VYNE Therapeutics Inc. Q3 FY2021 Earnings Call

Good morning and welcome to the VYNE Therapeutics conference call to discuss the Third Quarter 2021 financial results and corporate update. At this time, all participants are in listen-only mode. Following the Company's formal remarks, we will open the call for your questions. Please be advised that this call is being recorded at the Company's request. I will now turn the call over to John Fraunces of LifeSci Advisors. Please go ahead.

Good morning, everyone, and thank you for joining us. Participating in this morning's call are Dave Domzalski, VYNE's President and Chief Executive Officer, Tyler Zeronda, VYNE's Chief Financial Officer, and Dr. Iain Stuart, the Company's Chief Scientific Officer. Please note that there are slides to accompany Dr. Stuart's discussion. Those of you dialed into the phone lines will need to log on to the live webcast to access these slides. The link can be found on the Investors and Media section of VYNE's corporate website under Events and Presentations. The slide presentation and a replay of this conference call will be archived on the Company's website. Before we begin formal remarks, let me remind you that some of the information in the press release issued this morning and on this conference call contains forward-looking statements that involve risks, uncertainties, and assumptions that are difficult to predict, including statements regarding certain development programs, and future plans and prospects, as well as observations regarding ongoing operating expenses. These statements will include plans and expectations regarding strategic transactions and the success, timing, and cost of clinical trials. Words that express and reflect optimism, satisfaction with current progress, prospects or projections, as well as words such as belief, intend, expect, plan, anticipate, and similar variations identify forward-looking statements. The absence of such words does not mean that the statement is not forward-looking. Such forward-looking statements are not a guarantee of performance, and the Company's actual results could differ materially from those contained in such statements. Several factors that could cause or contribute to such differences are described in detail in VYNE's Therapeutics filings with the SEC. These forward-looking statements speak only as of the date of today's press release and conference call. The Company undertakes no obligation to publicly update any forward-looking statements or supply new information regarding the circumstances after the date of this call. Additionally, the financial portion of this call will include certain non-GAAP financial information. For additional disclosures relating to these non-GAAP financial measures, including a reconciliation to the most directly comparable GAAP measures, please see today's press release, which is posted on the Investor Relations section of our website. At this time, I would like to turn the call over to Dave Domzalski. Dave, please go ahead.

