Eledon Pharmaceuticals, Inc. Q4 FY2022 Earnings Call

Greetings, and welcome to the Eledon Pharmaceuticals Fourth Quarter and Full-Year 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded today, March 30, 2023. At this time, I would now like to turn the conference call over to Paul Little, Chief Financial Officer of Eledon. Please go ahead, sir.

Good afternoon, everyone, and thank you for joining Eledon's fourth quarter and full-year 2022 operating and financial results conference call. I'm joined on today's call by David-Alexandre Gros, Chief Executive Officer; and Steve Perrin, our President and Chief Scientific Officer; Jeff Bornstein, our Chief Medical Officer is not present today, as he is traveling to the World Congress of Nephrology. Earlier today, Eledon issued a press release announcing financial results for the fourth quarter and full-year ended December 31, 2022. You may access the release under the Investors tab on our Company's website at eledon.com. I would like to remind everyone that statements made during this conference call relating to Eledon's expected future performance, future business prospects or future events or plans may include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. All such forward-looking statements are intended to be subject to the safe harbor protection provided by the Reform Act. Actual outcomes and results could differ materially from these forecasts due to the impact of many factors beyond the control of Eledon. Eledon expressly disclaims any duty to provide updates to its forward-looking statements, whether as a result of new information, future events or otherwise. Participants are directed to the risk factors set forth in Eledon's reports filed with the U.S. Securities and Exchange Commission. Now it's my pleasure to pass the call to Eledon's CEO, Dr. David-Alexandre Gros. DA?

Thank you, Paul, and thank you all for joining the call today. We made the strategic decision as we entered 2023 to primarily focus our financial and organizational resources on our kidney transplantation program to continue to seek non-dilutive financing for the ALS program and to deprioritize our IgA nephropathy and islet cell transplant programs. Our rationale was based on the significant existing preclinical data from both tegoprubart, our anti-CD40 ligand antibody, and historical anti-CD40 ligand antibodies demonstrating the class's potential in organ transplantation combined with a large potential size of the transplant market, a clear regulatory path that also provides for potential upside using kidney function or another predictive endpoint and the concentration of organ transplantation in the United States across a relatively limited number of hospitals, thus making it possible for smaller-sized biotech to tackle this from a sales and marketing perspective. Tomorrow at the World Congress of Nephrology, we will release open-label data from our Phase Ib trial evaluating tegoprubart in kidney transplantation. We will present the kidney function data of three kidney transplant recipients that were treated with tegoprubart replacing tacrolimus as the cornerstone chronic anti-rejection therapy. Steve will go into further details about this open-label data later in the call, but I do want to point out one significant data point that at available time points between four and 31 weeks. The average eGFR achieved by this cohort was consistently above 70 ml per minute per 1.73 meter squared. These data demonstrate that tegoprubart is successfully protecting the kidney after transplant. In that there was no rejection and that the observed mean eGFR is notably higher than the mean eGFR using current standard of care, which is commonly reported in the 50s. A novel drug that could prevent rejection while also significantly improving short and long-term graft function would benefit transplant patients and fill an unmet need in a market where the standard of care has changed little in decades. When looked at together with the results we reported last year in ALS, these kidney transplant data further demonstrate tegoprubart's activity. In our Phase II ALS trial, we demonstrated dose-dependent target engagement and how that target engagement resulted in a broad dose-dependent decrease in pro-inflammatory biomarkers. We are now demonstrating that this broad anti-inflammatory effect results in a clinical benefit in the prevention of rejection and the protection of kidneys after transplantation. At the World Congress of Nephrology, we will also release safety data from our Phase II trial evaluating tegoprubart in IgA nephropathy, where in 16 patients going out up to 42 weeks, there were no severe adverse events and only two related drug adverse events. This IgAN data continues to demonstrate that tegoprubart is safe and well tolerated and adds to tegoprubart's robust and growing safety database, which now includes about 100 human subjects across various disease indications. Last year, we made significant progress in the development of tegoprubart for use in kidney transplantation and expect to continue that momentum this year. We received IND clearance from the U.S. FDA for BESTOW, our planned Phase II trial evaluating tegoprubart versus the standard of care tacrolimus for the prevention of rejection in persons receiving a de novo kidney transplant. The trial is planned to enroll 120 subjects and includes a long-term extension allowing for the collection of longer-term efficacy and safety from both this Phase II, as well as the ongoing Phase Ib trial. We remain on track to initiate this trial in the middle of the year. The shortage of transplantable organs and cells for patients needing them is a global issue and over the past decades, the number of patients that have required transplants has continued to grow faster than the number of potential organs available. Xenotransplantation or the use of animal organs in humans provides a potential solution to close the organ gap. In January of this year, we announced a collaboration for the use of tegoprubart in preclinical xenotransplantation studies with eGenesis. Under this agreement, tegoprubart will be administered as a component of eGenesis’ immunosuppression regimen for the prevention of xenotransplant rejection in nonhuman primate studies. We believe this is a key first step that establishes a framework for expanded collaborations including the potential use of tegoprubart for preclinical xenotransplantation studies across eGenesis’ kidney, heart and islet cell programs. With that, I'll hand the call over to Steve Perrin, our President and Chief Scientific Officer to provide additional details on our development programs. Steve?

