IMUX - NASDAQ

Good morning, everyone, and welcome to Immunic's Third Quarter 2022 Earnings Call. My name is Jessica Breu, Head of Investor Relations and Communications at Immunic. I will also be the moderator on today's call. Speaking on the call are Dr. Daniel Vitt, our Chief Executive Officer and President; as well as Glenn Whaley, our Chief Financial Officer. For the Q&A session, we'll also have Dr. Hella Kohlhof; our Chief Scientific Officer, and Dr. Andreas Muehler; our Chief Medical Officer on the line. [Operator Instructions] This event is being recorded. [Operator Instructions] Before we begin, I would like to remind you that this presentation may contain forward-looking statements. Such statements can be identified by words such as may, will, expect, anticipate, estimate or words with the similar meaning, and such statements involve a number of risks and uncertainties that could cause Immunic's actual results to differ materially from those discussed here. Please note that these forward-looking statements reflect Immunic's opinions only as of the date of this presentation and it undertakes no obligation to revise or publicly release the result of any revision to these forward-looking statements in light of new information or future events. Please refer to Immunic's SEC filings for a more detailed description of the risk factors that may affect Immunic's results and these forward-looking statements. I would now like to turn the call over to our CEO and President, Dr. Daniel Vitt, to open the presentation. Daniel, please go ahead.

Yes. Thank you, Jessica. I also would like to welcome everybody on Immunic's third quarter 2022 earnings call. Earlier this morning, we announced our financial results for the quarter ended September 30, 2022, and highlighted recent activities as well as upcoming milestones related to our clinical development pipeline. During today's call, we will walk through our third quarter 2022 and subsequent highlights, financial and operating results as well as anticipated milestones. As Jessica noted before, we close the call, you will have the opportunity to ask questions. Let me move to a more detailed review of the recent quarter, including our clinical and operational updates. Earlier in the quarter, Jan Van den Bossche decided to step down from our Board of Directors after six years of valuable service. At the same time, we announced the appointment of Maria Tornsen, our industry - an industry executive with 20 years of global commercial experience in the United States in ex-U.S. markets to our Board of Directors. Maria has become a key contributing member and we are thankful for her guidance and support. With respect to IMU-856, our orally available and systemically acting small molecule regulator targeting restoration of intestinal barrier function and regeneration of bowel epithelium. We were pleased to have strengthened our IP position by receiving Notice of Allowance from the U.S. Patent and Trademark Office for a key patent covering composition of matter of IMU-856 and related pharmaceutical compositions. This is expected to provide protection into at least 2038 without accounting for potential patent term extension. In September 2022, we reported positive unblinded results from the single and multiple ascending dose part of our Phase 1 clinical trial of IMU-856 in healthy human subjects. The data revealed a favorable safety, tolerability and pharmacokinetic profile for IMU-856 in single and 14-day multiple dosing. No maximum tolerated dose was reached and investigated doses were expected to exceed the required therapeutic dosing of IMU-856. The results support our ultimate vision of establishing IMU-856 as a potential first-in-class oral celiac disease therapy. IMU-856 mechanism of action could present an entirely new approach to treating a significant number of serious and widely prevalent gastrointestinal diseases. And we believe it could potentially offer a clinical benefit without the serious consequences associated with many current immunosuppressive therapies. Going forward, we are on sound financial footing; having significantly bolstered our balance sheet in October with the closing of a $60 million private financing. This financing extends our runway through multiple value creation inflection points into the fourth quarter of 2024. Finally, last month, we conducted an interim analysis of our Phase 1b clinical trial of IMU-935 in patients with moderate-to-severe psoriasis. Unfortunately, the group level mean data did not show a benefit of the two active doses tested compared to placebo. Although the active arms performed in line with the prior expectations, the trial experienced a greater decrease than expected in PASI in the placebo arm. Administration of IMU-935 and placebo were safe and well tolerated and no safety signals have been observed. The trial is ongoing and remains blinded. And we look forward to a full analysis, including pharmacokinetics and biomarkers which would - which should allow us to better understand these early observations and to determine the best next steps for this key program. We plan to provide further updates in guidance on potential next steps in the first quarter of 2023. I would like to reiterate, as noted in today's release that these results - that these results both disappointed and surprised us at the same time. However, based on the totality of data available and the volume of evidence generated thus far for the potential efficacy of IMU-935, we retained a high degree of conviction that IMU-935 has the potential to be a safe, efficacious and important treatment option for patients with psoriasis and other chronic inflammatory and autoimmune diseases. Given these were only the first two dose levels of IMU-935 tested in psoriasis patients and also based on the drug's very favorable pharmacokinetic safety and tolerability profile to date, we have the flexibility to explore different parameters in future clinical testing, including higher dosing and longer treatment periods. That concludes our summary of the third quarter 2022 and recent subsequent highlights. Glenn?