Thank you, John, and good morning to everyone. On our previous earnings call, we announced our transformational decision to refocus our efforts toward developing new and innovative therapies for the treatment of immuno-inflammatory diseases. Today, one quarter later, I'm pleased to report that we've achieved a number of important milestones as we continue to advance our proprietary pipeline through a series of near-term early-stage clinical catalysts over the next 12 to 18 months. Without question, the catalytic event driving this transformation has been the licensing of our Bromodomain and Extra-Terminal or BET Inhibitor Platform, which we announced in August. As a reminder, the BETi inhibitor platform provides VYNE worldwide rights to a library of small molecule NCEs and a unique platform to develop both topical and oral BET inhibitor therapeutics for any indication. Because BET inhibitors have the ability to target multiple pro-inflammatory pathways, we believe this exciting new drug class could offer the opportunity for highly potent therapies. These therapies have the potential to address serious unmet medical needs with immuno-inflammatory diseases. We're now poised to generate a series of data-driven milestones that we believe will unveil the significant therapeutic potential of these assets. Our focus will be to advance our lead topical BETi inhibitor product candidate, VYN201, into the clinic in 2022. VYN201 is a first-in-class pan-BD BET inhibitor designed to reduce inflammation while mitigating systemic drug exposure. VYN201 is being developed for topical applications, potentially including rare dermatoses, where there is significant unmet need due to a lack of indicated treatment options. As many of you know, we recently announced positive data showing that VYN201 was able to significantly reduce several key pro-inflammatory cytokines in both a preclinical model and in a human skin tissue model. Additionally, VYN201 demonstrated improvements in reducing fibrotic tissue mass and overall skin repair outcomes with no negative impact on healing time. These findings offer valuable insights into the evolving therapeutic profile of VYN201, suggesting that the drug may offer optimized efficacy and safety characteristics that could be highly differentiated. Our Chief Scientific Officer, Dr. Iain Stuart, will review the details from these studies later in the call. In parallel with these efforts, we have been working diligently with our partner, In4Derm, on the development of the oral BET inhibitor, VYN202. VYN202 is an orally delivered, first-in-class BET inhibitor that is highly selective for Bromodomain 2, or BD2, with the goal of having a more targeted anti-inflammatory effect with an improved benefit-risk profile as compared to other oral, non-selective BET inhibitors. Upon the final candidate selection, we intend to initiate an enabling non-clinical safety program and enter the clinic. We are evaluating VYN202 for use in several potential indications with an initial focus on autoimmune conditions. To further support our BETi inhibitor programs, we recently formed our Scientific Advisory Board, providing an important source of external scientific and medical expertise as we expand our BETi inhibitor R&D activities. The members of our Scientific Advisory Board are world-renowned experts specializing in immunological and inflammatory diseases. We are incredibly fortunate to have these distinguished scientists and clinicians to help guide our BETi inhibitor and other development programs. Turning to FMX114, we are encouraged by the progress made for our most advanced drug candidate. In October, we announced the first patient had enrolled in our Phase 1b/2a clinical trial that will assess the safety and efficacy of FMX114 gel versus vehicle gel in patients with mild-to-moderate atopic dermatitis. In light of the FDA's recent review of the oral JAK inhibitor class for the treatment of several systemic autoimmune diseases, we believe it's important to characterize the preliminary safety and pharmacokinetic profile of FMX114. The Phase 1b portion of the study will generate meaningful data as we advance the product into the Phase 2A portion for broader safety and efficacy evaluation. We currently expect topline results from the study in the early part of the first quarter of next year. FMX-114 is a proprietary topical combination formulation of Tofacitinib, a Janus kinase inhibitor, and Fingolimod, a sphingosine-1-phosphate receptor modulator that is being evaluated for the treatment of mild-to-moderate atopic dermatitis. This program is an important part of our strategic transition to develop therapies for immuno-inflammatory conditions. Atopic dermatitis is a chronic, periodic inflammatory skin condition and is a multi-factorial disease that supports our thesis that a multimodal therapeutic is the ideal approach to achieve optimal clinical outcomes for patients. FMX114 has been designed with intracellular and extracellular mechanisms of actions to address both the source and cause of inflammation in atopic dermatitis. As a JAK inhibitor, Tofacitinib reduces inflammation by inhibiting the release of cytokines that promote inflammation in the skin. These cytokines negatively impact both skin barrier integrity and function, which are key components of the disease. FMX114's second component, Fingolimod, reduces inflammation by inhibiting the migration of inflammatory cells into the skin. Additionally, Fingolimod upregulates filaggrin, a protein that plays an important role in supporting skin barrier recovery. If successfully developed, we believe FMX-114 has the potential to be the first topical combination product for the treatment of atopic dermatitis. Now I'd like to briefly touch on the planned sale of our topical minocycline franchise, which includes AMZEEQ, ZILXI, and FCD105, which is our Phase 3 ready combination product, and the underlying MST platform. These are excellent products, and responses from patients and healthcare providers continue to be very positive. AMZEEQ and ZILXI have generated nearly 165,000 prescriptions combined through September of this year. As noted in this morning's press release, our minocycline franchise is a high-quality commercial platform that has significant value. We continue to make progress on the sale of this franchise, and we are encouraged by the level of interest we have received. We will provide additional updates as our current discussions continue to advance. With that, I'd now like to turn the call over to Tyler to cover the financials. Tyler?

Thanks, Dave. And good morning, everyone. Revenues in the third quarter of 2021 totaled $4.1 million and consisted of $4 million of product sales from AMZEEQ and ZILXI and $0.1 million of royalty revenue. Our third quarter 2021 GAAP net loss was $21.3 million, or $0.41 per share. Excluding $2.4 million of stock-based compensation expense, our third quarter 2021 adjusted net loss was $18.9 million or $0.36 per share. For the third quarter 2021, adjusted operating expenses were $18.4 million, including adjusted SG&A expenses of $11.9 million and adjusted R&D expenses of $6.5 million. The third-quarter adjusted operating expenses of $18.4 million were $1.9 million lower than the second quarter of 2021, reflecting our focus on cost control and resource prioritization. As we continue to transition our focus and spending toward developing our pipeline, we expect to further reduce our adjusted operating expenses to a range of $10 to $15 million in the fourth quarter of 2021, excluding the one-time $4 million milestone payment related to the exercise of the license agreement for the oral BET Inhibitor, VYN202. Based on our current plans to conduct a Phase 2b trial for FMX114, assuming positive results in the Phase 2a trial, and to progress both VYN201 and VYN202 into the clinic in 2022, we anticipate our adjusted operating expenses will be approximately $10 million per quarter next year. Now turning to our balance sheet, our cash position as of September 30th was approximately $53 million. We believe this cash will be sufficient to fund our operations through the second quarter of 2022. This projection does not consider any potential proceeds from the sale of a topical minocycline franchise, new business development transactions, or additional financing activities. Finally, our shares outstanding at September 30th, 2021 totaled 53.5 million shares. For additional information regarding our third quarter results and prior period comparison, please refer to today's earnings release and our Form 10-Q filed with the SEC. With that, I will turn the call over to Ian, who will go through the progress we've made with our BETi Inhibitor Program.