Thank you, DA. Our lead indication for tegoprubart is kidney transplantation, where we are seeking to replace CNIs as the first line cornerstone immunosuppressive therapy for the prevention of organ transplant rejection. CNIs were a revolutionary treatment when they were first approved about 30 years ago and over the years, they have shown very good one-year patient and graft outcomes. Chronic exposure to CNIs, however, is associated with nephrotoxicity resulting in decreased kidney function, beta cell toxicity resulting in hyperglycemia and post-transplant new onset diabetes, cardiotoxicity and neurotoxicity including tremor and brain fog. Ironically, both CNIs nephrotoxicity and increases in diabetes may shorten the lifespan of the same transplanted kidneys that CNIs are intended to protect. As a result, we believe that tegoprubart in combination with the elimination of CNIs from renal transplant procedures can increase long-term graft survival and significantly eliminate the toxicities associated with prolonged exposures to CNIs. We see the market for a new immunosuppressive regimen for kidney transplant recipients as a significant unmet opportunity. There are approximately 25,000 kidney transplants a year in the United States and approximately 240,000 patients living with a kidney graft. Moreover, every year about 5,000 Americans die awaiting a kidney while on the kidney transplant list. Since the mean age of transplantation is about 50 years old and on average transplanted kidneys from deceased donors function only about 10 to 12 years, increasing graft durability is a significant unmet need for patients who are living with or waiting for a transplant. Moreover, extending the life of transplanted kidneys would mean fewer patients going back on dialysis or needing a second transplant, thus both relieving pressure on the duration of waiting less and decreasing medical costs. A key component in assessing kidney function is the measurement of estimated glomerular filtration rate or eGFR. According to the U.S. National Institutes of Health, an eGFR of 60 or above is considered normal in adults. From a drug development perspective, eGFR is an approval endpoint in kidney indications such as IgA nephropathy. In kidney transplantation, 12-month eGFR is the strongest single predictor of future graft failure, with eGFRs below approximately 55 associated with increased risk of graft failure, with the risk increasing almost exponentially the lower the eGFR. eGFR after kidney transplant has also been correlated to hospitalization risk, where each 10-point decrease in six-month eGFR was associated with an 11% increased risk of hospitalization in the year after the six-month transplant follow-up visit. Published kidney transplant longitudinal studies and prior kidney transplant clinical trials have reported a post-transplant mean eGFR using standard of care in the 50s. These results have also demonstrated that eGFR levels measured as early as 90 days are similar to the mean eGFR levels observed at six months and one year post-transplant. As DA stated, tomorrow, we will release the initial open-label data from our ongoing Phase Ib kidney transplant study at the World Congress of Nephrology. Results from the first three participants at the time of data submission to the conference demonstrated no incidence of acute rejection at 56, 167, and 232 days. Graft function was very good in all three participants with the participants having eGFRs of 54, 85, and 77 at the latest available time points of 49, 155, and 217 days, respectively. In terms of adverse events deemed by the investigators to be related to the drug, one participant developed BK viremia, a common occurrence after kidney transplants related to the combination of immunosuppressive drugs utilized to prevent rejection and reported to occur in over 20% of patients. Although the subjects' viral load was decreasing, the treating physician elected to remove them from the study on day 55 and put them back on standard of care with tacrolimus. This participant's serum creatinine remained in the normal range at the institution where he was being managed throughout and nephropathy was never suspected. A second participant elected to discontinue the study after 33 weeks for reasons not attributed to tegoprubart or related to her kidney function. We will provide additional details on these subjects in our presentation tomorrow and we will continue to report additional data on graft function and survival from this study at future scientific conferences. In terms of enrollment, our trial design includes a mandatory 28-day safety observation and evaluation period for our first three participants that requires a DSMB review of the data prior to enrolling the next participant. Our fourth kidney transplant participant enrolled in early March, so we will now anticipate the pace of enrollment to increase since we no longer have the prior safety and observation period. Last year, we received clearance from the FDA to evaluate tegoprubart in a randomized, multi-center, open-label active control study to assess the safety and efficacy of tegoprubart compared with tacrolimus in the prevention of allograft dysfunction after kidney transplantation. 120 participants will be randomized one-to-one to receive either tegoprubart via intravenous infusion every 21 days or twice-daily oral tacrolimus. The primary endpoint will compare the mean eGFR at 12 months for participants receiving tegoprubart versus tacrolimus. Secondary objectives will include safety and tolerability, participant and graft survival, biopsy-proven acute rejection, and the incidence of new onset diabetes mellitus after transplant. We anticipate initiating this Phase II study known as BESTOW in the middle of the year, and as DA mentioned, this trial design includes an open-label extension allowing for the collection of long-term efficacy and safety data, both from the Phase II as well as the ongoing Phase Ib trial. In addition to the Phase Ib kidney data, we will be sharing this weekend at the World Congress of Nephrology, we will also release safety data from our Phase II trial evaluating tegoprubart in people with IgA Nephropathy or IgAN. This snapshot looks at the safety data on the first 16 enrolled participants and the 10 mg per kg dosing cohort, with four participants having completed at least 24 weeks on treatment and five others having completed at least 12 weeks. The available data suggests that tegoprubart is safe and well tolerated at this dose and this population of people with IgA nephropathy. To date, there were only two adverse events deemed related to the drug and there have been no serious and no severe adverse events reported. I will wrap up with a few words about our preclinical work on xenotransplantation. Xenografts from genetically modified pigs have become a promising solution to the lack of human organs available for transplantation, but the primary challenge has been rejection. To decrease rejection risks, pigs have been bred with a variety of genetic knockouts, but immunosuppression is still needed and the use of anti-CD40 ligand antibodies have been particularly effective for controlling humoral and cellular responses to porcine antigen in nonhuman primate models of organ transplantation. Our collaboration with eGenesis, a leader in the xeno space, will allow us to test tegoprubart in a large range of transplant models using their modified pig organs themselves. With that, I'll now turn the call over to Paul for a financial update.

