Earnings Call Transcript - IMUX Q2 2022

Jessica Breu, Head of Investor Relations and Communications

Good morning, everybody, and welcome to Immunic’s Second 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 section of today’s webcast, we also have with us our Chief Scientific Officer, Dr. Hella Kohlhof. 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 result of any revisions 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 webcast over to our CEO and President, Dr. Daniel Vitt, to begin the presentation. Daniel, up to you.

Daniel Vitt, Chief Executive Officer and President

Yes. Thank you, Jessica. And I would like to welcome everybody to Immunic’s second quarter 2022 earnings call. Earlier today, we announced our financial results for the quarter ended June 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 second quarter 2022 and subsequent highlights, additional clinical updates we provided in the filings this morning, 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. The second quarter of 2022 was a period of continued progress in our clinical programs, which we believe set the stage for important data readouts during the second half of this year. In particular, we look forward to reporting the first clinical activity data for our selective oral IL-17 inhibitor, IMU-935 in psoriasis, and first-in-human healthy volunteer data from IMU-856, an orally administered small molecule that has shown preclinical leads to regulate intestinal barrier function and regenerate bowel epithelium. But let me move to a more detailed review of our second quarter updates. In May, we announced the start of the patient cohort in our ongoing Phase 1 clinical trial of IMU-856 in patients with celiac disease. This represents the first time patients are being treated with this small molecule, oral epigenetic regulator that appears to influence the tightly regulated network of genes and proteins associated with intestinal epithelial cell interaction and adhesion. With respect to vidofludimus calcium, our selective oral DHODH inhibitor, in June, we reported top-line data from our Phase 2 CALDOSE-1 trial in patients with moderate to severe ulcerative colitis. The data reveals a previously unknown interaction with chronic concurrent steroid use, resulting in the trial missing its primary endpoint. As a consequence, we decided not to continue our development of vidofludimus calcium for inflammatory bowel disease indications without a partner. Consistent with prior data sets in other patient populations, administration of vidofludimus calcium has been observed to be safe and well tolerated. Also in June, the data from Cohort 1 of our Phase 2 EMPhASIS trial in relapsing-remitting multiple sclerosis, comprising 30 and 45 milligrams of vidofludimus calcium and placebo, was published in the peer-reviewed journal, Annals of Clinical and Translational Neurology. The publication underlines the importance of our excellent Phase 2 findings for vidofludimus calcium in patients with relapsing-remitting multiple sclerosis. I would like to express my thanks to the lead author and coordinating investigator, Robert Fox from Cleveland Clinic, and to the entire team involved in preparing this article. In other corporate news, last month, we announced the appointment of Maria Tornsen, an industry executive with 20 years of global commercial expertise and experience in U.S. and ex-U.S. markets to our Board of Directors, and the resignation of Jan Van den Bossche from the Board, both of which were effective on July 5, 2022. Before I hand over to Glenn for the financial summary, I would like to highlight some other interesting clinical updates we provided in our earnings filing this morning. Based on the observation of the interaction between vidofludimus calcium and chronic steroid use in the CALDOSE-1 trial UC patients, we performed a post-hoc analysis of our Phase 2 EMPhASIS data in RMS patients to explore the potential influence of steroids on these study results. As anticipated, steroid use was rare, and among those RMS patients who received any steroids, the majority received only short steroid courses following relapse events or acute neurological events. Most of these patients had only one short course of steroids, and the average duration of steroid treatment was 4.4 days. This underlines that steroids are rarely used in MS patients and mostly for very short durations. In conclusion, comparing patients who received at least one dose of corticosteroids with those who did not, we see neither differences in clinical parameters nor evidence that the rare short-term use of steroids in RMS patients has any influence on the effectiveness of vidofludimus calcium in this patient population. With respect to IMU-935, we are progressing well in our development program. In this context, we have already completed an exploratory Phase 1 study in 15 evaluable healthy human subjects to assess the drug-drug interaction potential for the drug. No relevant signals for drug-drug interaction potential were observed, and the treatment in this trial was safe and well tolerated. Finally, the first two dose cohorts of our Phase 1 clinical trial of IMU-935 in metastatic castration-resistant prostate cancer have been fully recruited with six patients enrolled in the 300-milligram cohort and six patients in the 600-milligram cohort. All of these patients have completed the 28-day dose-limiting toxicity observation period. The third 900-milligram cohort is expected to start dosing soon. Initial safety data available so far show a promising safety profile of IMU-935 in metastatic CRPC with only benign adverse events and no dose-limiting toxicities. We plan to provide a more comprehensive update on safety and also on potential signs of anti-tumor activity of IMU-935 in this trial as soon as data from the planned dose expansion part are available. That concludes our summary of the second quarter 2022 and subsequent highlights, as well as our clinical updates. I’d like to turn the call over to Glenn, who will provide the financial overview. Glenn?

