INMB - NASDAQ

Good day and welcome to the INmune Bio First Quarter 2023 Earnings Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please note today's event is being recorded. I would now like to turn the conference over to David Moss, Chief Financial Officer. Please go ahead sir.

Thank you, and good afternoon everybody. We thank you for joining us for the call for INmune Bio's first quarter 2023 financial results. With me on the call is Dr. RJ Tesi, CEO of INmune Bio; and Dr. Mark Lowdell, Chief Scientific Officer of INmune Bio who will provide an update on INKmune, our memory-like natural killer cell oncology platform. Before we begin, I remind everyone that except for statements of historical facts, the statements made by management and responses to questions on this conference call are forward-looking statements under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that can cause actual results to differ materially from those forward-looking statements. Please see the forward-looking statements disclaimer on the company's earnings press release, as well as risk factors in the company's SEC filings including our most recent quarterly filing with the SEC. There's no assurance of any specific outcome. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made as the facts and circumstances underlying these forward-looking statements may change. Except as required by law INmune Bio disclaims any obligation to update these forward-looking statements to reflect future information events or circumstances. With that behind us, now I'd like to turn the call over to Dr. RJ Tesi, CEO of INmune Bio. RJ?

Thank you, David, and thank you everyone for joining the call. I will arrange my remarks to highlight the key takeaways for the first quarter and the subsequent period and also provide updates on our platform programs. I will start by reviewing developments in XPro, with XPro, the DN-TNF program and then hand the call to Mark Lowdell, our CSO who will speak about the developments in INKmune, before I pass it back to David to discuss financial results and provide an update on upcoming milestones. Then we will move to Q&A. During the first quarter, our primary focus has been to accelerate recruitment into our international blinded randomized Phase 2 trial in patients with early Alzheimer's disease. We are working to develop the infrastructure needed to expand the number of clinical trial sites in Canada, engage in enrolling patients along with adding regulatory jurisdictions beyond North America. In Australia, we continue to see patients opting to continue treatment after the Phase 2 program and joining the Phase 2 open-label extension program. Although, frustrated by the clinical hold, we remained -- we continue to move forward with the blinded randomized Phase 2 trial in patients with early ADi. And we have reached an understanding with the FDA regarding what is needed to lift the clinical hold and are on track to meet those commitments before the end of the year. Although, the FDA hold has affected the pace of enrollment of patients into the clinical trial, there have been tangible financial benefits. David Moss, our CFO will provide more detail shortly. But because of a meaningful portion of the trial thus far has occurred in Australia, we have received a sizable research and development rebate in February and expect to continue to receive additional rebates as we continue to invest there. These rebates significantly lowered our cash burn in the first quarter to roughly $1.2 million. On our last call we announced a change in the scope of the Phase 2 program in patients with ADi. As a reminder, ADi is Alzheimer's disease in patients with biomarkers of inflammation, our target population that is about 50% at least of patients with Alzheimer's disease. Based on new data and a desire to streamline the clinical operations of the trial, we combined the two blinded randomized Phase 2 trials into a single program. Originally there was a trial in mild ADi patients and a trial in MCI patients. MCI is mild cognitive impairment the prodromal Alzheimer's disease syndrome. These are now combined into a single trial of early ADi that includes both mild ADi and MCI patients. This format has not compromised the trials, but is a benefit. Consolidation of the mild ADi and MCI patients into a single trial improves the probability of success comes with significant cost savings conforms with the industry standard and aligns the program with the expected design of a pivotal Phase 3 trial. This change is not easy but the complex regulatory process is beginning to bear fruit. Once fully implemented the pace of enrollment should increase in Australia and Canada and should energize enrollment in newly-added regulatory jurisdictions. Currently the Phase 2 is a blinded randomized placebo-controlled study in early AD