Greetings, and welcome to the INmune Bio Third Quarter 2022 Earnings Call. At this time, it is my pleasure to introduce Mr. David Moss, CFO of INmune Bio. David, thank you. The floor is now yours.

Thank you, Donna, and good afternoon, everybody. We thank you for joining us for the call for INmune Bio's Third Quarter 2022 Financial Results. With me on the call is Dr. RJ Tesi, CEO of INmune Bio; and Dr. CJ Barnum, Head of Neuroscience, who together will provide a business update on our dominant negative TNF platform, or DN-TNF for short. Also on the call is Dr. Mark Lowdell, Chief Scientific Officer of INmune Bio, who will provide an update on INKmune, our memory-like natural killer cell oncology platform. Before we begin, I remind everyone that except for statements of historical facts, the statements made by management and responses to questions on this conference call are forward-looking statements under the safe harbor’s provision 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 disclaimers 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's 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. With the forward-looking statements behind us, now I'd like to turn the call over to Dr. RJ Tesi, CEO of INmune Bio. RJ?

Thank you, David. And today's call is organized a little bit differently. We have both Mark Lowdell and C.J. Barnum on the call. And I believe going forward, you will see this larger cast on the calls because we are a complicated company with a lot of programs going on, and we believe that investors learn the most when they hear directly from the people that are responsible for those programs. So I will begin with some top-line comments. And obviously, the most important issue is the clinical hold that we are under from the FDA. As we stated previously, the clinical hold was placed on XPro1595 due to manufacturing issues. These issues are technical in nature and they are related to the fact that manufacturing batches were separated by many years and by geography, i.e., different manufacturing plants, and this has caused some problems related to the manufacturing controls and release testing. We have been working very closely with the FDA and our manufacturing teams to resolve these problems, and we continue to look forward to clearing these hurdles. Despite this delay, we continue to make progress with the AD02 trial in mild Alzheimer's disease patients in Australia. And we are exploring other regulatory venues that we will hopefully be able to open the trial and continue to enroll patients or begin to enroll patients. The XPro program is like a coiled spring. Once the clinical hold is lifted, we will work to have both AD02 and mild AD and AD03 in MCI or mild cognitive impairment, enrolling in all regulatory jurisdictions. Soon after those two programs are enrolling, we plan to launch the treatment-resistant depression program in the U.S. Importantly, we will update guidance on the timing of top-line readouts in the Alzheimer's trials at the end of the year. Obviously, the timing of those readouts depends on our discussions with the FDA. I will now pass it back to Dr. CJ Barnum, the VP of Neurosciences, to speak about the Alzheimer's Phase II programs.

Thank you, RJ. As RJ mentioned, we continue to enroll patients in Australia for the AD02 study. AD02 is a blinded, randomized, placebo-controlled study evaluating cognition in patients treated with XPro for six months. We are pleased to announce that the first patient has completed the six-month Phase II study. Notably, this patient has elected to enroll in our open-label extension study. This open-label extension is a twelve-month study where safety and efficacy are evaluated in an unblinded fashion. All patients that enroll in the open-label extension study received XPro. The open-label extension has three purposes. First, it is a recruiting tool. Patients are offered a year of therapy after participation in the trial. Second, this helps in our product approval strategy. The FDA and other regulatory authorities focus on both efficacy and safety. The open-label extension provides the expanded and extended safety database required for approval. Finally, the open-label extension provides long-term efficacy data. In the Phase I trial, MRI biomarkers showed continuous improvement through twelve months. While the data from the open-label extension are not placebo-controlled nor blinded, they do provide additional information that will inform the clinical development strategy. We expect to report data from the open-label extension in 2023. Finally, we remain as confident as ever that we have the right drug for the right target. Two recent developments reinforce this belief. The first comes from the literature that continues to provide evidence for targeting TNF. Yet another nationwide study has reported that TNF inhibitors reduce the risk of dementia. There are now five epidemiological studies examining more than 60 million records that show anti-TNF therapies reduce the risk of AD and/or dementia by up to 75%. The second comes from patients treated in the Phase I study. We have been extremely encouraged by their desire to remain on therapy. As a result of their persistence, we have opened a special access program in Australia, akin to compassionate use in the United States. As a result, patients now have another avenue to gain access to XPro in Australia, and we have another means of collecting long-term safety information. Now I'd like to pass the call back to RJ.