Hey. Thank you, Steve. The company reported a net loss of $58.4 million, or $4.09 per share, for the three months ended December 31, 2022, compared to a net loss of $8.8 million, or $0.59 per share for the same period in 2021. The net loss for the three months ended December 31, 2022 includes a non-cash goodwill impairment charge totaling $48.6 million. Excluding the non-cash impairment charge, net loss would be $9.7 million, or $0.68 per share. Research and development expenses were $7.3 million for the three months ended December 31, 2022, compared to $6.2 million for the comparable period in 2021, an increase of $1.1 million. The increase was primarily due to an increase in manufacturing costs related to the increased production of clinical trial materials. General and administrative expenses were $2.8 million for the three months ended December 31, 2022, compared to $3.2 million for the comparable period in 2021, a decrease of $400,000. The decrease primarily reflects a decrease in headcount costs, stock-based compensation costs, and professional fees. During the three months ended December 31, 2022, we recorded a non-cash goodwill impairment charge totaling $48.6 million for the full write-down of our goodwill balance. I'll now turn to a few key financial metrics for the full year. The company reported a net loss of $88 million, or $6.16 per share, for the year ended December 31, 2022, compared to a net loss of $34.5 million, or $2.33 per share in 2021. The net loss for the year ended December 31, 2022 includes a non-cash goodwill impairment charge totaling $48.6 million. Excluding the non-cash impairment charge, net loss would be $39.3 million, or $2.75 per share. Research and development expenses were $27.1 million for the year ended December 31, 2022, compared to $23.7 million for 2021, an increase of $3.4 million. The increase was primarily due to higher clinical development expenses, primarily with external CROs, an increase in personnel costs, including stock-based compensation costs, and an increase in manufacturing costs related to the increased production of clinical trial materials. General and administrative expenses were $12.7 million for the year ended December 31, 2022, compared to $13.1 million for 2021, a decrease of $400,000. The decrease was primarily due to a decrease in personnel costs, a decrease in professional and consulting fees, partially offset by an increase in stock-based compensation costs and general operating expenses. Eledon ended the year with approximately $56.4 million in cash and cash equivalents. We now have less than one year of cash runway under our current operational plan, and as such, the execution and timing of the studies discussed on this call are all subject to financing. With that financial update, I'll turn the call back over to DA.

Thanks, Paul. I am proud of the progress we made as a company in 2022 and with our renewed strategic focus on the opportunity for tegoprubart in kidney transplantation, we believe 2023 has the potential to be transformative for Eledon. We are highly encouraged by the results to date from our ongoing Phase Ib trial evaluating tegoprubart as a novel component of an immunosuppressive regimen in kidney transplant recipients. The data provides significant clinical validation to our approach of inhibiting the CD40 ligand and reinforces our belief in tegoprubart's potential to transform the management of patients receiving organ transplants. I'll now ask the operator to begin our Q&A session. Operator?

We will now begin the question-and-answer session. Today's first question comes from Pete Stavropoulos with Cantor Fitzgerald. Please proceed.

Hi, DA, Steve and Paul. Thank you for taking my questions. Nice to hear that the eGFR values were so high, suggesting efficacy for tegoprubart. The first question I have is, what data can we expect to see from tomorrow's presentation? Can you provide a little more color on measures of efficacy? Or will you show biomarkers of inflammation or other biomarkers that may have predictive value? And then also, what's been your KOL feedback on this data?

Thank you for the question. It's DA. Let me turn that over to Steve.

Yes. Thanks, Pete. At the presentation, we're really focusing on eGFR data right now, which as you point out was very, very good function for our first set of patients. The rest of the study for the Phase Ib study is safety and tolerability. We're not overly focused on additional biomarker work at this time because eGFR is a very predictable biomarker of kidney function.

Okay. Thanks. And then…

We will show eGFR at various time points for each of the three participants, so you'll be able to see how they were doing at one month or three months, etc.

Okay. I look forward to that. Yes. And another question I have is, CD40 ligand, it's expressed on CD40, CD4+ T cells, and when you block it, not only do you prevent pro-inflammatory differentiation. A proportion of the cells also seem to convert to FoxP3 positive regulatory T cells that secrete cytokines and sort of create a tolerogenic environment. So the question is, from the ALS study and/or preclinical studies, did you observe any of those changes in cytokines that suggest a tolerogenic environment is being created?

Do you want me to take a pass at that one DA?

Please.

So another great question, Pete. And yes, when you block CD40 ligand, there are lots of preclinical examples that it does change the polarization of CD4 positive cells from pro-inflammatory to regulatory cells, but they tend not to be in circulation. So in the context of transplant rejection, you would actually see them in the kidney and you would have to see that by biopsy. So at this point, as you know, we're not going to do biopsies. It's not part of the protocol. Should a PI choose to do a biopsy at that point in time, we may have that available to do further work. Similarly, in the ALS study, again, you wouldn't tend to see it in circulation, whereas, which is where we did show our reduction in pro-inflammatory markers. In ALS, you would probably see those Treg population shifts in tissues where you're modulating the immune system. And in the case of the animal data, I would suggest that it would be in skeletal muscle.

Okay. Thanks. And just one question on the BESTOW study. I know that you're evaluating if there's going to be a difference between the rate of new onset diabetes after transplantation in the tegoprubart arm versus CNI arm. Can you just help me understand why there would be a difference in new onset diabetes after transplant in one arm versus the other? And what's the mechanism that drives the new onset diabetes?

Steve?

Oh, I thought you were going to take that one, DA. The thing that drives new onset diabetes in these polypharmacy applications is toxicity to the beta cells that are in the pancreas. And CNIs have particularly high toxicity to those beta cells that secrete insulin.

Great. And is there anything else? I mean from my understanding, steroids may also affect the development of post-transplant diabetes?

That is correct. Steroids do as well.

Okay. All right.

And we have in our two trials – in the BESTOW trial, we will be looking to taper the patients off steroids completely.

Okay. And what's the timeframe of tapering off the patients, if you can disclose that?

It's pretty quick, it's a few months.

Okay. All right. Well, thank you for taking my questions and congratulations. I look forward to seeing the data tomorrow.

Thank you.

Thank you.

Our next question comes from Thomas Smith with SVB Leerink Securities. Please proceed.

