Earnings Call Transcript - GLMD Q4 2020

Operator, Operator

Good day. Welcome to the Galmed Conference Call to discuss Financial Results for the Fourth Quarter and Year Ended 2020. Today's conference is being recorded. Before we begin, please note that we'll 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 the 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.

Allen Baharaff, CEO

Thank you, Ross. Good morning and thank you for joining us on today's conference call. I'm pleased to be here with our Chief Scientific Officer, Dr. Liat Hayardeny, and our Chief Financial Officer, Yohai Stenzler, to update you on our clinical development programs and report on our financial results for the fourth quarter and year-end of 2020. We will be happy to take any questions you may have after our prepared remarks. Earlier this quarter, we hosted a KOL Symposium and Pipeline Update focusing on our lead compound Aramchol, a Phase 3 asset for NASH and fibrosis, and our pipeline compound Amilo-5MER developed for chronic inflammatory disorders. Let me share the highlights of the data we presented on these two programs. In December last year, we announced the addition of an open-label part of our ARMOR Phase 3 registrational study. This part will enroll approximately 150 patients at selected sites and is designed to evaluate treatment response, pharmacokinetics, and safety with twice-daily administration of Aramchol 300 milligrams. It will also explore the kinetics of histological outcome measures and several non-invasive tests associated with NASH and fibrosis over treatment durations of 24, 48, and 72 weeks. Additionally, the open-label part includes pre and post-baseline microbiome profiling, which will help us develop early biomarkers for efficacy. We are currently analyzing the microbiome characteristics of patients responding to Aramchol, which occurs significantly earlier than the histological response. This part may start addressing questions critical for drug development and subsequent treatment optimization for patients, such as how early a beneficial effect on fibrosis can be observed, whether there are patients who improve with a longer duration of therapy, and if there are non-invasive tests that correlate or predict a histological response.

Yohai Stenzler, CFO

Thank you, Allen. Good morning and thanks for joining our call today. This morning, I will be providing you with our financial results for the fourth quarter and year ended December 31, 2020. For more information, please refer to our report on Form 20-F filed earlier today with the SEC, which among other things provides a summary of such financial results. Our net loss for the three and 12 months ended December 31, 2020, totaled $10.3 million and $28.8 million respectively compared with a net loss of $8.3 million and $20.5 million for the corresponding period in 2019. As a result, our loss per share for the three and 12 months ended December 31, 2020 was $0.48 per share and $1.35 per share as compared to $0.39 per share and $0.97 for the corresponding period in 2019. Research and development expenses for the three and 12 months ended December 31, 2020, totaled $9 million and $26.1 million. This compared with $7.4 million and $18.2 million for the corresponding period in 2019. The increase primarily resulted from an increase in clinical trial expenses in connection with the ARMOR study and an increase in drug development expenses in connection with the manufacturing of Aramchol to support our clinical studies. Turning now to G&A. Our general and administrative expenses for the three and 12 months ended December 31, 2020, are pretty consistent with the corresponding period in 2019. The expenses totaled $1.3 million and $4.1 million respectively, versus $1.3 million and $4.2 million for 2019. During the three and 12 months ended December 31, 2020, we had a net financial income of $0.1 million and $1.4 million respectively versus $0.3 million and $1.9 million during 2019. Our cash balance as of December 31, 2020, which includes cash, cash equivalents, restricted cash, short-term deposits and marketable debt securities totaled $51 million. This amount does not include the $17.5 million of net proceeds raised during February in an underwritten public offering and from our ATM equity facility. With that said, operator, please provide instructions for the Q&A portion of our call.

Operator, Operator

Thank you. Our first question is coming from the line of Ed Arce with H.C. Wainwright. Please proceed with your question.

Ed Arce, Analyst

Great. Thank you and good morning, everyone. Thanks for this update and congrats on the recent progress. First question for me is, Allen, if you could remind us of the timeline now as you look to switch in the ARMOR study to the meglumine, beginning with the actual switch of dosing? And then, ultimately, full enrollment and expected data readout? Thank you.

