Conference Transcript - MSLE 2026-06-02

Ella Rosenblatt, Analyst — Investment Banking Team, Jefferies

and welcome to the Jefferies Global Healthcare Conference in New York. My name is Ella Rosenblatt with the Jefferies Investment Banking Team and it is my great pleasure to introduce Frank Gleason, CEO of Sotelos Buy and Science.

Frank Gleason, CEO

Well, thank you very much, Ellen, and thanks to Jefferies for the invitation. I look forward to telling you about Sotelos this morning and appreciate you taking some time to visit in person or online. Sotelos is about regenerating muscle. Our focus is the area of Duchenne muscular dystrophy and additional dystrophies and diseases of muscle degeneration, where we have a very different approach and paradigm-shifting technology platform for restoring the ability of muscle to regenerate and to bring back function. Of course, we're a publicly traded company, so basically everything I'm telling you may be in the realm of forward-looking statements, so beware of anything I tell you. So what is it about DMD that's important to us, and why are we attempting to assist children and young people who live with this devastating condition? Our mission is, you know, to change lives. Many companies will say that's their mission, and rightly so. We're all trying to do our best. In our case, what we're trying to do is restore the body's natural ability to repair and regenerate muscle. In children who are born and live with Duchenne muscular dystrophy, their body's ability to repair muscle and create new muscle is severely compromised. And this is an aspect of the disease that we have identified as Sotelos, and it's an aspect of the disease that has not been featured or focused on despite 40 years of development since the discovery of the gene. It is also a huge market opportunity. It's a fatal condition. It affects 1 in 5,000 males born worldwide. In the U.S. at any one time, approximately 12,000 individuals are living with Duchenne. it's characterized as i mentioned by ongoing loss of muscle mass so imagine you lose your ability to move your body it leads to functional decline and ultimately to premature death usually by cardiorespiratory failure there are no treatments either that have been approved or in development other than what we're working on that are designed to regenerate muscle So in a disease in which the pathophysiology is caused by muscle loss, no treatments are designed to restore muscle. We find this just an incredible situation, but also a remarkable opportunity. And the treatments that are approved or in development often come with side effects or consequences. Standard of care, corticosteroids, often yield very toxic side effects. The lone-approved gene therapy is restricted to a very young age group. And exon skippers, by their very nature, being exon by exon, are limited to narrow subsets of the population. And yet, the value ascribed to this area is, by anyone's standard, quite substantial. Sarepta, Wave, Dine, Avidity, Solid, Capricor, all very substantial valuations. Earlier this week, Servier purchased the DMD asset or the dystrophy asset of Edgewise for $2.5 billion with $1.5 billion up front in cash. That alone is 10 times the market cap of Cetelibs. So the potential for this approach, if successful, is truly enormous. Now, what is it about Duchenne muscular dystrophy that we've identified that everybody else has not identified? In this progression of the disease, you can see from infancy through to end of life in the late 20s, typically early 30s, by cardiac failure. you can see on this slide what most people look at is the right-hand side of this slide the wheelchair then progressively the inability to even sit in a wheelchair then the ability to breathe being lost that constant progression and ascribing that to muscle fragility ongoing muscle fragility what most people have never really focused on is that in the early years, children grow. Children make muscle. Children stand. They walk. Their muscle has strength. But somewhere in this age group that we refer to as the tipping point, between five and ten approximately, children go into a very significant decline. And by decline, what I mean by that is their ability to continue to make muscle is outstripped by the damage their bodies can't keep up with the combination of the growth signals and the damage signals and they start to begin to physically lose muscle even at that young age and our focus is on restoring muscle regeneration and consequently muscle function and so we're very unique in what we're doing firstly our medicine is a small molecule pill. So this is not required to be taken by infusion. It's not required that there are co-therapies to deal with immune responses. It's safe and tolerable. And it's suitable for all individuals with DMD, regardless of genetics. And it has the potential to be disease-modified. We are conducting two clinical trials right now that are both phase two trials. One is called Basecamp. The age group is seven, eight, and nine. So that tipping point age group that I described a moment ago. And then the second is called Trailhead. And these are in older patients, 16 and above. So we're trying to kind of capture bookends of this trial. Our goal is data from both of these trials in 2026. with the objective of