Conference Transcript - MSLE 2026-04-21

Weldon, Analyst — Other

I am very excited. It's a very exciting morning. Lots of very exciting companies. But I'm excited yet again to introduce this next presenter. We have the CEO and president of Sotelos Biosciences. Frank Gleason. Frank take it away. Thank you very much.

Frank Gleason, CEO

Good morning everybody. I'm happy happy happy happy this year to be here presenting Sotelos as a Nasdaq traded company. So, many of you in the room have been part of the Sotelo story from the very, very beginning. Some days you must feel perhaps you're long-suffering participants on our journey. But what I want to talk to you about this morning is where we are, where we're going in 2026, and where we hope to be in 2027. Because we believe we are now months away from meaningful clinical data and months away from being in a position to pursue approval for a drug to treat a devastating disease. And I've never been in a position at this meeting at this time of the year to make such a bold assertion. And I'm really pleased that I am in a position to do that. So let me tell you about Sotelos, those of you new to the story and those that already know the story. So our business is focused on patients like little Charlie here who's eight years old is a real person and Charlie lives with Duchenne muscular dystrophy which means between the ages of 8 and 12 Charlie will progressively lose the ability to walk and from that point on will begin to lose all of his muscle mass and will not have a very long life as a result of that and our mission as Sotelos is to change the lives of patients such as Charlie and others who have different forms of muscular dystrophies or degenerative muscle conditions and our business is grounded in revolutionary science out of a Canadian Institute at the Ottawa Hospital Research Institute by my colleague and co-founder Dr. Rudnicki and we're extremely proud to be in a position that we might be able to to do something about the lives of these children. Now, why should anyone care about Duchenne muscular dystrophy? This is an investor conference, it's not a self-help conference, I get that. So this is a fatal genetic disease. It causes ongoing loss of muscle mass. Imagine losing all of your muscle mass. There are 12,000 individuals in the US and Canada that live with this disease every day of their lives at any one time. One in 5,000 males born everywhere in the world every year suffer from this disease will be diagnosed with this disease. The standard of care is a class of medicines called corticosteroids. Corticosteroids are pretty nasty drugs. They have very toxic side effects and they have especially toxic side effects on young children who wind up on these medicines sometimes as young as age five and generally for the rest of their lives. And the most common new therapeutic approaches are genetic in nature. These are the medicines that have held the greatest promise for the last close to 20 years that they have been prominent in clinical development. Some have been approved. They're generally only suitable for specific age groups, either very young or for specific genetic mutations. And they come with the potential for quite severe side effects. And even by the most objective standards possible, their functional benefit is minimal. Yet, from an investor point of view, the market capitalizations for companies in this space that are working on these genetic approaches which are listed here are somewhat higher than Sotelos at 200 million approximately U.S. Anywhere from 2 billion, 12 billion that Avidity was acquired by Novartis. And these companies are all focused on muscle, sometimes more broadly than we are but muscle and they all have a core program in duchenne muscular dystrophy so the potential for satelos is enormous from an investment point of view now what is it about this disease that we know that other people don't know why can satelos make the bold claim that we can do something about this disease that others have not been able to do so the first thing is when you look at this chart of progression. We look at the first part of this chart. Children make muscle. They're born with muscle. They make muscle. They stand. They walk. They can ride their bicycles. Later in life, they're wheelchair bound. They lose the ability even to sit upright in a wheelchair. They will ultimately lose the ability to move their body at all, and then they stop breathing. And somewhere in this age group, when they're still ambulant, they reach a biological tipping point. And in this tipping point, this gain of muscle loses out to muscle loss. And it becomes very quick, it's very progressive, and it's completely unstoppable. And we've discovered why this tipping point occurs. That's our contribution to the science. What we've discovered is that during the progression of this disease, children's efficiency at making muscle is compromised. It's compromised because of the genetics that they're born with. and it prevents their body from continuing to make muscle to keep up with the ongoing damage. We're experts in a different area of science, not genetics, but stem cells. And what we've come to understand is that the stem cells that are responsible for muscle regeneration, which are called muscle stem cells, oddly enough, are not working properly in these