Good day and welcome to Axcella’s Top Line Data Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, this event is being recorded. I would now at this time, let’s turn the conference over to Jason Fredette, Vice President of Investor Relations and Corporate Communications. Please go ahead..

Thanks, Ian and thanks everyone for joining us this morning. About an hour ago, we issued a press release and filed an 8-K containing our second quarter financial results as well as our top line data for our AXA 1665-002 clinical study. We also posted a presentation to our website that will be used as a guide for our call today.

Those documents can be accessed by going to axcellahealth.com and going to the Investors and News section. Please access those slides now if you haven’t already done so. On the call with me today are Axcella’s President and CEO, Bill Hinshaw and our Chief Medical Officer, Dr. Manu Chakravarthy.

Other members of management are on the line to take part in the Q&A session. But first, please go to Slide 2 of our presentation and you will see our Safe Harbor statement.

We would like to advise that certain remarks we make on today’s conference call will be forward-looking, including those related to our expected regulatory engagements and our planned clinical trials under IND.

These are forward-looking statements and are subject to certain risks and uncertainties that are detailed in our Form 10-Q for the most recent quarter and our other SEC filings. Those filings can be accessed on IR website or the SEC’s website.

All forward-looking statements represent our views as of today, August 5, 2020 and should not be relied upon as representing our views as of any subsequent date. We undertake no obligation to update these forward-looking statements. On Slide 3, you will see a description of Axcella’s development model and its clinical approach.

The data we are recording today are generated in non-IND clinical study that was designed to evaluate the product candidates for safety, tolerability and effects on normal biological structures and function. The study was not designed or intended to evaluate the ability to treat or prevent a disease.

Subsequent to initiating AXA 1665-002, we announced our intention to develop AXA 1665 as a therapeutic. As such, any future clinical investigations of this product candidate will be conducted under an IND filing with the FDA. And now, I would like to turn the line over to CEO, Bill Hinshaw.

Bill?.

Well, thank you, Jason and good morning everyone. We are pleased to share our Q2 results and recap several of our recent accomplishments in today’s press release.

These accomplishments include positive top line data for our NASH candidate, AXA 1125, as well as the completion of a follow-on equity offering that enabled us to further strengthen our balance sheet.

We are also excited to be speaking with you now about the encouraging top line data from our clinical study of AXA 1665, Axcella’s product candidate for the reduction in risk of overt hepatic encephalopathy, or OHE. Before getting into the details, let me first ground you on what we are trying to achieve overall at Axcella. So, please turn to Slide 4.

We are focused on utilizing endogenous metabolic modulators or EMMs to work with the body in order to tackle complex diseases and improve health. Our platform today primarily uses multiple amino acids and their derivatives to influence multiple targeted pathways simultaneously.

And this approach is distinct from most other small molecules or biologics, which didn’t have single targets and mechanisms. Now, this multi-targeted approach would also distinguish us within the OHE treatment landscape as you will see on Slide 5. In patients with advanced cirrhosis, the liver has essentially broken down.

Amino acids become dysregulated, which contributes to an elevation of ammonia. The muscle which is already in a wasting state tries to take over the ammonia detoxification process, but it does so poorly. And this ends up creating a vicious cycle driving further muscle wasting and elevations in ammonia.

And ultimately, the whole process can lead to neurocognitive impairment and OHE events. Now, the primary therapies for OHE today are rifaximin and lactulose. Both of which simply seek to remove ammonia from the gut.

Now, rifaximin is an antibiotic that eliminates ammonia producing colonic bacteria and lactulose traps ammonia and causes it to be treated in multiple loose stools per day. So, it’s not a pleasant experience for the patient nor one that makes it easy to comply and actually achieve the desired results.

So, we believe there is an opportunity to address important unmet needs for these patients by restoring amino acid balance, halting or slowing their muscle wasting process and reducing the number of OHE events that they continue to experience even while on these existing therapies.

Now, this would enable us to take a meaningful share of this roughly $1 billion market. We also see the potential to meaningfully grow this market by providing benefit additive to today’s approved agents. Now, the exciting part for us.

So, following the data from our 001 study that earned an EASL late breaker were excited by the 002 data that demonstrate dose-dependent impact on important neurocognitive measures and sustained statistically significant impact on amino acid balance and a safe and well-tolerated profile.

We are eager to take this candidate forward into Phase 2 as we seek to provide a much needed new treatment option for the many patients who have experienced an OHE event.

So, now let me turn the call over to Manu, our Chief Medical Officer who will provide background on AXA 1665’s mechanism of action, discuss our study design and of course, share the data.

Manu?.

Thank you, Bill and good morning everyone. Slide 6 shows the design of 1665.

This novel proprietary multi-targeted candidate contains eight amino acids as shown on the upper left in advanced liver diseases, diminished urea cycle capacity and portosystemic shunting impairs or bypasses, the main root of ammonia detoxification, which then leads to the ammonia buildup.

On the lower left, you can see that they are utilizing ornithine and aspartate as key substrates needed to fuel the cycle to detoxification of ammonia. Now, on the right, we are using branched chain amino acids, leucine, isoleucine and valine to primarily do two things.

First, stimulate [indiscernible] in order to provide the substrate for glutamates to glutamine conversion and consequently generate the substrate for ammonia removal via the gut. Second, [Technical Difficulty] amino acids activate mTORC1 which is a key in factor regulating protein synthesis and myogenesis.

Finally, we are providing three additional essential amino acids, histidine, lysine, threonine for additional anabolic support. Increased anabolism uses up the aromatic amino acids which are intentionally excluded from 1665.

In totality, we believe this candidate holds the potential to demodulate both hepatic and muscle metabolism, which could ultimately lead to clinical improvements in neurocognition, physical function and quality of life in patients with advanced liver disease. Slide 7 recaps our initial clinical investigation with 1665.

On the top left quadrant, you see the design of our first clinical study. [Technical Difficulty] conducted in a single center domiciled setting with a rigorous control of many confounding factors. All subjects received meals with adequate protein content to provide [Technical Difficulty].

On the background of this received either the high dose or the low dose of AXA 1665 each over a 15-day period.

As is the case with all of our non-IND studies, including the one we’ll talk about in just a minute, the primary intention was to determine the safety and tolerability profile and that goal was achieved with 1665 showing an excellent tolerability profile.

In addition, we carefully evaluated a range of biomarkers, some of which are shown in the three remaining quadrants. On the upper right, you can see the Fischer ratio, which is a measure of amino acid metabolism. Previous studies have correlated this ratio, especially the low Fischer’s ratio with poor clinical outcomes.

So, it was gratifying to see a notable increase in subjects receiving the high dose in the first 15-day period, which you can see in the orange line, while the control which is shown in the blue line remains unchanged from their expected low baseline.

When these subjects then washed out and received the control regimen in period two, the previously elevated level was no longer observed, clearly indicating that this was an AXA specific effect. These data also show a very clear dose response as the low dose of 1665 in the second period had no meaningful increase in the Fischer ratio.

Now, it was very important for us to ensure that the increase in this ratio was not accompanied by concomitant increase in plasma ammonia, since you will know that AXA 1665 contains additional nitrogen through the amino acids.

So, you can see on the lower left that the high AXA 1665 dose, in fact, the plasma ammonia trended downward from baseline to Day 15. We also measured body composition by bio impedance and physical function by the liver frailty index, or LFI, which we will speak more about in a few minutes.

A data on the lower right suggests that AXA 1665 tended to shift the body competition toward a leaner phenotype, which was accompanied by an improved LFI score, indicating improved physical function. Having demonstrated 1665, there is activity across these key measures in the short-term study we embarked on 002, which is now illustrated on Slide #8.

This was a 12-week non-IND study with a 4-week follow-up period in subjects with mild and moderate hepatic insufficiency. At the outset, we sought to achieve a few key goals. First, we wanted to do additional dose-ranging.

So, we evaluated safety and tolerability of 29 and 54 grams per day doses, which are the doses that bracketed the previous 44 gram per day dose in our 001 study.

Secondary, we sought to confirm key signals from 001, including dose for hepatic and muscle metabolism in a placebo-controlled, randomized real-world setting over an extended 12-week duration. And third and importantly, we wanted to see what activity 1665 might have from a neurocognitive standpoint.

This last point is particularly important since neurocognitive changes are commonly seen in patients with AHE. Overt AHE predominantly is an impaired cognitive state in which patients are confused and disoriented to a magnitude where they are unable to care for themselves.

As such, an assessment of cognitive function is therefore highly clinically relevant. Based on demographics for the 60 enrolled subjects in the study who received at least one 1665 or placebo, on average, some enrolled in the study were approximately 50 years of age, 60% were female, majority were obese.

Other baseline characteristics on the lower left half of this slide are consistent with the population with mild hepatic insufficiency, with approximately 90% of subjects having a Child A-score and amine ammonia across the cohorts in the low-40s. All subjects were non-sarcopenic indicated by normal skeletal muscle index.

By design, all enrolled subjects were pre-frail, with an average LFI of 3.9. Also more than a third had evidence of MHE as determined by key neurocognitive tests, the Stroop test and the PHES test, which we will talk about subsequently. Now, let’s turn to Slide 10 for the data, starting first with amino acid metabolism and the Fischer ratio.

Again, the Fischer ratio is the ratio of branched chain amino acids to aromatic amino acids. It was reassuring to see the replication of the data from 001 on many levels.

First, we continue to see the increase in Fischer ratio as early as Week 2 and are pleased that the changes are now sustained over this longer duration, indicating that the amino acid metabolism changes and the impact from 1665 are not a transient finding.

Second, the magnitude of change is dose-dependent and is statistically significant, with the low dose arm achieving a 19% increase and a high dose arm achieving 41% increase at Week 12 from baseline. There was no change in the placebo.

Third, the absolute increase at 12 weeks of 1.3 units, as shown on the graph on the right, with the high dose arm resulted in a total FR value of approximately 4.5, which is nearly identical to the same magnitude that was seen in the 001 study at Week 2.

And finally, the improvement was driven in part by decreased circulating plasma aromatic amino acid levels, phenylalanine and tyrosine, which was thought to contribute to impaired neurotransmission and potentially could impact cognitive function. Next, we looked at ammonia changes.

As many of you know, ammonia is notoriously challenging to measure and can vary significantly based on a variety of factors. As a result, it has been shown to be a poor predictor of clinical events and is not an approvable endpoint.

That being said, ammonia is clearly a key contributor to the pathogenesis of AHE and importantly is a direct readout of the consequence of nitrogen metabolism. Since we are providing additional nitrogen via the amino acids in 1665, it was therefore important for us to ensure that plasma ammonia levels didn’t increase.

And indeed, as you can see, on Slide 11, it was reassuring to see that plasma ammonia levels generally remain flat across both the active arms and these levels were comparable to the placebo levels, which had no excess nitrogen.

In a subgroup that showed evidence of MHE at baseline, their baseline ammonia levels were higher than in the overall population.

And in this subgroup, as shown in the graph on the right, both AXA 1665 doses showed a decreasing trend in ammonia of approximately 7% at Week 12 whereas the placebo-treated subgroup remained very similar to that of the overall population.

What these results suggest was is that AXA 1665 effects maybe more pronounced in those with greater impairments at baseline. Now, please turn to Slide 12 showing measures of muscle structure and function. You will recall that AXA 1665 was designed to work through hepatic and muscle metabolism.

In this particular population, non-sarcopenic subjects, you can see that the peripheral thigh muscle as well as the core muscles around the L3 spine remains stable across all the groups. In the bottom panels, you will see the LFI, the liver frailty index.

As a reminder from our discussion of the 001 study, the objective here is to lower the LFI score and an absolute reduction of 0.3 or more has been associated with the inability to perform the activities of daily living.

On the lower left, you will see that each of the arms saw a modest reduction of LFI of approximately 0.1 across all the overall population.

If we now look at the proportion of subjects in each arm that met this pre-specified threshold of 0.3 of better LFI reduction, we see a higher percentage into the 1665 treated arms, achieving this clinically relevant threshold, whereas only one subject in the placebo reached that threshold.

It’s the important role that certain amino acids within 1665 play in muscle metabolism and protein synthesis. Along with the results we have seen from both of our studies provide us with confidence in this candidate’s potential to show clinical benefit in an appropriate population with advanced liver disease and muscle wasting.

Now, let’s turn to our attention to Slide 13 to discuss our findings in neurocognition. At the top left, you can see the changes in the PHES from baseline to Week 12. PHES is composed of five different tests and it’s considered to be the gold standard for diagnosing minimal hepatic encephalopathy. An increase in the PHES score indicates improvement.

We were very pleased to see that the positive directional change for both doses with those receiving the higher dose were achieving statistical significance and on the right, you can also see a dose-dependent increase in the proportion of subjects who achieved the 2 point change in PHES, which is considered to be a clinically relevant threshold based on what has been seen with other therapies.

On the bottom left is the critical flicker frequency, which is a neurophysiological test that measures the frequency at which a flickering light appears as non-flickering to a subject. An increase in frequency indicates improvement.

And on the bottom right is the Stroop test administered via the EncephalApp, which is a validated measure of – an essential measure of MHE. This is a time test. And so a reduction in time is considered to be an improvement in cognitive speed and flexibility.

Those apparent directional improvements in both of these psychometric tests were also seen in the study. In some, it is encouraging to not only see the consistency in the change across all three different psychometric tests, but also for magnitude that could support the potential of 1665 as a therapeutic for OHE.

Slide 14 presents the safety profile of 1665 in our 002 study. As a clinician, it’s always reassuring to see a very clean profile. And indeed similar to what we saw with 1125, we got a few months ago, 1665 was also very well-tolerated, with a generally benign safety profile in this hepatically impaired population.

These were mostly mild to moderate generally noted as unrelated to the study product. In fact, the only AEs observing two or more subjects were mild nausea and increased bowel movements both in the high dose group and neither requiring intervention. There were four discontinuations in the study due to aged, all in the 1665 dose arm group.

There were also a total of 4 SAEs, 2 in the placebo, 2 in the low dose, none of which were attributed to 1665. One of the AEs included a COVID-19 related death. A second death in the study was attributed to a sudden myocardial infarction prior to any product administration in the running period. Now, let me turn things back over to Bill..

So, thank you, Manu. As you can tell, we are very pleased with the findings from this study and Slide 15 serves as a good summary.

First off, we once again saw activity on multiple targeted biologies and AXA 1665 was shown to be safe and well-tolerated, continuing to validate our EMM platform and I want to stress this serves as our fifth consecutive study across our portfolio with successful outcomes.

It’s also important to point out that both AXA 1665 and our other lead candidate for NASH, AXA 1125, were designed as recently as 2017 and we are now already planning to bring them into Phase 2 and Phase 2b clinical trials respectively.

We believe the speed at which we have been able to generate a substantial amount of human data and progress them to this advanced stage really does demonstrate the power of our EMM platform and approach.

Now, as it relates specifically to AXA 1665, we are excited by the concordant effects seen across the neurocognitive measures, which are arguably the most relevant markers as it relates to the manifestation of OHE episodes.

The effects on amino acid metabolism replicate the findings from our clinical study, our previous clinical study and were dose-dependent, statistically significant and sustained. And despite the additional nitrogen load, ammonia levels remained stable across all arms, while the clients were seen in the active arms of the MHE subgroup.

And we continue to believe in this candidate’s potential to enhance hepatic and muscle metabolism, including physical function in a relevant population with advanced liver disease. We look forward to presenting these data at future medical congresses.

And in the meantime, we plan to share the results with additional investigators and medical experts as we refine the design of our planned Phase 2 clinical trial.

This trial will seek to confirm the encouraging findings in neurocognition, while also evaluating the AXA 1665’s impact on muscle metabolism and physical function in a population with advanced and de-compensated liver disease, such as those who have experienced the prior OHE episode.

We are targeting the first half of 2021 for the initiation of this trial, which will coincide with planned start over a Phase 2b trial for AXA 1125 in NASH demonstrated in our continued ability to execute our clinical programs. I would like to extend our Axcella’s thanks to all of the subjects and investigators that participated in this study.

Now, before opening the call to your questions, I also want to congratulate Dr. Shreeram Aradhye on his addition to Axcella’s Board of Directors and Manu on his promotion to Executive Vice President and CMO. As many of you know, Shreeram joined Axcella in May of last year as our Chief Development Officer.

At the end of this month, he will be stepping down from this position to accept the new full-time role with Manu taking over his day-to-day activities. Together, Shree and Manu have done a fantastic job of building out our clinical and regulatory teams. So, we are well-prepared to take our next steps and continue our clinical programs.

And I am very happy we will have the opportunity to continue benefiting from Shree’s council as a board member going forward. So with that, let’s open up your call to questions.

Ian, would you please provide the instructions?.

[Operator instructions] At this time, our first question comes from Julian Harrison of BTIG. Julian, please proceed..

Hi, good morning. Congrats on these data. Just two for me.

First, you previously indicated you might be able to move into a potentially registration of trial for 1665 as the next step for this program, I just want to know is that no longer the case and if so, can you talk about the decision to back away from that?.

So, good morning, Julian. Thank you for your question here. Couple of things. We see this as a very successful outcome. As you know, this study was conducted in a non-IND setting. And we saw the important impact on neurological cognitive findings for the first time.

We replicated and extended our amino acid metabolism impact that you saw in the Fischer’s ratio and that based on our 101 and our science that we built, AXA 1665 around give us a lot of confidence to proceed.

Now with that said, when you look at starting the next trial, you of course are looking at what will give you the best chance of success and what will do that in an efficient way. So you understand the impact and the effect size that you are trying to design.

And prior to starting a full registration trial with the cost and patient impact that you have to consider there, we believe the next step is a Phase 2 and would be highly informed, efficient and de-risk the next stage in advanced, because this is looking at patients specifically in advanced liver disease.

We have demonstrated all these impacts in mild-to-moderate and predominantly mild patients. And we believe that in an increased dysregulated state, we will be able to potentially have an additional impact.

So, we are looking in that specific advanced liver disease patient population to replicate and confirm our neurocognitive findings, such as MHE remission and OHE events will better understand the muscle metabolism and function impact again in that patient population.

And that will allow us to design and readout hopefully a successful trial that could be smaller and shorter then otherwise we would have to embark on at this stage and that would allow us to bring a new treatment options for the patients.

And I go back to the fact that we designed AXA 1665 in 2017 and at this stage just 3 years later, we are talking about moving into a Phase 2, which is a pretty remarkable timeline..

Okay. Thanks, Bill. That’s helpful.

And then my last question, I was just wondering if you are still considering a label expansion opportunity for 1665 in the broader patient population of cirrhotic patients suffering from frailty, not necessarily just goes with encephalopathy? And if that is the case, can you just briefly walk through perhaps an updated timeline there and what the data points are currently informing that decision?.

Yes. So we continue to believe that the multiple biologies that we are targeting with 1665 will play an integrated and important role to the outcome of patients with OHE.

And that may in fact as you know, we are working through muscle metabolism and that may indeed in a more advanced patient population offer benefits in terms of frailty and sarcopenia. That’s part of what we want to evaluate in the next program.

And at that point that would allow us to continue to plan for potential additional opportunities outside of OHE. At this time, it would be premature to talk about timing, because of the stage we are in. Of course, we will update you appropriately as we go along and develop those plans..

Great. Thanks very much..

Thank you, Julian..

Your next question comes from Liana Moussatos of Wedbush Securities. Lina, please proceed..

[indiscernible] for Liana. And thanks for taking our questions. Following up from the question on the path forward, could you give us any idea as to what a Phase 2 would look like from [indiscernible] standpoint? Thank you..

I am sorry, from a what standpoint, I just couldn’t understand that last part..

Yes, yes, I apologies if I didn’t sound clear. But could you kind of clarify us on looking forward with the FDA in your communications with the FDA, what they would be looking for endpoints points going forward? Thanks..

Okay, so thanks for the question here. And we have actually had extensive interactions with not only the FDA, but also European authority. So, we feel very well positioned about our next steps forward there.

And again, it will be premature to describe the exact design, scope and scale of the program, because this data is very recent and we will continue to work with the medical experts to finalize it.

What I can tell you is we are clear that the endpoint is around the risk of reduction of OHE episodes and potential for to Julian’s question, continued impact on muscle function and overall quality of life.

So, those are very clear guidances we have from all the agencies we have interacted with and we are in a position to factor that into our design and again we plan on initiating the program in the first half of ‘21 after finalizing the design and updating you at that point..

Alright. I will jump back into queue and let someone else ask the questions. Thank you..

Thank you..

Our next question comes from Yasmeen Rahimi of Piper Sandler. Yasmeen, please proceed..

Great data. I am very happy for you. I have a number of questions for you.

So, maybe the first one to start off would be can you kindly comment on why the study did not include any Child-Pugh B patients? I know the design was going to include that so if you could comment on that? Then the second question is what would be helpful for us is critical flicker frequency and Stroop off time, are those invalidated in other clinical studies? Can you help us to visualize what magnitude differences and those cognitive tests have been considered clinically meaningful? And then I have another follow-up..

Okay. Thanks, Yasmeen. I will start with the first question and then ask Manu to build on it and into your second one and thanks for the congratulations on the data.

In terms of the nature of the population, as you guys know, this is a non-IND study and as such we are looking at safety tolerability first, muscle function and structure as well as liver function and structure in that setting. And if you go to more advanced patient populations, you have the risk of events that could cloud that outcome.

And so we did enroll Child’s A and B was part of the criteria both in 001 and 002, we ended up with a predominance of mild populations in this particular study. So that’s why we ended up with that distribution.

Now, we are very pleased again in that population to be able to see these cognitive effects replicate the amino acid metabolism effects and have stable muscle and ammonia. I will have Manu expand on that and then answer your question about CFF and Stroop.

So Manu?.

Yes. Hi, Yasmeen. So, Child B was certainly included in both studies, it’s roughly about the same proportion. So it’s not that different in that regard. In regards to your second question, so you measured three psychometric tests, because they measure three different sort of domains if you will.

The Gold standard just to reinforce it again is the PHES, because it includes the paper pencil format and includes actually five different tests that patients have to do and it basically looks at many different domains. So, that has been in some ways the Gold standard, the most validated.

More recently, there have been data around the Stroop, the EncephalApp through the group of Virginia. That would certainly be another test that measures cognitive speed and flexibility. And then finally, the CFF is more a neurophysiological test, amongst those three, probably the one that has the least validation.

So, we have really focused on the most validated the Gold standard, which is the PHES and so shown our data why we showed the data on all three, the data where we are most pleased about is on the Gold standard test..

Yes. And the only thing I would supplement there is we did indicate and review how this looks at versus other agents that have been in development. And the range we have demonstrated in this population is certainly well within the range of the therapeutics that have achieved utilization and approval.

So that’s a great leading indicator for us that we are in the right zone..

Thank you. And then my follow-up question is maybe could you comment on sort of the Fischer’s ratio test data was phenomenal and consistent with what we have seen. And when you look at the ammonia handling, I don’t see as much as the dose response between the low dose and the high dose.

Maybe you could just [Technical Difficulty] when we measure ammonia given that it has to do assessments have to be done on imminently. So if you could just kind of comment on the ammonia data around it would be very helpful for us? Thank you..

Sure. So again, just to remind everybody, ammonia is notoriously difficult to measure. It’s very variable. There is lot of vagaries in terms of how it’s measured. So, generally speaking, most of the acceptance in the field is that it’s a highly variable biomarker.

The key thing for us was to make sure that ammonia levels were not increasing, because remember, we are giving nitrogen into the system via the amino acids that’s contained in 1665, which is reflected by the Fischer’s ratio that as you pointed to.

So, we are in a more sustained way reprogramming the metabolism, if you will, right increasing the basal levels of branched chains, decreasing the basal levels of aromatics. And what that – especially the latter one, aromatics in particular, can also contribute to ammonia genesis if you don’t get incorporated into protein synthesis.

And so by looking at the overall pattern and the sustained pattern, the conclusion that we have made is that not changing ammonia levels is a reflection of that improved metabolism and improved profile, not seeing the dose response, if you will and looking at the just the variability, it’s not surprising for us at this point given the normal variance of ammonia, we may not be really separating between the two doses?.

Yes, Yasmeen, the second part of that question was broken up a little bit in case we didn’t answer it up fully. But there are two other pieces I would point out. One is while the baseline ammonia in this study was abnormal it was in the 40s, whereas in our 001 study, it was in the 60s and 70s.

And as Manu pointed out during the presentation, the MHE population, which was slightly higher, did show a greater improvement on ammonia reduction. So, this is something again in a more dysregulated population of advanced liver disease patients we will be tracking carefully..

Great. Thank you so much for taking my questions and congrats to you..

Thank you. Absolutely..

And our next question comes from Paul Choi of Goldman Sachs. Paul, please proceed..

Thank you and good morning, everyone. Congrats on the data.

Maybe just one clarification with regards to the trial, can you – on the 1665 data, can you maybe just remind us was there any background therapy allowed in addition to 1665? I know new medicines were not allowed in the 2 month prior for the exclusion criteria, but can you just remind us what background therapy levels were like?.

Yes, hi, Paul. All background therapies regarding HE were excluded. So the people were not allowed to be on lactulose or rifaximin doing the study. All the other meds that they were doing phenyl for their normal comorbidities, like diabetes, hypertension and hyperlipidemia, etcetera, those were all allowed..

And they were giving guidance in terms of exercise as we had previously. In this case, this is not in a domiciled setting, right..

Yes..

Great. Thanks for that clarification.

And then just on the neurocognitive endpoints, specifically with regard to PHES, can you maybe just comment on how that compares and just understanding how that might compare to and translate to a con score, which is you know occasionally used as well in terms of diagnosing this population and the degree of acceptance, I guess and utilization of PHES in real world clinical practice?.

Sure. So the PHES is designed specifically for MHE, right, so minimal hepatic encephalopathy and just by definition minimal hepatic encephalopathy can only be detected by using such test. It’s not – the manifestations are not overt and hence that’s why it’s not overt hepatic encephalopathy.

Con score is mostly a scoring system for looking at sort of grading the cognitive decline, mostly in an overt hepatic encephalopathy setting and then typically the ranges of 0 and 1 are in the same category as the MHE score. So, they are not exactly the same score if you will, because they measure different things.

What we can say is that when we looked at – all of the caveats across many comparisons across multiple different other trials that have used other agents for treatment of OHE like lactulose or LOLA and probiotics, etcetera and you compare what their scores are for PHES, it ranges anywhere between an improvement of somewhere between 2.1 and 3.2.

So, when we look at our scores, it’s essentially the PHES score of placebo just to change of around 2.2 is right in that zone. So in that way, we basically can do sort of other types with all the caveats of custody comparisons, get a sense of where we are with 1665 on the PHES in relation to other therapies..

And then, Paul, I think one of the other aspects that Manu and the experts in the field that he has been talking with indicate us progression to OHE is a known event from MHE and a significant percentage of those populations do that and that would be the population that you would be looking at that would warrant intervention..

Okay, great. That’s helpful context. And then in terms of my last question, maybe just pivoting to 1125, have you set a date for your discussion with the FDA? And then following that meeting, how would you plan to communicate to the market your plans and any specifics on the Phase 2? Thank you for taking our questions..

Yes, thank you, Paul.

So 1125, as you are alluding to, we had very important and exciting data we shared earlier in the quarter about our results of the 003 study, where we saw consistent effect across all the biology is a safe and well-tolerated profile, exciting data related to the diabetic population that we look to take forward in a planned Phase 2b.

Now as a matter, of course, we don’t typically comment on timing and nature of our interactions in specificity with the FDA or other regulatory agents. What I can tell you is we remain on track for our time to initiate the program in the phase first half of next year.

We will post the exchanges and final trial design, which we have shared with you in the past. You can expect we will be looking at important measures that are expected in a Phase 2b that we will share with you once we finalize that in exchange with the agency and are ready to initiate. We will update you at that time. Everything is on track..

Thank you..

Yes. Thank you, Paul..

[Operator Instructions] Our next question comes from Geoffrey Porges of SVB Leerink Jeffrey. Please proceed..

Good morning. This is Brad on for Geoff and congrats on the data. And I appreciate that you cannot yet describe the detail of the planned Phase 2 trial, but can you please comment on typical duration of Phase 2 IND trial for HE? And then, there have been quite a few NASH updates in the quarter both clinically and regulatory across the space.

So, I would like to hear from you if these have changed your thinking on competitive positioning for 1125? Thank you..

Okay, great. So I will have Manu start with the first one and then I will comment on the second.

So, Manu?.

Yes. So, in regards to the Phase 2 duration, trials can range quite a bit. It depends on what sort of the key goals are, but generally speaking, most OHE trials span somewhere between 6 and 12 months largely to accumulate sufficient number of events of OHE population. So, typically it’s in that range..

Yes. And Brad as you are aware, this will range on as Manu has described the design also, your effectiveness in collaborating with the medical community in enrolling, we have a good relationship with this group and they are very keen about our modality. And as Manu has shared the data with some of the experts, they are quite encouraged.

So we look forward to collaborating with them on the next stage. In terms of NASH, and yes, there has been quite a bit of movement in the field.

We remain and feel encouraged by that outcome to be very open with you, because our belief is that the exchange related to the intercept CRL is more of a intercept-specific dialogue with the agency that the drive and focus as to what is designed to the registration endpoints still remains and it’s kind of a risk benefit trade-off.

And that’s where we get very encouraged that we believe the multiple simultaneous interventions with the 1125 design on metabolism inflammation and fibrosis continue to position us as a potential first line agent in that area as well as the potential differentiation we have discussed on diabetes that we will evaluate.

I also want to mention that the pediatric needs in this population are real and growing and with our safety modality and position of the program, where we can investigate that earlier than most we feel well positioned to take the next step with a Phase 2b in the adult population, have the regulatory exchanges on the path forward on pediatric and timing and then come back to you guys with the update.

So, we know NASH remains a big complex disease with lots of space for interventions and benefits and we are excited for the potential for 1125 to play an important role there.

Ian, if you could take the next question?.

[Operator Instructions] And our next question comes from Mayank Mamtani of B.Riley FBR. Mayank, please proceed..

Hi, good morning. This is [indiscernible] on for Mayank. Congratulations team on the data. A number of our questions have been answered so far. So, just maybe a quick one from us.

I just wanted to get your thoughts on how you can think about the dose selection moving forward appreciating that the Phase 2 is continuing to be optimized and just wanted to kind of, yes, if you could provide a bit more color in the breadth of data generated at 44 gram in 001 relative to what we are seeing here? And if there is any plans to test additional doses in the Phase 2 and maybe as a follow-up given the data that we are seeing in the MHE subjects here, if there are additional subgroup analyses or plans to enrich the patient population.

Thank you..

Great. I will start and Bill certainly can chime in here too. So regarding the dose selection, so just a quick reminder which we think about our two programs, 001 and 002 studies, we have had the opportunity to test a wide range. We have gone from 14.7 grams per day all the way to 54 grams per day.

And in the first study, we were able to establish what is called the floor effect meaning at least identifying one pharmacologically inactive dose, which is the 14.7 grams. So that was one of the key reasons why we bracketed the other two doses around the 44 grams, which was our first active dose.

So, we went to 29, which was the one step below 44 and a one step higher which was 54. So between these two studies, we believe there is sufficient dose-ranging information. The second is that we have enjoyed sort of the tolerability and safety profile, which has allowed us to go to these higher doses relatively quickly.

So that was one of the key reasons why we were able to go to 54 grams per day in the 002 study. And the third point is that when you look at the Fischer’s ratio, which is in our view the most proximal readout of 1665, there is action if you will. We have a very clear dose response on that key biomarker.

So again, 14.7 is not much of an effect, 29, somewhere in between and then you have 44 and 54 giving the same magnitude of effect. So, we believe that we have identified a fairly good dose response and we are in a good position to take our approach forward in our Phase 2 study.

And in regards to the subgroup question, so certainly, this is an ongoing analysis that we are embarking on. The most immediate and obvious subgroup that we have been able to share with you is the MHE subgroup.

There are other additional analyses that will be going forward and sharing with their medical experts and our other key clinical advisors and we should be able to come back with a more fulsome analysis after that is completed..

And I think the only thing I would add there is the purpose in going into the Phase 2 with the advanced liver disease population gets us into a more enriched and dysregulated population. And then to Manu’s point, we will discuss with the experts any additional stratification that we believe is there.

We already know on the pre-frail we will be looking at sarcopenic dynamics as well as the MHE..

Great. That’s very helpful. Congratulations on the data and thanks for taking our questions..

Thank you..

At this time, this concludes our question-and-answer session. I would now like to turn the conference back over to CEO, Bill Hinshaw, for any closing remarks..

Okay, thank you very much, Ian. Thank you all for joining us today and sharing our enthusiasm for our data. We are excited to have another study continuing to demonstrate the platform of our EMM approach and have impact on biologies multiple and simultaneous and a safe and well tolerated profile to-date. So, thank you for tuning in everyone.

We hope to speak to some of you very soon in September once the conference season picks back up. Until then, enjoy the rest of your summer and stay safe. Thank you everyone..

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect..