Hello, and welcome to Aerpio Pharmaceuticals’ Second Quarter 2020 Earnings Conference Call. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to turn the call over to Gina Marek, Vice President of Finance. Please go ahead..

Good morning, and thank you for joining us for Aerpio’s second quarter 2020 earnings call. Joining me on the call today from Aerpio is Joseph Gardner, President and Founder. This morning, Aerpio released financial results for the second quarter ended, June 30, 2020.

If you have not received the news release or if you would like to be added to the company’s distribution list, you can do so on the Investor Relations page of our website at aerpio.com. I’d also like to remind you the remarks made on the call today include forward-looking statements about Aerpio.

Such statements may include, but are not limited to, those related to Aerpio and its business and its product candidates, including razuprotafib also called AKB-9778, ARP-1536 and the bispecific antibody asset; the clinical development plan therefore and therapeutic potential thereof.

Our plans and expectations with respect to razuprotafib and the development therefore and therapeutic potential thereof; in addressing COVID-19 and the intended benefits from Aerpio’s collaboration with Gossamer Bio Inc. for GB004.

Each forward-looking statement is subject to risks and uncertainties that could cause actual results and events to differ materially from those projected in that statement. A more complete description of these and other material risks can be found in Aerpio’s reports filed from time to time with the SEC.

Aerpio does not undertake any obligation to update publicly any forward-looking statement, whether as a result of new information, future events or otherwise. I will now turn the call over to our President and Founder, Joseph Gardner.

Joseph?.

Good morning. This is Joseph Gartner, President of Aerpio Pharmaceuticals. I am very pleased to share an update on our 2020 progress with our investors.

As announced previously, we started our Phase II trial of a topical ocular formulation of razuprotafib in glaucoma, for which we expect top line results by the end of year 2020 ahead of the earlier guidance we provided. As announced on June 24, we have over 20 clinical sites actively screening patients for the trial with a target enrollment of 195.

We now have 170 patients enrolled, including those in the 28-day washout period and those in the drug treatment period. Based on these results, we are well on our way to meet our target of 195 patients completing the 28-day drug treatment regimen. We expect – and we expect the trial to be fully enrolled by October.

Our investigators have been extremely enthusiastic to return to their practices after the lifting of the COVID quarantine in large regions of the country.

And they are very interested in working with an agent that has a novel mechanism of action that lowers the resistance to fluid outflow via Schlemm’s canal, thereby lowering intraocular pressure, which I will refer to as IOP.

Notably, this IOP lowering signal was seen in two sequential Phase II studies with a subcutaneous formulation of razuprotafib in ocular normotensive patients, who had diabetes. As stated above, we remain on track to report top line results from this Phase II glaucoma trial in the fourth quarter of 2020.

You may recall that we opted to progress into Phase II after a highly encouraging result in a small Phase I trial for 43 glaucoma patients who had baseline interocular pressure ranging from 27 to – 17 to 27 millimeters of mercury at a 1.58-millimeter mercury incremental reduction in the diurnal IOP on day seven when razuprotafib was added once-daily on top of existing standard of care prostaglandin therapy.

Our product candidate was associated with a statistically significant reduction in IOP on top of standard of care prostaglandin. And these effects were not only clinically meaningful, but deemed to be potentially best-in-class for adjuvant therapy by our clinical advisers.

Equally important, the data suggested a favorable tolerability profile for a topical drug candidate, including low incidence of hyperemia or red eye and no systemic safety concerns. So the tolerability profile of razuprotafib is a clear differentiator in today’s market. At this point, I want to switch gears to our COVID program.

We are also making progress with our subcutaneous formulation of razuprotafib in the I-SPY trial for the treatment of acute respiratory distress syndrome, or ARDS, in COVID-19 patients.

The I-SPY COVID-19 trial is a platform trial run in collaboration with an outside network of investigators, which includes four active drug arms and a control remdesivir arm.

Aerpio’s razuprotafib was one of the four product candidates selected to be in the trial and the only candidate from a biotech company as the other three candidates are from major pharmaceutical companies.

The goal of the study is to identify agents that will result in substantial improvements to the clinical condition of participants with critical COVID-19. Patients to be enrolled are classified as critical because they are already either on high flow oxygen or incubated on a ventilator.

To learn more about this study and its design, please feel free to look up razuprotafib on www.clinicaltrials.gov. Now in addition to the I-SPY trial on August 4, 2020, we announced funding of up to $5.1 million from MTEC, the medical technology enterprise consortium funded by the U.S.

military to initiate a second clinical trial with razuprotafib, which is designed to assess its potential to prevent the acute respiratory distress syndrome in patients with moderate to severe COVID-19 symptoms.

The MTECH trial is a stand-alone study managed by us at Aerpio that will evaluate earlier stage patients, i.e., moderate to severe COVID-19 patients. These patients are presenting prior to requiring high flow oxygen or incubation.

The endpoints will include proportion of subjects alive and respiratory failure free at day 28, also the length of hospitalization from baseline to day seven and the length of hospitalization from baseline to day 28 or death. Trial startup activities are progressing rapidly.

The two trials are complementary as they will assess razuprotafib across a range of disease severity in COVID-19 patients, potentially demonstrating the ability to prevent the ARDS in moderate to severe patients and/or treat ongoing respiratory distress in the critically ill patients.

The two-trial approach will optimize our ability to determine how to best utilize razuprotafib to potentially save lives in patients with COVID-19.

As background, the key COVID binding receptor is the ACE2 receptor, which has been widely published, which is expressed on both pulmonary epithelium and endothelial cells, indicating that both tissues are disease targets for the virus.

Our scientific hypothesis about razuprotafib is that restoring Tie2 activation enhances endothelial cell function and vascular stability to improve outcomes in COVID-19 by preventing the vascular leak of both the fluid and the inflammatory cells into the lung.

The vascular stabilization provided by razuprotafib may potentially prevent or ameliorate the devastating respiratory distress that these patients often experience.

Outside scientists have conducted significant preclinical work to demonstrate that Tie2 is expressed in the vasculature in the lung, and we believe that active Tie2 is essential for maintaining endothelial cell function and vascular stability in the lung and throughout the rest of the body.

Now fortunately, Aerpio currently has the financial resources to support the completion of these clinical trials with the cash and cash equivalents of $44.9 million as of June 30, 2020. Gene will provide more details on the financials at the end of this call. Now I will discuss the market opportunities for razuprotafib.

We believe that glaucoma is an attractive commercial opportunity. As many of you know, glaucoma is a serious eye condition affecting three million patients in the U.S. We estimate that the dollar value of the total global market for adjuvant therapies is greater than $3 billion.

Simply capturing one third of that market could produce a $1 billion product. If our drug is truly disease-modifying, as we expect, then the market share could go significantly higher. More background on the glaucoma market is provided in our 10-Q filing.

Based on published Science, supporting the role of Tie2 in the maintenance of Schlemm’s canal, we believe that razuprotafib has the potential to become the first disease-modifying therapy for glaucoma. And we are very enthusiastic about this opportunity for our shareholders.

Now in addition to glaucoma, the opportunity to address the ongoing COVID pandemic with a unique treatment that may render the disease less lethal could be profoundly important to patients, their families and simultaneously, a significant source of value to our shareholders.

The outside thought later support we have received has been remarkable, with both the I-SPY network and the U.S. military supporting our programs. This third-party validation is critical in helping us move forward as we are treating a new disease with a novel biological mechanism. We expect to announce progress on both trials in the first half of 2021.

Positive results will have a beneficial impact on the company and our shareholders and hopefully, will transform how these patients are treated. As reported previously, Aerpio has pioneered the field of Tie2 activation by developing both small molecule and antibody drug candidates that activate Tie2.

Tie2 is a receptor tyrosine kinase, uniquely expressed in vascular endothelial cells in all vasculature and is also expressed in Schlemm’s canal in the front of the eye. We have learned over the years how Tie2 activation stabilizes vasculature in a variety of settings as demonstrated in our publications.

Over the years, Aerpio has studied Tie2 activation in multiple models of ARDS and sepsis with positive results. Hence, when the COVID pandemic arrived, we already had significant preclinical data supporting our hypothesis on why it might be very effective.

In addition, Aerpio’s Tie2 activators have the potential to treat multiple diseases where the underlying pathology is driven by unstable vessels. This disease does also include diabetic nephropathy where we have another pipeline candidate.

However, before discussing our preclinical programs, I want to remind investors that we have a third drug candidate in clinical development, which is partnered with Gossamer Bio. The drug candidate is GB004, and it is a hypoxia inducible factor, or HIF activator, that is being developed for ulcerative colitis by our partner in Gossamer.

Now, Gossamer just recently indicated that it plans to initiate a 12-week Phase II trial in patients with mild-to-moderate ulcerative colitis in the second half of 2020. So they have moved up their time line.

Investors may benefit from this program as well because our deal terms specify that Aerpio has a 20% participation right in any transaction on this program. For example, if Gossamer sells the program to a third party, Aerpio will receive 20% of those proceeds. Now I would like to switch back to Tie2 activation and describe our preclinical programs.

In a recently completed Phase IIb study, razuprotafib demonstrated the ability to lower proteinuria as measured by decreasing urinary albumin creatinine ratio by about 20%, replicating a finding in a previous Phase II study.

The decrease in proteinuria suggests that razuprotafib and our other Tie2 activating drug, the antibody ARP-1536, may have the potential to improve kidney function in diabetics, potentially delaying progression to kidney dialysis.

The company’s second asset, ARP-1536, is a humanized monoclonal antibody observed to activate Tie2 receptors in a dose-dependent manner in preclinical models. Aerpio believes ARP-1536 holds potential as a monthly or biweekly systemic therapy to treat diabetic complications, including diabetic nephropathy.

The company’s third asset is a bispecific antibody that binds both VEGF and VE-PTP, the phosphatase enzyme. And by doing so, it inhibits VEGF activation and activates Tie2. This bispecific antibody has the potential to be an improved product for treating wet age-related macular degeneration and diabetic macular edema.

These antibodies would be dosed intravitreally into the eye in the same fashion as the current anti-VEGF drugs like EYLEA and LUCENTIS. That completes the description of our pipeline this morning. So, I would like to thank you for your attention during this call.

We are excited about the prospects for Aerpio and believe that both our glaucoma program and COVID-19 programs could be transformative for the company. Over my career as a drug developer, I have never been more pleased or excited to be part of the Aerpio team. I will now turn the call back over to Gina to review the financials for the second quarter..

Thank you, Joseph. The earnings release details our financial results for the second quarter of 2020. For those interested, you can find additional details on our operations, results and financial condition beyond what is in our press release and our 10-Q, which will be filed today. I would now like to walk you through a few key items.

Let me start with the income statement. For the three months ended June 30, 2020, and earnings attributable to common stockholders was $9.3 million, benefiting from a one-time payment of $15 million from Gossamer Bio for an amendment to our license agreement for GB004. In the second quarter of 2019, we reported a net loss of $5.7 million.

Operating expenses for the second quarter of 2020 were $5.7, million compared to $6 million for the same period in 2019. Research and development expenses for the quarter ended June 30, 2020, increased by approximately $1.3 million or 56.7% to $3.6 million from $2.3 million for the same period of 2019.

This was the result of increased spending on our lead candidate, razuprotafib, primarily for the glaucoma and ARDS for COVID-19 development programs. General and administrative expenses for the quarter ended June 30, 2020 decreased by approximately $600,000 or 21.6% to $2.2 million from $2.8 million in 2019.

This decrease was primarily attributable to decreased employee-related expenses and stock compensation. One quick note on the balance sheet. Our cash position at June 30 was $44.9 million, and we have no debt. We have sufficient cash to get to top line data for our current clinical trials and through at least the fourth quarter of 2021.

This concludes our presentation on the financial statements. At this time, I will turn it back over to Joseph for final comments.

Joseph?.

Yes. Thank you, Gina and thanks everyone for participating in this morning’s call. We look forward to updating our investors as we move forward, particularly over the next six to nine months. At this time, we will now take some questions..

Thank you. [Operator Instructions] Our first question today is coming from Yi Chen from H.C. Wainwright. Your line is now live..

Hi, thank you for taking my questions.

My first question is why do the MTECH trials start enrolling COVID-19 patients? And when do you expect to report entering in or top-line data from the MTECH trial? Also, could razuprotafib be used to treat mild to moderate patients as well?.

Yes. Thank you, Yi for the questions. The trial will start enrolling patients imminently within the next few weeks. We’ve been very busy working to get that trial up and going. And that – and we’re making very good progress there. We expect to have top line results toward the end of the first quarter of 2021.

So that trial is – hopefully, we’ll enroll quickly, and we’re very optimistic about that outcome.

And your second question was?.

Could the drug be used to treat mild-to-moderate patients as well?.

Yes. The drug definitely could be used to treat mild-to-moderate patients, particularly if we start to show that it may prevent patients from going into the acute respiratory distress syndrome that is so severe.

We’ve also thought, given our mechanism that it may be able to be used in the recovery mode, where we’ve noticed that many, many patients have really troubled recovering their lung function and the vascular components and vascular remodeling and stabilization that we might provide may be useful in that setting as well..

Okay.

So, will there be a separate trial for mild to moderate patients?.

Well, we want to certainly focus on the two trials we’re running right now. We would certainly contemplate additional trials on the back end of these trials. So both for going – expanding into Phase III as well as for expanding into either earlier or recovery stage of disease..

Got it.

And my next question is, could you share your expectation for the glaucoma trial results and what degree of IOP lowering for razuprotafbi versus latanoprost would warrant a pivotal trial in 2021?.

Yes. As stated in the presentation and also our earlier presentations on our Phase I data, we did observe a 1.58-millimeter reduction on top of standard of care prostaglandin in that Phase I trial. We have heard from many thought leaders and other commercial experts that a 1.5 millimeter or better result is clinically meaningful.

And that’s particularly meaningful because of our exceptional tolerability profile. We’re actually hoping to do maybe better than that, particularly because of our mechanism, if we are actually repairing Schlemm’s canal, with increased duration of dosing.

So going from seven days in that Phase I trial to 28 days of dosing in the Phase II, we might actually get – we may actually get an improved result. So, we’re definitely thinking that 1.5 is a very good result. And obviously, we’re hoping to do better..

Got it.

Is it possible to formulate razuprotafib and latanoprost into a single eye block?.

We have done some preliminary experiments on that. Yes, excuse me. Yes. And it does look to be feasible to do that. We have some more work to do to fully expand that and to make it viable and take it into the clinic..

Got it. Thank you..

Thank you for your questions..

[Operator Instructions] We’ve reached the end of our question-and-answer session. I’d like to turn the floor back over to management for any further or closing comments..

Yes. Thank you and thanks to all of our investors. Again, as I said, as a drug developer, this is really the most exciting moment in my career to be able to potentially deal with two very severe diseases, one very sight-threatening in glaucoma as well as one very life-threatening in the COVID pandemic.

It’s very, very exciting, and we, at the Aerpio team, are very dedicated to moving these programs forward. And we look forward to providing updates in – over the next six to nine months. Thank you for your attention..

Thank you. That does conclude today’s teleconference. You may disconnect your lines at this time, and have a wonderful day. We thank you for your participation today..