Immunic, Inc. Q2 FY2023 Earnings Call

Good morning, and welcome to Immunic's Second Quarter 2023 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. Please note that all participants will be in listen-only mode and 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 meaning, 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 results 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 begin the presentation.

Yes. Thank you, Jessica. I would also like to welcome everybody to Immunic's second quarter 2023 earnings call. Earlier this morning, we announced our financial results for the second quarter ended June 30, 2023, and highlighted recent activities as well as upcoming milestones. During today's call, we will walk through our second quarter 2023 and subsequent highlights, financial and operating results as well as anticipated upcoming milestones. After the presentation, as Jessica noted, we will open the line to give the audience an opportunity to ask questions. Let's start with a review of our second quarter 2023 and subsequent highlights. In April, we reported positive data from the maintenance phase of our Phase IIb CALDOSE-1 trial of vidofludimus calcium in patients with moderate-to-severe ulcerative colitis. These results were extremely encouraging as they demonstrated statistically significant activity of vidofludimus calcium compared to placebo, while confirming the very favorable safety and tolerability profile for the drug already observed in other trials. As illustrated on the slide, data showed a dose-linear increase in clinical remission compared to placebo at week 50. An exploratory statistical analysis showed a p-value of 0.0358, confirming the 30-milligram dose of vidofludimus calcium to be statistically superior in achieving clinical remission at week 50 with a 33.7% absolute improvement over placebo. Overall, we believe the maintenance phase data confirms vidofludimus calcium's activity in ulcerative colitis patients. Also in April, we welcomed Dr. Richard Rudick to our Board of Directors. Rick has spent decades as a clinical expert in multiple sclerosis and as a clinical trialist, overseeing multiple successful pivotal studies. His insights are already proving valuable as we continue to progress the development of vidofludimus calcium in multiple sclerosis as well as in our earlier programs. In May, we posted stronger-than-expected positive results from the Part C portion of our Phase I clinical trial of IMU-856 in patients with celiac disease during periods of gluten-free diet and gluten challenge. The dataset shows the first clinical evidence of disability observed preclinically to regenerate the gut wall. In particular, the Phase Ib data showed that IMU-856 was effective compared to placebo in improving four crucial aspects of celiac disease pathophysiology, protecting gut architecture, improving and reversing patients' gluten-induced symptoms, biomarker response, and enhancement of nutrient absorption, such as vitamin B12. IMU-856 was also observed to be safe and well tolerated in this trial. Most importantly, the observed protection of the lining of the gut and intestinal villi from gluten-induced destruction, independent of targeting immune mechanisms involved specifically in celiac disease, appears to be unique among proposed therapeutic approaches. We believe this data provides initial proof of concept that this oral first-in-class molecule may represent an entirely new therapeutic approach, which could be a game changer in the way we treat gastrointestinal disorders such as celiac disease, but also, for example, ulcerative colitis, Crohn's disease, or irritable bowel syndrome with diarrhea. We are extremely enthusiastic about the potential for our IMU-856 program. On the years of these results was our announcement at the Digestive Disease Week in Chicago of clinical and preclinical data for IMU-856, including its molecular mode of action as a potent and highly selective modulator of SIRT6, a protein, which serves as a transcriptional regulator of intestinal barrier function and regeneration of bowel epithelium. Through its effect on SIRT6, IMU-856 has shown the ability in preclinical models to restore intestinal barrier function and regenerate gut architecture. Importantly, in May, we also announced publication in the Journal of Medicinal Chemistry of preclinical evidence showing that vidofludimus calcium acts as a potent Nurr1 activator in addition to its known mode of action as a DHODH inhibitor. We believe that the activation of Nurr1 could be responsible for the drug's postulated neuroprotective effects and may contribute to the reduction of confirmed disability worsening events in MS patients, as previously reported from our Phase II EMPhASIS trial in patients with relapsing-remitting MS. That said, these findings could be relevant not just in multiple sclerosis, but also in other neurological indications. As a reminder, the potential neuroprotective properties of vidofludimus calcium were already identified in our EMPhASIS trial where the trial did not show encouraging clinical signals regarding prevention of confirmed disability worsening, as well as a remarkable reduction of the biomarker neurofilament light chain (NFL). Most recently, last month, we hosted a virtual celiac disease expert round table to discuss ongoing active celiac disease (ACD), a serious lifelong autoimmune disorder and the substantial unmet medical need for our therapeutic solutions. We were honored to have been joined for this event by three renowned thought leaders from Harvard Medical School, Mayo Clinic, and the Celiac Disease Foundation. We could not be more grateful for their participation. During the call, our Chief Medical Officer, Andreas Muehler, also provided an overview of our IMU-856 program, including our positive Phase Ib trial results in celiac disease patients, which we discussed a little earlier this call. That concludes our summary of the second quarter 2023 and subsequent highlights. I would now like to turn the call over to Glenn to provide a financial overview. Glenn?

