Good morning, ladies and gentlemen, and welcome to Axcella’s Second Quarter 2021 Conference Call. Please be advised that today’s conference is being recorded, and then all participants will be in a listen-only mode until the question-and-answer session. [Operator Instructions] And now for opening remarks, I would now like to hand the call over to Mr.

Jason Fredette, Vice President of Investor Relations and Corporate Communications at Axcella. Please go ahead..

Thank you very much, operator and good morning everyone. We would like to advise that certain remarks we will make on today’s conference call such as those relating to our ongoing clinical trials for AXA1665 and AXA1125, as well as our pipeline expansion work include forward-looking statements that are subject to various risks and uncertainties.

These risks and uncertainties are detailed in our most recent Form 10-Q and our other SEC filings, which can be accessed on our website axcellahealth.com or on the SEC’s website. All forward-looking statements represent our views as of today, July 29, 2021, 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. With that let me turn the call over to our President and CEO, Bill Hinshaw, to begin the discussion.

Bill?.

Thank you, Jason. And thanks to all of you who are turning in for our update this morning. We're happy to have the opportunity to bring you up to speed on all that we have accomplished recently and our core areas of focus for the months ahead.

To briefly recap some of the highlights from the first half of 2021, following a set of successful regulatory exchanges and meetings, we cleared two investigational new drug or IND applications with the FDA and got the green light to proceed directly into a Phase 2 clinical trial with AXA1665 for OHE and a Phase 2b AXA1125 for NASH.

We also obtained similar clearances from multiple health authorities in Europe and Canada enabling us to advance our global development efforts. And in the second quarter, our team was able to initiate both of our trials.

I'm very pleased to report that patient recruitment is now well underway, putting us in a strong position entering the back half of the year. So, let's get into some of the details beginning with the status of our development program AXA1665. AXA1665 is our product candidate for the reduction in risk of recurrent overt hepatic encephalopathy, or OHE.

The severity of this condition and the unmet needs for patients who experienced it, are truly underappreciated. And we believe we're uniquely positioned to make a real difference. OHE is a serious, neurocognitive, episode that results from cirrhosis.

Patients in the midst of these crises are impaired to the point where they have difficulty caring for themselves and may need to be hospitalized. These events may also lead to coma and even death. Now OHE involves a cascade of events.

Given its cirrhotic state the liver is unable to handle one of its primary functions, which is to process and detoxify waste products, such as ammonia. As a result, muscles within the body try to assist in the detoxification process, but they do it poorly and end up wasting themselves. This results in another serious complication known as sarcopenia.

Meanwhile, toxins within the bloodstream continue to increase and cross the blood-brain barrier, causing recurrent neurocognitive episodes. Today patients who have experienced OHE tend to be treated first with lactulose, which is a laxative syrup.

Lactulose is administered orally multiple times a day in order to remove ammonia from the gut via multiple loose stools per day. And as you might expect, there are a number of well understood challenges related to this treatment, with a lack of compliance and tolerability being at the top of that list.

Also, nearly 50% of patients on lactulose alone have been shown to experience OHE breakthrough within six months. The other primary treatment, which is approved as an adjunct to lactulose is rifaximin. Similar to lactulose, rifaximin focuses on ammonia removal.

Unfortunately, patients continue to experience OHE breakthrough even while on combination therapy. We believe that this is due in part to the fact that these treatments don't in duress the imbalance in amino acids in sarcopenia that are also associated with the condition. This is where AXA1665 comes in.

Unlike today's standards of care, which focus on removing ammonia from the gut, AXA1665 has a multi targeted mechanism that focuses on the gut, the liver and the muscle. It seeks to improve neurocognition by not only improving ammonia and nitrogen handling, but also restoring amino acid homeostasis and halting the progression of muscle wasting.

Now we've already completed two clinical studies in which we were able to demonstrate activity in each of these areas with a very safe and well tolerated profile. And we were pleased to have Dr.

Arun Sanyal, one of the world's preeminent, chronic liver disease specialists deliver an oral presentation containing data from our most recent study at Digestive Disease Week or DDW 2021 in May. For those who are interested, a video of this presentation is now available on the publication section of our website.

Now these data provide a strong foundation for our EMMPOWER Phase 2 trial. EMMPOWER, which starts with an E and double M’s is the branding of this trial because we are leveraging the endogenous, metabolic modulators or EMMs within AXA1665 in an effort to enable patients and caregivers to overcome the significant challenges that they face today.