Thanks, Tyler. I'd like to start by providing a brief progress update on our BETi Inhibitor Program, which includes VYN201 and VYN202 that we are introducing today as the Inhibit platform. I will then present a few slides covering recently announced pre-clinical data for VYN201, our topical Pan-Bromodomain BETi Inhibitor project. As a reminder, today's slide presentation is being presented via our live webcast, and these slides can also be found in our corporate presentation available on our website under the Investor Relations section. Beginning with VYN201, we have selected our topical formulation for this pan-BET inhibitor and have already generated significant stage-appropriate product characterization and stability information to support this development. In the past quarter, we have initiated the prerequisite preclinical safety program to support the product's regulatory submissions. I'm pleased to report that both formulation development and preclinical safety programs are progressing well to date. Moving now to VYN202, our bromodomain 2 selective oral BET inhibitor project. The lead optimization work is progressing well with our partner In4Derm to identify potential development candidates for this program. In4Derm has produced several drug-related NCE candidates with potential class-leading potency and BD2 cell activity. Work is continuing to further characterize these molecules and adding new molecules to the platform of several hundred BET Inhibitor examples. As Dave outlined earlier, we recently announced the formation of a Scientific Advisory Board, and we convened our first meeting last month with this esteemed group of advisors. In brief, there was broad agreement and interest from the Scientific Advisory Board members on the utility of the BET inhibitor platform across the respective specialties, and enthusiasm for this first-in-class potential. Turning back to VYN201, we recently announced new data from two preclinical studies demonstrating the potential of VYN201 as a highly potent anti-inflammatory therapy for the treatment of various dermatoses with high unmet needs. Slide 3 presents data from a common model of Th17 mediated inflammation. The differentiation and activity of Th17 immune cells drive inflammation in several autoimmune diseases. This is particularly relevant to the diseases we are currently investigating with VYN201. In this model, animals were topically treated with a mid-range dose once daily for seven days to induce a Th17 inflammatory dermal phenotype. Following this induction phase, VYN201 was applied once daily at several concentrations and compared to vehicle and to the Class-1 super potent glucocorticosteroid clobetasol propionate cream 0.05% over a seven-day treatment period. The graph on the left of the slide presents the percent change in the inflammatory severity score of erythema and scaling severity for the treatment group over the 7-day treatment period. Over the concentration range 0.001% to 0.1%, we observed a dose-dependent improvement in clinical signs of inflammation with VYN201 treated animals, culminating in a 94% reduction in clinical signs for VYN201 0.1% compared to vehicle at the end of the treatment. Furthermore, VYN201 0.1% was found to have a comparable positive impact on reducing clinical signs of inflammation when compared to the competitor product, indicative of a marked anti-inflammatory effect. Moving to tolerability, the part on the right of this slide presents the mean change in animal body weights during the treatment phase. Change in body weight is used as an indicator of general tolerance to treatment. Here, we compare body weight changes between a VYN201 0.1% vehicle to clobetasol cream and a healthy control animal group shown here in green. Animals treated with VYN201 0.1% continued to gain weight throughout the treatment phase, similar to the healthy control animals, and was well tolerated. However, animals treated with Clobetasol experienced a 17% mean reduction in body weight throughout the treatment period compared to VYN201 0.1% treated animals. This is attributable to the negative impact glucocorticosteroids have on the endocrine system by causing hormonal imbalances that impact metabolism. Slide 4 presents the impact of VYN201 in reducing the expression of key cytokines that drive Th17 mediated inflammation. It should be noted that all of the cytokines presented here play contributing roles in Th17 cell differentiation and inflammatory response in several autoimmune diseases. In this study, we observed a strong correlation between cytokine reduction and resolution of clinical signs of inflammation that I presented in the previous slide. Furthermore, we observed a dose-dependent reduction in all six cytokines, culminating in a maximum effect at the VYN201 0.1% dose. Slide 5 presents typical examples of photography at the end of this treatment. The first photograph is of an animal treated with the VYN201 vehicle. As you can clearly see, there is still significant inflammation, redness, and scaling present. The central photograph of an animal treated with VYN201 0.1% shows that the clinical signs of inflammation and scaling have greatly subsided, presenting a more normal clinical phenotype at the end of treatment with no evidence of dermal intolerance to treatment. The animal treated with Clobetasol cream has experienced a significant reduction in clinical signs of dermal inflammation. However, this is associated with marked dermal toxicity, with clear evidence of fine and deep wrinkling, translucency, and lack of elasticity. Although clearly undesirable, these phenomena are expected based on well-known skin toxicities from topically applied glucocorticosteroid treatment. Slide 6 presents the effect of VYN201 on inhibiting the release of key inflammatory cytokines from human skin tissue, in comparison with the JAK1/2 inhibitor, Ruxolitinib, and the glucocorticosteroid, Betamethasone. This ex vivo assay uses harvested human skin tissue that has been stimulated to adopt a Th17 inflammatory phenotype, with the impact of VYN201 on the release of several Th17 cytokines evaluated in comparison to untreated controls. In these examples, cytokine release was inhibited by greater than 95% relative to the untreated control. In this example of Interleukin-17, the effect of VYN201 was demonstrated to be statistically superior to both active competitors. This confirms findings from the preclinical model I presented earlier and demonstrates the portal and perhaps inflammatory inhibitory potential of VYN201 for the treatment of diseases driven by Th17 immunology. Now we move to the most recent amounts relating to the evaluation of VYN201 in the preclinical model of skin healing. Although the virus in etiology, neutrophilic dermatosis, commonly presents as ulcers, it requires rapid intervention to halt tissue destruction and allow innate skin repair mechanisms to facilitate lesion healing and closure. It is therefore essential to assure that any potential treatment for these diseases does not interfere with these processes. The primary objective of this study was to demonstrate that our topical VYN201 product would not impede skin tissue healing. In this model, two identical incisions were made on either side of the flank of hairless mice under anesthesia. Three treatment groups were treated topically once daily with either VYN201 vehicle, VYN201 0.1%, or a hydroalcoholic gel control that is known to delay lesion healing and closure. The graph on the left presents the global external lesion healing score by treatment date. This score is a composite of lesion length, width, degree of swelling, and overall lesion visibility. It was anticipated that VYN201 1% would perform similarly to vehicle in this model, thereby confirming that the BETi inhibitor active ingredient would not impact the healing time and closure, unlike the hydroalcoholic gel control. As of treatment day 5, there was a statistically significant improvement in lesion healing score for VYN201 1%, compared to the hydroalcoholic gel, and this continued for the remainder of the treatment period. The mean time to heal for VYN201 1% and vehicle was 15.5 days, whereas the mean time to heal for the hydroalcoholic gel was approximately 5 days later. Based on these results, VYN201 0.1% does not appear to negatively impact skin repair mechanisms. Looking to the graph on the right, this data represents the extent of fibrotic mass formed during the healing period at the end of the treatment. Excessive fibrotic tissue deposits in healing lesions frequently result in an undesirable aesthetic outcome from scarring. Fibrotic tissue mass was assessed on a 4.0 Severity Scale. Findings from the study showed that both vehicle and hydroalcoholic gel treatments resulted in moderate levels of fibrotic tissue present at the lesion bed after the lesions had healed. However, in comparison, there was a much lower presence of fibrotic tissue mass in the VYN201 1% treatment group, indicating the anti-fibrotic mechanism of action for BET inhibitors. This slide presents typical examples of photography at the end of treatment. The left photograph is of an animal treated with VYN201 vehicle. As you can see, there is residual swelling, and the scars are still clearly visible. The central photograph is of an animal treated with VYN201 0.1% that shows little evidence of residual swelling, and the lesions are flatter and less distinct compared to the other treatment groups. On the right, animals treated with the hydroalcoholic gel display clearly definable scars with significant residual swelling and scabbing still present. In conclusion, we are very satisfied with the preliminary data we have generated with VYN201. VYN201 significantly reduces the expression of several key pro-inflammatory cytokines relevant to Th17 mediated autoimmune diseases and has demonstrated improvement in reducing fibrotic tissue mass and overall skin repair outcomes. These initial data validate our earlier belief in the broad utility and attractiveness of this platform in addressing dysregulated immune activity in several serious autoimmune diseases. We continue to work diligently to generate the additional data on BETi Inhibitor pharmacology and epigenetics. The prerequisite enabling non-clinical safety program is underway, and we intend to enter VYN201 into the clinic in 2022. We look forward to providing additional updates as the program progresses. With that, I will now pass the call back to Dave. Dave.

