Earnings Call Transcript - IMUX Q1 2022

Jessica Breu, Head of Investor Relations and Communications

Good morning and welcome to Immunic's First 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 recently promoted Chief Financial Officer. Please note all participants will be in listen-only mode and this event is being recorded. After today's presentation, there will be an opportunity to ask questions. If you joined the webcast via this new platform, there are two ways to submit questions. You can either submit your question in writing via the Q&A tool of the Zoom portal or if you would like to speak with us directly, please use the raise hand function in the Zoom portal to queue your question. 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 a 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 in these forward-looking statements. I would now like to turn the call over to Dr. Daniel Vitt, our CEO and President to begin with the presentation. Daniel, please go ahead.

Daniel Vitt, CEO

Thank you, Jessica. I would like to welcome everybody to Immunic's first quarter 2022 earnings call. Earlier this morning, we announced our financial results for the quarter ended March 31st, 2022, and highlighted recent activities as well as upcoming milestones related to our clinical development pipeline. During today's call, we will talk through our first 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. The first quarter of 2022 was marked by continued advancements.

Operator, Operator

My apologies, Daniel. I had to mute you for a second. It seems like the audio had a little problem. Maybe you can restart with the review of the quarter, please.

Daniel Vitt, CEO

I had to mute you for a second due to some audio issues. Could you please restart with the review of the quarter?

Operator, Operator

No. Still a technical issue with the line. My apologies to the audience. No, not working. I'm not sure. Maybe, Glenn, would you like to take over?

