active clinical site in Canada; third, prevention of kidney allograft transplant rejection, where we have received guidance from the FDA on the path forward in the United States and are parallel exploring a renal transplant study outside the U.S.; and fourth, autoimmune nephritis, where we are finalizing indication selection and plan to communicate our strategy next quarter. I'll now go into more detail regarding each of these indications.

Thank you, Steve. In addition to the financial results summarized in our press release, you can find additional information in our form 10-Q, which we will file later today. The company reported a net loss of $8.5 million, or $0.57 per share for the three months ended March 31, 2021, compared to a net loss of $8.2 million, or $0.52 per share for the same period in 2020. Research and Development expenses were $5.6 million for the three months ended March 31, 2021, compared to $1.6 million for the same period in 2020. The increase in R&D costs was primarily due to spending related to the production of clinical trial materials and other CMC activities as we advance our AT-1501 program. General and administrative expenses were $3.3 million for the three months ended March 31, 2021, compared to $1.7 million for the same period in 2020. The company had approximately $108.6 million in cash and cash equivalents as of March 31, 2021, compared to $114.2 million in cash and cash equivalents as of December 31, 2020. We expect our financial resources to be sufficient to fund operations as currently planned well into 2023. With that financial update, let me turn the call back over to DA to highlight some of our key upcoming milestones for 2021.

Thank you, Paul. In the early part of this year, we became Eledon Pharmaceuticals and continued to progress advancing AT-1501 and building out our team. During the second quarter, we expect to initiate a Phase 2 trial in islet cell transplantation in Type 1 diabetes, and we will be presenting AT-1501 data, including nonhuman primate data in a Type 1 diabetes model at the American Society of Transplantation annual meeting in June.

Certainly, and thank you very much. Our first question comes from Alethia Young with Cantor. Your line is open.

Hi, thanks for taking the call. This is Li, on for Alethia. Just kind of curious why you think the FDA wanted specific information related to AT-1501 when given that there's already primate data out there from the competitors?

So, I think the FDA was focused on being able to see drug-specific and organ-specific data. As you know, we have done, as we discussed on this call, nonhuman primate studies looking at transplantation, but with islet cells. Here in transplantation, we're in a unique situation where it becomes hard to separate safety and efficacy data, since one needs efficacy in order to be able to protect the organ. So, what the FDA was looking for was to have specific information on AT-1501 in renal transplantation in order to ensure that there would be not only safety but efficacy in this particular type of transplantation.

Okay, got it.

Everyone needs to understand that each organ is extremely valuable, and as such, there are significant standards when it comes to transplantation.

Okay, just a follow up, can you just maybe talk a little bit more about your potential plans to run an XUS study for AT-1501 in renal transplant, just to sort of generate some proof of concept data here?

Exactly. So these are still early days in these discussions. As you know, we just received the feedback from the agency recently, but the goal would be to do a smaller trial than what we had initially anticipated. But one that could be done internationally and to your point, would allow us to begin to be able to show data in terms of both safety and efficacy in renal transplantation in humans.

Okay, got it. Thank you.

Great. Thank you.

And our next question comes from Rami Katkhuda with LifeSci Capital. Your line is open.

Hey, guys. Thanks for taking my question. Just a quick one for me, but based on preclinical ITT data that you've presented, do you guys envision utilizing a monotherapy arm in the upcoming Phase 2 trial? Or will you test AT-1501 in combination with standard of care?

Just to clarify, are you talking about the renal trial, the human islet cell transplant trial, or the nonhuman primate renal trial?

Sorry. This would be for the human islet cell transplantation trial.

Let me turn that over to Steve to talk about that trial.

Yes. Currently, the human islet cell transplant trial is not a monotherapy trial. It's a trial where we're trying to really achieve getting rid of calcineurin inhibitors due to the associated toxicities that we've described. We really feel that in the absence of CNI, based on our preclinical data and historical preclinical data, we will have much better islet cell survival, much better islet cell function, and hopefully reduce the number of transplants required to get people with large enough islet cell mass to really impact insulin production. So, it's not a monotherapy trial. It's a trial with induction therapy, plus maintenance therapy.

Got it. Thank you very much.

Thank you.

Thanks, Rami.

Our next question comes from Thomas Smith with SVB Leerink. Your line is open.

Hey, guys, good afternoon. Thanks for taking the questions. First, just on the updated plan in renal transplant. Can you provide a little more color on the plans for running the additional nonhuman primate study? I know you've laid out some initial timelines, but just a sense of, I guess, size and scope and specifically what you're looking for?

Yes, so we're still in discussions with the agency about the design. Obviously, we're trying to be sensitive to the utilization of nonhuman primates in these types of experiments, but understand, the ability to generate that type of data. The guidance from the agency is they want to show our ability to prevent transplant rejection. So, that was probably the most important requirement as we think about our design with them. But we're still in a dialogue on what that design needs to look like.

It will most likely include monotherapy in order to be able to show the effect specifically of our antibody.

And follow-up question, just in terms of the ALS study enrollment. As we're starting to see some improvement in COVID-19 infection rates, maybe if you could just talk a little bit about enrollment trends. Are you guys seeing any meaningful changes in terms of patient enrollment or cadence that gives you a little bit more confidence in the first half 2022 timeline for data?

So, in terms of the ALS trial, as we mentioned, we're on track. Overall, we've been on track for pretty much the whole time since we've launched the trial. We did see some slowdowns that were associated with the various COVID peaks here in the United States, but maybe because we're in enough sites, and the sites are distributed across the United States and Canada, it did not have a meaningful impact in terms of recruitment and enrollment. So, with regards to that one trial, we continue to see good interest as we've seen, but at least that specific trial has been quite independent of what's been happening with COVID.

