Good day, and welcome to the Galmed Conference Call to discuss Financial Results for Second 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, 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 beliefs and expectations of management as of today and actual results, trends, timelines, 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 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, Sherry. 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 my prepared remarks.During the last quarter, we continue with the preparations for the initiation of ARMOR, our Phase 3/4 NASH study and we plan to commence later this quarter.

If you may recall, ARMOR would have valuated safety and efficacy of Aramchol in approximately 2,000 patients on a 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 the second part, clinically-based, a total of 2,000 subjects 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; First, NASH resolution and no worsening of liver fibrosis; and second fibrosis improvement without NASH worsening.

Under current FDA guidance, meeting one of these endpoints is expected to suffice for successfully achieving approvable drug.Similar to our Phase 2b ARREST study, 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 patient population investigated during the ARREST study.ARMOR core principal investigators are Professor Vlad Ratziu and Professor Arun Sanyal, with Professor Stephen Harrison as the U.S.

lead investigator.

Based on the learnings from the other advanced NASH clinical study, we’re working with industry leaders in the management of the ARMOR study, including [indiscernible] clinical research and others, and are looking to rapidly enroll the first 1,200 patients with a targeted timeline of 16 to 18 months from the time of commencement with a aim of reporting the topline results by Q4 2022.I would like now to turn the call over to Yohai Stenzler, our CFO.

Yohai?.

Thank you, Allen. Good morning. This morning I would be providing you with our financial results for the quarter ended June 30, 2019.

For more information please refer to our report on Form 6-K filed earlier today with the SEC, which among other things provide the summary of such financial results.In the second quarter of 2019, our net loss totaled $4.2 million, or $0.20 per share, compared with a net loss of $2.7 million, or $0.17 per share, for the corresponding quarter in 2018.

Research and development expenses totaled $3.5 million for the second quarter of 2019. This compares with $1.9 million for the second quarter in 2019. All R&D activities are included during the second quarter, mainly due to the work we are making towards the initiation of the ARMOR Study later this quarter.Turning now to G&A.

Our general and administrative expenses for the quarter was $1.2 million, compared to $1.1 million for the corresponding period in 2018.

The increase primarily resulted from an increase of approximately 0.2 million in non-cash stock-based compensation expenses.During the three months ended June 30, 2019, we have a net financial income of $0.5 million versus $0.1 million for the corresponding period in 2019.

The increase is attributable to our interest income from financial instruments.

Our cash balance as of June 30, 2019, which includes cash, cash equivalents, short-term deposits and marketable securities, totaled $83.6 million, compared with $90.2 million in December 31, 2018.With that said, operator, please provide instructions for the Q&A portion of our call..

Thank you. [Operator Instructions] Our first question Yasmeen Rahimi with Roth Capital Partners. Please proceed..

Thank you for the update [Technical Difficulty] that will allow you to expedite enrollment into far more? And what percentage of the ARMOR sites are the same as in the ARREST Study? Thank you so much for taking my question..

I’m sorry Yasmeen, but you are breaking completely, and operator did you hear that question, because we could not hear the question properly?.

I can repeat it. You want me to repeat it..

Okay. Thank you..

Question number one is, what are the key lessons that you’ve learned from Phase 2b in regards to enrollment that allows you to expedite it? And then the second is, what percentage of the sites, ARMOR sites as in the ARREST Study?.

Okay. So, the first lesson I think we’ve been heavily engaged over the last year or so in understanding the NASH phase and the investigators who participated in large Phase 2b and Phase 3 studies.

We built a – I would say a proprietary database with global NASH physician and we are really looking that this [road map] because we understand that for a successful study it is advisable to limit the number of participating sites for 200 patients, wishing to break the paradigm of 0.2, 0.3 patients, enrolling patients per site per month.

And if we are doing so, we have to identify the high-enrolling sites and understand the enrollment strategy to fit ARMOR study.All of this was based as you remember ARREST study was already conducted in more than 80 sites in the same jurisdiction.

So, working together with investigators, preparing the sites, discussing the needs, and I hope that all these lessons will help us to limit the duration of the recruitment for the 16 to 18 months as we’ve stated..

Thank you, Allen..

Okay..

Our next question is from Adam Walsh with Stifel. Please proceed..

Hi Allen and team, how are you? Thanks for taking my question.

My first question is regarding, some of the dynamics in the NASH base we’ve seen data from other [indiscernible] mixed, just curious, as you think about potential partnership for the drug into geographic or in combination, have the dynamics of the NASH space actually made you more or less likely to potentially sign a partnership? And then the second question is on the cash balance given your visibility now on the upcoming Phase 3, Phase 4 trial, how do you feel about your cash balance as you kind of mapped out the logistics around the enrollment timeframes and the data read-out? Thank you..