children. And there's a way to fix it, and that's what we're focused on. So we're focused on restoring muscle regeneration, in other words, reversing this tipping point, to put it as bluntly as possible. And we're different because we're an oral daily tablet, not a genetic medicine that's needed to be delivered by infusions in a hospital setting. We're safe and tolerable. No nasty side effects so far in any of our work. and we've been working on our drug now for years. It's suitable for all individuals with DMD, regardless of their genetic background, regardless of their immune status or their age. And it has the potential to be disease-modifying, in other words, to change the course of their lives. What are we doing right now? We have concurrent Phase II clinical trials underway. One in children, age 7, 8, and 9, called Basecamp, and one in adults over the age of 16 called Trailhead. Our goal in 2026 is data from both of them, and our ambition in 2027 is to pursue accelerated approval for our drug. We have shown effects pre-clinically and clinically already on functional measurements. we've shown in a canine model of dmd which is kind of the gold standard because canines believe it or not can spontaneously develop the same disease that humans do so we don't have to engineer it into these animals we showed that we improve the strength of these animals We showed that in humans as well, in adults, that we saw a doubling of their grip strength after treatment for 28 days with our drug. We showed that in the first quarter of last year. This year, we showed that that gain was durable, and they sustained that doubling of strength. I'll show you this as we go along. So let's go through some of the data. And what I want to try here is to convey to you how we look at the path to approval of our drug. What is it that guides our strategy? And what is it we've been trying to do over the last several years of building the data set to approval? Because our objective is very singular. Get our drug approved and get it paid for. That's our objective. and to do that as fast as we possibly can with the minimal amount of capital investment required. So what I'm showing you here are images from our canines that we treated with our drug. We treated them for four months. They were nine months old when we started the trial, which means they were sick dogs. What you look at at the left is what tissue, hind leg tissue, biopsy material, in one of the animals, pre-treated, looks like. And you'll see in here lots of red. That's the immune system, a component of the immune system, an antibody or a protein called immunoglobulin G, IgG. It's a signal that tissue is dying and that the immune system needs to come in and basically consume the necrotic tissue and clear it out. That's what causes the muscle loss, and this just progressively gets worse and worse and worse. What you're looking at on the right is a similar type of biopsy of a similar-aged animal that's healthy. And what you're looking at in the middle is one of our animals after four months of treatment. So, which would you rather be, the one on the left or the one on the right? If you can't be the one on the right, the one in the middle looks pretty darn good. So we are affecting directly the quality of the muscle, the architecture of the muscle. And this is really important because in our base camp study in children, we will be doing biopsy. And it's over a similar time frame. This was four months in the biopsy, and the children, it will be three months. And we would expect to see some improvement in the architecture of the muscle. And the regulators will like to see that, if we have that. now our drug in a phase one clinical trial in 72 adults healthy adults was safe we really saw absolutely nothing of any consequence or concern and our drug has a very clean pk profile it means it's rapidly acting and it gets out of the body fast and we designed it exactly that way in fact our chemist is in the room today and this was his sort of PS the resistance of scientific work figuring out how our drug would be fast acting and clear quickly and this is important because that adds huge safety profile to a drug now we know from our work in adults with DMD that our drug We know it in dogs because we could show you the before and after of the muscle. It's a little harder in the adult humans to take biopsies because they don't have much muscle left. In this case, what we're looking at are proteomic markers. We did what's called a SomaScan analysis. SomaScan is a tool. It's a proteomic tool. A company called Illumina owns SomaScan. and using this tool, you can look at blood samples and look at about 11,000 proteins. And then they do these volcano-type graphs, and you can spot what's changed. Well, what changed in our case was this handful of established, well-known, well-recognized, validated, used by others, markers of DMD. And in every one of our five participants, in every one of these markers, we saw a dramatic decline in these markers of muscle and muscle damage in DMD. So it means our drug is getting into muscle, and it's acting on that muscle. And this is of huge importance as we think about our primary goal, which is approval of our drug, because now we'll have markers that we can talk about from a clinical point of view. So this is, for us, really exciting. And this was very