Thank you, Daniel. I will now review the financial and operating results for the second quarter ended June 30, 2023. Let me start with the cash overview. We ended the quarter with $77.3 million in cash, which we expect will be sufficient to fund operations into the fourth quarter of 2024. Regarding the operating results, R&D expenses were $21.2 million for the three months ended June 30, 2023, as compared to $16.5 million for the three months ended June 30, 2022. These costs were mainly driven by external development costs related to ongoing clinical trials of vidofludimus calcium and IMU-856, and partially offset by a decrease in external development costs related to the Phase II clinical trial of vidofludimus calcium in ulcerative colitis and the IMU-935 program. For the six months ended June 30, 2023, R&D expenses were $44.1 million as compared to $34 million for the same period ended June 30, 2022. These costs also were mainly driven by external development costs related to the ongoing clinical trials in vidofludimus calcium and IMU-856 and were partially offset by a decrease in external development costs related to the Phase II clinical trial of vidofludimus calcium in ulcerative colitis and the IMU-935 program. General and administrative expenses were $3.8 million for the three months ended June 30, 2023, as compared to $4.1 million for the same period ended June 30, 2022. The slight decrease was chiefly driven by a decrease in noncash-based stock compensation, partially offset by increased costs across a number of categories. For the six months ended June 30, 2023, G&A expenses were $8.1 million as compared to $8 million for the same period ended June 30, 2022. The nominal increase was related to an increase across a number of categories which was partially offset by a decrease in personnel expense and G&A, primarily due to non-cash-based stock compensation decrease. Other income was $1 million for the three months ended June 30, 2023, as compared to negative $1.3 million for the same period ended June 30, 2022. The increase was primarily attributable to a decrease in foreign exchange losses and an increase in interest income as a result of higher interest rates. This was partially offset by a decrease in R&D tax incentives for clinical trials in Australia. For the six months ended June 30, 2023, other income was $3 million as compared to negative $0.7 million for the same period ended June 30, 2022. The increase was primarily attributable to an increase in interest income as a result of higher interest rates, a decrease in foreign exchange losses, and a research allowance attributable for the tax year 2021 from the German Federal Ministry of Finance. The increase was partially offset by a decrease in R&D tax expenses for clinical trials in Australia. The net loss for the three months ended June 30, 2023, was approximately $24 million or $0.54 per basic and diluted share based on 44.4 million weighted average common shares outstanding. Compared to a net loss of approximately $21.9 million or $0.72 per basic and diluted share based on 30.2 million weighted average common shares outstanding for the same period ended June 30, 2022. Net loss for the six months ended June 30, 2023, was approximately $49.3 million or $1.12 per basic and diluted share based on 44 million weighted average common shares outstanding. Compared to a net loss of approximately $42.7 million or $1.49 per basic and diluted share based on 28.7 million weighted average common shares outstanding for the same period ended June 30, 2022. With that, I will turn the call back over to Daniel for a review of our upcoming clinical milestones. Daniel?