Hey, guys. Good afternoon. Thanks for taking the questions and congrats on the early data here, and thanks for providing the latest available data points on those three patients. I was just wondering if you could just at a high level, put a little bit more context around those reported eGFR rates and how those compare to current standard of care at those time points?

Go ahead, DA. Sorry.

eGFR rates have been shown to be pretty stable in multiple longitudinal studies, typically in the 50s with standard of care. And that's now demonstrated to be the case both with some large patient population studies that have had as many as 20,000 patients in them, as well as with some historical clinical trials, including those that were done with belatacept and iscalimab.

Okay. Got it. And then on safety, it sounds like you continue to have a pretty clean profile here. Haven't seen any SAEs, which is good. Just in terms of the AEs that have been deemed drug-related, any additional color you can provide on these? Or do we just have to stay tuned for the presentations tomorrow?

I think the one that we pointed out was we had a patient that had BK viremia that is not an uncommon occurrence after transplant. And of course, the patient was immunosuppressed using – at the time using triple therapy since they were on tegoprubart as well as mycophenolate and steroids. But overall, the safety and tolerability of tegoprubart continues to look good.

Okay. Great. And maybe just one last question and appreciate the color on enrollment and the DSMB review with the first three patients. Maybe you could just talk about sort of your overall expectations in terms of pace of enrollment and whether you think there's anything else that you would want to do at this point to maybe augment enrollment pace into the study?

So we expect with our Phase Ib study to finish enrollment by the end of the year. Enrollment in transplant trials can be a little bit lumpy since there are some patients that might come in with planned transplants if they're receiving a kidney from a living donor, but the majority of patients today receive a cadaveric donor. And so it becomes harder to plan for obvious reasons. The way one plans is by making sure that one has enough sites and therefore that enough cases are being done at the various hospitals. So today, we have five sites that we're using in three different countries for the Phase Ib, and we expect that to be sufficient in order to be able to enroll our trial by the year's end. Of course, for the larger BESTOW study, we're going to be using many multiples of that amount of trials in multiple countries, but primarily in the United States.

Understood. Super helpful. Thanks DA. I appreciate the color and looking forward to the data presentations tomorrow.

Thanks, Tom.

The next question comes from Matt Kaplan with Ladenburg Thalmann. Please proceed.

Hey guys. Thanks for taking the questions. Just a quick follow-up on Phase Ib. Now with your first three data points coming out tomorrow, should we expect additional data as this is an open-label study during the course of the remainder of the year? Or will you just report data after you finish enrollment after the end of the study?

Thanks, Matt. Appreciate the question. We plan on continuing to share data from the study over time. As we continue to get more patients and as we continue to get longer term data, we will share them with both you and investors more broadly. We will aim to do so at some of the larger conferences during the year.

Okay. Great. Thanks.

So that will be true probably later on this year as well as in future years. What's exciting is it's over time, this population of up to 12 participants will allow us to generate significant data.

And then in terms of the expected timeline, you're alluding to this a little bit for the BESTOW Phase II study that you're going to start, I guess, in the middle of this year. Can you give us a sense in terms of how that enrollment should track?

So we expect that enrollment to take about a year and a half from the enrollment of the first patient. And then there would be a year to data since we're following the patients out a year, that's the last patient out; it would be a year later.

Thank you. And I guess maybe a question for Steve. I guess given the recent ALS AdComs for a different product and the AdComs, the committee there, really looking like they would accept the light chain as a biomarker for efficacy. What are your thoughts on that for tegoprubart in ALS and kind of next studies there?

Yes. They seem to reopen in receptive to NFL changes, but albeit not required. We didn't see it in the MLX study as an example. And yet they went ahead and approved it based on more traditional endpoints of ALSFRS. I think all studies are now incorporating it into their study designs. It's unclear at this point how long you have to go to really be confident that you'll see changes. It certainly appears you have to go at least six months. But most people are now incorporating that into their studies and we would certainly incorporate NFL into our future studies as well.

All right. Well, thanks for taking the questions and look forward to tomorrow's data presentation.

Thanks, Matt.

Thanks, Matt.

At this time, I am showing no further questioners in the queue. And this does conclude our question-and-answer session. I would now like to turn the conference back over to DA Gros for any closing remarks.

Thank you for your assistance, operator, and thank you all for joining us on today's call. Have a great afternoon and evening.

The conference has now concluded. Thank you for attending today's presentation, and you may now disconnect.