Patient screening in EMMPOWER got underway in June. And I'm pleased to report we have already initiated a dozen clinical trial sites. In the months ahead, we plan to increase this number to more than 70 sites across nine countries in total. Virtually all of which have already been selected.

Approximately 150 patients who are on lactulose ± rifaximin will be enrolled and randomized equally to AXA1665 or placebo for a 24-week treatment duration. We'll also stratify patients based on rifaximin use.

As a reminder, the primary endpoint in the trial is the proportion of patients who achieve at least a two-point improvement in PHES, which is the neurocognitive battery that's considered to be the gold standard for diagnosing minimal hepatic encephalopathy.

Key secondary endpoints include the number of OHE events, time to OHE events, including hospitalization and measures of physical function. These endpoints should enable us to gain clear insight into AXA1665’s effects and guide the next steps in its development.

We look forward to continuing our engagement with the medical community and advancing this important program. So, let's shift gears now and discuss our other lead candidate, AXA1125. AXA1125 is advancing in parallel as a potential treatment for NASH, which is another serious liver disease that impacts up to 40 million people here in the U.S. alone.

This differentiated multi-targeted composition of EMMs seeks to improve metabolism and reduce both inflammation and fibrosis by influencing well known pathways that have been implicated in the pathogenesis of NASH. Some of these include PPAR alpha, AMPK, Hif1 alpha and TGF beta.

In two prior studies, we've demonstrated AXA1125’s ability to reduce liver fat, insulin resistance and fibroinflammation across a range of well-established biomarkers and enhanced effects have been seen in subjects with Type 2 diabetes, which is a closely associated condition that affects 40% or more of NASH patients.

We were pleased to share findings about this sizable and important sub-population at the American Diabetes Association’s 81st scientific sessions, just a few weeks ago.

Based on our past data and encouraging dialogue with regulatory authorities, we were able to get our EMMPACT Phase 2b clinical trial underway in the second quarter, just one month after opening our IND. This is a result of strong planning and execution from our team and the high level of interest from investigators.

Similar to EMMPOWER, the EMMPACT branding is a reflection of AXA1125’s potential to provide profound benefits to patients with this chronic disease using EMMs with well-established safety. Today, over 30 clinical sites have been initiated across the U.S. and Canada.

This number will be increasing to more than 70 global sites virtually all of which have already been selected. Ultimately, the trial will enroll approximately 270 patients who will receive one of two doses of AXA1125 or placebo for a 48-week treatment period. Consistent with regulatory guidance, this will be a paired biopsy trial.

The primary endpoint in EMMPACT is the proportion of patients achieving at least a two-point improvement in the NAS score. We will look at the achievement of biopsy confirmed resolution of NASH without worsening of fibrosis and the achievement of at least a one stage improvement in fibrosis without a worsening of NASH as the secondary endpoints.

Additionally, a range of noninvasive biomarkers are being included in the trial. These will be utilized for an interim analysis after a meaningful number of patients reach 24 weeks of treatment, which will provide progressive data compared to our past 12- and 16-weeks studies. We expect to be in a position to read this interim analysis in mid-2022.

Now, in addition to all the clinical progress that's been made, our R&D group has been hard at work to define the next potential applications for our EMM platform and candidates. We're looking forward to sharing more detail about these efforts later in the year. And finally, we have continued to bolster our team of excellence.

One of our most recent additions is Virginia Dean, who joined as our Chief People Officer in June. Virginia is leading our human resource’s function, as well as our organizational and cultural development initiatives.

She joins us from the consulting firm, ClearSight Leadership and has led the HR functions for multiple high growth organizations, including both TESARO and ARIAD Pharmaceuticals. We're thrilled to already be benefiting from our insights and contributions. So, the first half of 2021 has been a time of tremendous progress here at Axcella.

Our team continues to execute on or ahead of plan as it relates to EMMPOWER and EMMPACT. And we're seeing strong inbound interest in our candidates and trials. We're also ready in the company for pipeline expansion as we seek to unlock the potential of EMMs across multiple areas.

Now, let me turn the call over to our CFO, Laurent Chardonnet to provide a financial update.

Laurent?.

