Galmed Pharmaceuticals Ltd. Q3 FY2020 Earnings Call

Good day, and welcome to the Galmed Conference Call to discuss financial results for the third quarter of 2020. Today's conference is being recorded. Before we begin, please note that we will be making certain forward-looking statements on today's call, including those regarding financial results, statements and forecasts regarding anticipated timelines and expectations with respect to our regulatory and clinical development programs as well as other statements that relate to future events. These statements are based on beliefs and expectations of management as of today, and actual results, trends, timelines and projections relating to our financial position and projected development programs and pipeline could differ materially. In particular, there is a significant uncertainty about the duration and severity of the COVID-19 pandemic and its impact on Galmed's business and operations. We urge all investors to read carefully the risks and uncertainties disclosed in our filings with the SEC, including, without limitations, the risks under the heading, Risk Factors, described in our annual report on Form 20-F filed with the SEC and the risks and uncertainties included in the Form 6-K filed with the SEC earlier today. Galmed assumes no obligations to update any forward-looking statements or information, which speaks as of their respective dates only.

Thank you, Christine. Good morning, and thank you for joining us on today's conference call. I'm pleased to be here today with our Chief Scientific Officer Dr. Liat Hayardeny and our Chief Financial Officer, Yohai Stenzler, to provide you with an update on our clinical development programs as well as report to you our financial results for the third quarter of 2020. As always, we will be happy to take any questions you may have at the conclusion of our prepared remarks. I'd also like to say that I hope that you and your family are safe and well as we work to overcome the COVID-19 outbreak. The news in the past week regarding the progress on the Pfizer vaccine has been particularly encouraging, and we look forward to putting this all behind us. Our business report this quarter is going to be relatively short. However, we are expecting to be able to report next month first in human PK data from our Aramchol meglumine program. Earlier this quarter, we announced that we entered into a research agreement with Gannex Pharma, a wholly owned company of Ascletis Pharma, to develop a combination therapy of ASC41, which is an oral thyroid hormone receptor beta agonist, and Aramchol. By combining the ASC41, which has a rapid reduction of liver fat and improves blood lipid profile, with Aramchol, which shows improvement in glycemic index and fibrosis, we believe physicians will have solid additional tools in their toolbox. Earlier this week, we announced collaboration with MyBiotics, an Israeli-based company that develops microbiome-based products aimed at restoring microbiome equilibrium for the therapeutics and food markets. This collaboration is part of our overall plan to maximize Aramchol's clinical efficacy, built on our prior work which includes dose optimizations. A 300 milligram BID resulted in a higher exposure of Aramchol by 53%. We are also working on product optimization with the development of Aramchol meglumine, focusing on higher scalability and lower variability, as well as treatment duration optimization. The microbiome is known to be a major driver of NASH and fibrosis and offers great promise as a new approach to treat this challenging disease. The growing interest following the recent positive top-line data from the SER-109 Phase 3 suggests that microbiome is a novel drug modality, both as a monotherapy and in combination with Aramchol. The collaboration also aims to identify specific microbial biomarkers for Aramchol based on microbiome data collected from Galmed clinical studies, which could serve as a biomarker for Aramchol at an early stage of treatment.

Thank you, Alan, and good morning, everyone. This morning, I will be providing you with our financial results for the third quarter ended September 30, 2020. For more information, please refer to our report on Form 6-K filed earlier today with the SEC, which, among other things, provides a summary of such financial results. For the third quarter of 2020, our net loss totaled $6.9 million or $0.32 per share, compared with a net loss of $4.5 million or $0.21 per share for the corresponding quarter in 2019. Research and Development expenses totaled $6.5 million for the third quarter of 2020, compared with $4.1 million for the third quarter in 2019. The increases resulted primarily from an increase in the clinical trial expenses related to our ongoing ARMOR trials. Turning now to G&A, our general and administrative expenses for the quarter totaled $1.5 million compared with $1 million for the corresponding period in 2019. The increase resulted primarily from an increase in the cost of our D&O insurance policy premium. During the three months ended September 30, 2020, we had net financial income of $0.7 million compared to $0.5 million in the third quarter of 2019. The increase primarily relates to the realization of unrealized gains from prior periods.

Our first question comes from the line of Steve Seedhouse with Raymond James. Please proceed with your question.

Great, thanks very much. I was hoping that you could just elaborate on the Gannex TR beta that you've licensed. Maybe just comment on the selectivity and potency of that molecule for TR beta and also selectivity for liver if you could just to compare and contrast it with the other clinical-stage TR betas?

Thank you, Steve. So first, we are not at liberty to disclose any information from ongoing studies by Gannex as it is a public company, but I will let Liat maybe talk a little bit about the specificity and I guess what you also would like to know is the differentiation from Madrigal's steroid-based treatments. So Liat, please go ahead.