Okay, great. Appreciate the color. Thanks, guys.

Next question comes from Matt Kaplan with Ladenburg Thalmann. Your line is open.

Hi, good evening, guys. Thanks for taking the question. Just wanted to follow up a little bit on the islet cell transplant trial. Sounds like you're about to have your first patient enrolled in that near term. How should we think about the rollout of data from that study? Is it going to be as you reach a certain cohort number? Or will you announce that as you get towards the completion of the study?

Thank you very much, Matt. Let me turn that over to Steve.

Yes, it's a great question, Matt. Obviously, we want a cohort of patients to be able to determine readouts on the study. So, we're enthusiastic that the site is active and we're looking forward to our first patient coming in. But we need three or four subjects worth of data to really understand the outcomes that we're looking at in the study, which is islet cell function, metabolic control, glycemic awareness. So, I think we're still on track to be able to acquire that data by late next year. But we're not going to be announcing data on a subject-by-subject basis.

Yes. So we'll announce the data on the first subset in the first half of next year and then we would expect to have the full number of patients enrolled and to get that full top line data in the second half.

Okay, that's very helpful. Thank you. And then a second question. You mentioned some upcoming presentation at the American Society of Transplantation. Can you give us a little bit more color in terms of what to look for there as you announce those data sets in June?

Yes, sure. There are four presentations that are going to happen at the Transplant Congress. There are two posters and two oral presentations. One of the posters is focusing on the historical design of AT-1501 and its characterization, primarily in vitro studies with our receptor binding, FC effector function and lack of platelet activation. The second cluster is focused on the nonhuman primate work that we did initially with AT-1501, so talking about the pharmacokinetics and nonhuman primates, as well as reviewing data from our two toxicity studies that we did in nonhuman primates: a 12-week study as well as a subsequent 26-week study. The two oral presentations, one of them is focusing on a presentation of our Phase 1 data of AT-1501 primarily in healthy volunteers, but we did have a cohort of ALS patients in that study, and again, focusing on safety readouts, pharmacokinetics, ADA responses, as well as we did do an immune challenge showing functional activity of the antibody in that study. And then the last presentation will be presented actually by Norma Kenyon, our collaborator at U Miami, who has worked with AT-1501 in her nonhuman primate islet cell model, and she'll be presenting data on AT-1501 in combination with other traditional immune modulatory drugs that are used in the context of transplant rejection, as well as presenting data with several doses of AT-1501 either as a monotherapy and presenting data on the ability of AT-1501 to prevent acute and long-term islet cell transplant rejection.

Great. Thanks a lot for the added color, Steve.

You're welcome.

Next question comes from Vernon Bernardino from H.C. Wainwright. Your line is open.

Thanks for taking my question. No worries. You might get my evil twin if you say that though. Just to follow up on Matt's question, Steve, can you describe a little bit what the immune challenges and how it's done?

Yes, there are several methods to conduct immune challenges. Generally, this involves the use of a foreign antigen. Tetanus toxin is one example, and KLH, which is a protein derived from shellfish, is another common choice that we utilize. We take precautions to exclude individuals with shellfish allergies from this type of experiment. When a foreign antigen, such as one from shellfish, is injected subcutaneously under the skin, it can trigger an acute hypersensitivity reaction because the body has not encountered that protein before. In typical experiments, subjects are usually enrolled three to seven days before the foreign protein challenge, and treatment with an immune modulatory immunosuppressive drug begins to inhibit their immune response. Following this, a subcutaneous challenge is conducted to evaluate the immune system's response to the foreign antigen. However, in our Phase 1 study, we took a more aggressive approach by administering the KLH injection subcutaneously simultaneously with our IV infusion of AT-1501. We successfully demonstrated the ability to completely block the immune system's recognition of the foreign antigen in two or three subjects, with notable attenuation observed even in the third subject. This was the first instance providing data on the functional activity of AT-1501 in humans under a challenging condition.

And so you'll do the same with the current ALS study that is at on the same day?

So, in the ALS study, we're not planning on doing any KLH challenges in that Phase 2 study in ALS.

Okay. Would that data for the immune challenge serve as the result you would keep in mind as far as the results concern across the board, as far as the different studies? ALS, renal and islet?

The goal of the KLH study in the Phase 1 study was really to just show the first signs of functional activity for AT-1501 in humans. In our subsequent studies, we're more focused on disease-specific biomarkers to show functional activity. As I described in our ALS study, there are a couple of different biomarker components to that study. One of them being the ability to look at AT-1501 changing B cell function. So, as I described, when you block the CD40 ligand pathway, it has a dramatic impact on B cell maturation, antibody production, and class switching. One of the ways that you can measure that is markers of B cell function; one of them is CXCL13. Another way to measure whether AT-1501 is having effects in ALS is to look at those pro-inflammatory markers that have been described in multiple studies that are elevated in people with ALS compared to healthy controls. AT-1501 modulation of the immune system should have an impact on those pro-inflammatory markers.

Perfect. I am eager to see the ALS data, particularly the Phase 1 transplantation results and ongoing advancements in ALS as well as studies beyond renal conditions. Thank you for addressing my question.

Thank you.

Thank you, Vernon.

And there are no further questions at present time. Please continue with your presentation or closing remarks.

Thank you again, everyone, for joining us on the call. We are pleased you could join us today to hear our progress during the first quarter and we look forward to keeping you updated on our programs.

And that does conclude the call for today. We thank you very much for your participation and ask that you please disconnect your line.