Glenn Whaley, Chief Financial Officer

Thank you, Daniel. I will now review the financial and operating results for the quarter ended June 30, 2022. Let me start with the cash overview. We ended the second quarter with $88.1 million in cash and cash equivalents, which we expect to be sufficient to fund our operations into the fourth quarter of 2023. Regarding the operating results, research and development expenses were $16.5 million for the three months ended June 30, 2022, compared to $15.7 million for the three months ended June 30, 2021. These costs were mainly driven by external development costs related to the ongoing clinical trials of vidofludimus calcium and IMU-935. For the six months ended June 30, 2022, R&D expenses were $34 million compared to $27.3 million for the same period last year. These expenses were also mainly driven by external development costs of our three clinical development programs. General and administrative expenses were $4.1 million for the three months ended June 30, 2022, compared to $3.4 million for the same period ended June 30, 2021. The increase is mainly driven by personnel expenses, including non-cash stock compensation related to headcount. For the six months ended June 30, 2022, G&A expenses were $8.1 million compared to $7.1 million for the same period in 2021. The increase was driven primarily by personnel expenses, including non-cash stock compensation related to headcount. Other expense was negative $1.3 million for the three months ended June 30, 2022, compared to other income of $1.2 million for the same period ended June 30, 2021. The decrease was primarily attributable to an increase in the loss on intercompany loan between Immunic Inc. and Immunic AG as a result of changes in currency exchange rates. For the six months ended June 30, 2022, other expense was negative $0.7 million compared to negative $0.9 million for the same period last year. Net loss for the three months ended June 30, 2022, was approximately $21.9 million or $0.72 per basic and diluted share based on approximately 30.2 million weighted average common shares outstanding compared to a net loss of approximately $17.9 million or $0.82 per basic and diluted share based on 21.7 million weighted average common shares outstanding for the same period ended June 30, 2021. Net loss for the six months ended June 30, 2022, was approximately $42.7 million or $1.49 per basic and diluted share based on approximately 28.7 million weighted average common shares outstanding compared to a net loss of approximately $52.5 million or $2.44 per basic and diluted share based on 21.5 million weighted average common shares outstanding for the period ended June 30, 2021. With that, I will turn the call back over to Daniel for an outlook on our upcoming clinical milestones. Daniel?

