Immunic, Inc. Q3 FY2022 Earnings Call

Good morning, everyone, and welcome to Immunic's Third Quarter 2022 Earnings Call. My name is Jessica Breu, Head of Investor Relations and Communications at Immunic. I will also be the moderator on today's call. Speaking on the call are Dr. Daniel Vitt, our Chief Executive Officer and President; as well as Glenn Whaley, our Chief Financial Officer. For the Q&A session, we'll also have Dr. Hella Kohlhof; our Chief Scientific Officer, and Dr. Andreas Muehler; our Chief Medical Officer on the line. This event is being recorded. Before we begin, I would like to remind you that this presentation may contain forward-looking statements. Such statements can be identified by words such as may, will, expect, anticipate, estimate or words with similar meanings, and such statements involve a number of risks and uncertainties that could cause Immunic's actual results to differ materially from those discussed here. Please note that these forward-looking statements reflect Immunic's opinions only as of the date of this presentation and it undertakes no obligation to revise or publicly release the result of any revision to these forward-looking statements in light of new information or future events. Please refer to Immunic's SEC filings for a more detailed description of the risk factors that may affect Immunic's results and these forward-looking statements. I would now like to turn the call over to our CEO and President, Dr. Daniel Vitt, to open the presentation. Daniel, please go ahead.

Yes. Thank you, Jessica. I also would like to welcome everybody on Immunic's third quarter 2022 earnings call. Earlier this morning, we announced our financial results for the quarter ended September 30, 2022, and highlighted recent activities as well as upcoming milestones related to our clinical development pipeline. During today's call, we will walk through our third quarter 2022 and subsequent highlights, financial and operating results as well as anticipated milestones. As Jessica noted before, we close the call, you will have the opportunity to ask questions. Let me move to a more detailed review of the recent quarter, including our clinical and operational updates. Earlier in the quarter, Jan Van den Bossche decided to step down from our Board of Directors after six years of valuable service. At the same time, we announced the appointment of Maria Tornsen, our industry executive with 20 years of global commercial experience in the United States and ex-U.S. markets to our Board of Directors. Maria has become a key contributing member, and we are thankful for her guidance and support. With respect to IMU-856, our orally available and systemically acting small molecule regulator targeting the restoration of intestinal barrier function and regeneration of bowel epithelium. We were pleased to have strengthened our IP position by receiving Notice of Allowance from the U.S. Patent and Trademark Office for a key patent covering the composition of matter of IMU-856 and related pharmaceutical compositions. This is expected to provide protection into at least 2038 without accounting for potential patent term extension. In September 2022, we reported positive unblinded results from the single and multiple ascending dose part of our Phase 1 clinical trial of IMU-856 in healthy human subjects. The data revealed a favorable safety, tolerability, and pharmacokinetic profile for IMU-856 in single and 14-day multiple dosing. No maximum tolerated dose was reached, and investigated doses were expected to exceed the required therapeutic dosing of IMU-856. The results support our ultimate vision of establishing IMU-856 as a potential first-in-class oral celiac disease therapy. IMU-856's mechanism of action could present an entirely new approach to treating a significant number of serious and widely prevalent gastrointestinal diseases. Furthermore, we believe it could potentially offer a clinical benefit without the serious consequences associated with many current immunosuppressive therapies. Going forward, we are on sound financial footing, having significantly bolstered our balance sheet in October with the closing of a $60 million private financing. This financing extends our runway through multiple value creation inflection points into the fourth quarter of 2024. Finally, last month, we conducted an interim analysis of our Phase 1b clinical trial of IMU-935 in patients with moderate-to-severe psoriasis. Unfortunately, the group-level mean data did not show a benefit of the two active doses tested compared to placebo. Although the active arms performed in line with prior expectations, the trial experienced a greater decrease than expected in PASI in the placebo arm. Administration of IMU-935 and placebo was safe and well tolerated, and no safety signals have been observed. The trial is ongoing and remains blinded, and we look forward to a full analysis, including pharmacokinetics and biomarkers which should allow us to better understand these early observations and to determine the best next steps for this key program. We plan to provide further updates in guidance on potential next steps in the first quarter of 2023. I would like to reiterate, as noted in today's release, that these results both disappointed and surprised us at the same time. However, based on the totality of data available and the volume of evidence generated thus far for the potential efficacy of IMU-935, we retain a high degree of conviction that IMU-935 has the potential to be a safe, efficacious, and important treatment option for patients with psoriasis and other chronic inflammatory and autoimmune diseases. Given these were only the first two dose levels of IMU-935 tested in psoriasis patients and also based on the drug's very favorable pharmacokinetic safety and tolerability profile to date, we have the flexibility to explore different parameters in future clinical testing, including higher dosing and longer treatment periods. That concludes our summary of the third quarter 2022 and recent subsequent highlights. Glenn?