filing for an NDA in 2027 for approval. We have already demonstrated, both preclinically and clinically, impact of our drug. So we've shown muscle regeneration, in other words, the ability to make new muscle cells in a canine model of DMD. We've shown strength gains in that same model of up to 4X in those animals. And we've shown gains in strength in adults treated with our drug of up to 2X in terms of their grip strength, which is one of the last remaining muscles that adults with DMD have. So let me walk you through some of the data that give us confidence that we're going to see positive results in our base camp and trailhead studies. When I speak to regenerating muscle, what you're looking at here on this slide are three samples. On the left is a sample of a hind leg bicep muscle in one of the canine animals that we treated prior to treatment. In the middle is four months later after treatment. And on the right is a healthy comparator that's intended to show you what healthy muscle in a canine bicep hind leg at the same age would look like. And I think you can appreciate that there's been a transformative change between the pre-treated and the treated muscle that now starts to look very closely like normal healthy muscle. And what What characterizes the damage on the pretreated muscle is the infiltration of the immune system into the muscle itself because of the weakened fiber, the weakened membrane of the fiber that is consuming damaged and dying tissue. It's not repairing itself. When the body is able to repair itself, you don't see that constant infiltration of the immune system and macrophages and phagocytes coming in to basically consume necrotic tissue. So this, we believe we will expect to see a similar type of response in the children through biopsies that are part of the protocol of the study. When we treated healthies in a phase 1a trial, we did not see any meaningful side effects that concerned us or any of the physicians that we have worked with. We also saw very, very clear and clean PK profile of our drug. This is important because as we want to think about modulating dose, if we do want to do that, we've got a very consistent pattern and a drug that clairs very quickly and very easily. So this is not a drug that will accumulate in the system, which assists, of course, with the side effect profile, but also is consistent with the mechanism of action of our target molecule, which is a protein called AAK1. When we treated DMD adults, what we saw very quickly was an effect on muscle. So we now know, not just preclinically, but clinically, our drug is active on damaged muscle. And these markers that we've picked out were identified through a soma scan analysis, which is a proteomic analysis of a panel of approximately 11,000 proteins. So we're showing you the five that all moved in a significant way in all patients treated in our trial. And they are all established markers of DMD that are signals of damage. So all of them have gone down. This is really powerful for us as an indicator that our drug, as I mentioned, is active. It's active in muscle, and we hope and expect we'll read through as we continue our studies. I'm showing you here in that same adult cohort treatment results after 28 days on drug. So this was a preliminary phase 1a study only designed for 28 days. This was the limit of our tox coverage at that time a year ago, over a year ago. and what you can see here in all patients we saw an increase on average across all of the patients whether it was their dominant hand or their non-dominant hand of almost a doubling in grip strength and this wasn't ascribed to one outlier that dominated the group. We saw three of the five patients show improvements and the other two were stable and this is in an age group where individuals have lost massive amounts of muscle mass by the time they're in their 20s and have suffered the ravages of this disease in many different ways. And when we correlated the results to either the CMAX of the drug, so how much drug did they see of 3247, or creatinine, which is a marker of baseline muscle mass, we saw in both cases the same individuals that responded the most saw the most drug and had the most muscle mass. So again, we expect when we move to children who have a higher proportion of muscle mass, this is very, very encouraging. And in our clinical study in children will be studying two dose groups to see if CMAX shows a difference. And now we rolled those adults into a long-term follow-up study. So this is a slightly messy slide which I'll try and walk through and explain as best I can. Those individuals came back on drug in a new study called trailhead this is a 12-month study in adults this will enroll up to 30 individuals we're just opening this study in the US in the next month or so we have FDA clearance what you can see here on this slide on the left you can see the gain and grip strength of those individuals in the first 28 days of the study what happens in between was a gap period between the time the phase 1a study stopped and trailhead restarted as a new study and that gap for some individuals was a couple of hundred days and for one of the individuals was 328 days almost a year during that time of course these individuals all got older one year later we brought them back in put them back on drug