Thanks, Iain. We're very excited about the future direction of the Company, and we are quickly building momentum across our pipeline of novel and highly differentiated candidates, each with the opportunity to address significant unmet medical needs in immuno-inflammatory diseases. As I previously mentioned, we intend to leverage our existing development capabilities and strong network of discovery and preclinical science partners to develop products and advance a series of truly innovative new medicines through the clinic. Our key priorities are to complete the divestiture of the minocycline franchise and advance the pipeline. Over the next 12 to 18 months, we anticipate multiple milestones in early-stage development catalysts for our programs. As we move toward 2022, creating shareholder value remains front and center for our Company, and we look forward to providing further updates on our progress. This concludes our prepared remarks. I will now turn the call back to the operator and open the call for questions. Thanks.

Thank you. We will now begin the question-and-answer session. We will pause for a moment as callers join the queue. The first question comes from David Amsellem with Piper Sandler. Please go ahead.

Thank you. I have a few questions, starting with 201 and 202. This is a high-level inquiry, but I believe it's important to ask. Considering the underlying mechanism of these compounds, do you have any insights on which specific indications would be most suitable for both 201 and 202? I realize it's early, but I'm interested in your thoughts on this area of opportunity. If you proceed with both, should we consider the topical treatment for mild to moderate disease and the oral treatment for moderate to severe disease, similar to other classes like the JAK inhibitors? Please help us understand your reasoning on this. Also, regarding 114, with what we know about JAK inhibitors, my question pertains to safety and tolerability, but also efficacy, given market conditions. What criteria will you need to see in order to make a go or no-go decision after receiving your data next year? Thank you.

Hey, David. You were a bit hard to hear. Let me try to summarize and see if this aligns with what you were asking. I believe you were inquiring about our BET platform for 201 and 202, where we have some early indications that could be promising. The second question seemed to be about whether we plan to extend the topical treatment into more mild-to-moderate disease states rather than just severe cases. The third question appeared to be asking for clarity on 114 in relation to the current situation in the JAK class. Please confirm if that’s correct or if there was anything else you needed.

Yes, that's exactly right. Sorry for the bad connection.

I will start with the JAK program and how we do our product. So, I don't know if you want to provide some color on how we see the benefits and the advantages of FMX114.