Thank you, Daniel. I will now review the financial and operating results for the third quarter ended September 30, 2022. Let me start with the cash overview. We ended the third quarter with $72.8 million in cash and cash equivalents. As Daniel stated earlier, these funds, combined with the $56.4 million of net cash raised in our PIPE financing in October '22 should be sufficient to fund operations into the fourth quarter of 2024. Regarding the operating results, research and development expenses were $16.5 million for the three months ended September 30, 2022, as compared to $15.5 million for the three months ended September 30, 2021. These costs were mainly driven by external development costs related to the ongoing clinical trials for vidofludimus calcium, IMU-935, and IMU-856, and an increase in personnel expense in R&D. The increases were partially offset by decreases in external development costs related to the Phase 2 clinical trials of vidofludimus calcium in UC and RRMS. For the nine months ended September 30, 2022, R&D expenses were $50.5 million as compared to $42.7 million for the same period ended September 30, 2021. These expenses were also chiefly driven by external development costs of our three clinical programs and an increase in personnel expense in R&D. The increases were also partially offset by decreases in external development costs related to Phase 2 clinical trials of vidofludimus calcium in UC, COVID-19, and RRMS. General and administrative expenses were $3.6 million for the three months ended September 30, 2022, as compared to $2.9 million for the same period ended September 30, 2021. The increase was driven by personnel expense and to a lesser extent, by increases across numerous categories. For the nine months ended September 30, 2022, G&A expenses were $11.6 million as compared to $10 million for the same period ended September 30, 2021. The increase was driven chiefly by personnel expense and to a lesser extent by increases across numerous categories. Other expense was $1.1 million for the three months ended September 30, 2022, as compared to $0.9 million for the same period ended September 30, 2021. The increase was primarily attributable to a $1 million increase in the loss on intercompany loan between Immunic Inc. and Immunic AG as a result of changes in currency exchange rates and partially offset by currency transaction gains, interest income due to favorable interest rates, and tax incentives for clinical trials in Australia. For the nine months ended September 30, 2022, other expense remained relatively unchanged at $1.8 million as compared to $1.8 million for the same period ended September 30, 2021. However, the company had a $1.2 million increase in the loss on the intercompany loan between Immunic Inc. and Immunic AG as a result of currency rate fluctuations, which was offset by gains in interest income due to favorable interest rates, currency transaction gains, increased tax incentives for clinical trials in Australia, and an increase in grants. Net loss for the three months ended September 30, 2022, was approximately $21.2 million or $0.69 per basic and diluted share based on approximately 30.6 million weighted average common shares outstanding compared to a net loss of approximately $19.3 million or $0.76 per basic and diluted share based on 25.3 million weighted average common shares outstanding for the same period ended September 30, 2021. Net loss for the nine months ended September 30, 2022, was approximately $64 million or $2.16 per basic and diluted share, based on approximately 29.7 million weighted average common shares outstanding compared to a net loss of approximately $71.8 million or $3.33 per basic and diluted share based on approximately 21.6 million weighted average common shares outstanding for the same period ended September 30, 2021. With that, I'll turn the call back over to Daniel for an outlook on our upcoming clinical milestones. Daniel?