Thank you, Bill. And good morning, everyone. I would like to echoes Bill's comment about the team strong execution and know that extend to our financial as well as we continue to manage our expenses and maintain a solid balance sheet.

We ended the second quarter with approximately $79 million in cash and marketable securities, which compares with $107 million as of December 31, 2020.

We expect that this cash balance will be sufficient to meet our operating need into the third quarter of 2022, while also enabling us to advance our EMMPOWER and EMMPACT trials, read our interim data from EMMPACT and expand our pipeline. Turning to the income statement.

Our research and development expenses were $10.3 million and $20.5 million for the three and six months ended June 30, 2021. This is up from $8.6 million and $18.9 million for the comparable periods of 2020 reflecting the recent initiation of our EMMPOWER and EMMPACT clinical trials.

G&A expenses were $4.9 million and $9.2 million for the three and six months ended June 30, 2021. This is up slightly from $4.6 million and $8.7 million for the same period of 2020. These increases were primarily the result of greater non-cash stock-based compensation and benefit related cost.

Axcella’s net loss for the quarter and the six months ended June 30, 2021 was $15.9 million or $0.42 per share and $31.1 million or $0.83 per share respectively. Our net loss for the second quarter included approximately $1.7 million in non-cash stock-based compensation expense.

Our net loss for the three and six months ended June 30, 2020 was $13.9 million or $0.48 per share, and $28.9 million or $1.10 per share. That concludes our formal remarks.

Now, operator, will you please open the line for questions?.

[Operator Instructions] First question comes from Yasmeen Rahimi, Piper Sandler. Please go ahead..

Hey, this is Alicia [ph] on for Yas. Thank you so much for taking our questions. So, we have two for you today. First, so what is the current screen failure rate in the EMMPOWER study? And when do you expect to report out data for this study? And second question is regarding the noninvasive biomarkers.

So recently we saw discordance between the noninvasive tests and histological endpoints in NGM's all-time dataset.

So, we were just hoping you could highlight to us why we should not lose trust in the predictive value of these noninvasive tests and which one in your view, given the NOA [ph] is most predictive of histological responses in NASH as we head into the interim results in mid-2022. Thank you,.

Alicia, thank you for the questions. I'll start and then I'll turn to Margaret to supplement one or two of the comments there. So, in terms of the screen failure rate, we're very pleased with the start of our trials, but I'll remind you that we just initiated them.

And so consistent with what we provided you guys before, we won't be providing real time updates in that level of detail especially at the early stages of a trial that underway. We are very pleased with the response that we've seen. We're very pleased to have more than 30 sites already initiated in this trial.

Anecdotally, it's great when our principal investigator tells us that investigators are calling them and wanting to get into the trial and we've been very thorough in how we're examining and working with the fact that we have an opportunity to appropriately guide the patients as to which patients should come in, use the right algorithms, use the right training and work with groups like the summit network that are very experienced in that.

So, we've already considered and plan for an appropriate screen failure rate and are very pleased with our start on that piece. In terms of when we expect the data to come in, we are, this is a 48-week trial. And so, our initial estimate at this stage is that the second half of 2022 will complete enrollment.

And that puts us in a position to utilize top line data in the second half of 2023. Now, in terms of the aspects related to the noninvasive markers and other elements, I'll integrate that because we do plan a 24-week interim analysis middle of next year.

And we will, of course provide an overall update on the enrollment end trajectories that we'll be doing as the trial becomes more advanced at the appropriate time. Now, in terms of the noninvasive markers, I think there's some general comments here and then this specific situation. This is an area that you guys follow very closely.

And as we know, there are a series of noninvasive markers that have indeed been correlated to clinical outcome, and they're emerging as the MRI-PDFF, the ALT, along with cT1 and a few other measures. Now the NGM will always refer you to the company that ran the trials, et cetera, for those aspects.

What we can share is that that endpoint in that measurement timeframe was quite early for fibrosis. And so, the anticipation is that that may have been premature in terms of time to see an impact on that type of disease state. And it's one data point across a number.

So, I'll pause there and ask Margaret if she would like to add any additional context on the noninvasive markers..

Thanks, Bill. This is Margaret Koziel, VP of Clinical Development. Let me just pull it back up and to say, we all understand that liver biopsies are problematic inherently as an endpoint and assessing histology too early, as some companies have done is goes against FDA guidance on this matter.