Thank you, Daniel. I will now review the financial and operating results for the third quarter ended September 30, 2022. Let me start with the cash overview. We ended the third quarter with $72.8 million in cash and cash equivalents. As Daniel stated earlier, these funds, combined with the $56.4 million of net cash raised in our PIPE financing in October '22 should be sufficient to fund operations into the fourth quarter of 2024. Regarding the operating results; research and development expenses were $16.5 million for the three months ended September 30, 2022, as compared to $15.5 million for the three months ended September 30, 2021. These costs were mainly driven by external development costs related to the ongoing clinical trials, vidofludimus calcium, IMU-935 and IMU-856, and an increase in personnel expense in R&D. The increases were partially offset by decreases in external development costs related to the Phase 2 clinical trials of vidofludimus calcium in UC and RRMS. For the nine months ended September 30, 2022, R&D expenses were $50.5 million as compared to $42.7 million for the same period ended September 30, 2021. These expenses were also chiefly driven by external development costs of our three clinical programs and an increase in personnel expense in R&D. The increases were also partially offset by decreases in external development costs related to Phase 2 clinical trials of vidofludimus calcium in UC, COVID-19 and RRMS. General and administrative expenses were $3.6 million for the three months ended September 30, 2022, as compared to $2.9 million for the same period ended September 30, 2021. The increase was driven by personnel expense and to a lesser extent, by increases across numerous categories. For the nine months ended September 30, 2022, G&A expenses were $11.6 million as compared to $10 million for the same period ended September 30, 2021. The increase was driven chiefly by personnel expense and to a lesser extent by increases across numerous categories. Other expense was $1.1 million for the three months ended September 30, 2022, as compared to $0.9 million for the same period ended September 30, 2021. The increase was primarily attributable to a $1 million increase in the loss on intercompany loan between Immunic Inc. and Immunic AG as a result of changes in currency exchange rates and partially offset by currency transaction gains, interest income due to favorable interest rates and tax incentives for clinical trials in Australia. For the nine months ended September 30, 2022, other expense remained relatively unchanged at $1.8 million as compared to $1.8 million for the same period ended September 30, 2021. However, the company had a $1.2 million increase in the loss on the intercompany loan between Immunic Inc. and Immunic AG as a result of currency rate fluctuations, which was offset by gains in interest income due to favorable interest rates, currency transaction gains, increased tax incentives for clinical trials in Australia and an increase in grants. Net loss for the three months ended September 30, 2022, was approximately $21.2 million or $0.69 per basic and diluted share based on approximately 30.6 million weighted average common shares outstanding compared to a net loss of approximately $19.3 million or $0.76 per basic and diluted share based on 25.3 million weighted average common shares outstanding for the same period ended September 30, 2021. Net loss for the nine months ended September 30, 2022, was approximately $64 million or $2.16 per basic and diluted share, based on approximately 29.7 million weighted average common shares outstanding compared to a net loss of approximately $71.8 million or $3.33 per basic and diluted share based on approximately 21.6 million weighted average common shares outstanding for the same period ended September 30, 2021. With that, I'll turn the call back over to Daniel for an outlook on our upcoming clinical milestones. Daniel?

Thank you, Glenn. I would like to now provide an update on important upcoming data readouts. With respect to our leading asset, vidofludimus calcium, we continue to progress the development in multiple sclerosis, specifically our Phase 2 clinical trials in progressive MS and the Phase 3 ENSURE trials in relapsing MS continue to enroll patients. As you will recall, the CALLIPER trial is designed to corroborate the neuroprotective potential of vidofludimus calcium. If successful, this data, along with that of the ENSURE program, and vidofludimus calcium already proven strong safety and tolerability profile may allow us to draw a clear clinical differentiation for the drug versus other oral medications. Our current goal is to report data from the interim analysis of the Phase 2 CALLIPER trial in the second half of 2023 and to read our top line data at the end of 2024. The readout of the first of the Phase 3 ENSURE trial is currently targeted for the end of 2025. We believe that the design of the ENSURE trial has provided a straightforward path towards potentially - potential regulatory approval of vidofludimus calcium in RMS. Furthermore, we plan to perform an interim readout of the open-label extension part of our Phase 2 EMPhASIS trial in RMS soon. Patients treated during this trial with either 30 or 45 milligram of vidofludimus calcium over the placebo were offered to continue in open-label extension for up to nine years. We look forward to learning more about how many patients are continue in the trial and how these patients disease status has developed. Overall, we remain highly enthusiastic about the potential of vidofludimus calcium to become best-in-class therapeutic for this RMS patient population, given its demonstrated activity in preventing lesion formation as shown in our Phase 2 EMPhASIS trial in RMS and its exceptional safety and tolerability profile has demonstrated thus far. The ongoing Part C of our Phase 1 clinical trial of IMU-856 is designed to assess safety and tolerability during 28 days of treatment with 80 and 160 milligrams of IMU-856 or placebo once daily in patients with celiac disease during periods of gluten-free diet and gluten challenge. Secondary objectives comprised pharmacokinetics as well as acute and chronic disease markers, including those evaluating gastrointestinal architecture and inflammation. We expect the initial data readout in 2023. This brings us to the end of our formal presentation. Jessica, please open the call for the Q&A session.

Great. Thank you, Daniel and Glenn for walking us through the third quarter. [Operator Instructions] Our first guest today is Andreas Argyrides of Wedbush. Andreas, please unmute yourself and go ahead.

Okay, good morning, and thanks for the update and taking our questions. A couple here around 935. So number one, what are your thoughts around AbbVie's decision to discontinue their RORgamma t and the implications around the class - the RORgamma t class of therapies. How are you thinking about the future development of 935 for psoriasis? Do you think you would run a study in a more mild to moderate patients? Or do you think you might explore different inflammatory autoimmune indications like psoriatic arthritis? And then lastly, do you find 28 days would be too short of a time period to see change in secondary endpoints like disease markers, GA architecture and inflammation? Thanks.

Yes. Thank you, Andreas, for that for the question. Maybe starting with the AbbVie question. Of course, that was - so as you know, we spoke a lot about the selectivity our molecule IMU-935 has shown in tons of preclinical models and data. And we have spent a lot of time in communicating on this, because we think it's important to make sure that with 935, we believe we have solved the selectivity issue, which has been observed for other RORgamma t inhibitors or inverse agonist. And therefore, we believe that does not apply for IMU-935. And this was - we talked about that before the AbbVie decision. And I think just looking on data we have available, I think this maybe is not a lot of a big surprise to see that decision. At the end, we don't know the details about what was going on, on the AbbVie side and we don't know exactly what were the reasons for their decision. Therefore, it's difficult to comment further. Maybe, Andreas, if you take over the question on the potential to go forward on mild to moderate or arthritis psoriasis.

Yes. Andreas, this is Andreas here on our side. The - I think we strongly believe in the activity of IMU-935 based on the entirety of the data that we have from in vitro and vivo experiments. And we also believe that more of it to severe psoriasis is the right population to test this drug to get a clinical proof of concept. This is a - this has been a Phase 1 trial. And Phase 1 trial always works through dose escalation. And it's very hard to predict sometimes where you are in a dose response relationship. And so I think we're currently assessing exactly how to continue going forward. But I don't think the population is something that we would like to change. I think this is the right population to test it. And we will - as we said, I think, in the release today, we will announce more details about how we're going forward to show proof of concept here in the first quarter of next year. But I don't think it will be a change in populations to be studied. And then the third question that you had was about whether 28 days is enough to - and I think - I hope because you said gastrointestinal. So this is about IMU-935...