Glenn Whaley, CFO

Sure. We'll do Jessica. So earlier this morning, we announced our financial results for the quarter ended March 31st, 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 first quarter 2022 and subsequent highlights, financial and operating results, as well as anticipated milestones. As Jessica noted, before we close the call, you have the opportunity to ask questions. The first quarter of 2022 was marked by continued advancements across the business, including financially and within our key pipeline programs. The progress we have made, as I stated in the last quarter, is clearing the way for several important data readouts this year that could be transformative for Immunic. Let me walk you through the first quarter '22 and subsequent events in more detail. In February, we presented preclinical data at the potent anti-inflammatory activity of vidofludimus calcium at the 17th Congress of ECCO. Highlights included: First, that vidofludimus calcium reduces proinflammatory immune cell responses by inducing regulatory macrophages, reducing proinflammatory cytokines secretion and reducing T-cell proliferation. Second, vidofludimus calcium shows additive to synergistic effects with anti-TNF antibodies. And finally, DHODH is important in the fraction of cells that receive a strong immune stimulus and are highly metabolically active. In conjunction with the Eco Congress, as you may recall, we also announced the blinded baseline characteristics of our Phase III CALDOSE-1 trial of vidofludimus calcium. Patients in the trial had active to moderate severe disease. And as we noted, we were pleased to see that only 17% of the patients were pretreated with biologics. The trial utilized a central independent reader to evaluate the endoscopic eligibility criteria. At baseline, 55% of patients had a modified mayor endoscopic score of three and 45% of patients had a score of two. As previously noted, we firmly believe that the randomized patient data and the methodology regarding endoscopic assessments used in the trial contribute to ensuring optimized study readout. We continue to believe that the results of the interim analysis, along with vidofludimus calcium, already established strong safety and tolerability profile, suggest that the drug could become a preferred oral treatment option for patients suffering from ulcerative colitis compared to alternatives to biologics. Moving to our second asset, IMU-935, our potentially best-in-class oral IL-17 inhibitor. In February, we significantly bolstered our intellectual property protection for IMU-935 with the receipt of notice of allowances for composition of matter patents in the U.S., Europe, and Australia. These patents provide protection, at least to 2038, with further extension possible through the potential PTE in the U.S. or SPC in Europe, respectively. In March, we promoted Glenn Whaley to our Chief Financial Officer. He has done an outstanding job since 2019. I’m pleased to have him in this position. Most recently, we announced the start of the patient cohorts in our ongoing Phase 1 clinical trial of IMU-856, our third clinical asset in patients with celiac disease, marking the first time patients will be treated with this early available small molecule, which targets restoration of intestinal barrier function and regeneration of the epithelium. This is an important milestone in the clinical development of this program as data from preclinical studies have suggested that IMU-856 can restore barrier function in the gastrointestinal tract and regenerate intestinal architecture while maintaining immunocompetency. Moving on to the financial results. Let me start with the cash overview. We ended the first quarter with $95.7 million in cash and cash equivalents and then subsequently, in April, we raised an additional $10 million through our at-the-market facility. We anticipate this cash balance to be sufficient to fund operations into the third quarter of 2023. Regarding the operating results; research and development expenses for the quarter ended March 31st, 2022 were $17.4 million as compared to $11.5 million for the same period in 2021. The increase in costs for the quarter reflects the continued ramp-up of clinical expenses related to our three clinical programs as well as increased personnel expenses related to the hiring of more people to support the company's growth. The increases were partially offset by decreased costs related to our Phase 2 clinical trials in COVID-19 and ulcerative colitis and a decrease in drug supply costs for vidofludimus calcium. General and administrative expenses were $4 million for the quarter ended March 31st, 2022, as compared to $3.6 million for the same period last year. The increase in costs was primarily due to personnel expenses as well as smaller increases in costs across numerous categories. Net loss for the three months ended March 31st, 2022, was approximately $20.8 million or $0.74 per share based on approximately $28.1 million weighted average common shares outstanding compared to a net loss of approximately $34.5 million or $1.63 per share based on $21.2 million weighted average common shares outstanding for the same period in 2021. Moving on to one of our most important upcoming value inflection points will be the highly anticipated readout of our Phase II CALDOSE-1 trial of vidofludimus calcium in patients with moderate-to-severe UC, which we previously reported having completed enrollment during the fourth quarter of last year. As a reminder, at the completion of patient recruitment, the trial had randomized a total of 263 patients into four arms: three active dosing arms of 10, 30, and 45 milligrams, as well as placebo. As for IMU-935, after having previously reported positive unblinded safety, PK, and PD data from healthy volunteer portions, our ongoing Phase 1 trial of IMU-935 is planned. We expanded the trial in Q4, '21 to include a third portion to treat patients with mild to severe psoriasis. This was a key milestone for us, as it represents the first time patients are being treated with this compound. As mentioned in our fourth quarter call, in order to address the COVID-19 related limitations in Australia and New Zealand, where this trial has been exclusively conducted, we have now submitted the required documentation to regulatory authorities in Bulgaria and North Macedonia in order to press forward rapidly with patient randomization. We expect initial results from this third portion of the trial to be available in the second half of this year. The initial data will provide us with a first important look at IMU-935 safety and efficacy profile in this patient population. In addition, enrollment in the Phase I dose escalation trial of IMU-935 in progressive metastatic castration-resistant prostate cancer, which was initiated in late Q4 of 2021, has been ongoing. The trial is led by principal investigator Dr. Johann Sebastian de Bono, one of the world's foremost experts on the subject of CRPC. We're grateful to have Dr. de Bono at the helm of this trial and anticipate that initial safety data will be available in the third quarter of this year. As a reminder, the trial is designed to establish a recommended Phase II dose and to assess safety tolerability, anti-tumor activity, biomarkers, and pharmacokinetics of IMU-935 in this indication. With regards to our ongoing Phase I clinical trial of IMU-856, with the single-ascending dose part already completed and multiple-ascending dose currently ongoing, we eagerly anticipate reporting the unblinded safety data from these healthy volunteer parts in the third quarter of 2022. It is also important to note that our two Phase 3 trials of vidofludimus calcium (ENSURE one and two) in patients with relapsing multiple sclerosis are progressing. As a reminder, we have targeted an enrollment of approximately 1,050 patients in each trial. Dosing is either 30 mg once daily of vidofludimus calcium or placebo. The primary endpoint for both trials is the time to first relapse up to 72 weeks. Also ongoing is our supportive Phase 2 CALLIPER trial in progressive multiple sclerosis designed to demonstrate vidofludimus calcium’s potential for neuroprotective activity. This trial is expected to enroll approximately 450 patients randomized to either 45 mg once daily of vidofludimus calcium or placebo. The primary endpoint is the annualized rate of brain volume changes up to 120 weeks. We remain highly enthusiastic about the potential of vidofludimus calcium to become a best-in-class therapeutic for this patient population given its demonstrated activity in preventing lesion formation as shown in our Phase 2 trials and its exceptionally safety and tolerability profile thus far. Despite the limitations of currently approved therapies, the global MS market exceeds $23 billion, and vidofludimus calcium is uniquely positioned to address the unmet needs for MS patients. That brings us to the end of this formal presentation. Jessica, please open the call for Q&A.