Allen Baharaff, CEO

Thank you, Ed. We expect to restart the double-blind component of the ARMOR study by the first quarter of 2022. If everything goes according to plan, we anticipate enrolling 1,000 patients over 18 months, bringing us to the third quarter of 2023. The duration of treatment in the open-label study may vary between 48 weeks and 72 weeks, depending on the data we gather from this phase. We are still optimistic that 48 weeks will be adequate, as we do not expect any difference in efficacy between the two durations. If all goes well, we plan to submit Aramchol for sub-age conditional approval around the second quarter of 2024. At that time, we will also continue recruiting the additional 1,000 patients needed for the study's outcome analysis.

Ed Arce, Analyst

Fantastic. Great. And then a couple of follow-ups as well. Turning to your pipeline candidate Amilo-5MER. Clearly, you're focused on IBD as you just started your Phase 1 this week. But you also mentioned that there is potential given the mechanism for other types of chronic inflammatory conditions. And I'm wondering if you could describe some of those that you think might be interesting for this compound? And then lastly, how should we think about the level or the pace of the increase of the R&D expense through 2021 given the support to both ARMOR and then the Amilo-5MER development? Thanks.

Allen Baharaff, CEO

Okay. First, the mechanism of action of Amilo-5MER suggests it is applicable for several chronic inflammatory diseases. The ones that come to mind are rheumatoid arthritis and COVID-19, which is particularly relevant today. As we've mentioned before, we plan to develop this compound gradually. Our initial goal is to observe a biomarker in a Phase 1b study. As we stated in our investor symposium a month ago, this study will involve 20 patients, and we expect to start it in the second half of this year.

Ed Arce, Analyst

Great, Allen. And if I may squeeze one last one in. Actually, what I was actually trying to determine a better question really is, is there a budget in mind that you have for the overall ARMOR program in terms of R&D spend?

Allen Baharaff, CEO

It varies with a number of variables, making it quite challenging to determine. We are certainly considering an amount below US$100 million. However, it will largely depend on the competitive landscape at that time. Currently, we know that at least 50% of the patients will be recruited outside the U.S., and U.S. patients are the most expensive. Therefore, half of the patients will come from outside the U.S., which tend to cost about half or even a third of the cost of U.S. patients. The other half is very much influenced by the competitive environment. I noticed this morning that Novo and Gilead are starting another large Phase 2 study for combination therapies. It will depend on how many of the Phase 2b assets progress by next year, coinciding with our plans to ramp up recruitment for the Phase 3 registration. Just as a reminder, the budget we had previously estimated for Phase 3 was about $65 million, as the 150 patients currently in the open-label study are not included in the double-blind portion. We still anticipate counting on that full budget of $65 million, but this may change based on market conditions. I estimate somewhere between $70 million to $80 million, although these are not definitive figures. We need to validate these numbers once all 200 centers are operational and ensure that recruitment remains on schedule within 18 months, which might necessitate additional funding.

Ed Arce, Analyst

Great. That’s very helpful, Allen. Thank you so much.

Allen Baharaff, CEO

Thank you, Ed.

Operator, Operator

Our next question is from the line of Steve Seedhouse with Raymond James. Please proceed with your question.

Steve Seedhouse, Analyst

Hey, good morning, everyone. First question I had was just on NASH. And I understand the FDA is open to or in fact encouraging sponsors to run Phase 3 programs now with histology data in let's say F3 patients, but also looking at F4 patients to collect outcomes data as part of a sort of broader pivotal program. I'm curious, if that's something you expect to discuss at the Type C meeting that you have scheduled or Galmed's thinking about incorporating F4 patients into a Phase 3 design?

Allen Baharaff, CEO

So yes, Steve, thank you – thank you for the question, Steve. I've seen that also – but this is not part of the guidance we received from the FDA. We are not recruiting F4 patients to the study. Our study population has not changed in the double-blind registrational part. It's F2 and F3 with risk factors. So it's really – this new proposed structure is not relevant for Galmed.

Steve Seedhouse, Analyst

Okay. Perfect. And then the other question I had on also on NASH was just with respect to Phase 1 studies hepatic impairment, cardiac repolarization. I think there were a few of these that you'd mentioned in the past. I'm curious, if those are being run with Aramchol meglumine now given the transition of the program?