IMU-856.

IMU-856 sorry, Andreas, just to reiterate what I'm -

Yes, 856.

856, okay. Yes. So you asked this last question is about IMU-856, our third drug candidate that we use for the restoration of basically a bowel barrier function and the regeneration of epithelium is 28 days enough. So this is - of course, this is another Phase 1 trial, where we have the chance now to dose for 28 days. Based on - and I would say, I would agree with you that we - it would be good for some of the endpoints that dose longer. But we had decided to include all of the endpoints that we currently have in this trial including, for example, a histology assessment in this trial because previous trials has shown that you are able to show this within 14 days of gluten challenge, some change in histology. But to a certain extent, I would have to say that this is an exploratory endpoint, its chronic endpoint - like histology, I think it's an exploratory endpoint. And we hope that that gives us some first data and understand the mechanism of action and also the dose response relationship where we are here in this trial. But we also have included in the IMU-856 Phase 1 trial acute markers like IL-2 on the first day of gluten challenge, which usually is an absolute nice marker to show whether there's an acute effect of our drug on the release of this immune marker. So for sure, I think that the timing is - you could basically give us on one day. But I think this is the right - the timing that we do. So in general, I would say I think we designed it so that we can find something. But certainly in future trials, we would like to dose it longer when we have the opportunity. So this is, again, another Phase 1 trial where we're learning a little bit about the drug one piece at a time to go forward and learn with each step with new information about the right development path for IMU-856.

All right. Thanks for taking my questions.

Thank you, Andreas.

Thank you, Andreas. Our next guest is Yasmeen Rahimi of Piper Sandler. Yasmeen, unmute yourself and go ahead.

Good morning. team. Thank you for the update. Two questions for you. The first one, and can you maybe comment on sort of when you look at - and I understand the placebo is one, but lots of times you're asking us, like, can you comment whether the treatment effects that you're seeing are exceeding mean reductions of 40% in PASI, that could be helpful. And then secondly, like why 1Q - why is it going to take quite a bit of time to analyze this data? Are you just being conservative in saying 1Q and it could come maybe towards the earlier half of that, just the time to analyze it. And then I have a follow-up question on CALLIPER.

Sure. Thank you, Yasmeen, for the questions. I try to do my very best to answer. But unfortunately, I think I can't answer everything right now. First of all, I think, we - basically, the disappointment is now that there is no benefit over observed for the two doses tested over placebo. And that's our knowledge right now. We only have the mean values for the groups. And we - this trial is, going on and is analyzed further and unblinded is something which has not yet happened for initial patients and it takes time. And therefore, the guidance to give an update on where we want to go for next quarter is really based on we need to first have info data, digest and make them conclusions based on the full data set. I hope that's something which can be understood and also that, for example, includes measuring biomarkers and so forth, which is still, work currently done on a blinded fashion.

Okay. And then team on - as we head into the CALLIPER interim readout, which is based on half of the population that have finished 20 weeks of treatment, like what should we be expecting? Like help us understand in this population, what is considered a bar for success?