patients with biomarkers of inflammation that uses a validated measure of cognitive function as the primary endpoint. The Phase 2 is a test run for a pivotal trial. And based on data from the Phase 1 trial our goal is to stop cognitive decline. That is we don't want to just decrease the rate of cognitive decline we want to stop cognitive decline in patients that received XPro. Patients who are treated with XPro in this trial are treated for six months. After that six-month period the patients are offered the opportunity to enroll in a 12-month open-label extension trial. The open-label extension trial is a 12-month study where safety and efficacy of the XPro treatment in patients with early ADi will continue to be evaluated. Efficacy will be assessed every three months by MRI and clinical rating scales. All the patients that enroll in the open-label extension received XPro regardless of previous treatment assignment. The open-label extension serves multiple purposes. First, it provides long-term safety data. We believe the regulatory authorities expect 18 months of safety data for marketing authorization. The open-label extension strategy will provide this critical safety data. Second, the open-label extension provides long-term efficacy data. Finally, the open-label extension is a recruitment tool, guaranteed access to 18 months of treatment following a six-month study provides significant advantages to patients and their clinical teams. So far participation in the open-label extension is high and the clinical teams are enthusiastic. We expect to share some data in due time. We signaled our interest in the use of DN-TNF, our dominant negative TNF platform for the treatment of Duchene's Muscular Dystrophy or DMD. As highlighted in the January 25th press release, we established DN02 Inc. a separate wholly owned subsidiary that will hold the intellectual property needed to facilitate partnering and business development activities for treating DMD with our dominant negative TNF compounds. This structure allows us to focus on our core mission, which is the treatment of Alzheimer's disease without leaving a valuable asset on the shelf so to speak. Our confidence in a DMD treatment is based on pre-clinical data. The ticket for entry into DMD as a therapy is that it must decrease inflammation in the muscle and decrease muscle fiber destruction. In the animal models DN-TNF does this and more. The most interesting and novel attribute is that DN-TNF treatment promotes muscle fiber regeneration. To our knowledge muscle fiber regeneration has not been seen in any small molecule, biologic or gene therapies being tested to date. A therapy that promotes muscle fiber regeneration may change the course of the disease in these boys. Some of you are wondering why we are promising -- promoting a biologic therapy at the dawn of the gene therapy era in DMD, the answer is simple, gene therapies may work but the durability of the therapy and who will benefit is unknown and complicated. Furthermore, we suspect gene therapies may benefit from an anti-inflammatory boost that also has regenerative medicine effects. Today most patients are treated with corticosteroids, a time worn and dangerous standard of care. Corticosteroids slow the progression of DMD but at a price. Most of the metabolic and cosmetic problems in boys with DMD are related to corticosteroid use. The only benefit of DN-TNF therapy is to replace corticosteroids. It is a big win for patients who currently suffer from insulin-resistant diabetes, obesity, cardiovascular disease, short stature, hirsutism and muscle weakness due to the promiscuous use of corticosteroids to treat the disease. Like the DMD program we use MBO3, our cancer program using a DN-TNF compound as a partnering program. I don't need to tell dedicated biotech investors the oncology drug development space is changing. Typically innovation in cancer therapy comes in two forms; development of new therapies or the better use of existing therapies. Inventing new drugs is hard and the number of unclaimed pathways in cancer therapies are few. Although MBO3 acts as an innate immune checkpoint inhibitor, it is ideally used as part of combination therapy to make existing drugs better. We are focused on using MBO3 to treat MUC4 expressing cancers to decrease resistance to existing therapies such as in HER2, immune checkpoint inhibitors and tyrosine kinase inhibitors. Adding MBO3 to the therapeutic cocktail treating MUC4 positive cancer should improve patient survival. Our goal is to find a partner for MBO3 to allow this promising asset to benefit patients and allow INmune Bio to focus on our core mission, the treatment of Alzheimer's disease. I will now move to INKmune, our memory-like Natural Killer Cell Priming program and pass the call to Mark Lowdell, CSO to describe this in more detail. Mark?