We also look forward to contributing the ongoing and very rich discussion about which non-invasive testing really predict clinical outcomes. And at the heart of it, that's what is missing there. There are a number of groups that are working on this. We look forward to those results.

We have worked with investigators to collect a rich suite of non-invasive tests that we believe at the end of the day will be more useful to practicing physicians..

And thank you, Margaret, and Alicia, just to make sure I answered the right question on the screen failure rate, was that for EMMPOWER or EMMPACT? Just to make sure, because I answered it more for the EMMPACT..

Yes, I was originally asking about EMMPOWER. Sorry about that..

Okay, great. Yes. So let me clarify the same upfront answer. We're pleased with the engagement and the response and how we're proceeding with that population in terms of the timing of that.

This is the 24-week trial, and we are looking at completing enrollment around the third quarter of next year with a top-line data readout in the first quarter of 2023. Now this is in OHE and we – it's our first experience recruiting in OHE. We have again, great engagement with the medical community. There's a high unmet medical need here.

There's a high differentiation for our mechanism. And so, the medical community is very interested in looking and working with these and we're working with a series of world leading experts in this field. So, we will update you again on the timeframes of that. So, apologies for the – you got more answers than you asked for. I'll put it that way..

Thank you..

Okay. Thank you..

Thank you. The next question comes from Ed Arce, H.C. Wainwright & Company. Please go ahead..

Hi, good morning. And congratulations on all the progress so far this year. A couple of questions for me, I'll start with EMMPOWER for OHE. As you mentioned in your remarks, the primary endpoint is at least a two-point improvement in PHES.

I'm wondering if you could walk us through both the amount of alignment that you have with the FDA on that as well as prior data that substantiates that well-known biomarker?.

Yes. So let me ask Alison Schecter, our President of R&D to address the – those questions. Thank you. And thanks for the comments.

Alison?.

Yes, appreciate the question. In terms of the FDA, we have confirmed this design, including these statistical assumptions with the FDA. The trial is powered adequately to assess the primary endpoint that change in PHES. The powering level that is consistent with most other Phase 2 trials.

And we're leveraging, as you alluded to our past experience and data regarding the PHES and are assuming a benefit of PHES in the placebo group. In our previous study, we did see in the 12 weeks study a statistically significant change in PHES. So, we're confident about our assumptions..

Great. That's helpful. And then a few questions on the Phase 2 EMMPACT study. You mentioned the interim analysis in mid-2022. So, three questions there.

First, walk us through exactly what you expect to report? Second, why was the primary endpoint of the two-point improvement in NAS score chosen vis-à-vis FDA guidance? I think there's probably some questions around that, especially given that you also have the two surrogate endpoints as well that you're going to measure.

And then thirdly, given that this is an interim just to be clear. Is there any capacity to make any adjustments to the trial as a result of the data that you collect? Thanks..

Alison?.

So, we were very mindful about the endpoints that we chose, the greater than or equal to two-point change in NASH is a standard histopathologic benchmark that's used across 2b trials in this field.

And we believe that the primary and secondary endpoints biopsy confirmed resolution of NASH without worsening of fibrosis and a greater or equal to one stage of proven in fibrosis without worsening of NASH from this trial will enable us to define and an efficient and well powered Phase 3.

You also asked about the interim analysis and what we'll be looking at. And in that case, we'll be looking at the well characterized non-invasive biomarkers that Bill mentioned that are used as field and validated to associate with histology such as PDFF, liver elastography and other serum biomarkers that are key in the pathogenic process..

Thank you, Alison. And lastly, in terms of Ed, what will we use that data for? It will help inform our go forward programs because as you know, we're stratifying for Type 2 diabetics on that population, it will help. As Alison said, help us prepare for the Phase 3 in an efficient way.

It will help inform us related to dose response, because we have two active doses there, the anchor dose, as well as the higher dose that we're looking to evaluate and can help prepare us for pediatrics and combination options as well.

So, in terms of ability to adjust the trial itself, that'll depend on what we find and what we want to do, but it helps really set us up and inform us for expanded opportunities in this important deal..

Great. Thank you, Bill and Alison. Appreciate it..

Thank you, Ed..

Thank you. The next question is from Jessica Fye, JPMorgan. Please go ahead..

Hey guys. Good morning. Thanks for taking my questions. It sounds like screening is going well in the Phase 2b. I guess specifically for the NASH trial, what strategies are you using to encourage patients to enroll in a paired biopsy study in the context of the current COVID situation.

