Good day, and welcome to the Galmed Conference Call to discuss Financial Results for the First Quarter of 2019. Today's conference is being recorded.

Before we begin, please note that we will be making certain forward-looking statements on today's call, including those regarding financial results, statements and forecasts regarding anticipated timelines and expectations with respect to our regulatory and clinical development programs, as well as other statements that relate to future events.

These statements are based on the beliefs and expectations of management as of today and actual results, trends, timelines and projections relating to our financial position and projected development programs and pipeline could differ materially.

We urge all investors to read carefully the risks and uncertainties disclosed in our filings with the SEC, including without limitation the risk under the heading Risk Factors described in our Annual Report on Form 20-F filed with the SEC, and the risks and uncertainties included in the Form 6-K filed with the SEC earlier today.

Galmed assumes no obligation to update any forward-looking statements or information, which speak as of their respective dates only. I would now like to turn the call over to Allen Baharaff, President and Chief Executive Officer. Allen, please go ahead..

Thank you, Miscynth [ph]. Good morning and thank you for joining us on today's conference call. I'm pleased to be here today with our Chief Scientific Officer, Dr. Liat Hayardeny; our Chief Medical Officer, Dr.

Tali Gorfine; and our Chief Financial Officer, Yohai Stenzler to provide you with an update on our clinical development program, as well as report to you on our financial results for the first quarter of 2019. As always, we will be happy to take any question you may have at the conclusion of our prepared remarks.

On April 9, we announced that we completed our end of Phase 2 meeting with the Food and Drug Administration, FDA, and reached general agreement on key aspects of the Phase 3/4 development and registration plan for our pivotal registration study ARMOR.

ARMOR is a Phase 3/4 multinational, multicenter, double-blind, placebo-controlled clinical study to evaluate the efficacy, safety and tolerability of Aramchol in subjects with NASH and fibrosis.

General agreement has been reached with the FDA on key aspects of the ARMOR Phase 3/4 study including patient population, study endpoints, study dose and treatment duration. We plan on submitting the study protocol of ARMOR to the FDA during this quarter, with study commencement expected in the third quarter of 2019.

In summary, the design of ARMOR -- of the ARMOR study is in line with Aramchol unique mechanism of action, which demonstrate an effect on both NASH resolution and fibrosis improvement and is based on the ARREST results and the FDA recommendations.

Under the current trial design, we are submitting to the FDA ARMOR will be -- will evaluate the safety and efficacy of Aramchol in approximately 2,000 patients on a dosage of twice daily 300 milligram treatment compared to placebo in a 2:1 randomization. The studies design consists of two parts.

In the first part, histology-based, 1,200 subjects will be treated with Aramchol or matching placebo for 52 weeks until the second biopsy. In thee second part, clinically-based, subject will continue with the same treatment assignment until study completion to confirm clinical efficacy.

The study is powered to meet the two alternative key histology-based endpoints; NASH resolution and no worsening of liver fibrosis and fibrosis improvement with NASH worsening with not worsening. Under current FDA guidance, meeting one of the endpoints is expected to suffice for success of the first part.

Assuming the results in the first part are positive, we plan to submit a marketing authorization application under regulatory provision of accelerated conditional approval.

As you may recall, we recently published results from our PK study comparing once daily Aramchol 600 mg to twice daily 300 mg with dose split resulting in the 53% increase in exposure.

As mentioned above, we plan on dosing patients with twice daily 300 mg in ARMOR study and we believe the increased exposure has the potential for even far greater efficacy than what we saw in ARREST. In the ARMOR study, our planned patient population will remain unchanged from the population characteristic investigated during the ARREST study, i.e.

diabetic or pre-diabetic, overweight or obese, although limited to S2 and S3, fibrosis stage only. Similar to ARREST, ARMOR is designed to be a robust global study in the U.S., Europe, Latin America, and Asia.

Maintaining global distribution is not only significant direct effect on the total cost of the study, but also ensure that we will adhere to the same design of our successful Phase 2b ARREST study.

Moreover, we expect a diversity of countries to allow faster registration in the various continents, if the study is conditionally approved following the first 52-week part of the trial.

From an operational point of view, based on the global presence of the ARREST study and learning from recently completed Phase 3 trials of others, we intend to keep the number of recruiting staff around 150 to ensure an efficient randomization and operation of the study.

We are concentrating our efforts to complete all new districts to prepare for ARMOR and look forward for rapid initiation and completion of randomization within 18 months of commencement.

Based on current timelines, we plan to report the study -- the first part of the study -- sorry; we tend to report the results of the first part of the study in Q4 2022. I would like to turn the call now over to Yohai Stenzler our CFO.

Yohai?.

Thank you, Allen. This morning I will be providing with our financial results for the quarter ended March 31st, 2019. For more information, please refer to our report on Form 6-K filed earlier today with the SEC, which among other things provides a summary of such financial results.

For the first quarter of 2019, our net loss totaled $3.5 million or $0.17 per share, compared with a net loss of $2.5 million or $0.17 per share for the corresponding quarter in 2018. Research and development expenses totaled $3.3 million for the first quarter of 2019. This compares in $1.9 million for the first quarter in 2018.

The increase is mainly related to the cost of manufacturing of Aramchol as we are making the necessary preparations for the commencement of the ARMOR study. Turning now to G&A, our general and administrative expenses for the quarter totaled $0.8 million compared to $0.9 million for the corresponding period in 2018.

The decrease finally resulted from a decrease in professional service expenses. During the three month ending March 31st, 2019, our financial income was $0.5 million compared with $0.1 million for the same period in 2018. Increase is attributable to our interest income from financial instruments.

Our cash balance as of March 31, 2019, which includes cash, cash equivalents, short-term deposits and marketable securities, totalled $86.6 million compared with $90.2 million on December 31, 2018. With that said, operator, please provide instructions for the Q&A portion of our call..

[Operator Instructions] Our first question comes from Steve Seedhouse with Raymond James. Please go ahead..

Good morning. Thank you.

Could you just talk about the reasons for the decision to enroll 1,200 patients in the interim Aramchol? Obviously that's a bit larger than some of the earlier NASH Phase 3 studies? And then also, what is the full definition of NASH resolution that you're using and also what is the significance level or alpha that you're assigning to the primary endpoint, I think intercepts Phase 3 study was 0.01? Thank you..

Okay. Thank you, Steve. This is Tali Gorfine. I'll answer your questions one by one. For the first question, we are enrolling 1,200 patients for the first part of the study in order to have a robust deflation studies, meeting both endpoints.

So note that endpoint definition -- the success of the study requires accepting only one of these endpoints, but with our drug Aramchol, we think we are able to power this study for both endpoints.

And to your first question that requires, of course, we’ll have to fix adjustment, which I will not go into in this call, but have been based on interaction with FDA. And in terms of the NASH resolution, will use the definition as recommended by FDA guidelines.

NASH resolution and no working of -- as of this, well, NASH resolution is defined based on the meaning of zero and commission zero one, actually 52….

Okay, great. And just given the [indiscernible] obviously you guys are finalizing the plans here.

Do you have any updated view on just the total cost of the Phase 3 study to get to the initial interim analysis that would be the basis for filing?.

So the estimated budget has not changed from our earlier prediction, which is around US$65 million. Again, I'm reminding you all that we're talking about the global study, which patients would come from high-cost recruiting countries and lower cost recruiting countries.

So, on average, the total cost including, of course, for the first 1,200 and by the time that 1,200 patients are enrolled already, many of the additional patients are already enrolled for the study, by the time the 1,200 is really read-out sorry not enrolled. So we budgeted to probably -- it should be sufficient for probably around 1,800 patients..

Okay, thanks. And just last question. Any near-term plans before I guess that the interim analysis would read out, I’ll just start with additional combination studies. I know this is something you guys have been thinking a lot about..

So, we are -- I mean, this is something that is in our top priority -- list of priorities and we are -- the first steps is identifying targets which we like and we think that would have synergistic effects together with our employees.