quick onset, two weeks. We saw this effect, so our drug is acting on muscle very quickly. And then this is data we have shown previously. This is data from a year ago. This is the data in the five adults that we treated. They were on drug for 28 days, and this is their grip strength. We see the grip strength on the average of the five in the left, and we see the grip strength by individual in the right. and on one side of the slide it's the dominant hand and on the other it's the non-dominant hand why they didn't say left and right I have no idea we did this in Australia maybe it's an Australian thing what this shows very clearly to us is that the drug is having an impact now I want to point out a couple of things the regulators are not looking for us or anybody developing a drug to cure everybody equally in any clinical trial they're looking for the balance of probability evidence that there's a significant chance of improvement and i would say looking at this we have clearly affected two or three of these adults in a meaningful way and these adults are in this case at the beginning of this study were between the ages of 20 and 27. a typical duchenne adult in their mid-20s that I have met, many of them, cannot shake your hand. They cannot articulate their hand sufficiently to give it to you to shake your hand. So the fact that we're showing improvement in the ability of them to use their hands is amazing. And interestingly, this one's a little bit nerdy science, the greater improvement amongst those patients correlated with their level of muscle, as measured by another marker of muscle called creatinine, and with the amount of drug they saw within that first day. Remember I showed you that PK graph. So patients with a little more muscle All saw better results than patients who had less muscle. Now this makes total sense to us because we're acting on the muscle stem cells that live in muscle. If the muscle's not there, they won't have as many stem cells. But this is extremely important for us when we think about our base camp study in children because children will have more muscle. They will have more muscle than any of these adults. Now, we started a first work that we did, I showed you, in the adults, was one year ago in a Phase 1B trial. That's plotted on the left-hand side of this graph. We started a new trial with these adults called Trailhead, which in the case of the patients that are returning, is an 11-month study for a total of one year and in which we will enroll 25 additional patients for a full year. So in between, these patients were off drug for a period of time between 205 days and 328 days. In other words, between 7 and 11 months off drug. So a study like this This is not the ideal planning to do a study like this. This wasn't designed this way. This is the progression of a small company advancing and being able to develop trials. But what we showed is that the gains we saw a year ago were sustained. The patients are all one year older. they decline at this age and they were off drug for an extended period and just to make it clear that was a two times gain sustained for a year that's a gain of function there has been no drug in development that i'm aware of or any of my colleagues are aware of that has ever reported this kind of a result, a doubling and maintenance of that gain over a full year. So we think this is extraordinary. Now, when we showed this data at the MDA Muscular Dystrophy Association meeting a few weeks ago, the stock market didn't see this picture. I can't explain that, so I'm trying again today. but that is what the data show us and just to hammer home the point when we compare this to natural history and there is significant body of natural history related to grip strength in DMD patients and it is an endpoint that the FDA will consider as part of accelerated approval this is the natural history for thousands of patients from age 5 to 30 and if you plotted a graph that would be a downward sloping line that's very steep and so young people gain grip strength until their mid-teens early teens and And then, bam, it really declines. And what did we do? We moved some of these adults into what is called white space, an area that's not seen because they don't get better. And we added to Trailhead other measurements because we're very curious to see could effects actually radiate out to other muscles. And what we saw in 56 days of treatment is that in elbow flexion and shoulder flexion, and that bottom one should be shoulder abduction, that's my bad for doing a cut and paste and not correcting it, we see a clear trend to improvement in shoulders for sure. Again, these are patients that, left on their own, cannot move anymore. This is remarkable. And when we tease it out between the ones with a little more muscle mass and the ones with less, that gap increases. So what's coming up? So in Trailhead, as I mentioned, we did a study, the one-month study which we did a year ago, those four of the five patients have come back and in the course of the year one patient became ill unrelated to us just the natural course of their their lives so four have come back and will be on drug we're measuring a variety of factors trailhead will be enrolling starting later in q2 and we'll enroll up to 25 patients we're looking at mri we're looking at pull which is upper body movement