Thank you, RJ, and thank you all for joining this call, and I'm looking forward to your questions later. So in early April, we took our first INKmune clinical expansion step towards the treatment of solid tumors via the filing of an IND for the use of INKmune to treat patients with metastatic castration-resistant prostate cancer and in the US. The filing was supported by our positive preclinical solid tumor data in prostate, renal cell carcinoma, ovarian cancer and indeed nasopharyngeal cancer, all tumor cell lines, which are resistant to natural killer cell killing. The prostate cancer trial is expected to take place at four or more medical centers in the US and it uses a bayesian optimal interval Phase 1/2 trial design. The trial is expected to enroll up to 30 patients and along with safety the open-label trial will evaluate tumor progression using traditional efficacy endpoints with disease burden PSA and CT scans as well as non-traditional measures of disease burden ctDNA and 18F-PSMA PET scans. So by the end of this open-label trial we will understand firstly the safety of INKmune in this new patient population, the dose to be used in a subsequent blinded randomized pivotal trial and have some indication of the ability of INKmune to control disease in patients with metastatic prostate cancer. We're excited about the potential of INKmune as we expand into the treatment of solid tumors. These are those, which account for approximately 90% of human cancers. The challenges of treating solid tumors are considerable and it's understandable that most cellular immunotherapies have focused on the 10% of cancers that are hematological tumors. So what is it about INKmune, which leaves us to believe it can treat solid tumors? The microenvironment of solid tumors is hypoxic and contained immunoregulatory cells, which inhibit T cells and indeed NK cell function. INKmune not only primes the patient's own natural killer cells to override the immunosuppression of hypoxia and the regulatory cells in the tumor microenvironment, it induces differentiation of the NK cells into a memory-like phenotype. This memory-like phenotype NK cells are not susceptible to the immunosuppressive signals from cancer cells and they express proteins on their surface which protect them for exhaustion and senescence. Uniquely, these memory-like NK cells secrete a protein which can remove inhibitory signals from tumor cells and at the same time, increase the strength of the bond between the NK cell and the cancer cell. All of this occurs even in extreme hypoxia. I presented most of these data at the Innate Killer Summit in Europe last year and a video of the presentation is currently available on the company's website under the therapies tab INKmune videos or via the company's YouTube channel. Meanwhile we continue to treat patients in the MDS/AML Phase 1 trial and have recruited the first patient to the second UK clinical site and opened our first site in Mainland Europe. Four UK patients have received a complete three-dose regimen so far and INKmune therapy has been safe at the dose tested. Indeed the fourth patient to be treated received INKmune on an outpatient basis, which is our planned treatment scenario for the prostate cancer trial in the US and it's a world away from the days of hospitalization associated with most current cell therapies. Through the four patients with hematological cancer treated so far have shown evidence of NK cell activation. And we're analyzing the biomarker data, to identify those, which could best predict outcome. Of the four patients treated, one remains alive 20 months post-treatment and has enjoyed a much improved quality of life with fewer hospital visits. Two patients were bridged to transplant, although sadly one died while waiting for a suitable stem cell donor. So whilst very early in the clinical trials of INKmune and being restricted to using the lowest dose at this stage, the trial chief investigator who's treated the four patients with hematological disease stated, and I'm quoting him here, all enjoyed an improvement in general fitness with resolution of fevers stabilized or even improved blood counts and we were able to give brakes from the low-dose chemotherapy they had been receiving. Definite improvement in subjective parameters of well-being, mood, appetite and clinical performance status. The clinical experience was presented at the American Society of Hematology in the annual conference in New Orleans last December. Now in preparation for the increased recruitment into the Laurel MDS trial, and the opening of our new trial in metastatic castration-resistant prostate cancer. The company has invested in upscaling the manufacturing process of INKmune and the validation of that new process to cGMP is now complete. This increases capacity and reduces costs substantially. The new manufacturing process forms the basis of the current IND application to the FDA. And this investment paves the way for our ambitious plans for trials in other solid tumors including ovarian cancer, renal and nasopharyngeal cancer, as we acquire the relevant supporting data from my R&D team. Thank you fellow INmune shareholders for the trust you've instilled in the company and for the opportunity to provide you with this update on the INKmune platform. I look forward to speaking to you again in the next quarterly call in three months. RJ over to you?