Daniel Vitt, Chief Executive Officer and President

Yes. Thank you, Glenn. As mentioned at the beginning of the call, we have several important data readouts coming up. Our Phase 3 program of vidofludimus calcium in RMS is progressing based on the excellent clinical data package obtained in our EMPhASIS Phase 2 trial. It’s interesting to see the new third-party data clearly highlight the unmet need of preventing disability progression, which is seen across the spectrum of patients with MS. The understanding of MS has evolved with evidence showing a smoldering disease that is connected to Epstein-Barr virus infections and subsequent inflammation and associated with neurodegeneration in MS patients. With its anti-viral, anti-inflammatory, and potential neuroprotective effects, vidofludimus calcium is uniquely positioned to address this high unmet medical need. As mentioned, several recent findings from clinical research underline this concept and the relevance for the next-generation MS therapy. An important epidemiologic study published earlier this year showed a clear association between EBV infection and occurrence of MS, with a 32-fold increased risk of EBV in EBV-infected patients with serum levels of neurofilament light chain increased. Another study revealed that cross-reactive antibodies between the EBV antigen EBNA1 and CNS protein GlialCAM were found in the cerebrospinal fluid of MS patients, linking EBV infections and neurodegeneration. Interestingly, the anti-CD20 directed therapies deplete B cells but do not deplete their progeny antibody-producing plasma cells, which are CD20 negative, and therefore, are unlikely to reduce those cross-reactive antibodies. One discussion point that many of us have been waiting for is our first-time public guidance of timelines for our ongoing clinical MS programs ENSURE and CALLIPER. We have carefully analyzed the impact that the current events in Ukraine and Russia may have on our ongoing clinical programs. Based on this assessment, our current goal is to report data from the interim analysis of our Phase 2 CALLIPER trial of vidofludimus calcium in progressive MS patients in the second half of 2023 and to read our top-line data at the end of 2024. The readout of the first Phase 3 ENSURE trials of vidofludimus calcium in relapsing multiple sclerosis is currently targeted for the end of 2025. We plan to periodically review this assessment and provide updates of material changes as appropriate. We believe that the design of the two ENSURE trials provides a straightforward path towards potential regulatory approval of vidofludimus calcium in RMS, which should be further supported by the data from the CALLIPER trial, focusing on vidofludimus calcium’s potential neuroprotective effects. We remain highly enthusiastic about the potential of vidofludimus calcium to become a highly differentiated and uniquely valuable treatment option for this RMS patient population. Recruitment of our Phase 1 clinical trial of IMU-935 in patients with moderate to severe psoriasis is ongoing in Australia, New Zealand, and Bulgaria. Initial results are expected to be available in the fourth quarter of this year. Additionally, we expect unblinded safety data from the single and multiple ascending dose part of our Phase 1 clinical trial of IMU-856 in healthy human subjects to be available in the third quarter of 2022. This brings us to the end of our formal presentation. And Jessica, please open the call for the Q&A session.

Jessica Breu, Head of Investor Relations and Communications

Yes. Thank you, Daniel, and also Glenn, for walking us through the second quarter update. Our first guest today is Andreas Argyrides of Wedbush. Sorry.

Daniel Vitt, Chief Executive Officer and President

Need a minute to switch here.

Jessica Breu, Head of Investor Relations and Communications

My apologies. Andreas, please unmute yourself and go ahead.

Andreas Argyrides, Analyst

Yes. Thank you, no worries. Good morning, and thanks for taking our question. Just two quick ones from us. So can you just describe the baseline characteristics of the celiac patients enrolled in the Phase 1 trial? And what are your expectations for the readout? And then perhaps you could just provide a little bit more color on the ENSURE readout. According to our timelines, it seems like it got pushed out a bit; we may not have that correctly. So any impact from the Ukraine conflict or other factors would be great. Thank you.

Daniel Vitt, Chief Executive Officer and President

Yes, I will try my best to answer the questions. So regarding the celiac disease trial, I think this trial is really proof-of-concept. So the goal is to really demonstrate that we somewhat confirm the impact of IMU-856 on barrier functions. So we said, okay, let’s do that in patients where it’s proven that barrier function plays an important role. So that was the reason why we picked celiac disease. It’s a four-week treatment, and we start treating for two weeks in a randomized fashion between active and placebo. After 14 days, we trigger a gluten challenge. Therefore, patients – and that’s maybe the most important baseline characteristic – need to be on a proper diet before inclusion in the studies, a gluten-free diet before inclusion in the study. There are two endpoints we’re looking at: the first is an inflammatory endpoint, so we have mentioned IL-2, and the second one is a histological assessment of height in the patient, representing two important parameters, one structural and one inflammatory parameter to be read out to give us an impression of whether we have an effect of the drug in these patients. Switching to the second question, I think we were a little bit misunderstood here in our presentation. These are the adjusted numbers. So we have adjusted our current guidance for the duration of the ENSURE trial and also CALLIPER. We’ve now considered that we do not have access to patients in Ukraine and Russia. So I think that’s now factored in, and this is the new guidance we are giving here on our way forward. Compared with our initial plans, this has slowed down a little bit, but I think we are very happy that the team was very successful in managing this challenge and finding new sites and also including new countries to get the best possible recruitment in this challenging environment. So thanks – by this way, I would also like to thank our internal team for all their efforts to manage that in this challenging situation.

Andreas Argyrides, Analyst

Great. Thanks. I will jump back in the queue.

Jessica Breu, Head of Investor Relations and Communications

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

Yasmeen Rahimi, Analyst

Good morning, team. And thank you so much for taking my question.