Thank you, Steve. So, we do know, and we saw the pharmacokinetic data and the binding assays of ASC41. It is more specific and can actually be given in a much lower dose, which shows much higher specificity. We are currently checking the effects of these compounds both standalone and together with an ample standalone, and the combination in order to compare in an in-vivo study. The rationale, the scientific rationale for the combination is quite clear. We do know that this compound can reduce liver fat quite quickly and should have a massive effect on liver fat. We're talking about one to ten doses of Madrigal MTL-3196, so we're talking about much more specificity. We know that they have very good liver steatosis data, and we do know that Aramchol will have very good liver fibrosis data, leading to natural solutions and improvement in fibrosis. So that being said, together, it will provide much better solutions for natural selection and fibrosis improvement.

And it has a very good safety profile. As far as we've seen so far.

Yes, well, it has a very good safety profile since it's, as I said, it can be given as one to ten doses of the Madrigal compound. So we will have fewer safety issues, very good efficacy, and benefits combined with Aramchol.

Okay, thank you. And then the other question I just had was Allen you mentioned that there's a lot of moving parts, obviously, geographically in the ARMOR study. And a lot is still left to play out with the pandemic. But I was hoping, I think heading into the study, you had some idea of how the enrollment would split between the US, Europe, I think South America, and Israel at least. And I was wondering if you already sort of had some sense of whether that geographic distribution of enrollment that you had originally anticipated will in fact play out differently, or if it's still too early to tell, given all the moving parts.

Unfortunately, it's too early to say. We are still, this is a reminder that we were talking about between 40% to 50% of patients coming from the US, 35% coming from Europe, 10% from the Middle East, and the rest from Latin America and other parts of the world, including Korea, etc. Unfortunately, the two main regions of the study, the US and Europe, have slowed down significantly over the last quarter. I was hoping we would see a pickup in June and July, but with the second wave it kind of slowed down again. So this is why I've asked both our internal clinical team and together with our CRO to sit and talk to the investigators one by one, understand what capacity has changed in the hospitals, clinics, and countries. There are some countries, like Australia, which are doing very well because COVID is quite contained. Korea is also performing well. However, all in all, we really need those two big engines to act, and unfortunately, they are slowing down. So we need to see how we compensate. We have good news coming from Brazil, unexpectedly. The feedback from our regulatory team is that we may be able to start recruiting patients already in January in Brazil. This is good news because at this point, studies such as Tobira's and Genfit and Intercept have not been getting recruitment due to regulatory issues, and we have passed those hurdles. I hope that Brazil can contribute many patients to the trial. However, one should bear in mind that at the end of the day, 85% of the patients need to come from Europe and the US.

Got it. Thanks for the question.

Just so you know, this is not time lost, because at the end of the day, we are planning to switch patients to Aramchol meglumine. We are using this time to advance our strategies, and this is why, if you recall from our previous guidance, we were not expecting to have clinical data from meglumine as early as this year. So we have pushed the timelines of Aramchol meglumine, and I hope that that will bring good news. It will certainly also have an impact on our physicist conductivity study.

Our next question comes from the line of Kristen Kluska of Cantor Fitzgerald. Please proceed with your question.

Hi, everyone, thanks for taking my questions and hope you're all doing well. I wanted to ask about your recently announced collaboration with MyBiotics. So maybe I could first take a step back here and ask you to describe your view on the role of the microbiome as it relates to NASH. I know we've seen a lot of evidence so far in 2020 about the potential of these medicines and biomarker work in general. And then also, as you look at the NASH landscape say five to 10 years down the line when we might potentially have some therapies on the market, do you think that if successful, tools like this could be used for precision medicine to identify potential responders from the very early stages?

Kristen, yes, of course. Liat, please take that.

Thank you, Kristen, for that question. I just want to say that to put everything in perspective, we have multiple activities around Aramchol in order to actually maximize its ability to treat NASH patients. So as an overall plan, we elevated the exposure to Aramchol. We have a better product now with Aramchol meglumine, and we are using the combination that I previously discussed with the thyroid hormone receptor agonist, as well as the combination we are planning with MyBiotics. Now, the science around the involvement of the microbiome and its etiology has been developing since 2015 and onwards. It is now emerging scientific evidence that it may be a cause or enhancing factor of the disease. Patients that have different microbiota are more prone to develop advanced NASH, and more publications are showing this specific microbiome profile for fibrosis. I would say that the scientific interest in this is ongoing and growing. We are looking for three main outcomes from this collaboration: first, to enhance the efficacy of Aramchol, considering that we have responses to Aramchol that we will be able to identify, and also to see how the microbiota of the responders differs from the non-responders, which will allow us to enhance the efficacy of Aramchol. Additionally, the change in microbiome could serve as a standalone potential therapy. We are also focusing on the combination of that standalone treatment together with Aramchol's efficacy to create a better treatment for NASH patients.

We have already incorporated, Kristen, in our ongoing clinical studies microbiome samples. We are collecting samples from healthy volunteers, NASH patients, and Aramchol-treated patients. There is a wealth of data that now we can provide and work together with MyBiotics, which is a leading company in this field to execute on everything Liat just mentioned.

I have to say we are moving towards multiple dosing of Aramchol meglumine, and the dose is almost finalized. The multiple dose studies will start as early as mid-December, and the microbiome samples are already being implemented in all our future studies.