we're looking at dynamometry which is hand grip and shoulder and we're looking at safety and we're doing this over a period of time at intervals which gives us the opportunity to see data and then to decide what we need to do about working with that data. Basecamp is a bigger, more complex study, more variables, more patience, because this is basically our gold standard study on which we plan to pursue accelerated approval. It's in children age 7, 8, and 9, an N of 51, 51 divides by 3 for those of you that are good at math. It's a placebo-controlled double-blind study. Two-dose levels of our drug, low and high, plus placebo, randomized one-to-one-to-one, and then a crossover, a nine-month follow-up study where placebo goes on to drug. 25 clinical sites across eight different countries. Safety and biomarkers, muscle fat fraction, muscle morphology, all the physical measurements I've been talking about. Patients will be enrolled who are on steroids as their standard of care prescribed medicine. We will enroll patients who've previously received gene therapy, and we'll enroll patients who have previously received exon skipping. And we're doing this because it's not only the regulators we need to be thinking about, it's the payers. So the more evidence we can build that our drug, even with others that have previously been delivered, shows benefit, then we can broaden the payer complement as well. So we're thinking as strategically as we can. And this is what Basecamp looks like over the three months on drug. It's a 12-week study. Generally speaking, once we start screening a patient, it takes four to six weeks to get them fully qualified and get the hospital, you know, moving them through their system and so on before they first get on drug. I made the unfortunate mistake of not fully understanding this length myself in a comment I made at a previous meeting a while back, and I got mixed up between enrollment and first dose. So, once patients are on board at the beginning, we do biopsy, we do MRI, we do NSAA, which is all of the lower body movements. We do pull, which is the upper body. We do dynamometry, which is shoulder, arms, hands. We do stride velocity, which the Europeans really love, and we do safety and biomarkers. Now these patients come in and it's a hospital visit, so they're very busy. they actually can get tired during the day then that's the first dose we check safety after one month and then at the end of three months we bring them back in and we do all of those tests again and then from that we build our database so inside Sotelos we've passed Q1 thankfully we've made great progress in Q1 we've got our trial up and running we're now in Q2 we've got roughly one third of all the clinical sites up and running we've got many patients on drug now we don't know if they're randomized to drug or placebo so I just say on drug meaning they're in the study they're being dosed by q3 we plan to have the study fully enrolled by q4 we plan to have data and we will be opening up trailhead in the US as I mentioned in q2 at some point and we We will be planning to launch a trial in a new field of FSHD, another disease area. And that wraps us up. Our financial summary is we're on NASDAQ as MSLE, not to be confused with MLSE. I am not a LEAF fan myself personally, so this has been pointed out to me, MSCL on TSX, and our market cap, fully diluted shares. now we have considerable analyst coverage of some pretty big names plus we have others coming on board so you'll get to lunch on time and we have a few minutes for questions so thank you very much thank you for that talk Frank so we have time for a couple questions any questions in the audience looking around all right we got one over there I'll let me pass the mic hi Frank thanks

Speaker 4

for the presentation. I was wondering, I'm sorry if I missed it, is there any form of physical therapy that the patients go through while they're on this treatment, or is that left out of the scope of the study?

Frank Gleason, CEO

No, there's not physical therapy in parallel to the trial. Okay, got it. Thank you.

Weldon, Analyst — Other

Okay, we got one more.

Speaker 3

Thanks for the presentation. Happy to see you're thinking strategically about payers down the road when you design your clinical trials. they're enrolled if patients are on steroids I think exon skipping and gene therapy any concern that the payers might reserve your treatment for patients who have failed on those instead of the novel or add-on therapies and I'm assuming you're including a stack inhibitors in the trial design as well yeah given us that's allowed in this trial no we haven't actually developed any reason to be concerned about about that perspective from payers but fundamentally these patients fail every treatment right they'd all die any other questions

Frank Gleason, CEO

well there's one at the back it's a genetic disease that's caused by a mutation to it the cost I think what is the cost of the disease oh the payer cost well the various drugs the exon skipping drugs they're all projected to be a million dollars a year annually gene therapy is over three million dollars correct and the payers are paying that and I'm I'm not forecasting anything about Sotelos I'm just telling you what the market evidence is any other questions okay well then please give Frank a very warm