Thank you, CJ. I'll now move to INKmune, our natural killer cell priming program. The MDS/AML program Phase I clinical trial program in the U.K. continues to progress. The oncology landscape for cell therapies is mainly focused on liquid tumors, which account for only 10% of cancers. We have generated compelling human preclinical data in solid tumors that suggest that INKmune may be an ideal therapy for the treatment of solid tumors, which represent 90% of cancers. Historically, this group of cancers is not well served by cell therapies. We believe refocusing INKmune towards solid tumors meets an unmet medical need with great potential. I'll pass it to Dr. Mark Lowdell, the Chief Scientific Officer of INmune Bio, to describe this in more detail. Mark?

Thank you, RJ, and thank you, everyone, for joining today's call. A couple of weeks ago, we shared with the investment community our recent positive efficacy data in multiple solid tumor cancer cell lines with INKmune, as RJ just alluded to. Solid tumors are the majority of human cancers, and licensed cell therapies currently only focus on the 10% of cancers that are hematologic cancers or liquid tumors. The recent data we've obtained build on data we've had for some years and provide insights into why the company believes that INKmune natural killer cells, or NK cells, can override the immunosuppressive nature and hypoxia and regulatory cells within the tumor microenvironment, or TME for short. The interaction of the TME with infiltrating immune cells and with the resident cancer cells drives tumor progression, which is the reason why many cell therapies are ineffective in that setting at the moment. These complex interactions must be considered when designing cell therapies to treat solid tumors, as the TME is hostile due to the presence of immunosuppressive regulatory cells and low levels of oxygen, or hypoxia. We have been doing a lot of our experiments in the hypoxic setting in vitro to see how immune cells overcome that environment. Cell therapy must overcome these impairments to treat solid tumors successfully. We have shown that INKmune converts normal resting NK cells into memory-like NK cells that target solid tumors, even in the presence of immunosuppressive regulatory cells and extreme hypoxia that we see in the TME. The company's preclinical data with human NK cells targeting cancer cells shows that INKmune primes the NK cells from patients and healthy donors to attack NK-resistant solid tumors from various cancers, including ovarian cancer, breast cancer, prostate cancer, renal cell carcinoma, and most recently, nasopharyngeal cancer cells. By comparing resting NK cells from healthy donors or patients' peripheral blood with NK cells treated with INKmune, we observed enhanced ability to kill all of these resistant tumor cell lines. I was fortunate enough to present these data at a recent conference, the Innate Killer Summit in Europe, on October 19. A video of that presentation is available on the company's website under the Therapies tab or the INmune videos or the company's YouTube channel. In the field of cell and gene therapies, it is becoming increasingly clear that regulatory agencies such as the FDA require extensive understanding of the mechanism of action of these types of novel drugs before they will consider licensing them for commercial supply. All companies in the cell and gene therapy field are heavily science-driven, and we are no different in this attempt to better understand the mechanism of action. INmune Bio's work is based upon data going back to the early 2000s, and we've been focused on the mechanism of action since our first publication in 2006. Our latest data from proteomics, genomics, and metabolomics clearly explain how INKmune works and delineate the differences between INKmune-primed NK cells and NK cells primed with