And second, how should we think about trajectory for R&D expenses from the roughly $10 million run rate in the last couple of quarters as you progress through these B2B trials?.

Okay. Thank you, Jessica and good morning. Thanks for the comments. I'll start, ask Margaret to comment a little bit on the NASH and then Laurent on your second part of your question. So overall in terms of COVID itself, while we're very cognizant of it. We have been working with the sites and so far, we're seeing limited to no impact on the pandemic.

A combination of the fact that the centers have had to work through this over the last year plus the fact of course, the vaccination rates that are ongoing. And then we're in a great position to participate here.

Now in terms of how our strategies, I think macro wise, what we've heard from the investigators and from the patients is they love the concept of our mechanism, right? You have endogenous metabolic modulator composition that is designed to work with the body system that is oral dosing. That date has demonstrated safety and tolerability.

And in fact, is something that they see as a way to restore their body systems. So, you combine that with the techniques that Margaret and the team had put in. And so far, we've had an excellent start and engagement.

And as I mentioned in one of the earlier questions, it's always encouraging when you hear from the principal investigator, that other sites are calling them and saying they want to be part of that trial because of their understanding of the science and the profile.

Margaret, is there anything detail wise on the specific strategies that you guys are in flooring that have been effective today?.

No, I would echo your comments completely about the investigator enthusiasm that in turn is communicated to potential subjects in the trial. That has been a very strong plus for us in setting up this study. And of course, we are monitoring the COVID situation clearly and have mitigation plans in place particularly once the trial gets ongoing.

So, we're well prepared for that. Everyone understands that the situation is fluid in terms of COVID and clinical trials in general..

Yes, I think it goes back to the fact that when we first shared the data, they spontaneously saw the benefit of this as a potential strong first line agent because of the profile I described and see the need there. Laurent, just the second question..

Yes, thanks [indiscernible] to address the financial questions, we have focused heavily on managing our resources so far, maintaining a very strong financial position. We are not providing explicit guidance. But what I can say is that R&D expenses will ramp going forward as we get the trials ongoing.

Again, as Bill mentioned, we just started the initiation of these trials. So, we have to see how the patient has been enrolled and at what speed. G&A will remain roughly flat in the near term.

So, we explained that our cash would be sufficient to fund us – to fund our operation to the third quarter of 2022, which would get us beyond a key milestone in 2022, including also the expansion of our pipeline..

Thank you..

Thanks..

Thank you. And the next question comes from Mayank Mamtani of B. Riley Securities. Please go ahead. .

Good morning team. Congrats on the progress and thanks for taking our question. So, two quick follow-ups on EMMPOWER and then I have one on EMMPACT.

So, on a standard of care for the EMMPOWER study, could you just touch on what the primary endpoint assumptions are for the PHES? It’s relatively understudied to my knowledge, but for current standard of care.

And then what expectation, if any, of you should have on the information you will gather on those two episodes? Could you maybe comment on that?.

Sure. This is a great question. We're powering the trial adequately to assess the primary end point, which is the change in PHES with a powering level that is consistent with other Phase 2 trials.

And we're leveraging our past experience where we showed in 12 weeks a statistically significant improvement in PHES and are assuming a benefit in PHES in the placebo group. We have confirmed this design, including the statistical assumptions with the FDA.

Now this is based on the fact that we are looking at these patients and enriching them for these patients are even more impaired. These patients have a baseline PHES of minus four with underlying cognitive dysregulation. And they are also already have had by enrollment criteria, an OHE breakthrough event in the last six months since enrolling.

So, based on that, we feel that will not only hit our primary endpoint, but then our secondary end points of seeing OHE events will be enriched and this will help us design our regulatory endpoint OHE breakthrough in our Phase 3..

And Mayank just to build on that, I think, if a component of your question with the standards of care related to the PHES. So, as you are aware, OHE is a clear, neat, sizable market growing. MHE is an even larger population and continuing to grow.

What we did to build on Alison's point about looking at the impact where we had the statistically significant impact, we had a greater than two-point improvement, that is comparable to the known data of the standards of care in our previous trial.

So, we not only have everything that Alison said about the powering and the modeling based on those impacts, we know that having that two-point improvement, which we saw in a majority of our high dose subjects in just the 12 weeks is comparable to the understood standard of care in that population.

