Greetings, and welcome to the INmune Bio Second Quarter 2021 Earnings Call. As a reminder, this conference is being recorded. A transcript will follow within 24 hours of this conference call, and the replay is available per the instructions on the press release announcing the second quarter call. At this time, it is my pleasure to introduce Mr. David Moss, Co-Founder and CFO of INmune Bio. David, the floor is yours.

Thank you, Rachel, and good evening, or good afternoon, everybody. We thank you for joining us for the call for INmune Bio's Second Quarter 2021 Financial Results. With me on the call is Dr. RJ Tesi, CEO and Co-Founder of INmune Bio, who will provide a business update. Before we begin, I remind everyone that except for statements of historical facts, the statements made by management and responses to questions on the conference call are forward-looking statements under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that can cause actual results to differ materially from those in such forward-looking statements. Please see the forward-looking statements disclaimer on the company's earnings press release as well as risk factors in the company's SEC filings, including our most recent quarterly filing with the SEC. There is no assurance of any specific outcome. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made as the facts and circumstances underlying these forward-looking statements may change. Except as required by law, INmune Bio disclaims any obligation to update these forward-looking statements to reflect future information, events, or circumstances. We had a busy quarter as we continue to make progress on our INKmune and DN-TNF platforms. And now I'd like to turn the call over to Dr. RJ Tesi, Co-Founder and CEO of INmune Bio, to discuss these developments. RJ?