At this point I'd like to turn the call over to David Moss, our CFO to review certain financial terms. Thank you.

Thank you, RJ and Mark for the update. I'll provide a brief overview of our financial results and upcoming milestones, before we head to our Q&A session. Net loss attributable to common stockholders for the quarter ended March 31, 2023 was approximately $6.5 million compared with approximately $6.9 million for the comparable period in 2022. Research and development expense totaled approximately $4.1 million for the quarter ended March 31, 2023 compared with approximately $4.3 million for the comparable period in 2022. General and administrative expense was approximately $2.3 million for the quarter ended March 31, 2023 compared with approximately $2.3 million for the comparable period in 2022. At March 31, 2023, the company had cash and cash equivalents of approximately $51 million. Based on our current operating plan, we believe we – our cash is sufficient to fund our operations through 2024. As of May 3, 2023, the company had approximately 17.9 million shares of common stock outstanding, the same number as the last two quarters. As RJ previously mentioned, we continue to focus on achieving our primary clinical trial objectives while remaining cost prudent. To reiterate, a key cash management point highlighted in the Q4 call, the previously-announced consolidation of the AD and MCI trials will reduce overall previously-forecasted budget outlays, for the two combined trials by approximately $8 million. Further, as we continue to dialogue with the FDA, our budgeted spend in the US is not occurring as forecasted thus resulting in less capital outlays. As highlighted in both the specific press release and the Q4 call, we expect to continue to receive further cash rebates as we spend on international trials based particularly in Australia. In sum, these events and actions along with longer-term strength of the US dollar reduced our base currency costs in foreign jurisdictions such as Australia, have significantly reduced our expenses with the first quarter to roughly $1.2 million cash burn. We are particularly pleased with our progress, during the quarter on all fronts and all of the aforementioned items, better position us to manage our cash runway more efficiently to reach our targeted goals of recruitment. Now I'd like to move on to our list of upcoming important milestones. Top line results for our Phase 2 early Alzheimer's disease trial in patients with inflammation in Alzheimer's disease, is expected in the second half of 2024. We will initiate a Phase 2 trial of XPro, in patients with treatment-resistant depression, upon resolution of the FDA manufacturing review. Additional open-label Phase 1 trial data of INKmune in high-risk MDS/AML in 2023. Initiation of a Phase 1/2 program in metastatic castration-resistant prostate cancer, upon the acceptance of the IND by the FDA which should occur in the first half of 2023. Finally, as RJ had mentioned, we are pursuing business development opportunities and there can be no assurance that the company can complete any of the transactions, as they are complex and difficult. We have two platforms and as a small company, we will try to expand the applications of these platforms in areas, we do not have the resources or expertise to pursue ourselves in order to benefit shareholders. Naturally, we will update investors should material business developments occur. In summary, we are pleased with our progress during the quarter, continue to overcome obstacles and are grateful for our shareholders' trust and support in our company, as we continue to work hard to bring value to our -- from our platforms, by carefully managing our shareholder resources. At this point, I'd like to thank you for your time and attention. I'd like to turn the call back to the operator, to poll for questions.

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Today's first question comes from Tom Shrader with BTIG. Please go ahead.

Good afternoon. Thanks for taking my questions. I actually have a question first for Mark. One of the biggest surprises in I/O is that it works with chemo. Do you have any sense of your approach? Do you have preclinical data? Does chemo get the immune fires burning -- or does it just kill your cell propagation? Do you know, yet?

Mark?

All right. I guess, it's a bad question.