Operator, Operator

Thank you, Glenn. Thank you very much for jumping in here and apologies again to the audience for the technical issues. That's what sometimes happens in the digital world. Daniel, do you want to say some closing remarks for the formal part of the presentation?

Daniel Vitt, CEO

Well, I just want to say thank you to Glenn and you for managing that despite the challenges here. We hope that works now for the Q&A session. I think what I wanted to add at the end of the presentation is that we're really pleased that we have a number of important clinical trials upcoming. And we can do that with a strong financial base, decent cash reserves, as well as we have raised an additional more than $40 million since the beginning of this year through our at-the-market facility. And with that, maybe Jessica, you can open the Q&A session.

Operator, Operator

Sure. More than happy to do this. Just as a reminder, if you joined a webcast via the Zoom platform, there are two ways to submit questions. You can either submit your questions in writing via the Q&A tool of the Zoom portal or if you would like to speak, please use the raise hand function of the Zoom portal to queue your question. At this time, we will pause momentarily to assemble our roster. Our first question comes from Thomas Smith at SVB Leerink. Thomas, please unmute yourself and go ahead.

Thomas Smith, Analyst

Great. Thanks, guys. Thanks for taking the questions. Just a couple on our end. First on the vidofludimus trial in ulcerative colitis. We've seen a number of Phase 2 readouts over the last few weeks. When you're looking at some of these results, can you just help put your study with vidofludimus in the context and remind us what's driving your confidence in success at the top line here in June?

Daniel Vitt, CEO

Sure. Happy to do that. I think we really prepared intensively with care in the design of the trial and inclusion criteria. And we've tried to make sure that the trial is well-designed, looking on baseline purposes as mentioned, also making sure that we technically have a good trial ongoing. So far, we're satisfied with what we have seen technically from the trial. So, we're very confident that this trial will yield positive results. Our confidence in the data comes from a couple of previous findings. First of all, you may remember that there was a small interim analysis done after 25% of the patients had completed the 10-week induction phase, and the data review committee at that time had suggested to continue with all active doses because none of the doses were expected to be ineffective compared with placebo. This was not done on a statistical assessment, but just from a data review committee perspective. Also, there was prior data from an open-label small proof-of-concept trial showing that the drug may have activity in these indications. So, we're quite optimistic and confident that this will work.

Thomas Smith, Analyst

Okay, great. That's helpful. And then just a couple on IMU-935. First, can you just clarify if you started dosing psoriasis patients in the Part C portion of the study? And then as you look to expand enrollment here in Eastern Europe and you're opening up the trial sites in Bulgaria and Macedonia, how are you thinking about regional enrollment? Do you expect more patients to come from the Australia - New Zealand region, or the Eastern European region? And then just a final question on how you're thinking about the overall study populations. Have you considered opening enrollment to mild-to-moderate patients maybe as a way to bolster enrollment in the short-term? Thanks for taking the questions, guys.