Daniel Vitt, Chief Executive Officer and President

Yasmeen, you’re on mute.

Yasmeen Rahimi, Analyst

Okay. Good morning, team. Can you hear me?

Jessica Breu, Head of Investor Relations and Communications

Yes. Sorry, we lost you for some reason.

Yasmeen Rahimi, Analyst

No worries. Thank you so much for taking my question. The first question that’s directed to you is, is there an opportunity to go into the CALLIPER and the EMPhASIS trial and exclude or clarify that steroid use should not be present? And then can you comment on whether the doses and the duration of steroid use and MS were similar to what we had seen in the Crohn’s study? And then I have a follow-up question.

Daniel Vitt, Chief Executive Officer and President

I can be very clear on that answer. I mentioned in the call that the goal was to show that basically corticosteroid treatment does not play a role in MS therapy. I mentioned that we had less than 20% of patients with any steroid treatment during the trial at all and the average duration was 4.4 days. In the ulcerative colitis trial, we have 50% of the patients on steroid treatment, and it has an average treatment duration of 300 days. So that’s, of course, a huge difference. There is no chronic steroid use in MS, only in cases of acute relapse do patients get an infusion for a couple of days, and then that’s it. Looking back on the data, there is no difference; we see really no hint that this is at all a challenge. It seems to be really a UC-limited problem we have identified here for the steroid interaction.

Yasmeen Rahimi, Analyst

Thank you. And then could you comment on this exploratory DDI study? What prompted the idea of measuring to run the study with IMU-935, and what are some of the findings of the study?

Daniel Vitt, Chief Executive Officer and President

The finding I mentioned is that there are no findings. That was the goal, exactly, to see that there are no drug-drug interactions. What prompted the study is clearly the way forward. We are preparing for Phase 2, and there is a broad package to be done. It is important going forward in all indications to make sure you don’t have a drug-drug interaction problem. Therefore, we said, okay, let’s get that done early, and we’re very happy that this trial was done and it clearly showed that there is no drug-drug interaction risk.

Yasmeen Rahimi, Analyst

Thank you. And sorry for one last question; can you just give us a little bit more color on how enrollment is progressing into the IMU-935 psoriasis cohort? I know you tend to give us a bit more detail in each call.

Daniel Vitt, Chief Executive Officer and President

It’s going well. As I mentioned in the last call, it was challenging in our Australian sites to get new patients active. That has changed. I’m very happy, and perhaps that’s also because our team was visiting the sites and had good discussions with our investigators. I think even the Australian and New Zealand sites are up to speed right now. With the addition of Bulgaria, we are optimistic about keeping our timelines. It’s still the second half, but we expect the data in the fourth quarter.

Yasmeen Rahimi, Analyst

Okay. Thank you, Daniel.

Daniel Vitt, Chief Executive Officer and President

Pleasure.

Jessica Breu, Head of Investor Relations and Communications

Thank you, Yas. Next question comes from Matt Kaplan at Ladenburg. Matt, please unmute yourself and go ahead.

Matt Kaplan, Analyst

Good morning. Thanks for taking the questions. Just wanted to dig in a little bit more to the Phase 3 study for vidofludimus and MS, given the recent publications on EBV. Are you monitoring for EBV activity in the study? What could you see given the activity against, say, EBV potentially?

Jessica Breu, Head of Investor Relations and Communications

So yes, of course, we have preclinical data that we inhibit or prevent the reactivation of Epstein-Barr virus infection that was tested in several other tests. We will monitor this as well in the Phase 3 clinical study because we will take sputum samples and check for shedding of the virus. So that’s implemented.

Daniel Vitt, Chief Executive Officer and President

By the way, that was implemented before the paper came out. So I’m very glad that our clinical team was forward-looking on that, and the team believed in the EBV relevance already before the science paper came out.

Jessica Breu, Head of Investor Relations and Communications

In parallel to this, to the shedding investigation, we will do the antibody distribution as well, anti-EBV antibodies.

Matt Kaplan, Analyst

Great. And then a second question in terms of 935 and the psoriasis cohort. What should we be looking for when we see the data in the fourth quarter in terms of activity?