Thank you, Glenn. I would now like to provide an update on the anticipated upcoming milestones for our available development programs. Our current expectation is to report an interim biomarker analysis from our Phase II CALLIPER trial in progressive MS, including serum neurofilament light chain (NFL) in the fall of this year. This now more precise timeline provides additional clarity compared to our previous guidance on the second half of 2023. We expect to readout this trial at the end of 2024. Additionally, we look forward to reporting data from the interim analysis of our Phase III ENSURE program late next year and to readout the first of our identical twin Phase III ENSURE trials in relapsing MS at the end of 2025. As we have stated before, based on the strong clinical activity observed thus far and vidofludimus calcium solidly established safety and tolerability profile to date, we continue to believe that the design of the Phase III ENSURE program will provide a straightforward path to potential regulatory approval in relapsing MS. As I noted earlier, the Phase II CALLIPER trial is designed to corroborate the neuroprotective potential of vidofludimus calcium in progressive MS and could, therefore, be an additional differentiator for the drug in the MS market. Vidofludimus calcium, with its combined anti-inflammatory, antiviral, and direct neuroprotective effects, may represent an important and unique treatment option targeting the complex pathophysiology of MS. With regards to our IMU-856 program, as a result of the overwhelmingly positive data generated from the final portion of our Phase I clinical trial in celiac disease patients, we have begun preparing for a Phase II clinical trial in ongoing active celiac disease patients. Once again, we are very excited about this program and believe that IMU-856 could represent an entirely new and innovative oral treatment option for a number of gastrointestinal diseases without the serious consequences associated with immunosuppressive therapies. This brings us to the end of our formal presentation. Jessica, please open the call for the Q&A session.

Yes. Thank you, Daniel, and also thank you to Daniel and Glenn for reviewing the first half of 2023 and the highlights, as well as our upcoming value inflection points. We will now move on to Yasmeen Rahimi from Piper Sandler. Yasmeen, please unmute yourself and go ahead.

This is Lauren speaking on behalf of Yas. Congratulations on the progress with the pipeline. I have two questions. First, I understand you have previously stated that you want to see a separation from placebo for NFL and GFAP. Could you elaborate on this? What level of separation would be considered a strong signal, and how does this relate to changes in brain volume regarding the primary endpoint? Secondly, have you had your end of Phase II meeting with the FDA before moving on to Phase II in celiac? When can we expect an update on your next steps for Phase II? Thank you.

Thank you, Lauren. Regarding the NFL, it is generally a more established market than GFAP, but we still lack substantial information on how other studies affect NFL changes in progressive MS. As such, it is challenging to provide clear guidance on what we might observe. Our primary objective in this trial is to identify specific signals, particularly focusing on sub-indications rather than random ones. We are assessing patients with primary progressive active and non-active secondary progressive forms to determine if certain indications show more benefit based on biomarker signals. Any other interpretations might lead to overinterpretation risks. Concerning the correlation with brain volume, that connection has not been firmly established, and we aim to closely monitor that aspect. Additionally, we have other clinical endpoints to emphasize, such as confirmed disability worsening, which I consider a critical outcome for the progressive MS aspect of the CALLIPER study. Regarding the 856 question, this was part of the Phase Ib study, and currently, there are no plans for an end of Phase II meeting. Our regulatory efforts are currently centered on the IND submission, and we are actively engaging in discussions with the FDA. This ongoing dialogue is why we believe we are on the right track for our regulatory interactions at this time.

Perfect. Thank you, guys.

Thank you, Lauren. And we have a follow-up question on the CALLIPER interim analysis that came in writing from Tom Smith at Leerink. Can you elaborate on what data you expect to report with the interim biomarker analysis from the CALLIPER trial analysis in the fall? What are your expectations for this readout?

Yes. As I mentioned, it's really more about a qualitative analysis to observe any differences. If, for instance, we see a more favorable NFL change effect in the treatment groups, such as a reduction, that would be excellent. However, the primary goal is to pinpoint the most promising paths forward in the treatment of progressive MS. I can't provide any specific quantification or guidance on the expected results since this is cutting-edge research and there isn’t much historical data for comparison. So, let's hope for a significant distinction between active treatment and placebo in this study.

Thank you, Daniel. Thank you, Tom, for the question. Next one, we have live here in the queue, Andreas Argyrides from Wedbush. Andreas, please unmute yourself and go ahead.

Good morning and thank you for taking our question. Can you provide insight into the patient enrollment for ENSURE? Is it progressing as you anticipated, and when do you expect the trial to be fully enrolled? Additionally, could you update us on the status of vidofludimus calcium in ulcerative colitis and whether you are still seeking a partner for the program? Thank you.