Okay, great. And then, just the second part of that question is: as the evidence of the microbiome's role in general is emerging, if you find in your experience that it's helping identify patients and the combinations work, do you think that down the line, we can look at NASH as something where precision medicine can come into play to really see which therapies might have the most potential just from the start, rather than starting patients on treatment X, and it doesn't work, and then moving them on to treatment Y?

Definitely. This will also pave the way for personalized medicine. I believe that in a time when we hopefully have multiple medicines in the market for NASH, yes, this will be accompanied by therapy alongside biomarkers for efficacy; so we definitely see it moving towards accessorized medicine.

Great, thanks so much.

Thank you, Kristen.

Our next question comes from the line of Ed Arce with H.C. Wainwright. Please proceed with your question.

Hi, good morning, everyone. Thanks for taking my questions, and thanks for the additional details and other aspects. I recognize, as you said in your prepared remarks, Alan, that there is a new recruitment plan underway. As you look at the various types across the globe and the different rates of recruitment, my question is, and perhaps this is just too early to say, but you have current guidance for full enrollment by the end of next year. Is there a chance that could be updated or revised when you get back to us, perhaps next month sometime on more details around the plan?

Thank you, Ed. Actually, we are moving right away from this call for your conference. Liat will be presenting or will be with you in about 30 minutes for your Israeli conference, so thank you for inviting us. There are many factors to consider here. On one hand, we want to push and are pushing as much as possible for recruitment and timelines for ARMOR, specifically where there are fewer COVID-19 cases, which is easier. But as I repeat and said before, the US and Europe are key regions, and recruitment has slowed down significantly in those places. I can tell you that in countries like France, UK, Spain, and Belgium, we have not randomized patients in the last two months. There is a serious COVID-19 second wave in these regions and the same in the US. So yes, we are adding more patients, but we also have to consider the switch to Aramchol meglumine, which we want to manage efficiently. We know that Aramchol meglumine is a better drug product. We would like more of our patients to be able to enjoy Aramchol meglumine for a longer period. It’s like walking a fine line between pushing for as much recruitment as possible and ensuring benefits for the patients. We are having discussions with regulators at the FDA and in Europe to consider this program and to determine the best course of action to achieve our goals. I hope that by December, when we come with the data on meglumine and our new recruitment plan, we will provide you with clear guidance for timelines followed by execution and catalysts.

Right, that’s fair enough. Thank you very much for that. And that’s a great segue, actually, to my next question. As you mentioned right at the beginning, your first in human PK data is expected for meglumine next month, as you mentioned. So I'm wondering, given this is key to your overall plan to move forward with the bioequivalence from the salt to meglumine, will you be identifying the equivalent dose next month to the 300 milligram BID of the salt? Is that part of what you're expecting to announce next month?

So, Liat will take that.

Regarding the single dose, of course, the design will be finalized next month. By mid-December, we will know the single dose exposure. Usually, the regulator expects bioequivalence shown in fast patients, and this is sufficient. Because Aramchol has a long half-life, we can wait two days and then start immediately selecting doses for multiple dosing studies that will end by the end of January. Regulatory expectations regarding single doses are pretty lenient, and the regulators usually require around 80% to 125% exposure data, which we believe we will meet by analyzing the Aramchol meglumine. We are aware that it will lead to higher exposure, and if it’s once daily, there will be a requirement for a higher dose to maintain therapeutic efficacy. So, in mid-December, we will publish the results of the single dose. With the bioequivalence, we will conduct two first-in-human studies comparing Aramchol meglumine to the 300 milligram tablets received by our patients.

Great. Thanks, Liat. That’s helpful. One final question then for me, if I may, around this MyBiotics collaboration and combination that you announced on Monday. You mentioned earlier, one of the objectives with these patients regulated by MyBiotics is to enhance the efficacy specifically of those non-responders. I imagine the way you will do that is through the biomarkers that they've developed. So, I’m wondering if you could provide us more detail on how exactly the company can identify potential responders or help enhance the efficacy?

To describe it best, imagine that we will characterize a patient based on their response in terms of natural solutions and fibrosis improvement, which are the regulatory endpoints for the clinical trials. Once we identify patients that respond well to Aramchol and those that do not, it is clear that they exhibit very different microbiome patterns. By identifying the specific changes in microbiota that lead to Aramchol's responses, we can aim to modify the microbiota of the non-responders to mimic that of the responders, thus pushing the response of non-responders closer to that of the responders.

Got it. That's helpful. Thanks, again.

Thank you. We have no further questions at this time. Mr. Baharaff, I would now like to turn the floor back over to you for closing comments.

Thank you all for joining our call today. I do hope that you will follow our press releases during December. I think that there is a lot of exciting news that we are hopefully going to start releasing by December and January, coming from both the Aramchol meglumine program. I'd also like to remind you that Amilo-5MER, our pipeline product, is also entering first in human study early in Q1. So hopefully, by Analyst Day on January 26th, we'll be able to communicate some data from this study as well. Keep safe, and thank you all for joining the call.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.