retested and what you can see here is that those gains that doubling of strength was sustained over one year later now there's noise in the system as you can see this is part of normal human physiology but you can see that the error bars basically overlap so essentially the gains that were seen a a year ago, held one year later. This is quite remarkable and not precedented by what others have reported. And this is all outside of natural history by a significant margin. So on the left of this graph, you see natural history of individuals from age 5 to 30. And you can see how in the early years, children are able to build strength and then they go into a very steep decline and they never recover from that whereas what you see on the right hand side where we've overlaid our data to that map you can see individuals have reversed the trend this again we think is very very powerful and portends well for what we're planning to do in children and continuing in adults so what's upcoming for Sotelos as we move forward in both trailhead and base camp. So the trailhead study is designed, and the outline of the study is laid out here. Across the top, you see from the very first dose to month 12, the intervals at which we will be measuring various characteristics. Down the left-hand side, you can see the first cohort of originally five individuals that were in the phase 1b study four returned to this study one individual became too ill naturally due to the progression of the disease in trailhead we will be adding up to an additional 25 individuals that will be on for a full 12 months we will be looking at a range of factors fat fraction by MRI the pull study with the pull test which is the pulling down, dynamometry, which is looking at grip strength again, and of course, multiple safety measures at various intervals over the course of the study. We've opened a study in children called Base Camp, 7, 8, and 9. This will be ambulatory children with DMD N of 51. It's a 12-week study, so 12 weeks on drug, weekday administration, taken orally, placebo controlled, double-blind, randomized 1-1-1 into two dose levels of our drug 3247 or placebo, and then a long-term crossover with placebo group randomized to one of the dose groups. Eight countries are approved for this study. We plan to do up to 21 clinical sites. clinical assessments will include safety and dynamometry these will be primary sort of points for us muscle fat fraction muscle morphology by MRI and biopsy strength and function by multiple measurements we'll do the conventional NSA a stride velocity a range of biomarkers we are allowing patients in the trial who are on steroids, who have had prior treatment with gene therapy or with Exxon Skippers, and or are stable on Juvenostat. So we've tried to make this as inclusive a study as possible to give us the greatest potential to see benefit and to see benefit against the background of other medications. And this study, which is a 12-week study, is laid out here, ages 7, 8, and 9. Typically, the screening period is about four to six weeks, four weeks on drug, at which point we do a safety measurement. This is important because this is what we take forward to our DSMB to allow us to continue the study. And then eight weeks on drug, baseline measurements across a range of measurements, biopsy, MRI, NSA, safety, dynamometry, stride. and then 12 weeks later, those same measurements. So right to date, 12 sites are operational. We have a number of sites that will be operational before the end of the month. That will bring us our full complement. We already have more than 51 participants either in pre-screening or actually being dosed, and we intend to be fully enrolled by the end of Q3 with top-line data by the end of the year. and so what does that look like for future plans and financings so just a quick outline of the two studies in q1 we updated the market at mda and we started base camp with site initiation in q2 we submitted to the fda to begin trailhead in the u.s that's been cleared and we've provided updates on progress in Basecamp such as we're doing right now. In Q3 we will provide progress updates and enrollment updates on Trailhead and Basecamp and similarly in Q4 we will have a one-year readout on those original four patients in Trailhead and we will have top line data in Basecamp. Throughout the year we will have poster and other sessions at various conferences. and uh early in q uh sorry in uh the second half early in the second half we will submit an ind and a cta to initiate an fshd trial in the usa and canada so that trial we will get up and running in the second half of the year in terms of where we are financially we have at the end of q1 70 million us in the bank that provides us runway to complete all of the milestones that we've talked about through to the end of 2027 and we now have eight analysts that are covering us including canaccord oppenheimer guggenheim wainwright lead financial lee rink and canter so we're beginning to make more and more progress now that we're um at t at both the tsx and a nasdaq listed company that wraps up our story so happy to take any Q&A for the remaining time that we have which is about eight minutes and really appreciate your attention today yes well then do you mind joining me okay yes could you discuss the grip