Daniel Vitt, Chief Executive Officer and President

As you know, Matt, we are very bullish about the program. So we think this is a big thing. On the other hand, this is the Phase 1 trial. We are aiming to treat around 40 patients in these two dose groups. We want to see a clear signal of activity. It’s perhaps not fair to specify what constitutes success. The success is if there is a medically meaningful signal for activity. That is what we’re aiming for. There will be a success and a signal for full speed to Phase 2 and our partnering discussions for it. The whole team is really excited about the progress right now. The next couple of weeks are really busy here, and we will do everything to get the data as quickly as possible.

Matt Kaplan, Analyst

Great. Thanks for the detail.

Jessica Breu, Head of Investor Relations and Communications

We currently have one more, which is Tom Smith of SVB Securities. Tom, please unmute yourself and go ahead.

Michael Kratky, Analyst

Hi, everyone. This is Mike on for Tom. Thanks for taking our questions. I guess a quick follow-up to the last one. In terms of what you see as a winning scenario in the upcoming 935 readout, could you give additional details on what kind of efficacy signals you’re looking for?

Daniel Vitt, Chief Executive Officer and President

Yes. Okay. I see, I need to provide more context. In the current market situation, perceived success would clearly be to perform better than our premier last performance to come closer to what we’re seeing with anti-TNF antibodies and IL-17 antibodies in the patient situation. I just want to emphasize that this is a Phase 1; we’re testing two doses. This is not a full Phase 2 trial with the broad exposure. Therefore, we are looking to see activity here. We're not only focused on the percent PASI reduction, which is the main readout for efficacy. We will also look for something like PASI 50 reduction, which is significant after four weeks. Additionally, we will monitor itch and other parameters. The intention is to publish whatever we have at that readout in the fourth quarter and give as much insight as possible at that time. The full unblinding of the trial is expected to happen later than the first top-line readout, including the histological assessment of skin punctures where we can evaluate cytokines and inflammatory subsets. This data will provide us with much more insight in a second portion of readouts. Yes, I don’t want to diminish its importance; it’s a big readout, and it is an important step for the company going forward.

Michael Kratky, Analyst

Got it. That’s really helpful additional color; I appreciate it. And then just one last follow-up: in terms of partnership discussions you’ve mentioned previously, is there any progress you can provide, and when might we expect to reach some kind of agreement?

Daniel Vitt, Chief Executive Officer and President

So what the – sorry, I missed the first part. Partnership? Okay, good. Yes, I think this is a good point. Of course, there are different ways to progress. We try to be open to communicate a full set of data, not only to shareholders and investors but also to our friends in pharma companies. Therefore, we have activated discussions in all three programs with pharma and biotech companies. Going forward, data is also driving these discussions. One remark on expectations here: we think that 935 is uniquely positioned as the first Th17, IL-17 selective RORgamma t inverse agonist. We know this is an outstanding feature, and we have high expectations regarding the value of the program and the scope of development; any partnership should reflect that value we see in this asset. Therefore, we will likely not settle for a quick or cheap deal. We will ensure that the value is also covered if we pursue a licensing transaction or similar.

Michael Kratky, Analyst

Understand. Thanks very much for the color.

Jessica Breu, Head of Investor Relations and Communications

Thank you, Mike. Alright. Given we have no more questions in the queue, we conclude our Q&A session. I would like to turn the conference back over to Daniel for any closing remarks.

Daniel Vitt, Chief Executive Officer and President

Yes. Thanks, Jessica, and thank you to today’s attendees for your interesting questions. To summarize, we are highly enthusiastic about the progress we have achieved so far in 2022 as well as the important upcoming milestones for our earlier clinical programs we anticipate later this year. These include the unblinded safety data from both the single and multiple ascending dose parts of our Phase 1 clinical trial of IMU-856 in healthy human subjects expected in the third quarter, as well as the initial clinical activity results from Part C of our Phase 1 clinical trial of IMU-935 in moderate to severe psoriasis patients expected in the fourth quarter. With that, I would like to close the call. Again, thank you for joining our webcast today, and we are very happy to answer any additional questions in one-on-ones.

Jessica Breu, Head of Investor Relations and Communications

Great. Thank you for joining Immunic’s second quarter 2022 earnings call today. The conference has now concluded. You may now disconnect.