Thank you, Glenn. I would like to now provide an update on important upcoming data readouts. With respect to our leading asset, vidofludimus calcium, we continue to progress the development in multiple sclerosis, specifically our Phase 2 clinical trials in progressive MS and the Phase 3 ENSURE trials in relapsing MS continue to enroll patients. As you will recall, the CALLIPER trial is designed to corroborate the neuroprotective potential of vidofludimus calcium. If successful, this data, along with that of the ENSURE program, and vidofludimus calcium's already proven strong safety and tolerability profile may allow us to draw a clear clinical differentiation for the drug versus other oral medications. Our current goal is to report data from the interim analysis of the Phase 2 CALLIPER trial in the second half of 2023 and to read our top-line data at the end of 2024. The readout of the first of the Phase 3 ENSURE trial is currently targeted for the end of 2025. We believe that the design of the ENSURE trial has provided a straightforward path towards potential regulatory approval of vidofludimus calcium in RMS. Furthermore, we plan to perform an interim readout of the open-label extension part of our Phase 2 EMPhASIS trial in RMS soon. Patients treated during this trial with either 30 or 45 milligrams of vidofludimus calcium over the placebo were offered to continue in open-label extension for up to nine years. We look forward to learning more about how many patients continue in the trial and how these patients' disease status has developed. Overall, we remain highly enthusiastic about the potential of vidofludimus calcium to become a best-in-class therapeutic for this RMS patient population, given its demonstrated activity in preventing lesion formation as shown in our Phase 2 EMPhASIS trial in RMS and its exceptional safety and tolerability profile it has demonstrated thus far. The ongoing Part C of our Phase 1 clinical trial of IMU-856 is designed to assess safety and tolerability during 28 days of treatment with 80 and 160 milligrams of IMU-856 or placebo once daily in patients with celiac disease during periods of gluten-free diet and gluten challenge. Secondary objectives comprised pharmacokinetics as well as acute and chronic disease markers, including those evaluating gastrointestinal architecture and inflammation. We expect the initial data readout in 2023. This brings us to the end of our formal presentation. Jessica, please open the call for the Q&A session.

Great. Thank you, Daniel and Glenn for walking us through the third quarter. Our first guest today is Andreas Argyrides of Wedbush. Andreas, please unmute yourself and go ahead.

Okay, good morning, and thanks for the update and taking our questions. A couple here around 935. So number one, what are your thoughts around AbbVie's decision to discontinue their RORgamma t and the implications around the RORgamma t class of therapies? How are you thinking about the future development of 935 for psoriasis? Do you think you would run a study in more mild to moderate patients? Or do you think you might explore different inflammatory autoimmune indications like psoriatic arthritis? And then lastly, do you find 28 days would be too short of a time period to see change in secondary endpoints like disease markers, GA architecture, and inflammation? Thanks.

Yes. Thank you, Andreas, for that question. Maybe starting with the AbbVie question. Of course, that was — as you know, we spoke a lot about the selectivity our molecule IMU-935 has shown in tons of preclinical models and data. And we have spent a lot of time in communicating on this, because we think it's important to make sure that with 935, we believe we have solved the selectivity issue, which has been observed for other RORgamma t inhibitors or inverse agonists. Therefore, we believe that does not apply for IMU-935. I think just looking at the data we have available, I think this may not be a surprise to see that decision. At the end, we don't know the details about what was going on at AbbVie and we don't know exactly what the reasons were for their decision. Therefore, it's difficult to comment further. Maybe, Andreas, if you take over the question on the potential to go forward on mild to moderate or arthritic psoriasis.

Yes. Andreas, this is Andreas here on our side. We strongly believe in the activity of IMU-935 based on the entirety of the data that we have from in vitro and vivo experiments. We also believe that more of it to severe psoriasis is the right population to test this drug to get clinical proof of concept. This has been a Phase 1 trial, and Phase 1 trials always work through dose escalation. It's very hard to predict sometimes where you are in a dose response relationship. I think we're currently assessing exactly how to continue going forward. But I don't think the population is something that we would like to change. I think this is the right population to test it. We will, as we said, I think, in the release today, announce more details about how we're going forward to show proof of concept here in the first quarter of next year. I don't think it will be a change in populations to be studied. And then the third question you had was about whether 28 days is enough to — and I think, I hope because you said gastrointestinal. So this is about IMU-856...

IMU-856.

IMU-856, sorry, Andreas, just to reiterate what I'm —

Yes, 856.

856, okay. Yes. So you asked this last question about IMU-856, our third drug candidate that we use for the restoration of bowel barrier function and the regeneration of epithelium. Is 28 days enough? Of course, this is another Phase 1 trial, where we have the chance now to dose for 28 days. I would agree with you that it would be good for some of the endpoints to dose longer. But we had decided to include all of the endpoints that we currently have in this trial, including, for example, a histology assessment in this trial because previous trials have shown that you are able to show this within 14 days of gluten challenge, some change in histology. But to a certain extent, I would have to say that this is an exploratory endpoint. The chronic endpoint — like histology, I think it's an exploratory endpoint. We hope that gives us some first data and understand the mechanism of action and also the dose-response relationship where we are here in this trial. We also included in the IMU-856 Phase 1 trial acute markers like IL-2 on the first day of gluten challenge, which usually is an excellent marker to show whether there's an acute effect of our drug on the release of this immune marker. In general, I would say I think we designed it so that we can find something. We think this is the right timing we have. So again, another Phase 1 trial where we're learning a little bit about the drug one piece at a time to go forward and learn from each step with new information about the right development path for IMU-856.