cytokines used by our competitors. The recent video presentation explains some of these very complex data, and I encourage you to watch it if you're interested. In parallel with increasing our knowledge of INKmune's mechanism of action, we continue to treat patients and expand our clinical trial activity. Four patients have received the complete three-dose regimen so far with complete safety, and in a Phase I trial setting, that's our driving aim. The most recent patient was treated on an outpatient basis, which is our planned treatment scenario, and is a world away from the days of hospitalization associated with current adoptive cell therapies. All patients treated so far have shown evidence of NK cell activation in vivo, and we're analyzing the biomarker data to identify those that best predict clinical outcome. The first MDS patient treated remains well 15 months post-treatment and is enjoying much improved quality of life with only occasional hospital visits. The second patient was a young lady with acute mild leukemia, which had transformed from MDS and had bone marrow failure. She received three allogeneic stem cell transplants due to her bone marrow failure. After being hospitalized for over six months due to her neutropenia, she stabilized her blood counts and had neutrophil recovery following treatment with INKmune. Clinically, she experienced reduced bone pain, indicating a reduction in tumor load. Unfortunately, she relapsed unexpectedly and passed away earlier this summer, seven months after treatment with INmune. The third patient treated has refractory oral low-dose chemotherapy and is awaiting a third transplant. Our most recent patient is a young 17-year-old MDS patient who relapsed with acute myeloid leukemia back in 2020 after an unrelated transplant and relapsed after a second unrelated transplant in 2022. After further chemotherapy, she achieved remission and was treated compassionately with INKmune as consolidation therapy in July this year. She showed evidence of improved NK cell function and remains well, with very low levels of detectable disease in her bone marrow while awaiting further treatment. Although we are still in the early stages of INKmune development and currently restricted to the lowest dose of the drug, our chief investigator has said that all patients have shown improvement in general fitness, resolution of fevers, stabilized or improved blood counts, and they were able to take breaks from the low-dose chemotherapy they had been receiving. There has been a definite improvement in subjective parameters of well-being, mood, appetite, and clinical performance status, which encourages us greatly. Moreover, the trial has now been selected for presentation at the American Society of Hematology Annual Conference in New Orleans in December. Finally, we have received approval to widen the trial's inclusion criteria to allow patients like the three compassionate cases to be enrolled in future trials. Additionally, the second U.K. trial site is scheduled for initiation on the 9th of November following an 18-month delay, and a third U.K. trial site is currently under discussion. The company has also submitted an application to the Greek Medicines Agency to open trials with colleagues in Athens to expedite recruitment further. In preparation for the increased recruitment into the LAUREL trial in MDS and ongoing trials in solid tumor indications, the company has invested in upscaling the manufacturing process, and the validation of that new process to CGMP is now complete. We are ready for the next manufacturing runs before the end of the year. The combination of basic research into the mechanism of action, manufacturing improvements, and clinical trial operations positions the company excellently for capitalizing on the INKmune product in 2023. I'll now pass the call back to RJ.