The second step, of course, is once would yield the scientific personnel which we already did in order to target these molecules is now working on in-vitro or in-vivo short-term studies to support initiation of combination studies according on to the FDA guidance, which are very clear about the toxicology and the clinical design, et cetera.

So, it's not a quick and dirty process. This is where -- I know that you know in Galmed, we don't believe in doing quick and dirty studies.

We are going to look very carefully and how we best designed the study, but all of that would start only once we would put ARMOR study on track, on time, and we can free the clinical department to look into more details of these combinations study. But this is definitely something which is on top of our priority list..

Okay, great. Thanks for taking my questions. Appreciate it..

Thank you, Steve..

Our next question comes from Yasmeen Rahimi with Roth Capital Partners. Please go ahead..

Hi this is Paul Ryan [ph] on for Yasmeen. Thanks for taking my question. Can you just walk us through the per-patient costs for NASH trials in the U.S. versus ex-U.S.? And then also could you maybe -- can you walk us through the timeline of turning on the Phase 3 sites U.S.

versus ex-U.S.? And kind of like what countries are easier to start a trial versus others? Thanks..

Okay. So, without going into too much into detail, I can tell you that the cost per patient in the U.S. can vary between $25,000 to $50,000 per patient and I'm only talking about the direct cost of the centers, not including other vendors like data management, labs, et cetera.

You compare -- you can compare that to a cost in Europe of about $12,000 to $15,000 and a cost in Latin America, which is another jurisdiction, which is less than $10,000.

So, all these numbers and these low, mid, and high and all of these have to be negotiated, but there's a ballpark number which is the number you can put your modeling in building up the cost of a study..

Sure. And also just about the timeline maybe turning on Phase 3 study U.S.

versus ex-U.S.?.

Timeline is -- we anticipate the U.S. in fact to be the first sites to open. As you know we are working the two PIs of the study, Professor Vlad Ratziu and Professor Arun Sanyal. We are also collaborating with Professor Stephen Harrison with summit for the U.S. patients. So, we expect the first patient to come in from the U.S.

as I said when the study will be initiated in the third quarter of this year. And consequently I mean, or sequentially when we’ll get regulatory approval from the other jurisdiction, we are talking of a study that's going to be run in 20 countries in five continents including the China, U.S., Europe, Latin America and possibly also Australia.

So, when any countries according to their regulatory limitations that we get approvals, we will of course start approaching as quickly as possible. But we are building the program so that randomization will be completed within 18 months..

Okay, great. Thanks for taking my questions..

Thank you..

The next question comes from Mayank Mamtani with B. Riley FBR. Please go ahead. Forgive my pronunciation. I'm trying for Mayank Mamtani..

I apologize. I was on mute guys. Thanks for taking my question. Good morning. A couple for me, mostly follow-up relating to the Phase 3 study.

Could you maybe like this talk through like some of the key considerations as you were in your end of Phase 2 meeting, more specifically do even like safety, I understand the efficacy, the higher 33% exposure allowed you to be comfortable on getting the effects that you may have had in the rest.

But maybe on safety also since that dose has relatively been untested in earlier settings..

Yeah. I would let Dr. Hayardeny, our Chief Scientific Officer to take this question..

Thanks for the question.

You're actually asking since we are increasing the exposure of Aramchol by 53%, you're asking about the safety?.

That's correct.

And what are some of the things are build in Phase 3 to lead data safety margin committee to took actions if there is any signal with the higher dose?.

So, this one, Dr. Gorfine will take, I’ll take the safety. When you do dose split, you split the dose to twice daily, what you're actually doing is reducing the Cmax through the maximize concentration. And you are elevating the minimal concentration, which we call Cmin. And, therefore, you are reducing side effects and not elevating side effects.

The side effects are also always derived from Cmax and efficacy is always drives from Cmin. So by doing this, you can elevate the exposure and we do not expect any signals of safety that we didn't see, and I will take you to Dr. Gorfine to speak to the safety in ARREST [ph]..

So I’ll answer your question in two parts; A, the safety profile on Aramchol study was very, very good, which allows us to increase the exposure with potential increase in efficacy. We also have a study that we reported was twice the day versus once a day building with similar safety. So, that does also gives us confidence.

And in terms of the ARMOR, the Phase 3/4 study will, of course, be extensively monitored in terms of different study visits and DSMB and as you know today there are adjudication committees for specific events and all these have been discussed and will be implemented in the ARMOR study..

Okay, great. That's super helpful. And then just on enrollment, could you -- it looks like the number of sites are like at least half as many as they were in the interseg region rate study.

Could you maybe comment on like how you're thinking about controlling the -- maybe the number of patients per site, any heterogeneity in terms of lifestyle management for some of these patients across different geographies?.

So in terms of the number of sites, we are working very hard to identify and -- the sites that participate in this study are sites that will enroll sufficient number of patients that is, of course, good for enrollment, for the context of the study, for training of the sites and for maintaining patient in the sites in a long study, so that is the reason you see less number of sites than in other countries, because we're focusing on higher recruiting site, potentially higher recruiting sites.

And in terms of the geographical potential differences, we have two ways of controlling for that. And the first is that we are maintaining the population of the study, which is pre-diabetes and overweight or obese with patients so you have homogeneous population.

And in terms of the -- so got -- actually you were asking about lifestyle differences?.

Yeah..

So from our experience in ARREST study and that is, I'm happy to say one of the good things about ARREST was already a global study if you remember and we already studied patients from not only U.S., but also different countries in Europe and in Latin America and we have very good experienced and consistent results in our regions..

Great. And then just last question. Do you have -- anything you can comment on F1 patient, by understand the Phase 3 focus is on F2 and F3, just from lifecycle management anything you could comment there? Thank you..

So F5 study is designed along with what the FDA access as population, placebo treatment and according to the regulatory requirements in terms of patient population, as you know, the FDA is specifically set things that go through the EMA patient population that they are looking at is F2, F3.

These F1 patients are in some studies enrolled as NASH exploratory arms and we have decided not to -- section on and that, of course, can change with regulatory metrics..

Okay. Great. Thanks for taking my questions..

Thank you, Mayank..

Next question comes from Thomas Yip with H.C. Please go ahead..

Hey, good morning, everyone. Apologize on behalf Ed, he's held up. And we have a couple of questions.

So first regarding to ARMOR study, for the first part, should we expect an interim efficacy or safety and that's just before the top line in fourth quarter 2022?.

So we are not doing any interim analysis for the study..

Okay.

But will there be interim safety reviews and if so will there be press releases co-related to that?.

Such studies are always routine and frequently followed by the release that you view all the accumulated data to the point of their meeting. These are mandatory and routine in such studies..

Okay. Okay. Thank you for that.

So – and then for the second part of the ARMOR study, does it consist of other 52 weeks of treatment and will patients be given the chance to cross over to another treatment arm?.

So the second part of the study is what we call the Phase 4 is the one that the regulators are requiring for clinical benefit so that includes a total of approximately 3,000 patients enrolled, all of them with the same treatment assignment at -- along the randomization that continue up to a specific number of clinical events that are seen in the study.

It is not a second round of randomization and it is not a 52-week study. It is of histology. It is a clinically based study with clinical endpoints..

Okay. Thank you for clarifying on that.

And then a financial question, how much we estimate the whole ARMOR program to cost until the top line readout?.

So, of course, the first readout is 52 weeks of – after 52 weeks, the histology part. And we – I don't have the exact number in front of me, but we are talking – if I recall at top of my head, about 110 million for the total study. But as we said, the first is – the first part is the 52 weeks histology and this is budgeted for 65 million..

Okay. Okay. Thank you. Thank you again for taking my questions. And thank you for all the clarity..

Thank you..

This concludes the question-and-answer session. I'd like to turn the conference back over to Allen Baharaff for any closing remarks..

I would like to thank you all for joining our call today. As always, we are happy to answer any questions you may have during the quarter. Please feel free to contact myself or Dr. Hayardeny or Dr. Gorfine for any questions. And we look forward to seeing you on our MBRs in the U.S. and on our next call..

This concludes today's conference call. You may disconnect your lines. Thank you for participating and have a pleasant day..