Thanks for taking my questions. Thank you, Andreas.

Thank you, Andreas. Our next guest is Yasmeen Rahimi of Piper Sandler. Yasmeen, unmute yourself and go ahead.

Good morning, team. Thank you for the update. Two questions for you. The first one, can you maybe comment on sort of when you look at — and I understand the placebo is one, but lots of times you're asking us, can you comment whether the treatment effects that you're seeing are exceeding mean reductions of 40% in PASI, that could be helpful? And then secondly, why is it going to take quite a bit of time to analyze this data? Are you just being conservative in saying 1Q and it could come maybe towards the earlier half of that, just the time to analyze it? And then I have a follow-up question on CALLIPER.

Sure. Thank you, Yasmeen, for the questions. I will try to answer as best as I can. But unfortunately, I think I can't answer everything right now. First of all, I think, the disappointment is now that there is no benefit over what was observed for the two doses tested over placebo. That's our current knowledge. We only have the mean values for the groups. This trial is ongoing and is being analyzed further, and unblinding has not yet occurred for initial patients, which takes time. Therefore, the guidance to give an update on where we want to go for the next quarter is really based on needing to first have raw data, digest it, and make conclusions based on the full dataset. I hope that's something that can be understood and also, for example, includes measuring biomarkers and so forth, which is still underway on a blinded fashion.

Okay. And then team on — as we head into the CALLIPER interim readout, which is based on half of the population that has finished 20 weeks of treatment, what should we be expecting? Help us understand in this population what is considered a bar for success?

So this is Andreas. I hope I can answer a little bit of the question. The interim assessment for the CALLIPER trial in the progressive MS population, we had planned to get some initial understanding of whether there's activity in this trial. The primary endpoint of this trial is brain atrophy. So it's an MRI-based measure of brain atrophy where 24 weeks is not long enough to really have a reliable measure of brain atrophy. That's why we had to go through some biomarkers or some surrogate endpoints that can be measured more early. We decided for an interim assessment to look at neurofilament light chain, also called GFAP, in blood serum or blood plasma. Both are biomarkers related to neuroprotective activity or suppression of neurodegenerative disease. There's a lot more evidence for neurofilament light chain in MS and most of the evidence is in relapsing MS. This is progressive MS. But there are also indications that active therapy in progressive MS reflects neurodegenerative activity as measured by neurofilament light chain. Thus, we wanted to get some understanding that in our patient population, we see a difference in GFAP for placebo and the 45-milligram of IMU-838. These biomarkers serve as surrogate endpoints and we believe they are useful in the progressive MS population. Please understand, the progressive MS population is underserved. There have been fewer trials done in this population than in the relapsing MS population. Therefore, the entirety of the evidence for these biomarkers is not yet well established compared to relapsing MS. However, we believe that there is a good chance they can also be applied to progressive MS. We will also look at some functional readouts for the MS population that are more exploratory, aiming to see a trend that there’s a difference in these functional readouts from a very early treatment stage. That was the purpose of the interim analysis.

Great, thanks.

Thank you, Yas. The next question will come from Matt Kaplan at Ladenburg. Matt, please unmute yourself and go ahead.

Thanks, Jessica. Good morning. Just wanted to, I guess, with your nearest term readout kind of zeroing in on the RMS EMPhASIS Phase 2 open-label portion. What are we looking for in that interim, and what would be a positive sign there?

Hi, this is Andreas. Thanks for the question. Yes, this open-label portion of the Phase 2 trial in relapsing-remitting MS patients was designed to look at long-term safety. It allows us to have long-term safety data available for several years of treatment for patients with relapsing MS when we file for the NDA approval. This is the major driver of this open-label portion. Fortunately, the vast majority of patients who enrolled in the EMPhASIS trial continue on treatment. Thus, we have the advantage of collecting long-term safety data from these patients. This is the primary purpose of the interim analysis. Additionally, we may also look at certain outcomes related to how disability develops over time, captured in this interim analysis, which is another potential readout. It's important to note, however, that there is no longer a placebo control in this analysis. Thus, all results will be based on treatment comparisons, but we can compare disability developments to similar trials.

Okay, great, thanks. And then, just going back to 856 here, the Part C cohort in celiac patients. In terms of the gluten challenge and what you're looking for there, beyond histology, can you help us understand in terms of some of the endpoints for the gluten challenge and what you're anticipating to see there?