Glenn Whaley, CFO

Thank you once again for your input. We are currently recruiting patients for the psoriasis study, specifically for the low-dose cohort of 150 milligrams once daily in Australia and New Zealand. We are in the process of setting up sites in Bulgaria and Macedonia, and we’ve submitted the necessary documents for that, which is ongoing work. I anticipate that these sites will be active soon. Regarding the study population, it is important not to recruit too broadly. A reasonably good level of psoriasis activity is essential to distinguish between placebo and active treatments. Therefore, we are focusing on moderate-to-severe patients, which necessitates a minimum PASI score of 10 to minimize variability. While including mild patients might make recruitment easier, it could distort our results due to potential placebo effects among those with milder conditions.

Operator, Operator

Thank you, Tom. Next guest in our line here today is Yasmeen Rahimi of Piper Sandler. Yas, please unmute yourself and go ahead.

Yasmeen Rahimi, Analyst

Good morning, team. Thank you so much for taking my questions. I have a number for you. Maybe the first place to start off is, recently we saw another competitor program who missed on their primary endpoint driven by losing maybe some patients due to the European conflict. So maybe, can you kindly ensure us that the number of samples that were analyzed specifically for clinical remission, were exactly as you predicted, and that there are no lost follow-ups? So, let's start there then I have a few more.

Glenn Whaley, CFO

Sure. I think the good thing is that the ten-week phase, which is the primary endpoint, was completed before the war started in Ukraine. So yes.

Yasmeen Rahimi, Analyst

Okay. Great. Second question for you is, we did also notice that there's quite a bit of sponsors who have lots of sites ongoing, there is quite a bit of heterogeneity that could influence the placebo. So, given the CALDOSE study has a very large clinical sites up and running, how can we get confident that there's not going to be an introduction on site heterogeneity? So just any commentary you could provide us as we head into the top-line could be helpful.

Daniel Vitt, CEO

That's true, and I think this will also be a challenge. We try to really address it by, for example, doing eligibility assessments based on baseline endoscopy streaming. So, we make that in a central unbiased fashion just to make sure there's no site bias and no country bias in these things. Also, to ensure data integrity, we implemented a two plus one scheme for the endoscopy. It's some in the sense of double-blind fashion, and the two independent readers are looking on the endoscopies, and if they don't come to the same conclusion, there's a third adjudicator taking care of that. That's also in line with our recommendation from the FDA in the new draft paper for UC guidance for Phase 3. So, I think we did what we can do to make sure there are no statistical issues here.

Yasmeen Rahimi, Analyst

Thank you, Daniel. With about two and a half to three weeks remaining until June, could you provide a brief update on whether the data has been unblinded? Additionally, what steps are remaining between now and the topline data reporting? If possible, could you also specify whether the report will be in early, mid, or late June? That information would be very helpful. Thank you again for addressing my detailed questions.

Daniel Vitt, CEO

Yes, I would love to give you a date, but I can't do that. So, we're just blinded. So, I've not seen the blinded data. I shouldn't have this call if I were unblinded. No, I think it’s June. It's maybe more likely the first half of June, but we keep the guidance for June. Database is still not locked. So, that's work in progress. It's final signature hunting and cleanup work on the database ongoing right now.

Yasmeen Rahimi, Analyst

Okay. Great, thank you. I'll jump back in the queue.

Operator, Operator

Thank you, Yas. Our next guest is Andreas Argyrides of Wedbush. Andreas, please unmute yourself and go ahead.

Andreas Argyrides, Analyst

All right. Good morning. And thanks for taking our question. Just a quick one from us on CALDOSE-1. The studies powered for an 8% to 12% improvement in clinical remission based on an expected placebo response of 5% to 10%. Can you just talk about how you have planned to mitigate the placebo response? Some other trials have seen a higher than 5% to 10% in their trials. I appreciate that. Thank you.

Daniel Vitt, CEO

I think there are endless discussions on that topic, and there may be a lot of reasons why, in some trials, placebo rates are higher. What we see as the biggest risk is, as it has been pointed out by KOLs recently, the issue of co-medication, which sometimes has an unpredicted activity on placebo patients. So, we don't allow immune-suppressors as core therapies, for example, which we have seen contributing to a higher risk of placebo rates. We're also ensuring stringent inclusion criteria and we adhere to our own principles here, which should bring comparability to other successful trials.