Thank you, David, and thank you, everyone, for joining the call. As is our practice, I will arrange my remarks to highlight the key takeaways for the second quarter and subsequent period and provide updates to our platform programs before I pass it back to David to discuss our financial results and upcoming new milestones. Then we'll move to Q&A. I will begin with INKmune, our proprietary natural killer cell priming platform, which we have termed a pseudokine. INKmune gives NK cells increased tumor binding, which is also called avidity, increased proliferative capacity and increased tumor-killing capacity. This combination of features has previously been seen in NK cells cultured with a cocktail of cytokines IL-12, 15 and 18. The NK cells produced with INKmune are termed memory-like NK cells, a phenotype that has been shown to be most effective in killing cancer cells. INKmune, certainly in vitro, improves antitumor NK responses. We believe in patients that will do this in a simple, cost-effective manner; there are no cytokines involved in either the manufacture of the cells or the treatment of the patients. We believe this product will have therapeutic potential in both solid and liquid tumors. INKmune is manufactured in bulk and available off the shelf. A month ago, we announced the first patient had been treated in the Phase I trial evaluating INKmune in patients with high-risk myelodysplastic syndrome or MDS. High-risk MDS is a pre-leukemia. Patients often experience what is called blast off, developing a very severe form of AML. This patient has received 3 doses of INKmune via intravenous infusion with absolutely no problems. Biomarker data shows the presence of activated NK cells in the patient's blood that were not there before INKmune therapy. We expect to provide more detailed biomarker response data in the near future. This is the first of 3 patients in the lowest dose cohort. We expect to enroll the second patient soon. We started with MDS, a serious hematopoietic stem cell disorder, as our first indication because MDS patients have functionally defective NK cells that do not have strong avidity to their cancer cells. Low avidity means low tumor killing. This level of dysfunction is predictive of overall survival—the worse the avidity, the shorter the survival. An in vitro study of their NK cells shows that they respond to INKmune priming with increased avidity and increased killing of tumor blasts in vitro, a response that may predict improved tumor killing in the patient. The biomarker panel used to monitor these patients will provide detailed data on the patient's immune response to therapy. The patients eligible for enrollment in this Phase I trial are not candidates for high-dose chemotherapy or stem cell transplant, often based on frailty or age. We believe a safe, effective, well-tolerated immunotherapy may be their only option. We hope that INKmune may be a solution to a difficult problem. We plan to enroll 9 patients with high-risk MDS in the dose escalation protocol. The primary endpoint is the safety and tolerability of the intravenously administered INKmune. Secondary endpoints are biomarkers of NK function in the peripheral blood, overall response rate using the WHO criteria for MDS, and duration of that response. I remind you this is a typical open-label Phase I dose escalation trial in patients with cancers. Cancer trials do not have a placebo group. We will release data periodically as we have done with the XPRO Alzheimer's disease trial. Based on extensive preclinical data, we believe INKmune may have utility in solid tumors as well. We hope to initiate a Phase I trial in ovarian cancer in the coming months. We understand the mechanism of action of INKmune is unique and different from existing NK cell therapies. INKmune acts like a cytokine cocktail even though there are no cytokines, hence the pseudokine name. INKmune makes the patient's own NK cells better. We are not giving the patient NK cells from another source, and we understand that INKmune's mechanism of action may be confusing. We have created a short video that explains how INKmune works, which can be found on our website under Therapies, INKmune, Videos or on our YouTube channel. We hope you will view it and contact us if you have any questions. On to XPRO as part of our DN-TNF platform. To our knowledge, this is the only selective TNF inhibitor targeting inflammation without causing demyelination or immunosuppression. XPRO is completely different from the currently approved TNF inhibitors. By neutralizing the bad form of TNF, called soluble TNF, we eliminate inflammation everywhere, including the brain. By protecting the function of the good TNF, called transmembrane TNF, XPRO improves the immune response to tumors and infection and promotes remyelination, nerve cell survival, and signaling. These differences are why XPRO can be used to treat neurologic diseases, while currently approved nonselective TNF inhibitors are contraindicated in patients with neurologic diseases. We repeat this message frequently in an effort to educate investors, the academic community, and the clinical community. Because of this difference, we are not competing with currently approved anti-TNF drugs or biosimilars. XPRO has many unique therapeutic opportunities to pursue. We have them to ourselves as far as it relates to targeting soluble TNF. We have announced programs using XPRO to treat Alzheimer's disease, treatment-resistant depression, and are performing preclinical studies in models of ALS. These diseases are the tip of a very large iceberg. XPRO can be used to treat CNS indications where neuroinflammation plays an important role. That list is long. We encourage a review of the more than 60 publications found on our website for an understanding of the breadth of the XPRO therapeutic opportunity in CNS. We try not to complicate the cause of cognitive decline in Alzheimer's disease and related dementia. Our hypothesis is simple: neuroinflammation results in synaptic dysfunction and neuronal loss, resulting in debilitating and progressive cognitive dysfunction. In our opinion, if a drug therapy does not reverse either of both problems, it has little hope of changing the course of the disease. Based on data from our Phase I trial in patients with Alzheimer's disease, XPRO fulfills this requirement. Treatment with XPRO for 3 months—actually in more than a handful of patients for almost a year—decreases neuroinflammation, improves synaptic function, and decreases neurodegeneration. Can we say that decreasing neuroinflammation, improving synaptic function, and decreasing neurodegeneration improve cognition? Not yet. We got a hint from several patients who had quite remarkable responses, including one patient who went back to work. But to properly measure cognitive improvement, a blinded, randomized, placebo-controlled trial is needed. That's the design of our Phase II trial, which is designed to answer this question. I won't go into too much detail here regarding the results of the Phase I trial. We've released data 3 times in the past year, and that data is available on our website. A final data release is planned for the third quarter. I will highlight the successes of the Phase I trial. Not only have we shown that XPRO decreases neuroinflammation using multiple biomarkers, but we showed a dose effect and have provided insights into the impact of XPRO on the CSF proteome, white and gray matter structure, and function. We now believe that the novel non-invasive white matter analytics of white matter free water and apparent fiber density developed by our partner, Imeka, are very useful in the development of XPRO for Alzheimer's disease, treatment-resistant depression, and many other CNS indications that we hope to target in the future. Put bluntly, we believe the golden era of CNS drug development has arrived and will be driven by thoughtful use of biomarkers to help us understand the disease, the biology, the drugs, and the therapies. INmune Bio is on the leading edge of this revolution. Last week, we released the design of the blinded, randomized Phase II trial plan in patients with mild AD. The dose, duration, and design of the trial were informed by a successful Phase I program. In the Phase II trial, we plan to enroll 160 patients with mild AD who have biomarkers of inflammation in a 2:1 ratio. That is, 2 active drug, 1 placebo. Patients will receive 1 milligram per kilogram once a week as a subcutaneous injection for 6 months. Patients must have mild AD as defined by a CDR of 0.5 or 1.0 and at least 2 of the peripheral biomarkers of inflammation used in the Phase I study. The primary cognition endpoint is the early Alzheimer's disease MCI, Alzheimer's Cognitive Composite or EMACC, a very sensitive composite of validated neurocognitive tests ideally suited to measure the effects of treatments on cognitive decline in patients with mild AD. There are many secondary endpoints in cognition, function, and CNS biology. The patients who complete the 6-month study will be eligible for 12 months of XPRO in an open-label extension trial. We've been asked how we can do a small, short trial with confidence. Clinical design is, at its heart, a statistical exercise. Statistical significance is influenced by variability in patient responses. The less variability in patient responses, the smaller the trial can be. We have applied every insight from the Phase I trial to design the Phase II trial. By using the enrichment and biomarker strategies perfected in the Phase I study, we have modeled the rate of cognitive decline in untreated patients and the impact of XPRO on those patients. Hence, 168 patients treated for 6 months is what is needed. Competition for these patients will be fierce because of the commercialization of aducanumab and, based on news today, maybe even donanemab from Lilly and by the many trials sponsored by companies in the field in earlier stages of development. Because of our biomarker inclusion criteria, we expect a 50% screen failure rate. We plan to open as many as 50 centers in the United States, Canada, and Australia to enroll these patients. Despite being a 6-month trial, we do not expect to report top-line data until the second half of 2023. Just think if we were doing a larger, longer trial, the wait could be frustrating. We believe the ability of XPRO to decrease neuroinflammation may have clinical utility across a range of neurodegenerative and psychiatric diseases. One such indication is treatment-resistant depression or TRD. We remain on track to initiate a Phase II trial in TRD by the end of the year. As with Alzheimer's disease and TRD, we will use biomarkers of inflammation to confirm diagnosis, enroll patients, and determine the responsive therapy. Psychiatric trials rarely use biomarkers in development. We believe the use of biomarkers will make development in the field less risky and more efficient. The trial has been funded in part by a $2.9 million SBIR grant from the NIH. The market opportunity in TRD is significant; in the U.S., an estimated 7 million people are suffering from TRD. Currently, there is no way to predict which therapy will work in which patient. Contemporary medical practice involves trial and error, cycling through therapies to find which one works for that particular patient. Once a patient fails 2 therapies, they are declared treatment-resistant. 20% of patients are treatment-resistant. About 1/3 of those have biomarkers to suggest neuroinflammation as a cause of their treatment resistance. Our hypothesis is simple: neuroinflammation contributes both to the symptoms of depression and resistance to therapy. Treating neuroinflammation may provide both symptomatic and therapeutic relief. Just to give you an idea of how big the problem is, the cost of TRD to the healthcare system is estimated to be $64 billion a year. Actually, that should be the cost to the economy because there are not only direct costs of therapy, but also costs from lost wages, etc. The trial will be formed in collaboration with 2 pioneers in the field, Professor Andy Miller and Associate Professor Jen Felger, both of Emory University. It will be a 6-week, double-blind, placebo-controlled study of XPRO versus placebo with 45 patients in each arm. In addition to psychiatric symptoms, the patients must have elevated blood CRP, a peripheral biomarker of inflammation to be enrolled. The primary endpoint is improved functional connectivity as measured by MRI. Secondary endpoints include the reduction in biomarkers of inflammation and improvement in clinical measures. Turning to Quellor, our Phase II program treating the cytokine storm in hospitalized patients with COVID-19. In November, we enrolled the first patient in the Phase II trial for treatment of pulmonary complications of COVID-19. The double-blinded, randomized, placebo-controlled trial was set to enroll 366 high-risk COVID-19 patients in 2 equal-sized cohorts. One cohort is placebo plus standard of care, while the other is Quellor plus standard of care. The primary endpoint was the need for mechanical ventilation during the 28 days following enrollment in the study. COVID-19 has changed our lives and has presented a challenging clinical development landscape. The disease has changed since March 2020 when we started. Mortality rates have decreased tenfold. Therapeutic strategies have been in continual flux with standard of care evolving over time. Personally, I thought the incredible success of the vaccination programs would stop the pandemic in its tracks. I did not anticipate that so many would put their health and the health of their loved ones at risk by not getting vaccinated. INmune Bio will report top-line data in about 5 weeks in patients that can be evaluated. This report replaces the go/no-go decision we had previously planned. 76 patients have reached that 28-day endpoint and are going to be part of this analysis. Data validation is underway. This change of plan was driven by 3 factors. First, the FDA has signaled they will no longer grant EUAs for treatments of COVID-19. The Phase II trial that we had originally planned, which was going to be eligible for an EUA, is no longer eligible for an EUA. We will have to do a Phase III trial. This means that the 366 patients were not going to be enough. Patient enrollment is geographically challenging. The pandemic comes in waves that appear to be geographically based. If you have sites opened in that geography, great. If not, not so great. Finally, clinical teams have been cautious about enrolling patients in the Quellor trial because we do not have preclinical data or clinical data. Although the medical or biological rationale for the trial is sound, without data in humans, clinical teams are careful. This strategy, converting this to a Phase II trial with a formal analysis, will provide clinical teams, the company, investors, and the FDA with the information they need to evaluate the program. We will all get to see the data. So what are the next steps? We planned an end-of-Phase II trial meeting with the FDA once the database has been locked and analyzed. We will discuss the next steps with the FDA based on the trial data. Our goal is for the FDA to give us a clear direction on the approval pathway. Once we have data from that trial and a conversation with the FDA, we will make a decision on the next steps, and we will communicate them to you. Drug development for the treatment of COVID-19 is a unique, challenging, and frustrating task. We ask for your patience as we analyze the data and negotiate with the FDA. Finally, as we indicated last quarter, there has been no change in the INB03 program, our DNF oncology program. We hope to initiate a Phase II trial in MUC4 positive cancer once the pandemic is better controlled. Although this program is clinically dormant, laboratory research continues on the combination of INB03 with tyrosine kinase inhibitors in MUC4 expressing tumors. Professor Schillaci is submitting an abstract at the San Antonio Breast Cancer Symposium for November. At this time, we have no plans to revisit the NAS program. I now pass the floor over to David to review the Q2 financials.

Thank you, RJ. I'll provide a brief overview of our financial results for the busy quarter and upcoming milestones. Net loss attributable to common stockholders for the quarter ended June 30, 2021, was approximately $6.7 million compared to approximately $2.1 million for the comparable period in 2020. Research and development expenses totaled approximately $4.5 million for the quarter ended June 30, 2021, compared to approximately $0.9 million for the comparable period in 2020. The primary reason for the increase in expenses was an increase in R&D activities related to our clinical programs and costs associated with manufacturing additional drug supply. General and administrative expenses were approximately $2.1 million for the quarter ended June 30, 2021, compared to $1.2 million for the comparable period in 2020. At June 30, 2021, the company had cash and cash equivalents of approximately $39.5 million. Subsequent to the end of the second quarter, the company raised gross proceeds of approximately $40 million through a registered direct offering and gross proceeds of $15.5 million from the ATM. Based on our current operating plan, we believe our cash is sufficient to fund our operations and achieve potentially value-creating milestones into late 2023. As of August 4, 2021, the company had approximately 17.7 million shares of common stock outstanding. Now I'd like to move on and list our upcoming milestones before we get to Q&A. In the fourth quarter, as RJ stated, we plan to initiate our Phase II program for Alzheimer's disease with XPRO in patients with neuroinflammation. Also in the fourth quarter, we plan to initiate a Phase II trial for XPRO in patients with treatment-resistant depression as partially funded by a $2.9 million NIMH grant. The week of September 6, we will be hosting a webinar to discuss data from our Phase Ib trial of XPRO in patients with Alzheimer's disease and neuroinflammation. This month, our data from Quellor should be in the hands of the Data and Safety Monitoring Board, and we will have a Phase II meeting with the FDA to discuss the next steps after the DSMB has reviewed the data. Finally, we plan to report additional data from INKmune before year's end, and we'll also plan to launch a second INKmune study in ovarian cancer likely by the end of the year or early next year. I will note that these trials are Phase I, small, and they are not tremendously expensive. In addition, assuming the clinical landscape has not changed, we are planning trials in our other programs once the COVID-19 pandemic has been controlled and our trial sites give us the go-ahead. These include INB03 in potentially other CNS indications. So in summary, we're pleased with our progress during the second quarter as we continue to advance our pipeline towards potentially value-creating milestones this year. At this point, I'd like to thank you for your time and attention and certainly your support of shareholders. I would like to turn it back to the operator for Q&A. Rachel, would you please poll for questions?

Our first question is from Jonathan Aschoff from ROTH Capital Partners.

I was wondering, given that there is a lot of AD out there and only about 3 patients required per site, is second half '23 guidance for the Phase II data pretty conservative? And if not, why not?

So I hope it's conservative. But if you look at the current clinical trial activity out there, sites can enroll 0.3 patients per site per month per trial. In fact, we are using that metric to set our enrollment criteria. You can expect that I have been urging our clinical team to shorten that time frame. Through them and their experts in CRO, people are saying it’s quite challenging. Remember, we’re discussing mild AD, which is probably about 40% of AD, amounting to about 2 million patients in total. We’ve actually designed the clinical trial to incentivize patients to join. So what are those incentives? One of them is the 2:1 random dose; they have a 2/3 chance of getting the drug instead of the typical 50/50 chance in a 1:1 randomization. There are other companies also conducting open-label trials where everybody gets drug, which is great for patients because they know they’re getting enrollment, but it's difficult to understand what happens with the therapy. Then there’s the fact that it is only a 6-month trial, and they will subsequently receive another 12 months of therapy, whether they’re on the placebo group or not. We believe our approach is very appealing considering the average age of an Alzheimer's patient is 71. That means the primary payer is Medicare. For all practical purposes, Medicare has a 20% copay. I’m not sure what Biogen plans to do with the 20% copay facing patients. Cost is going to be a significant issue. The patients will have to come up with $10,000 to $20,000. Therefore, we hope that our incentives and our approach will lead to faster enrollment. However, if I promise enrollment in 6 months and it takes 6 months and 2 weeks, I would certainly be held accountable. Our clinical teams and our CRO state it will take a year. I hope it’s less, but that’s what I'm presenting. I hope I can surprise you with a shorter trial.

Okay. And my last question is, will your primary plan in inflammation biomarkers of interest potentially change from Phase II to Phase III? Or are you certain at this point that you're focusing on the correct one? The second part is, what do you expect for your efficacy endpoint for that subsequent trial?

We love biomarkers, and we really appreciate our imaging of white matter analytics. At AAIC, we presented apparent fiber density. AFD goes up rapidly in patients with Alzheimer's disease and very quickly in mild AD. To answer your question, I believe that AFD will be the most potent biomarker of efficacy. However, we need to establish that correlation with clinical outcomes first. We have a number of biomarkers to employ in this trial, but we are still in discovery mode. We will use EEG endpoints in the Phase II trial as we experiment with that. Existing cognitive endpoints in Alzheimer's disease are not suitable. The ADAS-cog 13, in particular, proves insensitive in MCI and mild cases. We've developed our endpoints tailored specifically to the disease stage, using EMACC, which is a recognized composite of 6 neurocognitive assessments that are deemed reliable for mild AD evaluations. We are also measuring ADAS-cog and have powered our results based on it, although our focus is on EMACC. We aim to provide a very good understanding of the drug’s action.

Your next question is from Mikhail Keyserman from BTIG.

Thank you, RJ, for the additional details on INKmune. Just maybe one for me on the NK proliferation that you mentioned from the first patient, a high-risk MDS patient. Can you give us a sense of what kind of memory NK cells you're seeing? How do you think that can contribute in terms of persistence and response?

Yes, you've touched on 3 components here. The memory-like NK cell is a phenotype recognized for its cancer-killing properties. Proliferation is somewhat distinct, and persistence is yet another aspect. The NK community now agrees that the memory-like NK phenotype is desired for killing cancer cells. Remember, the role of NK cells is to kill either cancer or virally infected cells. Administering a high level of cytokines, for example, can lead to an antiviral-like phenotype rather than promoting cancer cell killing, which is unhelpful for our purposes. Growing evidence indicates that NK memory-like cells produce porphyrin and cytokines effectively. Therefore, stimulating proliferation specifically in NK cells that target tumors is vital, especially when dealing with hematologic malignancies, where NK levels are commonly low. As for persistence, I cannot comment definitively on that since we haven't yet followed that patient long enough; however, we believe based on ex vivo NK infusion data using a similar strategy that we should achieve at least 30 days of NK cell activity from the last dose. Since we administered the last dose on day 15, a persistence duration of around 45 days of tumor targeting seems reasonable. Interestingly, the NK cells activated or primed by INKmune should recruit additional NK cells, which enhances overall tumor containment. So far, the results we predicted from the lab seem to be manifesting in the patient, which is encouraging, but we need to monitor persistence and measure tumor killing as progress continues.

And just to clarify on the clinical responses, we were looking at blast risk cells, right? And we are understanding that higher doses might effectively repeat those cells. So the clinical responses would depend on higher doses and potentially longer treatments for more patients. Is that correct?

Yes, that's correct. The higher dose could yield more robust results. The intent is to determine the minimum dosage required for maximum killing, the sustainability of that impact, and whether longer administration results in a more responsive NK cell. Please keep in mind, we are also cautious about aggressive immune cell behavior as it could raise safety concerns. The first patient appears to be doing well. Patients with MDS often face challenges with chemotherapy or bone marrow transplantation because they tend to be in their 70s. We take great care in this area.

A quick follow-up on the EMACC question for the Alzheimer's endpoint. Appreciate the rationale and how it differs from more conventional endpoints. Could you comment on your assumptions for placebo performance at month 6? Also, regarding the 50% screen failure rate, how should we approach the different enrichment criteria and the impact of having a-beta antibodies?

We utilized the ADNI database to evaluate how quickly patients progressed in relation to the biomarkers we analyzed. It turns out that the biomarkers we applied correspond to a group of patients that progressed significantly faster compared to those without. From that discovery, we modeled patient enrollment, predicting about a 50% failure rate in screening. This setup supports the use of an enriched population, allowing us to conduct a smaller trial with a 168-patient target. This design is advantageous since a broader enrollment strategy would necessitate treating 450 to 600 patients.

Your next question comes from Daniel Carlson from TW Research.

Congrats on the progress. Regarding XPRO, there seems to be a correlation drawn between long COVID and Alzheimer's symptoms in terms of functionality. Will you pursue anything in that realm with XPRO?

Yes, we have been intrigued by the possible neuroinflammatory implications of COVID-19 since early on. However, the FDA has expressed hesitance in endorsing clinical trials for long COVID due to the undefined nature of its symptoms. We were surprised by their response. We are engaged in discussions with the FDA on a strategy to address this challenge, as we believe XPRO may be well positioned to respond to neuroinflammation issues associated with long COVID.

So on the Phase I trial, you've mentioned previously that high-dose patients remained on the treatment for a while. Is that still the case for those in the Phase I trial?

Yes, we halted dosing after a year, partially to align with our U.S. trial strategy. However, there's notable pressure from patients and their clinicians advocating for them to resume treatment. We're exploring the feasibility of reinstating those patients on the drug through a compassionate-use program. It is encouraging that our patients wish to continue therapy, as it indicates their perceived benefit from XPRO.

Got it. I have one last question. With your current funding situation, what are your staffing plans and where do you plan to hire?

Certainly, our primary focus will be expanding our clinical operations team mindful of our ongoing trials. We continue to leverage our partnerships and vendors as their familiarity with our programs is invaluable. However, we are transitioning to bring on extra staff where necessary, ensuring that we have the workforce required to effectively advance our clinical programs. Our emphasis will remain on ensuring that our clinical initiatives run efficiently and at an accelerated pace.

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. I would like to turn the call back to Dr. RJ Tesi for closing remarks.

Thank you. We are indeed excited about all our programs. INKmune has presented significant opportunities to impact the clinical world. Our commitment towards innovations in NK immuno-oncology and inhibiting neuroinflammation is steadfast. We're looking forward to demonstrating our findings through blinded, randomized, placebo-controlled trials. As we have seen, the landscape surrounding Alzheimer's therapies is rapidly evolving, which fills us with optimism for the future. We thank you for your support, and we are happy to engage further. Please reach out to David or myself for updates and clarifications. Have a good day.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.