Sure. Hey, hi, David. In relation to 114 and how we see it, obviously different in relative to others in the space, and obviously, the recently approved topical JAK inhibitor from Incyte. Dave covered it all in the prepared remarks. We do see this as the key benefits here being a multimodal impact on the disease state itself. The top set of the JAK inhibitor itself, we know can have exquisite impact on down-regulating key cytokines that drive inflammation in the skin in atopic dermatitis. But also, we see great utility in actually preventing some of these lymphocytes, these key immune cells from moving into the skin in the first place, where they unload the majority of these pro-inflammatory cytokines that drive the disease. This is where Fingolimod comes in. Fingolimod itself has the potential to inhibit and retain these autoreactive lymphocytes in the lymph nodes, therefore preventing those cells from moving into the skin in the first place. This is the extracellular mechanism that Dave talked about in the prepared remarks. We also find that Fingolimod has the potential to upregulate that key skin structure protein called filaggrin, important in maintaining the epithelium skin, the epidermis. We know that atopic dermatitis is a skin disease where the epidermis is effectively missing. The ability to prospectively support recovery of the epidermis as the anti-inflammatory effects of the treatments are working is a key component. That's how we see it being quite differentiated from any other topical JAK inhibitors or others that certainly don't have that potential. I hope that answers your question on that.

Yeah, I'll just add to obviously, we're in the middle of our 1B component of this Phase 1b/2a study for 114. The 1B component will provide meaningful pharmacokinetic data that will be helpful, especially in light of the recent class labeling around JAK inhibitors. It certainly appears that, even though it's class-labeled for all JAKs, this is really focusing on the view from the update, concentrating primarily on systemic JAKs. Dermatologists who prescribe these products are used to seeing these types of labels. We feel very good about the prospects of this product making its way through the clinic, and we hope to have absolute topline results in the early part of the first quarter of next year. The pharmacokinetic data should be available before the end of the year, so we're quite optimistic about the prospects of this program. I think for the 201 and 202 BETi Inhibitor programs, as we outlined, we're very early in the development of both these programs. The preclinical data we've seen so far for work 201 is quite encouraging. We will continue to conduct a battery of additional animal models and biomarker studies that are ongoing. We're also doing the prerequisite toxicology work for 201 now. There seems to be a significant level of enthusiasm from our Scientific Advisory Board and the general scientific community. We think this program gives us a lot of utility and flexibility for where this product can go. We've discussed some of the more rare skin diseases arena, as we mentioned, including pyoderma gangrenosum and others. We're going to hold off on putting a specific line or stand on where we're exactly going to take it. We're really excited about the work we will do. I think there are several different arenas, but ultimately, we want to develop products that address unmet needs for patients, and we think this platform could do that. You can anticipate data, but I wouldn't characterize it, David, as being mild to moderate versus much to severe. Ultimately, the data will drive where we go. We've shown through the in-show today that there is a potent anti-inflammatory effect from this BETi Inhibitor Platform, and we think that gives us a lot of flexibility on where we can take this product. When it comes to 202, as we've mentioned when last quarter, we envision looking at some of the more broader indications without specifically locking in on a particular disease. We've talked in our advisory board that it could have potential in rheumatoid arthritis, inflammatory bowel disease like Crohn's, multiple sclerosis, and obviously there has been work on various oncology settings, including myeloproliferative diseases. Whether or not we would explore there ourselves is yet to be determined. Again, we see significant utility in this platform, and we're eager to advance both these programs. As we move further down the line, we'll be able to lock in on where we take these programs for their first indication—both for the topical and oral BETi. Hope that helps, David.

Yes, that does. Thank you.

The next question comes from Louise Chen, with Cantor Fitzgerald. Please go ahead.

Hi, good morning, everyone. This is actually Carvey into Louise. We have a few questions here. First, what is the breakdown of product sales? How much of it was coming from AMZEEQ? How much was from ZILXI? We're interested in tracking the progress of these products. Second, I had a question about the Phase 1b/2a data for 114. Can you remind us how we should interpret the data once they come out? And lastly, on 201, there are a lot of promising images from the mouse model compared to vehicles, the hydroalcoholic gel, and you also included an ex vivo analysis against a JAK inhibitor. Just wanted to see if you have done the same mouse model testing against the JAK and see the comparison. If so, what are the takeaways there? Thank you so much.

Yeah, sure. Good morning, Carvey. This is Tyler. I'll take the first question regarding the breakdown of sales. For the quarter, we had $4 million of product sales for AMZEEQ and ZILXI. We have not historically disclosed the breakdown and haven't provided guidance on the specific split between products. What I can point you to is if you take a look at the script data just from a relative proportion that can give you a general direction. But at this point in time, we're not going to break the products down.