Speaker 3

strength and the use of like a measure that's more effort based i'm just looking at the phase 1b data and i'm just thinking grip strength um how objective is that and then maybe talk about what the regulators what regulators would want to see um you know for approval ultimately sure well then why don't you take that yeah so grip strength is a an assessment that has been evaluated in Duchenne for a very long time now.

Speaker 5

As Frank showed, there's a very clear established natural history. Johnny Pogrel from the Institute of Myalgia has published the paper that Frank described the natural history from. And this is an endpoint that is recognized by the FDA. So if you look at the 2018 DMD guidance from the FDA, they talk about myometry, which is dynamometry as a potential path to accelerated approval. One can show improvement in an intermediate endpoint like the strength and then correlate that to function that is a path to accelerated approval. I think to your question around, is it subjective? Is it reproducible? This is why we looked at the baseline data to see, is it consistent with the natural history? And so So, in that slide, what you see is, in fact, it is. The participants, when they had their initial assessments, it was all consistent with what would be expected in the natural history. What was different was how they performed at the day 28 assessment and then how they have continued to perform in trailhead. That is different than what is typically seen in the natural history where you see the decline in strength that progresses with time because of the loss of muscle. The loss of muscle has been documented in many different papers of whether looking at creatinine levels or looking at different DEXA scans or MRI. So the data will continue to play out over time. We believe the trailhead data was an additional incremental demonstration of benefit where we continue to see the improvement in grip strength. We began to see stabilization or improvement across additional muscle groups, across the elbow, across the shoulder. We'll have the opportunity in trailhead with muscle MRI, with the pull. We'll have opportunity in base camp with muscle biopsies, with MRI, with NSA, the different assessments we have there. So it's a story that will continue to play out. It's a small data set, relatively short period of follow-up right now, but it's all very encouraging and it's all consistent with what was seen preclinically and with what we would hypothesize based upon the biology that Michael and Nicky and others have published yes can you discuss like how that how that looks on your slides and how looks on your biopsy when you guys do it does it change dystrophin at all or is that like not a factor here so our our approach

Frank Gleason, CEO

is dystrophin independent. We're not putting dystrophin back in the body. We're not attempting to modulate dystrophin. Dystrophin is either not there or it's in such a compromised state that it's not useful in these patients. What we have discovered is that there is another problem that these children live with, and that's that their bodies cannot repair and regenerate And the reason for that is that the cell population that gives rise to new muscle, which are called satellite stem cells, aka muscle stem cells, hence the name Sotelos, which is a play on satellite, those satellite cells dysfunction. And we discovered why they dysfunction and how to correct that. And that's why we designed a small molecule drug that interacts with a protein called AAK1 that can reset the regenerative biology that these children lack. It's very elegant. In fact, it's very simple and straightforward after 30 years of research to figure it out. But it's elegant. This is why the side effect profile is so minimal, because we're very specifically targeting a particular protein. We understand its function. And the biology that we're modulating is consistent through evolution. So we've identified a target and the purpose of that target in a biological system that's conserved all the way down to Drosophila. So we think this is extremely robust, and it has nothing to do with dystrophin. And so what is really valuable about that is that this is therefore generalizable treatment. So this can be used in all patients, whether they've had gene therapy or not had gene therapy, whether they're on skippers or not on skippers, whether they're taking steroids or not taking steroids, because we are working on a completely separate mechanism that is lacking in the bodies of these children but is intended to be there yes it's the it's regarded as the most predictive of all of the models because animals dogs actually contract DMD spontaneously so it's not an induced model when you're working in mice it's an induced model you induce the genetic defect animals dogs rather believe it or not spontaneously develop DMD so this allows researchers to create colonies of animals that are natural have naturally occurring DMD and the pathophysiology in the dogs is virtually identical to human. Any other questions? Well, thank you very, very much. Again, really appreciate your time and a lively discussion. So thank you.