Let's see, if we can fix the thing and then we'll come -- there he is.

Yes, sorry, I was muted. Yes, it's a great question. It's not something that we can test in vitro and the animal models for INKmune don't really exist outside of a non-human primate. But you're quite right. And my biggest fear is the effect of chemo on the NK cells in the patient. And, obviously, we need endogenous NK cells to respond to the INKmune. The trick is to target diseases where there are a lot of NK cells even in the setting of chemotherapy and that prostate cancer is one of those. So that's one of the reasons we've gone down that route.

Okay. And then, kind of, I think an obvious one for RJ. It looks like the Abeta antibodies are here to stay. How do you think about developing a drug that's quite different in the presence of what is probably going to be a piece of the treatment landscape? Just your interest -- your initial thoughts as you think about your timing and where that treatment paradigm is likely to be when you are reaching the market. Thanks.

Yes. Good question. And, obviously, we think about this a lot. I mean, we now have two pivotal trials using anti-amyloid therapies. They gave consistent results. And I think the best way to describe it is, if I may paraphrase Lilly's leadership today is, these drugs may stall progression for six or seven months. Although, we don't know everything about the Lilly trial, we'll learn more at AAIC in July, I believe we understand the benefits and liabilities of this class of drugs. But I think there's three main issues and this is where opportunities exist. I don't think delaying progression is not where -- is where we need to be. It's a start, but I believe we need to stop dementia in its tracks. And so, I think that we can do better for sure. I personally and I think many in the field are confused by the safety profile of these drugs. What will happen when amyloid drug gets in the hands of community neurologists? Why does the brain volume continue to shrink? These are answers to questions that are needed. I'm sure we'll get them over time. But the safety issues are real and this is a fragile population that you're treating. And then, finally, what happens with patients that progress on the anti-amyloid drugs. I mean the majority of patients continue to progress. I mean, Lilly has built a total program around stopping the drug when you get below a certain threshold of amyloid. If patients progress what do you do? And I think this is where combination or sequential therapy will be needed. And that will play very well to XPro. So, I actually believe that there's a lot of opportunity for XPro in the space, either as therapy alone or part of combination or sequential therapy. Five years from now treatment of amyloid -- treatment of Alzheimer's disease is going to look a lot like the treatment of cancer. Therapy will be personalized, where drugs are used to fit the needs of an individual patient. We believe this is good for us. As you know we focus on biomarkers and those biomarkers dictate who get benefit from XPro and who -- what that benefit looks like. But let's be real. Well done to Lilly, kudos. They had a great result. Today's news is great for patients, it's great for Alzheimer's and it's great news for INmune Bio. So thanks for the question, Tom.

Sure. Thank you.

Thank you. [Operator Instructions] Our next question comes from Daniel Carlson with Tailwinds Research. Please go ahead.

Hi, guys. Thanks for taking my questions. Just a couple here, first off, can you talk a little bit about the timing of the IND for prostate?

Yeah. So actually I'm sitting here on pins and needles. I mean, if you guys do the math we're supposed to hear this week, I can honestly say, as of two seconds ago when I checked my e-mail we have not heard, but it will be this week. And so you will learn probably early next week where we stand on that. I will say, that we had very -- what's the right word, very vibrant dialogue between the FDA and the manufacturing team led by Mark, the clinical team led by me on the IND which is a sign that at least they're reading it. So all I can say is, it's -- you're going to -- I can -- you're going to hear one way or the other next week for sure, for sure.

Awesome. And then about the patients on the extension trial, I know you're going to come out with data at some point to be determined. But I'm wondering, if there's anything you can sort of say tangentially about what you're seeing from the patients there.