Anyone want to talk about the 1b/2a and other details?

Hey, Carvey. Yes, the primary endpoint will be change in atopic dermatitis severity index. Just to back up to the design itself, the Phase 1B patients will be treated for 2 weeks. The Phase 2 portion of the study is 4 weeks, plus an additional 2 weeks open-label study. The same endpoints apply. We're looking to report the data in the early part of Q1 next year. Regarding your question about comparative information in the animal models for the BETi Inhibitor, we haven't conducted that yet, although it is something we will be focusing on. We typically use glucocorticosteroids as a control, but it's certainly something we'll start to pursue as we hone in on indications later.

Okay, great. Thank you so much.

Thanks, Carvey.

Once again, the next question comes from Patrick Dolezal with LifeSci Capital. Please go ahead.

Hi. Thanks for taking the questions. For the BET inhibitors as a class, just curious about what safety effects have emerged clinically, and what gives you confidence that these may be averted by a topical approach in the case of 201, and the selective BD2 approach in the case of 202? Also, can you detail the items outstanding to IND submission for each of those? That would be helpful. Thanks.

Hey, Patrick. As you know, the majority of BET inhibitors in development are pan-BD, so they bind to BD-1 and BD-2, and are orally available, primarily for oncology indications, although there's one in the cardiovascular space. Why do we believe ours are differentiated from others? To start, the types of adverse events typically seen for an orally available pan-BD inhibitor tend to be things like thrombocytopenia, gastrointestinal toxicities, vomiting, flushing, and similar issues. Relaxing to 201, we have assumed reduced systemic exposure due to its topical nature. But we have also factored a metabolic liability into the molecule itself as part of the design principles from medicinal chemistry. What this means is that any 201 systemically exposed via topical application will be rapidly cleared by the liver and inactivated. This is a one-two punch, going topical and consciously introducing a metabolic liability. For 202, we are addressing the pan-BD toxicity question through the use of selective BD-2 inhibitors, which have shown improved safety profiles in general. Additionally, observed data indicates that the majority of pro-inflammatory signaling or genes activated tend to be driven through BD2 rather than BD1, which has been linked to the activation of housekeeping genes. Work with In4Derm has produced exquisitely potent and highly selective BD2 components already, and we're developing additional molecules as this work progresses. Hence, we are addressing it from two angles: one, topical with 201 to minimize systemic exposure, and two, through a selective BD2 approach with 202.

That's helpful. And just one follow-up: the preclinical data on composite inflammation severity in the inflammatory model looks solid and very comparable to steroids. Just curious, should we be thinking about the magnitude of effect observed here, or just that it's directionally favorable? As it relates to the biomarker data, are there any biomarkers in particular that are known to be pathogenic in a given disease state or are you giving excitement about future clinical development?

Yes. Just on your last point, the fact that we have significant impact on almost all cytokines driving T-17 immunology is exciting. You saw from the slide that we’ve significantly reduced IL-17, IL-6, and others. This speaks to the broad applicability as an anti-inflammatory agent. Secondly, we were effectively equipotent to a Class 1 super potent steroid, which is quite rare for a newer generation of anti-inflammatory agents. I think to your earlier question, consider the potential of that super potent anti-inflammatory effect without the specific liabilities you would expect with long-term use of corticosteroids.

Yeah, just to add to what you said, Patrick. Clobetasol is outlined as a super potent steroid, and it's a far cry from the over-the-counter hydrocortisone steroids. It's been classified as a Class 1 steroid for a reason; it's super potent. The fact that we noted that level of response in line with what you see from Clobetasol yet initial tolerability data being very positive and encouraging gives us a lot of enthusiasm regarding our molecule, platform, and the entire program.

Great. Thanks so much.

This concludes the question-and-answer session. I would now like to turn the conference back over to management for any closing remarks.

Thank you, operator, and thanks to everyone who took time out of their schedules to join this call. We look forward to continuing to update you on the progress of our business, and we wish everyone an enjoyable holiday season coming up over the next few weeks. We look forward to speaking with everyone soon. Thanks, and have a great rest of the week.

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day.