Andreas Argyrides, Analyst

Great. Thank you. I'll jump in the queue.

Operator, Operator

Thank you, Andreas. Next one is Matthew Kaplan of Ladenburg Thalmann. Matt, please unmute yourself and go ahead.

Matthew Kaplan, Analyst

Hi, good morning. Thanks for taking the questions. I just wanted to kind of stay with the CALDOSE study a little bit. I guess, given the interim analysis results that you saw, can you talk about how you're going to be analyzing the different doses in the study? And should we expect a dose response given the interim dose that SAD continual doses?

Daniel Vitt, CEO

Thank you, Matt. Thank you for asking about the doses. I think I had a very strong opinion on that when we started the trial and in between our wonderful data in 2020, where I think 30 and 45 milligrams from the two high-dose groups came on almost at the same good activity level. So, I can't tell you really if I believe 45 is the highest active dose. I'm a little bit cautious on that end. What I think we can deliver here is to identify a suitable dose for Phase 3. We're very fortunate that we have three active doses in the trial along with placebo. So, this trial is designed to deliver an answer to the question of what is the suitable dose for Phase 3. I think that's the ultimate purpose, and we'll likely deliver. Yes, a dose response would be wonderful, but if you look at other trials, it’s sometimes following interesting curves.

Matthew Kaplan, Analyst

And then in terms of 856, the Phase I program, you said you're expanding into celiac patients. Can you give us a sense in terms of what to look for there as the potential data readouts from the SAD and MAD group in the third quarter?

Daniel Vitt, CEO

I think that this is, of course, a big step because the third program is currently actively recruiting patients in the MAD portion of the healthy volunteer part, and this data, alongside with the single-ascending dose part, is expected to be available in the third quarter of this year. Not too far from now, we should have safety and PK data. For the celiac disease indication, we believe that this is a very good indication for proof-of-concept since the drug is able to restore barrier function without directly impacting the immune system.

Operator, Operator

Thank you, Matt. Next question comes from Boobalan Pachaiyappan at H.C. Wainwright. Boobalan, please unmute yourself and go ahead.

Boobalan Pachaiyappan, Analyst

Hi, can you hear me, okay?

Operator, Operator

Yes. Hi.

Daniel Vitt, CEO

Wonderful.

Boobalan Pachaiyappan, Analyst

Awesome. So just to follow-up on 856. Trying to get an understanding of the biomarkers that you might be evaluating down the road. So, are you planning to investigate some histological biomarkers that might require biopsies, or some less invasive peripheral blood cytokine biomarkers? And also, if these biomarkers were evaluated in any of the prior competitors’ trials?

Daniel Vitt, CEO

Thank you for the question, Boobalan. Yes, we will measure biomarkers in that part of the trial. We will also provide more updates on the trial itself in the next couple of months as we progress. The goal is to identify synchronized processes of barrier function modulation and use that to demonstrate that 856 has the potential to restore barrier function and possibly even the proper structure in the gut wall.

Boobalan Pachaiyappan, Analyst

Okay. I understand. And one more on this. You mentioned that you'll be evaluating the drug in 28 days. So just curious whether that period is sufficient to gain initial evidence for drug activity? Specifically, can interest in barriers function normalize and bowel epithelium regenerate in 28 days?

Daniel Vitt, CEO

Yes, I think based on the discussions we're having with the experts and our teams' very intense work there, we believe that should be possible in the 28-day timeframe.

Boobalan Pachaiyappan, Analyst

Okay. That's it for me. Thanks so much.

Daniel Vitt, CEO

Thank you.

Operator, Operator

Great. Thank you, Boobalan. The last one I currently have in the line here is Brandon Holly of Roth Capital. Please unmute yourself and go ahead.

Zegbeh Jallah, Analyst

Hi. This is Zegbeh. I'm actually on the line. I thought I wasn't going to make it. But I just wanted to ask a couple of quick questions. I'm looking at the blinded baseline characteristics for the CALDOSE study. Is there anything unique about this patient population that we need to be aware of before making any cross-trial comparisons? And are you also going to be stratifying based on baseline disease severity, meaning moderate versus severe in addition to what you mentioned about stratifying based on steroid use or other factors?