Yes, so in principle, these are either acute or chronic markers related to celiac disease. Gluten challenge is known to initiate an acute activation of certain immune markers like IL-2 within hours of starting a gluten challenge. That’s a reliable immunology market proven useful in many gluten challenge settings. The first day of gluten challenge will determine that. There are also more chronic markers that relate more to the nature of the disease, chronic damage to the epithelial lining of the bowel over time. That's a major issue for these patients. This may be more difficult to capture in a 28-day study. We plan to perform a biopsy at both the beginning and the end of the trial to assess the concrete differences in established histology markers for celiac disease. We anticipate initial insights between IMU-856 and placebo may be possible based on historical data, but for true treatment in celiac disease, 28 days may be too short. This Phase 1b trial is designed to look for proof of concept and understand where we are in the dose-response relationship. Thus, both acute and chronic markers serve as a good choice to assess the efficacy of IMU-856.

Okay, thanks. That's very helpful.

Thank you, Matt.

Thank you, Matt. The team around SVB Securities with Tom Smith submitted their questions in writing, so I'm more than happy to read them. The first one is around AbbVie again. Regarding the recent discontinuation of AbbVie's RORgamma inverse agonist ABBV-157 due to findings in a preclinical chronic toxicity study, any retrospection for IMU-935 and what differentiates IMU-935 from ABBV-157. Have you synthesized that compound? Do you have any specific hypotheses for what the signal may have been?

No, I think thank you to the SVB team for the question. It’s important to reiterate that, first, we don’t know exactly what they found because they didn't disclose it. So we're guessing a little bit here. We suspect maybe that this is in line with what other companies have seen looking more closely at these drugs' impacts on the maturation of MS. As I mentioned earlier, we didn’t see any such issues in our tests. We've shown that 935 is superior in selectivity concerning that respect. Therefore, our conclusion is basically this lack of issues is not unexpected. Of course, we’ll reemphasize our stake in the molecule, but we can't compare publicly and must base our guesses on speculation regarding the data and decisions made by AbbVie, so that's all we have to say for now. I’d be interested in learning more about what they have been seeing in their studies.

The SVB's second question is, what do you suspect could be driving the outsized placebo response rate observed in the interim readout of IMU-935? What additional data are you going to have with the IMU-935 update in 1Q?

Of course, I’m going to hand over the question to Andreas. It's still speculation. I mentioned this several times, and this is something we are addressing as quickly as we can. We're currently limited to only have group level data. So we can’t peek closely into individual patients and sites to see how the data builds at those levels. So we currently only have access to group-level unblinded data, making it hard.

Yes. I think I can only reiterate that we have several hypotheses regarding what could contribute to this. We are working closely with our well-experienced and recognized medical advisory board on psoriasis and had discussions with them on this point. We gathered some of their hypotheses, but unfortunately for some of these hypotheses, we will have to wait until we have the unblinded data to specifically test these against the actual data. We are fully exploring how to understand this issue, because we'd like to eliminate these factors that may have contributed to this placebo response. We believe in the activity of this drug and we believe we can demonstrate its effectiveness.

Okay. And third and final question from the SVB team is, what's the latest on IMU-935 and mCRPC?

What is the latest and greatest — I'm sorry? In mCRPC? Okay. So we have — this trial has been ongoing now for probably nine months or so. We have completed several dose cohorts. This trial is in a dose escalation phase where we are testing how far we can increase the dose without reaching dose-limiting toxicity. Therefore, it is somewhat limited in terms of what we can share about this trial at the moment, as it's primarily focusing on dose escalation. What we have seen is that we can increase the dose without encountering any major dose-limiting toxicity at this point.

Yes, and we have already announced that we completed the 600-milligram dose escalation. The next level is 900 milligrams. So that's where we are right now.

Great. Yes. I think given we have no more open questions, this concludes our Q&A session. I would like to turn the webcast back over to Daniel for any closing remarks.

Yes. Thank you, Jessica, and thank you to today's attendees for your insightful questions. As a final remark, I would like to mention that we look forward to discussing our MS program, recent scientific findings, and the unmet medical needs with renowned key opinion leaders at our upcoming multiple sclerosis R&D webcast on Thursday, November 17, 2022. If you have not received and saved the date for this event, please contact us as soon as possible. Jessica will also provide a detailed invitation with further information closer to the event. With that, I would like to close today's call. Again, thank you very much for joining. We are happy to answer any additional questions one-on-one.

Also from my side, thank you for joining our webcast today. The call has now concluded. You may now disconnect.