Thank you, Mark. As we enter the last couple of months of the year, the company’s events calendar turns towards oncology. Many forget that we actually have an oncology program with XPro and the DN-TNF program, and in fact, our first Phase I clinical trial was in patients with advanced solid tumors. We will have presentations at three oncology meetings in the next two months: SITC, which is the Society for Immunotherapy of Cancer; ASH, the American Society of Hematology; and the San Antonio Breast Cancer Symposium, all occurring in the last five weeks of the year. Mark has already mentioned the ASH presentation. The SITC and San Antonio Breast Cancer Symposium presentations will discuss the use of DN-TNF to reduce resistance to immunotherapy in MUC4 expressing tumors. Particularly, the data presented at the San Antonio Breast Cancer Symposium will include combination therapy with an ADC and HER2-positive breast cancer. HER2-positive breast cancer has been in the news a lot. It is a large market that has doubled in size recently, but still, more than half of the patients develop resistant disease even after therapy with the very best medicines available today. More details on each of these presentations will be provided as we get closer to each event. We will also be attending CTAD, which focuses on clinical trials in Alzheimer's disease at the end of the month. At this point, I'd like to turn the call over to David Moss, our CFO, to review certain financial items.

Thank you, RJ. I'll provide a brief overview of our financial results and upcoming milestones before we head to our Q&A session. The net loss attributable to common stockholders for the quarter ended September 30, 2022, was approximately $7.7 million compared with approximately $9.5 million for the comparable period in 2021. Research and development expense totaled approximately $5.2 million for the quarter ended September 30, 2022, compared with approximately $6.5 million for the comparable period in 2021. General and administrative expense was approximately $2.4 million for the quarter ended September 30, 2022 compared to $2.5 million for the comparable period in 2021. As of September 30, 2022, the company had cash and cash equivalents of approximately $57.4 million. Based on our current operating plan, we believe we have cash sufficient to fund our operations through 2023. As of November 2, 2022, the company had approximately 17.9 million shares of common stock outstanding, the same number we've had the last two quarters. I would like to further point out that because our burn has been less than budgeted due to delays in starting the trials in the U.S. and increased activity in Australia, as well as the rise of the U.S. dollar, this has helped lower our anticipated budgeted costs overall. Together, these developments help us manage our runway more efficiently. Now I’d like to list our upcoming milestones. Although our Phase II XPro trial for treatment of neuroinflammation as it relates to Alzheimer's disease is currently on hold pending the FDA manufacturing review, we expect to continue enrolling patients over the coming months, focusing on Australia, in order to reach the enrollment target of 201. Top-line results for the six-month program remain tentatively expected in late 2023; however, if the hold continues longer, this date will slip into 2024. We will provide an update on timelines at the end of the year. Upon resolution of the FDA inquiry, we remain on track to initiate the three-month 90-patient Phase II program for mild cognitive impairment. Bearing any unexpected delays, we anticipate having top-line results in late 2023, but again, if the FDA hold continues, this will slip into 2024. Additionally, it remains our plan to initiate Phase II trials of XPro in patients with treatment-resistant depression, which is partially funded by a $2.9 million NIH grant upon resolution of the FDA manufacturing review. We expect additional open-label Phase I data of INKmune and high-risk MDS/AML in the first half of 2023, along with the initiation of more sites in the U.K. and potentially Greece, as Mark Lowdell mentioned earlier. Finally, we plan to launch a second INKmune study in a solid tumor indication, which we announced upon approval with the FDA, expected to occur in the first half of 2023. At this point, I'd like to thank you for your time and attention, and I’d like to turn it back to the operator to poll for questions. Donna?

Our first question today is from Tom Shrader of BTIG.

I have a question. Are you concerned about having too many patients from Australia? And presumably, you are looking to include some U.S. patients as well. Is there a risk that you might have to stop enrolling patients in Australia?

Yes. Thanks. I'll take this, CJ. No, I do not believe that will be a risk for really two reasons. The first is that we anticipate having other venues in place in the near future. But more importantly, remember, this is a Phase II trial. Although remember, after Biogen got out of lecanemab approved. I actually speculated that we might be able to get approval after a Phase II. I no longer believe that after all of the bruhaha over the anti-amyloid drugs. We will have to do a Phase III trial. Hopefully, we only have to do one. It will be an international trial that includes both Europe and the United States and undoubtedly Japan. So that's a reasonable question, but I do not worry at all. I think just as an aside, one of the things that the FDA is focused on is increasing diversity in clinical trials. And that's an issue that we are focused on. Obviously, the best place to get diversity is in the United States, not in Australia.

And then I have a question. One of the surprises I thought in the lecanemab readout is how good the CDR sum of boxes did after so many people have talked about alternative endpoints. Does that change your thinking at all? You're one of the companies most focused on better endpoints. But do you think CDR sum of boxes should be a co-primary? Because it seems to have worked very well in the only trial that's really worked.

CJ?

Yes, I can take this. Thanks, Tom. As you may recall, the CDR is a secondary endpoint, and we actually powered the study to see an effect on the CDR. So to your point, we’re not going to try to reinvent the wheel if we don’t have to. We think there are better cognitive endpoints for this group. But the combination of cognitive and functional, the CDR still performs fairly well. I think the jury is still out. The Phase II study, as RJ mentioned, is not a registration study, and we have enough patients. Again, it’s powered towards that to know exactly how to do the Phase III study. So I think we’re in a really good position.

The next question is coming from Mayank Mamtani of B. Riley Securities.

Regarding the Australia Phase II study cohort, could you share the number of patients you have enrolled there? As the A02 study data sets progress, what specific components of the data are you examining? I’m interested in knowing which parameters will be unblinded as you enter the open-label section.