Okay. Thank you, Adam. Thank you for the questions. So, let’s discuss the cash, I mean our focus has not changed.

We are in the same ballpark numbers that we’ve been before, which is around $70 million [65 million] for the first part of the study and as we advance clearly there is less and less risk and we see that our budget is indeed in place in terms of the CTA, the contract that are being signed as we speak with different sites and the cost for older vendors, which I mentioned some of them, but clearly this is – our focus has been accurate and we have nothing to change on that.As to the first question was – the partnership, yes, again I don’t think that of course we – unfortunately we’ve seen some negative studies in this phase, but our philosophy has not changed.

We’ve always thought of how Galmed is running a global study and in the global study we are preparing for global licensing and global JVs or collaboration. We’re not waiting for this to come.

We are advancing both, for instance China, the factor we include China, Mainland China, not only [indiscernible] in the study we have contracted with the leading CRO to advance the regulatory discussion with the NNPA, this is the new name of the CFDA, and we are hoping that we will have an I&D meeting early first quarter of 2020 or the end of the fourth quarter of 2019.And all of these would naturally advance the attractiveness of a potential transaction in China.

I want to draw your attention to a recent transaction that was signed by [indiscernible] with very lucrative numbers, which are more or less what we see the kind of licensing terms that you see in other Western jurisdiction, but before China had much lower number, but now we see more and more better numbers, and the same is for Middle East, North Africa, and Latin America and so we are looking and holding discussions with number of parties and of course when there will be any news we will report as soon as anything to report..

Thanks for all the color, appreciate it..

Our next question is from Joon Lee with SunTrust Robinson Humphrey. Please proceed with your questions..

This is [indiscernible] on for Joon. Thank you for taking our questions. First one is, on the last earnings call, I remember you guys mentioned that you are able to power the study for both histologic endpoints.

Could you discuss some of your powering assumptions for each endpoint such as placebo response rate, effect size, [indiscernible] rate, study powering and [indiscernible] levels? Thanks..

This is, Tali, the CMO. We have very, as you know specific assumptions when powering the studies. These are based on the current knowledge in the field in terms of placebo response in terms of the ranges. We know the range is different for NASH delusion and for fibrosis improvement and range is lower for NASH delusion more for fibrosis improvement.

They are based on the ARREST data, they are based on what would be clinically meaningful magnitude effect and they are based forth on our understanding with the FDA, with regards to the [indiscernible] adjustment that is required in this Phase 3, 4 study, that means we have also the clinical endpoint and the two endpoints that each could be sufficient for the power of the study, taking all this together, brought up the number of 1,200 patients to be very well powered for those endpoints.We always have to remember that we are increasing exposure at this time.

So, we did all the [indiscernible] assumption based on the data that already was received in ARREST that we know that this time we have a higher exposure over Aramchol being given 300 milligram twice daily..

Okay. That’s helpful. Our second question. So, you recently had a [indiscernible] call and one of doctors mentioned that and if you can have a running phase, potentially that can minimize the life style changes that people have been enrolled in the trial, which may skew the placebo of this balance.

So, I was just wondering in your Phase 3 or Phase 4 trial, did you have a running phase to kind of minimize that potential lifestyle changes, so that you have a robust data set?.

No, we do not have in a study running period, but we have inclusion exclusion for a period where we can very much detail subscribing how the rate should be stable before the base line biopsy and we’re tracking lifestyle values and exercise in the study and this is obviously important in the field.

We – all of our inclusion exclusion are based on the knowledge of the – between this physician and the patients in the – at least 6 and sometimes 12 months prior to the biopsy.

Don’t forget in the baseline biopsy the patient has an S2, 3 regardless of the lifestyle activities and diet.So, altogether in the baseline the patient has evident for advanced fibrosis on the liver biopsy regardless of the changes and lifestyle before that.

And by the way the FDA is very specific with their guidelines related to the amounts of weight-loss reduction that is allowable in this time period etcetera..

Great. Thank you for that color. And lastly, I remember Allen previously mentioned that you guys are constantly doing up pediatric trial, doing a trial for pediatric patients and I think what’s your plan there and where I think and when that start, that trial has started? Thank you..

Okay. So, we have decided that this stage since all we could do with the pediatric study, we could only do a PK study and it will more prudent to wait and see the result of the first conditional approval before we advance into a large phase 2b study. So, we have decided that there is no hurry and there is no need to rush the initiation of that.

And we would reinvestigate this idea as we come closer to the initial completion of ARMOR and then discuss with the principal investigator of the study, which will – of course from a single center it will now be a multi-center study and not only a U.S.

study, but all of that we have sufficient time to discuss as we come to the data of ARMOR, which as I said, we have planned to be by Q4 2022..

Got it. Thank you so much. Thank you again for taking our questions..

Thank you..

Our next question is from Steve Seedhouse with Raymond James. Please proceed..

Thank you. Good afternoon to all. I have a few clarification questions on ARMOR.

Just first looking at the presentation that you gave at the NASH summit it Boston in April, one of the inclusion criteria is known type-II diabetes or pre-diabetes, so if you can just clarify, is that for both F2 and F3 patients and does that mean that patient must have the diagnosis of type-II diabetes or pre-diabetes to enter the study or are they just allowed to have it, but it’s not necessary to have it?.

It is mandatory. Thank you for the question. So, all our patients in the ARMOR study will have pre-diabetes for the disease. This is same as was the inclusion in the other study. we do this for several reasons on top of not wanting to change a population between one study to the next study.

We also believe that infuse of homogeneity in the population in [indiscernible] these patients have the same risk factors that have brought them to the stage of liver disease, which makes the study more uniform. In addition, as we know this has a potential effect on [indiscernible] rate and needs to reduce [the rate]..

Okay. Thank you for that. And another question on the design. The Phase 4 cohort.

So, the enrollment of up to 2,000 patients would that include exploratory F1 patients or is the entire study restricted to F2, F3?.

The entire study is restricted to F2 and 3. We know that other [steatosis] have a small exploratory arm with S1, which has currently not completed regulatory population for approval. At this stage of the development we are focusing on enrolling F2, 3 patients that will be included in the [indiscernible] over..

Okay. In the clinical outcome’s portions, is histologic progression to cirrhosis one of the components of the composite outcome to endpoint, and I guess just generally is your clinical outcomes end point basically what is recommended in the FDAs draft guidance..

Thank you. It is exactly as the other comment and histologic progression for cirrhosis it included in these entrants..

Okay, thanks. And one last question from me unrelated to the study design, any presentations Galmed submitted for AASLD this year? Thanks for taking my questions..

Hi, Steve. This is Liat. Thank you very much. Yes, we still have – we have two abstracts sent to the AASLD and fully they will be accepted and we will report it..

Great. Thank you..

Our next question is from Ed Arce with H.C. Wainwright. Please proceed..

Hi, everyone. Thanks for taking my questions and congrats on a continued progress towards initiating ARMOR. Few questions from me. First is, on the 1,200 subjects that you’ve determined necessary for the 52-week histologic phase 3 end point.

I believe that number had been talked about as been a 1,000 just a few months ago, and so I’m just wondering perhaps you could discuss what changes or perhaps with powering or something else led to that decision, especially given that you’ve known now for a good 8 or 9 months about the increased exposure in using BID dosing?.

Okay.

In terms of the 1,200 patients, this number was calculated to make sure that we have robust powering of this study for the two end points with all the more facility adjustments and I would remind you that in this specific design with phase 3, 4 study the patient continues to be enrolled after, as we reached 1,000 or 1,200 patients, so the gap in time consent for these 200 patients make this increase negligible when you are considering the success of the study..

Okay..

The other, as we did all the assumptions care, the effect that we have in ARREST. We know that this time we have higher exposure and we hope to get much better result. Nevertheless, all the calculations were on – based on the effect size that we have utilized..

Oh, I see. Alright. That’s helpful. The other question I had is just to walk through the time line given you stated now results are expected in the fourth quarter of 2022 and you obviously have 12-month treatment period here.

What are your thoughts around enrollment, or how long that could take and then once you’ve dozed your final patient for that end point, how much time do you think it would take to go through the data analysis preparation and then finally readout the results?.

Okay. So, I’m sure with 1,200 patients we won’t be able to let the same success that we had at ARREST last patient better look was on the 31 of May, and we would go to the data on June 6. This not feasible of course with 1,200 patients. What we are – our guidance is that we will initiate the study at the end of this quarter as we previously stated.

Assuming that the first few months because of Thanks Giving and Christmas are going to be slower, but even if we allow for more in the 18 months, so let’s assume we start the 18 months only on January and forget the patient, which are going to be randomized on the earlier months.So, the last patient, the patient 1,200 is going to be randomized on June 2021 and a year later on June 2022, he would complete – he or she would complete 52-weeks of treatment and then we allow for additional three months for data analysis and completion in [indiscernible] etcetera, which will allow us - the aim is to report the data that AASLD on November 2022..

Great. That’s very helpful. Thanks Allen. One last question from me, and I’ll jump back in the queue. Are there going to be – do you expect there to be any sort of interim announcements through the conduct of the trial perhaps DSMP or any sort of other announcement before the readout? Thanks..

Of course, we will have changes and these in the study and the routine safety. I don’t consider this interim analysis of any kind. We will not have an interim analysis in the study..

Great. Thank you very much..

Our next question is from Mayank Mamtani with B. Riley FBR. Please proceed..

Thanks for taking my question and congrats on the progress. Two just clarification for me and then I have two follow-ups. Number one, could you just confirm that you are working on the – continue to work on the twice daily and there is no once daily version, because I think the press release initially had the once daily.

So, I just wanted to be clear there is no once daily arm in the ARMOR study?.

This is correct. There is only – it is only twice daily and randomized 2:1 placebo..

Great.

And then on that, I remember in the last update I think the co-administration, starting co-administration phase 1 was still work in progress, is there any data you could talk to from that and if that was still needed as far as the safety filing for the – in follow up to the end of phase 2 meeting of the FDA?.

We would– I mean, can you, I am not sure, I follow completely the question, can you repeat the question please?.

Sorry.

Yes, there was a [sudden] co-administration study with a twice-weekly dose and you had another study, the dose split study, the PK, so I was just curious if there was anything from that understanding the safety package of Aramchol?.

Yes, thank you. It’s clear enough. So, the question relates to the Phase 1 plus the interaction with the 2 and that study showed no potential interaction between Aramchol and 2 as well as [indiscernible]..

Okay, great.

And then, on the Phase 2 ARREST, could you just remind us what was the ALT reduction that was observed over 52-weeks? And then, on the same team, how are you defining NASH resolution as part of your Phase 3 endpoint? As you know, there are two definitions now to look at it, so if you could give some clarity on that?.

I think the second question relates to the definition of NASH resolution and we want to define it exactly as the FDA recommends reaching ballooning of 0 and inflammation of 0 over 1, there is no worsening of fibrosis, which is defined by a one stage increase and this was also the definition, the exact definition that was used in ARREST study previous lines and responses.

The other question related to the ALT decrease in the ARREST, which was highly specifically significant and as we – the reduction was a 600-milligram dose with minus 17.3 with a P-value versus placebo, which was lower than [0.301]. In placebo, there was an increase from this line in ALT..

Great.

and just last question, I understand you're not prioritizing the paediatric study or the adolescent study, but could you maybe talk to the combination studies that you may be thinking about in – before you kind of conclude the ARMOR study?.

So, thank you for the question. We keep on due delicencing all the potential combination; almost have to say one by one doing all the pre-clinical analysis and mechanism of action that should be complementary.

But last but not least, very important to us is to have a potential combination with the safe compounds in order to keep the safety, which is so clear around Aramchol. That being said, we are screening one by one all the potential candidates.

Once we will have the right candidate we will report as forwarding and going to the clinic with the potential combination..

Great, thanks for taking my questions..

Our next question is from [indiscernible]. Please proceed..

Hi.

Thanks for taking the question, just a couple here, a lot’s been touched on, but when you talk about the combination mindset, just because you guys are so multi-targeted kind of mechanism, is there one in particular that makes sense in terms of combo? And if it's something that would have to go on the pre-clinical side and to try the combination, or would you feel comfortable? Is there a way that you can go right into clinical studies with potentially compounds that are quite known out there?.

Thanks for the question, so the mechanism of action of arm was very distinct and well described and published. So, the downregulation [indiscernible] is very, very distinct and all the bio-clinical pathways are described, very well researched and published.

So, when we are actually talking about combination therapy, we always look for complementary mechanism to our Aramchol mechanism of action, which is, as I said, downregulation of SCD1. So most probably we will not choose anything that those in the past of SCD1 and [indiscernible] that is upstream to SCD1.

So, we will look for some others.From fibrosis point of view, for example, our Aramchol is preventing collagen production.

We will look for any compound that has to do, for example, with MMPs that dissolve already exist collagen example or if we are looking for in [hepatitis] side, anything that will have reduction in [indiscernible] on the different mechanisms. So, this is where we are going in terms of complementary mechanisms.

I hate to say we – I mean in the fields we have limited potential candidates, but we are looking for them one by one. As I said, our primary goal is complementary mechanism with good safety so that we will not – I would say….

Jeopardize..

Jeopardize this [indiscernible] potential of Aramchol as a standalone as we see a clinical trial..

Thanks. That’s very helpful.

And then, just lastly, Allen, you mentioned potential global partnerships with – you mentioned China and the Middle-East, so I was just wondering from your perspective is this has – is NASH as known or I guess understood or people is aware of NASH in those parts of the world?.

So, in vitro we have – interestingly we have commissioned LEK and did a very interesting work on the NASH base in China and interviewing KOL because as you know, recently China joined the ICH guideline, so other ICH guidelines have been teamed and they are now – they can be included in global clinical studies and have the drug approved based on these global clinical studies.

We now have a very – I mean based on the interviews of multiple – LEK interviewed the multiple KOLs – Chinese KOLs, which obviously we are forging relationships with these KOLs because we would like to collaborate and add them [indiscernible] in the ARMOR study.So, we now have a very good understanding of the NASH base in China.

And interestingly, I can tell you that the numbers are not different from the numbers that we see in the U.S. It’s about the same market, the same prevalence. If you start from, you know, 15% to 20%, which is about 200 million patients and then 15% of them have – probably lower number diagnosis for NASH.

So, we are looking at numbers which are pretty much the same as one that you see in the U.S. and the EU, and obviously the market potential in all of them is very much the same..

Okay. That’s it for me. Thank you very much..

Thank you..

Our next question is from Jason McCarthy with Maxim Group. Please proceed..

Hi, everyone. It's [indiscernible] on the line for Jason. I was just wondering if you could shed some color on how much you see this trial of costing. You may have mentioned this previously, I may have not recall that, but if you could shed some color on the – on what you see or what you expect the cost to be for the ARMOR trial please? Thank you..

So, we are still the same number that we have anticipated before which is somewhere in between $65 million to $70 million. We are working, as I said before, with the leading industry NASH leaders who have participated in Phase 3 and large Phase 2b added before.

So, we feel now much more confident with these numbers, and doing a lot of the work in-house by spreading the different function of monitoring [indiscernible] study, backup management, laboratory, and etcetera.

I think we managed to – also to save a lot of dollars by simply allocating the different parts to different vendors, all of them now we are working successfully. Now, when old systems are integrated, they are all working, I can say, successfully together and we look forward for very efficient and I hope that is a quick study..

Great. Thank you.

And then, just one quick talent-related question here, so you plan on having a 52-week readout for the initial Top 100 patients, and perhaps that you plan at completing enrollment to the full 2,000, correct?.

Right..

Okay, great.

and then, just another quick question here, so given how interconnected NASH is of cardiovascular diseases, I was just curious if you’re seeing [indiscernible] any therapeutic with respect to cardiovascular issues such as portal hypertension or esophageal varices in patients?.

Can you repeat the question?.

And if you can elaborate on that. I’m not sure we follow that..

Oh! No, just if you’ve seen any benefit that confirmed by [indiscernible] patients in terms of cardiovascular issues given how it – you know the interconnect nature of NASH was with cardiovascular issues?.

Okay. So, in the ARREST study as reported we have significant research model on the liver enzymes, which talk to the well-being of the liver, but also on [indiscernible] control, which could potentially, you know, could be related to well-being of the liver and less stress on the liver cells.

You know the connection between cardiovascular and NASH is a conflict and difficult one and not possible to correlate in a one-year study specifically.

And as you know, we didn’t have any major cardiovascular events in ARREST Study.So, if we’re talking only about biochemistry, I think we show an effect of liver well-being and we are also showing effects on NASH and we know that NASH is an independent factor of cardiovascular risk.

Even the pivotal studies in the NASH space are not powers or targeting cardiovascular as endpoint and actually this field is, you know, the more we learn, the more agitated we are, and its indeed very interesting and a very good question..

Okay, thank you very much..

We have a follow-up question from Ed Arce with H.C. Wainwright. Please proceed..

Hi, just a quick follow-up for me, thanks. Just wondering, you know, if you could explain perhaps the rational in adding AST over 20 international units per leader as an inclusion-criteria in ARMOR, which you didn’t have in ARREST? Thank you..

Well, this inclusion was added for potential two reasons. One was to reduce screen failure rates and the other was to reduce [cost of placebo] responder rates and this was based on literature and advise that we have from our [payroll]..

Great, thank you very much..

We have reached the end of our question-and-answer session. I would like to turn the conference back over to Allen Baharaff for closing comments..

So, thank you all for joining the call today. We are all here – I mean, waiting and if you have any question, any follow-up question, as always please do not hesitate to contact us and we are happy to hold calls with investors or together with KOL and wish you all a restful summer holiday. Thank you..

Thank you. This concludes today’s conference. You may disconnect your lines at this time and thank you for your participation..