So the problem with the extension trial is we don't know what they were on coming into the trial. And we're kind of struggling -- we haven't yet figured out what this looks like, because you've got two out of three patients come in having had six months of XPro, one out of three come in having had placebo. So what happens in the first three months or so, based on the Phase 1 trial is going to be meaningful. So, we're trying to figure out, how to unravel this in a way that we can provide meaningful data to you guys so we can understand it, also not compromise the blinding of the trial. So it's a little bit – obviously, it's a little bit complicated until we un-blind it, but we'll get to something when the time is right and we make sure one, we're not compromising the blinded randomized Phase 2. And two, we can make accurate statements that aren't going to confuse down the line. So…

Got you. Got you. And then, the last question for me, just you guys talked a fair amount about DMD. So I'm just wondering if you can sort of give us any input into how the partnering process is going. Anything you can add there?

Yeah. So David is running the -- he now wears the hat of both CFO and business development, so I will let him answer this question. Please David.

Thanks RJ and thanks Dan for the question. Best thing I can do is tell you exactly what I said on the call Dan unfortunately, I just said, we'll update you on it. I think that the industry right now is on pins and needles to see what happens with Sarepta which is going to happen this month. And then, based on whatever direction happens I think it will be a very good time for INmune to have a number of conversations with all of the key players in the industry. We're pretty excited about the data that we've generated thus far. We have a little bit more data that's to come. And we will update you accordingly when we have something material to talk about.

All right. Great. Look forward to that. Thank you. Thanks guys. Keep up the good work.

Appreciate it Dan. Thanks for your patience.

Thank you. And our next question today comes from Jason McCarthy with Maxim Group. Please go ahead.

Hi. This is Chad on for Jason. I was just wondering, if you could expand a little bit on the importance of the biomarker directed imaging as it relates to the prostate program?

Yeah. Thank you. I mean, we actually -- and this is really Matt Rettig talking. I mean, you'll get a chance to hear from him directly. He's our PI. He's the head of Geo Oncology at the UCLA University and Cancer Center. But he's really one of the leaders in clinical trials in prostate cancer in the US. And the key element is the F-18-PMSA scan developed by Lantheus. This is a very sensitive assay. Now, as you know, prostate cancer has a good biomarker with blood PSA. But blood PSA doesn't give you as clean a look at tumor volume. And the PSMA scan, it's a nuclear medicine scan, is very sensitive at letting you really quantify tumor volume much more accurately than either CT scan, or the traditional bone scan. So we think that this is going to be the future of this disease. We're not alone. I'm sure you'll hear this from Matt – Professor Rettig when we -- you get a chance to speak with him, which will hopefully be very soon. But the bottom line is, as we've done with Alzheimer's, as we've done with the Laurel scan in MDS, biomarkers are the key to how we select these patients and follow their response. And we -- and one of the reasons, we selected prostate cancer is our first foray into solid tumors, as we think that the biomarker show a tools or the -- that we have at our disposal will allow us to really know whether we're seeing effect after 6 months of therapy.

Great, great. Thanks for taking the question.

Thank you. And ladies and gentlemen, this concludes our question-and-answer session. I'd like to turn the conference back over to Dr. Tesi for any closing remarks.

Yeah. So thank you for listening to the call. I mean, we grow more excited about our lead platforms every day. As you know, Alzheimer's and INKmune are both novel strategies that have risk and reward. But the bottom line is that, we are targeting neuroinflammation, which is now recognized as an important part of CNS pathology. And NK cells, at least the way Mark goes after them is novel. And in fact, if you listen to what he said closely, you know that he has been hard at work on the R&D front, and he ascended it new findings on how INKmune works, and he will explain these once we get the IP in place. And finally, today, I think we really want to emphasize that we really have a two-pronged approach at INmune Bio. One is that we focus like a laser on our core missions in XPro in CNS and INKmune in solid Boomers. And secondly, we have this business development effort or partnering effort ongoing because we have valuable assets that we don't want to waste so to speak. We are looking to find partners for these assets to allow their development to benefit both the patients and INmune Bio shareholders while providing non-dilutive capital for the development of our core assets. So, thank you for listening, and thank you for your continued support. Goodbye.