Allen Baharaff, CEO

So basically, the study, the hepatic impairment has progressed very well. There was some delay due to COVID-19. But in the recent weeks, we've accelerated – we've already completed the single administrative dose, and we've almost completed the multiple administrative dose both for moderate and mild patients. A few more patients are needed to be recruited in this severe part. The Aramchol meglumine and Aramchol circulate as the same moiety, there is no difference between the two. So, what we've done we have done. And in the future, a study that we have conducted so far will be based on Aramchol. And new studies like TQT with cardiovascular not sure that we will need, this is another benefit that would come from the open-label study, collecting the data from these 150 patients. Based on this data, we may get an exemption from the TQT study. But future studies of course that are necessary for approval will be done with Aramchol meglumine.

Steve Seedhouse, Analyst

Perfect. Thanks for the clarity, Allen.

Allen Baharaff, CEO

Thank you, Steve.

Operator, Operator

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

Kristen Kluska, Analyst

Hi, everyone. Good morning and good afternoon. Thanks for taking the questions. So the first one I had was as it relates to the upcoming ARMOR data, do you think it's possible that this could be presented at the liver meeting during the fourth quarter? And then, can you remind us about the current IPC on Aramchol meglumine? I know you recently had a US patent accepted here. Is it just now that the composition of matter of patents are pending at this time?

Allen Baharaff, CEO

Thank you, Kristen, for your questions. We may miss the AASLD deadline because we expect the data to arrive in early Q4, and the cut-off date is September. We will attempt to submit it as a late breaker, but I can't guarantee it will be accepted. We plan to share this data as soon as we have it from the first moderate cases in the open-label study. We’re collecting data regularly, and if the results are compelling, we might report findings after 30 patients instead of waiting for 50 to meet our timelines, though I can't promise that. Regarding the patent, the Aramchol meglumine patent expires in December 2034, giving us protection until 2035, considering potential extensions. This is based on a new patent accepted in the U.S. for low-dose administration of Aramchol. We’re still waiting for the composition of matter patent for Aramchol meglumine to be approved in the U.S., similar to its approval elsewhere, and I believe it will come soon. However, we already have patent protection in the U.S. from the low-dose administration patent.

Kristen Kluska, Analyst

Great. Thanks so much. And then, just on these 50 patients that you've completed enrollment for, could you speak to your level of confidence in collecting all of the key data sets, sometime during the fourth quarter in light of the pandemic? And I know that things have changed quite a bit from the last earnings call, just with the rollout of some of the vaccines.

Allen Baharaff, CEO

Yes. The system is set up for a large Phase 3 study involving 1,000 patients. The biopsy readings are conducted by three readers, and all data collection and adjudication processes are aligned with the standards of a registrational Phase 3 study. Therefore, I have complete confidence in our ability to collect the data on time. We are currently observing an increase in the number of patients being randomized now that some COVID-19 restrictions have been lifted, which is very encouraging. I've seen positive trends in new recruitment and screenings over the past two weeks. It's important to note that we are currently working with 50 selected sites out of the 200 available for the double-blind part of the study, specifically those that were less impacted by COVID-19. We've been collaborating with these sites for a year and a half, and the partnership has been strong. I do not foresee any issues or risks concerning the data reporting.

Kristen Kluska, Analyst

Okay, great to hear. Thank you so much, Allen.

Allen Baharaff, CEO

Thank you, Kristen.

Operator, Operator

Thank you. At this time, I will turn the call over to Allen Baharaff for closing remarks.

Allen Baharaff, CEO

I would like to thank you all for joining the call today. As always, we are always available for follow-up calls and emails. If you have any additional information that you would require, both on Aramchol, but more specifically on Amilo-5MER, which is an exciting time in Galmed, having a new compound now getting into the clinic. And looking forward and keep safe, and looking forward to talking to you on the next investor call.

Operator, Operator

Thank you. This will conclude today's conference. You may disconnect your lines at this time. And thank you for your participation.