Daniel Vitt, CEO

Yes, thank you for that question. We've looked at baseline characteristics alongside our team, and we found that compared to other trials, the best comparator would be the ozanimod Phase 2 trial, which had a level of precluded patients that was also quite severe. So, I think that this is probably the best comparator from what I’ve seen.

Zegbeh Jallah, Analyst

Thank you. And then the next one here is just, as we prepare for the first preclinical data for the psoriasis patients treated with IMU-935, again, what should we be keeping in mind as we think about benchmarking the data that's coming out again? And have you begun active conversations with regulatory bodies in the U.S. and Europe?

Daniel Vitt, CEO

With respect to the 935?

Zegbeh Jallah, Analyst

Yeah. 935 psoriasis specifically.

Daniel Vitt, CEO

Yes. I think that 935 is a wonderful molecule with very unique inhibition of IL-17 as an oral drug. So, we believe the drug is poised to be successful compared to currently used oral treatments, which are largely dominated by IL-17 pathway antibodies. So, if you ask me what can you expect, the treatment is limited to four weeks. Therefore, we can only show four-week data, and we will not look at PASI-50, PASI-75, etc. But for the Phase I proof-of-concept trial, we're looking at the reduction of the PASI score. The good news is there’s so much data on currently used therapies that you can actually compare this. Typically, if you look at historic trials there, the placebo rates are around 10%, 15%, and sometimes up to 20%. We believe we should see quite a good differentiation after four weeks if we compare the two active doses with the placebo group. Therefore, this trial is designed to deliver a strong rationale for a Phase II trial, which is now bridging to the next question on regulatory discussions. We are currently working on packages for discussions with the FDA and other regulatory bodies, but it's not yet finalized, so that’s work in progress.

Zegbeh Jallah, Analyst

Thanks, Daniel. And then the last one here, with so many catalysts coming up it's easy to forget about the ensuring CALLIPER studies, but I was just wondering if you can provide any additional color on progress there with enrollment or site activations?

Daniel Vitt, CEO

Well, as you know, we usually don't give any guidance on updates on trial enrollment. We give guidance on how we believe they're running. So, given that, ENSURE and CALLIPER started not too long ago, they are still in the startup mode. They are actively recruiting in several countries, and we're adding more countries and sites step-by-step, so that's progressing. You're right; we have many other things we're currently focusing on in the readouts for the next couple of months that we don't talk too much about that. But as you know, it’s a good opportunity to remind everybody that the drug has shown wonderful activity in the very big Phase 2 trial in relapsing MS, and therefore we continue to believe that the drug is likely to be successful in the Phase 3 RMS phase trial as the ENSURE trials. However, we’re also quite cautious about the potential in progressive MS, as it's usually not covered too much in the press and everywhere, but we believe the mode of action and features we have seen might also show strong benefits for progressive patients with MS as well, and that’s an important piece we're working on.

Zegbeh Jallah, Analyst

Thank you. Looking forward to the updates.

Operator, Operator

Thank you, Zegbeh. All right. I think this was all the questions I have in the list. So, this concludes our question-and-answer session. I would like to turn the conference back over to Daniel for any closing remarks.

Daniel Vitt, CEO

Thank you, Jessica. I just need to find them. Thank you, Jessica. And thanks to today's attendees for your insightful questions. We're highly enthusiastic about the progress we've achieved recently, and the important upcoming milestones we anticipate this year, including the Phase II UC data for vidofludimus calcium in June and the initial psoriasis patient data for IMU-935 in the second half of this year. With that, I would like to close today's call. Thank you very much for joining, and we're very happy to answer any additional questions in one-on-ones. And once again, I apologize for the technical issues we had during this call.

Operator, Operator

Thank you, Daniel. Also from my side, thank you for joining Immunic's First Quarter 2022 Earnings Call today. The conference has now concluded. You may now disconnect.