Yes. So let me clarify a couple of things. Remember, the Phase II portion of the trial is blinded, randomized. So there is no readout before all patients get six months. And what we've been promising is top-line data by the end of 2023; that may slip if the FDA hold continues for much longer. The open-label extension that CJ mentioned, what happens is patients who were on XPro and get unblinded can continue to take it for up to 18 months. Patients who were on placebo actually cross over to XPro if they wish for up to 12 months of therapy. In those patients, that's the open-label portion, but it's a totally different clinical trial that has a different study number. CJ, I'll let you comment on what information will be available for the patients in the open-label extension that we'll be discussing.

Thanks, RJ. So Mayank, I think the thing to point out is that the endpoints are similar in terms of the clinical and the biomarkers. We'll be doing MRI, collecting blood and that sort of thing. In terms of how we will look at the data, I think the most important thing related to clinical data is that I am not a big fan of open-label cognitive data. It doesn't really tell me anything. If patients know they're on the drug, we absolutely know there is a placebo effect. So that's of limited value in my opinion. But the biomarker data will be interesting. We know what it looks like in the Phase I study. Part of what we'll want to see, assuming that the open-label extension data is available before the close of the Phase II blinded study, is that the biomarkers are performing the same way? Are we continuing to see an improvement in the metrics that are important to us and white matter in particular and some of these other things that we're looking at? We have a more homogenous group here, and I think that's really going to help us. The expectation is that we'll see a difference. What will get interesting is in the patients that come into the study from being on XPro versus those that come from not being on XPro to see if there's a difference in their trajectory. I don't know what the answer is. And of course, we're not going to know by the time they enroll in the study whether or not they have been on active drug or placebo. But that data will be of value, as I mentioned, as it relates to clinical development and how we think about it moving forward in terms of duration and number of patients that will all be put into the bucket. So primarily, it’s about safety to build up that database of safety and long-term safety that we will absolutely need before we can get approval. Does that answer your question?

Yes. Did you say how many are now in the study? I missed that.

So we have said that we are going to update enrollment numbers at the halfway mark, and we're still planning to do that. So stay tuned.

Got it. And then just quickly, a process question on the manufacturing hold. What kind of regulation does this fall under with the agency? Just trying to understand the turnaround times now that you submitted the procedure query. How do these discussions work? Are they written and also oral? And if you're able to comment on the shelf life of the volume of doses that you had in hand earlier in the year as you were getting on that for the program.

Yes. So two things. First of all, this communication is very inefficient. It takes about a 45 to 60-day turnaround, and that's just the nature of the beast. We have been campaigning very hard to get a face-to-face or video conference with them because we believe that will be a more efficient process. We think we are almost there and I hope. There is no concern about running out of drug or drug going out of date; not only is the current drug still well within date, but we have manufactured a subsequent batch as part of the original campaign, which has additional dating. So there's no concern that we're going to run out of drug; it’s just a continued frustration over a couple of these assays that didn’t exist during the first round when the drug was manufactured in the past and is now causing us some conversations with the FDA. As David always says, we will get through this; this is not a safety issue, this is a manufacturing technical issue. It's just an inefficient process that the FDA has in place, and we're tracked by it.

Understood. I'm confident you will manage that. Regarding Dr. Lowdell, could you provide an update on the open-label high-risk MDS/AML study you plan to share in 2023? I recall you mentioned presenting data on three patients at ASH. What specific information are you hoping to gather in the first half of 2023 to identify the right patient population? Can you explain what insights we might gain from the readout in that timeframe?

Yes. I think we have to remember this is a Phase I trial in cancer where, from a regulatory perspective, we are expected to design a trial to show safety or to test safety, not to test efficacy. This is one of the big balancing acts that all biotech companies have: how do you choose your patient population? As we've always said, we will use this trial to get safety data and to build on our biomarker data to try to identify which changes we see in patients are associated with any clinical benefit we find. That will play out throughout the trial recruitment. We are also focusing on the IND for the solid tumor work based on constructive dialogue with the FDA. We aim to submit the IND in January; we could have had it ready for Christmas but decided to delay it due to the volume of submissions around the holidays. We’re keen to enroll our first patients in the solid tumor trial in the U.S. by the end of Q2 or very early in Q3 next year. This is exciting for us. We will be following up the MDS patients as we enroll them and increasingly using that data. It is disappointing that we haven't been able to enroll more patients in the MDS trial. However, had all patients been enrolled, we wouldn't have been able to present data from compassionate use patients at the American site hematology conference, which is an opportunity to share valuable data.