So this is Andreas. I hope I can answer a little bit of the question. So the interim assessment for the CALLIPER trial in the progressive MS population, we had planned to get some initial understanding of whether there's activity in this trial. The primary endpoint of this trial is brain atrophy. So it's an MRI-based measure of brain atrophy where 24 weeks is not long enough to really have a reliable measure of brain atrophy. So that's why we had to go through some biomarkers or some surrogate endpoints that can be measured more early. So that's why we decided for an interim assessment to look at neurofilament light chain and also called G-F-A-P, GFAP and basically in blood serum or blood plasma. Both are biomarkers related to neuroprotective activity or for suppression of neurodegenerative disease. I think there is a lot more evidence, of course, for neurofilament light chain in MS and most of the evidence is in relapsing MS. This is progressive MS. But there's also some indications that you see an active therapy in progressive MS. Make sure also a - an inhibition of a neurodegenerative activity as measured by neurofilament light chain. There's less evidence than in relapsing MS. But there is initial data that this could be a good biomarker for progressive MS as well, although that's still under discussions probably by some experts. GFAP is another emerging biomarker. So there's much less evidence for that. But it is very much discussed as probably a biomarker for the progressive MS population, where there is really no major inflammatory activity. And that's, I think, where we also wanted to get some understanding that in our patient population, we see a difference in GFAP for basically placebo and the 45-milligram of IMU-838. So these are the two biomarkers that are more surrogate endpoints and where I think there's emerging evidence that they are useful in the progressive MS population. And please understand, Yasmeen, the progressive MS population is underserved. There have been less trials done in this population than in relapsing MS population. And so maybe the entirety of the evidence for these biomarkers is not yet there as a relapsing MS. But we believe that there's a good chance that they can also be used in progressive MS these 2. And then we have some functional readouts that we'll also look at for the MS population, which also is probably a little bit more exploratory, whether these functional outcomes may provide early in the trial, which I think 24 weeks is relatively early for treatment of these progressive MS patients. You already begin to see a trend that there's a difference in these functional readouts. I think this is also more on the exploratory side, which would give us an early indication that there's activity in this trial. And that's the interim analysis was designed to really give us an initial early indication that there is activity in this trial. And that was the purpose of this interim analysis.

Great, thanks.

Thank you, Yas. The next question will come from Matt Kaplan at Ladenburg. Matt, please unmute yourself and go ahead.

Thanks Jessica. Good morning. Just wanted to, I guess, with your nearest term readout kind of zeroing on the RMS EMPhASIS Phase 2 open-label portion. What are we looking for in that interim and what would be a positive sign there?

Hi, this is Andreas. Thanks for the question, and yes, so I think this open-label portion of this Phase 2 trial in relapsing-remitting MS patients was really designed to look at the long-term safety. And it allows us to have long-term safety data available with several years of treatment in patients with relapsing MS when we file for the approval, the NDA for relapsing MS. And so this is the major driver of this open-label portion. And we're very fortunate that of the patients that enrolled in the EMPhASIS trial, the vast majority is still on treatment and continues on treatment. And so we have the luxury that we really see the long-term safety data from these patients. So this is the major - the purpose of the interim analysis. The other, I think, possibility is to look at certain outcomes of these patients. So because of, for example, how disability develops over time and this is also captured in this interim analysis and which would be maybe an additional readout that we can report. But here, you have to understand, there's no longer a placebo control, of course. So this is all basically treatment. But you can compare to maybe the development of disability in other trials that you have seen in a very similar population. But I think that's the two major outputs that we expect from this interim analysis.

Okay, great. Thanks. And then, just going back to 856 here, the Part C cohort in celiac patients. In terms of the gluten challenge and what you're looking for there, beyond histology, can you help us understand in terms of some of the endpoints for the gluten challenge and what you're anticipating to see there?

So yes, so that's - in principle, these are either acute or chronic markers that are related to celiac disease. So gluten challenge is known to have an acute activation of certain immunology markets like IL-2 and that can be done within hours of starting a gluten challenge. So that's something that is a reliable immunology market that has been used in many settings in these gluten challenge settings. And again, this is on the first day of gluten challenge. And then there's more chronic markers that relate more, I think, to the nature of the disease where gluten actually damages the epithelial lining of the bowel over time. That's probably also the major disease issue for these patients that they're suffering from. And this is a little bit harder to capture maybe in a 28-day study. But I think what we're looking at is basically a biopsy at the beginning of the trial and at the end of the trial, where we can see the difference in the histology markers - the established histology markers for celiac disease. And maybe also look at some of the immunohistochemical markers in that biopsy. And as I explained before, I think this is something that we hope that it gives us an initial readout between IMU-856 and placebo. And based on historical data, I think that may be possible. But I think for a treatment of - a true treatment of celiac disease, the 28 days is probably too short. But I think this Phase 1b trial was really designed to look at a proof of concepts here and also to understand a little bit where we are in the dose response relationship. And for that, I think both the combination of acute and chronic markers, I think, are a good choice to my mind.