Yes. First of all, I think the ENSURE enrollment is going well right now. We have the two studies, ENSURE 1 and ENSURE 2, running, and they are on track with the planned enrollment. So that's a pretty good situation there. Regarding ulcerative colitis, we are having ongoing discussions. Additionally, we have added IMU-381 to the pipeline, which is focused on gastrointestinal indications and may benefit from the data we've obtained from the CALDOSE study during the maintenance phase. This could potentially lead to another effective molecule that leverages the proof-of-concept for vidofludimus calcium in ulcerative colitis. There is more potential here, and I strongly believe that our mode of action has been proven, allowing for interesting developments going forward in this area.

And just one quick follow-up. Can you just also remind us what gives you confidence that the Nurr1 activator would work in progressive forms in multiple sclerosis?

Yes, I believe it is largely based on the established biology from literature. So far, we have observed confirmed disability worsening, leading us to conclude that vidofludimus may impact relapse independent of disability worsening. Consequently, it could also be effective in progressive MS. However, demonstrating this is the goal of the clinical study, and we need to validate it through our research.

Thank you, Andreas. We also have Matt Kaplan on the line from Ladenburg. Matt, please unmute yourself and go ahead.

Thanks, Jessica. And good morning. Just a follow-up on 856 and Celiac. I guess you're in preparation mode with the IND, what are your current thoughts on the design of the Phase II as you move it into Phase II?

Thank you, Matt. This is an important matter for us right now. As shown in our presentation, we are very enthusiastic about the program and believe it should advance into celiac disease as swiftly as possible. We have collaborated with some global experts and held several productive meetings to discuss the optimal design while also closely reviewing the FDA draft guidelines for Phase III in celiac disease published in the latter half of last year. This is an ongoing discussion, and I’d like to share some of our thoughts. We believe the patient population aligns well with the FDA guidance, so we will focus on active celiac disease patients. The endpoints we are considering include histological changes, symptomatic improvements, and also some biomarkers and functional changes. The FDA guidelines indicate they want to see symptom and histological improvements in Phase III studies, which we need to test effectively to pinpoint the appropriate doses and designs for these studies. Regarding the study duration, while it’s not finalized, we anticipate examining a three-month timeline for improvements in these scores. Currently, we are determining the exact size of the trial and each group within it. As for the doses, we are exploring a range of doses to help identify the most suitable one for the Phase III study moving forward.

That's very helpful. And then one follow-up on that, I guess, given the potential utility of 856 outside of celiac disease and ulcerative colitis. How are you thinking internally about the development of 856 and 838 in ulcerative colitis?

Both are interesting, honestly. I think the challenge with 838 is that we are in a very important MS study at the same time. Therefore, I think our GI focus is right now with the fresh results from the Phase Ib study on 856. Clearly, I think 856 has something very special. It is not immunosuppressive. Therefore, I think the drug could really add something new to the treatment landscape in GI disorders. If you look at the current treatments and things in development for indications like Crohn's and colitis, clearly a non-immunosuppressive drug that is able to restore the proper healthy epithelial layer in the gut wall would add something substantial. I see a very bright future for 856 in the broader GI space really beyond celiac disease as well. It's early to say what indications exactly, but likely IBD is a core theme in further development.

Thanks Daniel. That’s very helpful.

Thank you, Matt, and thank you to all our guests today. This concludes our question-and-answer session. I would like to turn the conference back over to Daniel for any closing remarks.

Yes, thanks, Jessica. And thank you to today's attendees for your insightful questions. In summary, we remain well funded with $77.3 million on our balance sheet, providing expected run rate through multiple value-creating clinical milestones into the fourth quarter of 2024. Looking ahead, as noted, we expect to report data from the interim analysis of our Phase II CALLIPER trial, vidofludimus calcium in progressive MS in the fall of this year. As progress is made, we also expect to provide an update on our preparation for the Phase II clinical trial of IMU-856 in patients with ongoing active celiac disease. With that, I would like to close today's call. Thank you very much for joining. We are very happy to answer any additional questions one-on-one.

Thank you also from my side for joining Immunic's second quarter 2023 earnings call. The webcast has now concluded. You may now disconnect.