The next question is coming from Daniel Carlson of Tailwinds Research.

For CJ, just regarding the special access scheme, it sounds like things are being well received in Australia in terms of the patients there. I’m wondering what you expect to get out of this in terms of data. Can you give us any feedback on how the patients have done since being off drug? Where do you expect to go with this?

Thanks, Dan. I think you cut out a little bit, but I think I got the gist of it. The reason we bring this up is there are two reasons. One is it really reinforces what we believe the drug is going to do; having the few patients that were in the Phase I study receive what we consider an efficacious dose speaks volumes. As for what we can get out of this, there’s not much we can do without putting together a full clinical protocol and going through all the regulatory hurdles, which can be quite expensive for anecdotal data. However, we can get information from the clinic related to safety and receive some commentary. The longer patients stay on the drug, it’s safe to assume that they are seeing some benefits from it. This gives us the chance to build our safety database and provide access to patients who may not fit into our current trials. We see this as a positive step. RJ?

Yes, I'd like to add that this is an interesting question, Dan. Remember, with my clinical background, I look at this from two sides, and what I find intriguing is that I haven't seen in oncology or even transplant trials, the clinical teams are very adamant that patients not be taken off the drug. Their position is if the patient is doing well, I don’t care that it’s the end of your clinical trial—we must figure out how to make this happen. We're fine with that; at the end of the day, it’s all about treating patients. If patients and clinical teams think they’re getting a benefit, we're thrilled, and CJ has been in the process of implementing mechanisms so that patients aren't removed from the product if they show progress.

Got you. And then also just with regard to the FDA, I'm curious with the trial running in Australia and having patients on drugs for over six months now. Does that factor into their thinking? Is it easier for them to say no if it's working elsewhere in terms of the safety?

Well, as you can imagine, we’ve informed them about these patients, and I think they are listening. It will take us getting enough patients long enough to convince them. However, we hope to solve these technical problems well before that. I don’t think they are completely indifferent; you could argue, for instance, that the Amylyx approval in ALS or the second ADCOM was a result of the drug being approved in Canada. I believe the FDA is not tone-deaf, but they have their ways and they follow them carefully.

Can I comment on this real quick, RJ?

Yes, please do.

So Dan, I think, the real issue is, remember, this is a blinded study. To share safety data, we would need to break the blind, and I am not sure how to manage that without complicating the trial. As RJ said, we have other avenues to address this issue.

Yes, that makes sense. Just one last question regarding the solid tumor; what is the target cancer going to be for those?

I'd like to be able to tell you that, but we're going to hold off until we've filed our IND. It’s a tumor that is a big issue globally and certainly has a very large unmet need in the United States, which is why we have a substantial number of clinicians who want to run the trial with us. This is another reason why I'm so delighted because it’s our first opportunity to work with a large patient population with significant unmet needs.

Yes. We’re not trying to be evasive here, Dan. We are just being careful to ensure that the promises we make are very accurate. In some ways, I prefer to share stale news than to provide misleading updates.

That’s fine. And it’s good to hear your partners are excited about it, and hopefully, enrollment will be a lot faster in the U.S. Appreciate the good work.

Thank you. At this time, I'd like to turn the floor back over to Dr. Tesi for closing comments.

I think this new format, where you've got one-third of the company here speaking on the phone, has worked well. Please let us know if you think it did not go well or is not appropriate, but I think this would be more of our standard for the future. I appreciate your participation. INmune Bio is a complex company, and we have many promising programs that are biologically innovative and intriguing. Despite the frustrations with the FDA, we are making progress in both CNS and oncology. I can assure you that we will continue to move forward and are making a difference in patients' lives. So with that, thank you very much, and have a nice evening.

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines and walk-off the webcast at this time, and enjoy the rest of your day.