Okay. Thanks. It's very helpful.

Thank you, Matt.

Thank you, Matt. [Operator Instructions] The team around SVB Securities with Tom Smith submitted their questions in writing. So I'm more than happy to read them. The first one is around AbbVie again. Regarding the recent discontinuation of AbbVie's RORgamma inverse agonist ABBV-157 due to findings in a preclinical chronic tox study, any retro for IMU-935 and what are the differentiations between IMU-935 and ABBV-157. Have you synthesized that compound? And do you have any specific hypothesis for what the signal may have been.

No, I think thank you SVB team for the question. I think it's important to reiterate that, first, we don't know exactly what they found because they didn't disclose it. So we're guessing a little bit here. So we are guessing that this is maybe in line with some other companies have seen in looking in more detail on an impact of those drugs on the maturation of MS. And as I already mentioned earlier, I think we didn't see that in our test. So we really have shown 935 is superior on the selectivity with that respect. So therefore, our conclusion is basically that's not unexpected. And of course, we reemphasized the molecule. But that is something which we can't compare here in the public and just base guesses here and speculate how that is related to the data and the decision that made by AbbVie. So I think that's all we can say for now. I would be interested in getting learning more about what they have seen in their studies.

The SVB's second question is, what do you suspect could be - again, what do you suspect could be driving the outsized placebo response rate observed in the interim readout of IMU-935? What additional data are you going to have with the IMU-935 update in 1Q?

Of course, I'm going to hand over to Andreas. It's still a guessing. I think as I said a couple of times and it's, of course, something we work to really address as quickly as possible. We still have only group level data. So we can't really look into detail on individual patients on sites, for example, how the data is there specifically and to conclude from that. So we just so far only have the group level unblinded data, which limits our access to the full dataset.

Yes. And I think I can only say, of course, we have hypotheses what could contribute to this. And I think we have an extremely well-experienced and recognized medical advisory board for psoriasis that we also had discussions with, of course, now. And they gave us also some of their hypotheses. And unfortunately, for some of them, we have to wait until we have the unblinded data to really test these hypotheses against the data. And of course, that's in full, I think we're in full exploration mode to make sure that we really dig in and understand this because going forward, we would like to eliminate some of these factors that may have contributed to this placebo response because we believe in the activity of this drug and we believe that we can show activity in this drug. And that I think - but we have to kind of wait a little bit to test our hypothesis against the actual unblinded data, unfortunately.

Okay. And third and final question from the SVB team is, what's the latest on IMU-935 and mCRPC?

What is the latest and greatest what - I'm sorry.

In mCRPC.

Okay. So I think we have - this trial is ongoing now for the last probably nine months or so. We have several dose cohorts are now done. And basically, this is in a dose escalation phase, where we test how far we can increase the dose without reaching dose-limiting toxicity. And so - and that's why I think it's a little bit limited in terms of what we can say about this trial at the moment because it's more or less targeting the dose escalation part at the moment. And I think what we have seen is that we can increase the dose without running in a major way without really running into dose-limiting toxicity at this point.

Yes. And we have already announced that we completed the 600-milligram dose escalation. So we - the next level is 900 milligram. So that's may be the stage that we are right now.

Great. Yes. I think given we have no more open questions, this concludes our Q&A session. I would like to turn the webcast back over to Daniel for any closing remarks.

Yes. Thank you, Jessica, and thank you to today's attendees for your insightful questions. As a final remark, I would like to mention that we look forward to discussing our MS program, recent scientific findings and the unmet medical needs with renowned key opinion leaders at our upcoming multiple sclerosis R&D webcast on Thursday, November 17, 2022. If you have not received and saved the date for this event, please contact us as soon as possible. Jessica will also provide a detailed invitation with further information closer to the event. With that, I would like to close today's call. Again, thank you very much for joining. And we are very happy to answer any additional questions one on one.