And then the breakthrough part of this is even in the registration trial, the batch study for rifaximin, you saw almost 50% of patients breaking through on lactulose monotherapy within six months and 22% on combination therapy. So as Alison outlined, we've got an enriched patient population, and we know even in that setting there's breakthrough.

So, we're confident of our ability to test and evaluate our chance to make a difference on top of that and stratify for those two arms..

Great, great, I appreciate the detail there. And then on the impact study, the NASH study where the dewpoint improvement is on the NASH score, so 24 weeks, isn't something that you've seen others do a lot. There's a couple of examples out there, one you've already discussed.

Just maybe, walk through the rationale for not just the timepoint, but also like if you can comment on the methodology of how you are doing biopsies. There are different methodologies, as you know, and the field’s is knowledge is advancing on that.

And if you can comment on the effect size expectation there, obviously again, factoring in the understanding we are having on the placebo response from your more advance peers? Thanks again for taking our questions..

Yes. So, I'll start with the first question then turn it to Alison for the next two. So, in terms of the 24 weeks, Mayank, you are familiar with our program, we've already demonstrated activity across all of these areas in 12 and 16 weeks of data. So, we were looking to evaluate a progressive set of information with 24 weeks in this IND setting.

Additionally, our hypothesis is because of our multi targeted mechanism that we will continue to build our compound positive effects across these different mechanisms. So, you're familiar of course, with the quality and measures that we utilized in our previous studies. We want to add to that and build on that.

And that's why we're choosing the 24-week data period at this point in time. It also goes to one of the earlier questions Alicia asked. So that's the rationale for the 24 weeks. And then as Alison said in a previous question, we'll be looking at the key markers that allow us to understand and plan going forward.

Now in terms of the aspects of biopsy and effect size, Alison will comment on that..

Yes. I just want to go into a little bit inside the greater than two-point change in the NASH is a standard histologic benchmark used for Phase 2 trials across the field. We don't want to make the mistake of, given a heterogeneous disease, we don't end with fast progressors and slower progressors, and we don't know how to choose each.

We want to make sure that we give enough time for our drug to show a histologic change.

And we believe that the primary and secondary end points the biopsy confirmed resolution of NASH without worsening of fibrosis with a greater equal to one stage improvement in fibrosis, without worsening of NASH from this trial will enable us to design an efficient Phase 3.

In terms of the discussion of biopsies, which is again, a great question is and actively discussed question in this field [indiscernible].

It’s well-known that in these NASH studies, there is a placebo effect, which is likely to do better adherence with prescribed medications and diet as most patients do when they enroll in a trial on top of the inherent, intrinsic variability of biopsies.

We're asking patients to adhere to a baseline diet, we're taking diet diaries and monitoring all of these variables and impact. In addition, we're building a comprehensive set, as we've mentioned, the biomarkers, which will likely guide clinical practice in the future.

And from a histologic perspective, once completing the full biopsy analysis, the central pathologist, who is one of the premier NASH histopathologists in the world will be rereading a representative sample of biopsies to evaluate inter reader variability and ensure reliability..

And the effect size, I think, was the other question if I remember correct..

Yes..

Which we covered, I think, in terms of the aspect of the powering and how we prescribed that with the FDA, right?.

Yes..

Yes..

Yes. So, this is all our plans in terms of pathologic and histologic changes have been well reviewed with the FDA and they are aligned with the use of a single-blind essential pathologist. And as I said, we're going to be looking at a representative portion to be re-read. But of course, all of these endpoints have been aligned with the FDA..

Thank you for all the detail and the thoughtful answers. Thank you..

Thanks, Mayank..

Thank you. And the next question comes from Keay Nakae of Chardan. Please go ahead..

Yes. Thank you.

Just in terms of the EMMPOWER study and clinical site selection, talk to us about how the specialist diagnosing and treating the OHE patients are captured to feed those patients into your clinical sites?.

Yes, that's a great question. I mean, obviously this is a rare disease for OHE and it takes specialized doctors and tertiary care centers to do that. Therefore, the vast majority of our sites in this trial will be in larger academic tertiary centers just to address that point that you brought up. About one third of the sites will be in the U.S.

with the remainder in Europe..

Okay.

And is there also an equivalent network that you have with NASH that helps to facilitate this?.

Yes. I mean, we've been working with the leaders in the fields in this. And Dr. Harrison does have some impact in OHE as well. And we're using one of his sites for the study as well. But we've have a large KOL network for OHE, and we're exploiting that to make sure that we get the right patients in the right centers..

Okay. Thanks..

Thanks, Keay. I think the reinforcement here again, I'll go back to the differentiated mechanism, the high unmet medical need here. We have had a lot of inbound interest on this and building on Alison's comments about these tertiary care centers, thing to know is OHE patients are largely in the system, meaning that they are diagnosed [indiscernible].

And when you get these sites on Board, then they tend to have a larger number of patients per site that are eligible for clinical studies. And we're recruiting for 150 patients across 70 sites globally. So, we’re excited by the engagement and the initiation here of the team..

And I think, something that Bill mentioned, we're really getting inbound interest from the investigators which then goes to the patients about going beyond removing ammonia, which is the standard of care for both rifaximin and lactulose. We're doing multimodality mechanisms of action.

So not only are we expecting effects on neurocognitive, but also our other effects in terms of our secondary endpoints of improving muscle mass and frailty, that occurs in these patients. And that also is associated with increased morbidity and mortality..

Okay. Thank you.

[Operator Instructions] Then one next question comes from Paul Choi with Goldman Sachs, please go ahead..

Hi everyone. Congratulations on the progress. I'll echo what others have said regarding the initiation of the trials. This is Charlie on for Paul. We just have one quick one also regarding recruitment on the EMMPOWER study.

And I'm sorry that it's a COVID-related question, but you know, the COVID backdrop has obviously much improved over the course of this year. But if we go back to 24 weeks ago things were looking a lot more different.

And so, if we're considering OHE patients that have had OHE events within the past 24 weeks, do you think there are any possibilities for lingering impacts of the COVID environment 24 weeks ago with presenting a difficulty in terms of identifying patients who have had these events around that time? Thank you very much..

Charlie, thank you for the question. And I'll say the level of sophistication of it.

The short answer is we have, of course been coordinating with these centers and as was alluded to in a previous question, these are academic tertiary care centers who are very accustomed and used to managing their patients in a number of vehicles, whether that's telemedicine, whether that's home health, whether that is having them come in as structured elements.

The OHE events are well-documented because these are circumstances where it requires a visit, a change of therapy, a change of care. So, from that standpoint, we have not seen that particular issue be of concern.

And as you alluded to the timing of this has actually worked out very well for us in terms of the progress that's made on the pandemic and how the centers manage it. So, we will monitor it. And of course, as you said, it's dynamic but to date what we have seen and heard is continued progress in this area..

Awesome. Glad to hear it. Thanks so much..

Thank you, Charlie..

Thank you. Next question comes from Andreas Argyrides, Wedbush Securities, please go ahead..

Thank you, operator. Good morning to you and congrats on the quarter as well. Just a quick one from us. Can you tell us what – any updates you have on the discussions with the FDA regarding pediatric NASH? And then also when can we expect an update on the next EMM product candidate? Thanks..

Okay. Thanks, Andreas. Thanks for the compliment and on the progress. In terms of pediatric NASH, as we've communicated before our first project objective was to really get the Phase 2b up for the adults and then re-engage with the agency at the right time to talk about the optimal strategy, didn't move forward.

As we all know unfortunately this is a high growing need with one in ten American children already considered to have NASH. There's very limited development. We believe our profile, including our mechanism and safety and dosing sets us up well for that. And we look forward to updating you at the appropriate time on that.

Regarding the next step in the company, in terms of additional opportunities. We're very excited about the work that our R&D team has done. The learnings that we've had from the major number of studies that we've taken into the company.

And we will be updating you guys later this year about the next steps that we'll be taking in terms of the approach, the learnings and the biologies that we want to affect. So, we look forward to that and Jason, of course, we'll be reaching out to schedule that at the right time..

Great. Thanks. Congrats again..

Thank you, sir..

This concludes our question-and-answer session. I'd like to turn the conference back over to CEO, Bill Hinshaw, please go ahead..

So, thank you everyone for your time this morning. We're certainly looking forward to the start of the comfort [ph] circuit this fall and hope to see everyone in person soon. Until then please enjoy the rest of the summer. And operator, this concludes our call. Thank you everyone..

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect..