Galmed Pharmaceuticals Ltd (GLMD) 2020 Q4 法說會逐字稿

Good day, and welcome to the Galmed conference call to discuss financial results for the fourth quarter and year ended 2020. Today's conference is being recorded.

Before we begin, please note that we'll be making certain forward-looking statements on today's call, including those regarding financial results, statements and forecasts regarding anticipated time lines 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. In particular, there is significant uncertainty about the duration and severity of the COVID-19 pandemic and its impact on Galmed's business and operations.

We urge all investors to read carefully the risks and uncertainties disclosed in our filings with the SEC, including, without limitation, the risks under the heading Risk Factors described in our annual report on Form 20-F 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, Ross. 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; and our Chief Financial Officer, Yohai Stenzler, to provide you with an update on our clinical development programs as well as report to you on our financial results for the fourth quarter and year-end of 2020.

As always, we will be happy to take any questions you may have at the conclusion of our prepared remarks.

Earlier this quarter, we hosted a KOL symposium and pipeline update focusing on our lead compound, Aramchol, a Phase III asset for NASH and fibrosis; and our pipeline compound, Amilo-5MER, developed for chronic inflammatory disorders. Let me share with you the highlights of the data we presented on these 2 programs.

In December last year, we announced the addition of an open-label part of our ARMOR Phase III registrational study. The open-label part will enroll approximately 150 patients in selected sites. It is designed to evaluate the treatment response, pharmacokinetics and safety of twice daily administration, BID, of Aramchol 300-milligram and explore the kinetics of histological outcome, measure as well as several noninvasive tests, including ProC3, ELF and Fibroscan associated with NASH and fibrosis for treatment duration of 24, 48 and 72 weeks.

In addition, the open-label part includes pre- and post-baseline microbiome profiling, which will help us to develop early biomarker for efficacy. We are currently checking the microbiome print of responding patients to Aramchol, which is significantly earlier than the histological response. The open-label part may start addressing questions that are paramount, not only for drug development, but also for subsequent treatment optimization for patients. Such as how early can a beneficial effect on fibrosis be observed, are there subjects that improve with longer duration of therapy, are there noninvasive tests that correlates or even predict a histological response and others.

I'm happy to inform you today that the addition of the open-label part to our ongoing Phase III was approved in the U.S., Canada, Australia, U.K., France, Belgium and Spain, and is expected to be approved in the coming weeks in Israel, Korea, Turkey, Mexico and Chile. Based on our plans and the rapid regulatory approvals, I can confirm that the results from the approximately 1/3 of the study population, about 50 subjects, that has completed the post baseline liver biopsy are expected to be available in Q4 2021 as planned.

Along with the advancement of our Aramchol meglumine program, the open-label part will allow us an informed decision by providing initial histology data with higher exposure and potential for improved efficacy, characterizing the kinetics of histological outcomes and noninvasive tests of 24, 48 or 72 weeks for Aramchol and long-term safety data on the kinetics of histological outcomes and noninvasive tests in support of regulatory submissions. As you may recall, the open-label part will enroll a broader study patient population at the initial ARMOR protocol-defined, including subjects with NASH and liver fibrosis, stages 1 to 3, subjects with NASH who may or may not be overweight, and subjects with NASH who may or may not have type 2 diabetes or pre-diabetics. ARMOR double-blind placebo-controlled registrational part is expected to initiate by the end of Q1 2022 based on Aramchol meglumine, which is a salt form of Aramchol free acid with an improved target product profile.

At the end of last year, we reported first-in-human PK data, which showed that Aramchol meglumine and Aramchol free acid, a drug product that is currently being evaluated in the open-label part of ARMOR, have a very similar PK profile, i.e., very similar half-life in the same Cmax and circulate in the blood as Aramchol regardless of which drug product is administrated. Furthermore, Aramchol meglumine has higher solubility, which results in better homogeneity in blood levels. These PK results also suggest that we will be able to dose Aramchol meglumine once-daily to get a potentially 50% higher exposure than the one we had in our ARREST Phase IIb study, and that was already approved by the FDA for the ARMOR study.

By developing Aramchol meglumine, we can revert to once-daily 300-milligram treatment in the ARMOR registrational part and optimize our clinical development program for the subpart, age filing and approval. This will also have important economic effects on Aramchol commercialization modeling, being able to reduce COGS by up to 50% as well as gaining patent protection until 2035. We plan to submit the new PK results to the FDA, along with other supportive data in a Type C meeting planned for Q2 2021. And discuss with the FDA, a plan to introduce Aramchol meglumine into the double-blind placebo-controlled registrational part of the ARMOR Phase III study.

Now shifting gear to our pipeline compound, Amilo-5MER. Amilo-5MER is a highly potent inhibitor of chronic inflammation currently under development for IBD. Amilo-5MER now regulates multiple pro-inflammatory cytokine secretion. In preclinical studies, Amilo-5MER demonstrated interference with Serum Amyloid A, polymerization and aggregation resulted in significant reduction of chronic inflammation in multiple animal models. Amilo-5MER has a unique mode of action, upstream to all pro-inflammatory cytokine production, which are currently being used in clinical trials.

In LPS-induced inflammation in mice, the animal model for systemic inflammation, Amilo-5MER reduced IL-6, TNFalpha, and IFN gamma and IL-1 beta levels in the serum. Elevated levels of these pro-inflammatory cytokines is the hallmark of acute and chronic inflammatory conditions, and are symptomatic also among COVID-19 patients. Earlier this week, we announced the first dosing, a first-in-human Phase I clinical trial of Amilo-5MER for single and multiple dosing and include -- which also include oral dosing.

Top line data is expected in the second half of 2021. A Phase Ib proof-of-concept study is planned for Q4 2021 and will include biomarker for efficacy such as reducing Serum Amyloid A in the serum of patients. We are currently developing Amilo-5MER as an oral treatment for mild to moderate ulcerative colitis. However, and its mechanism of action is relevant to other chronic inflammatory diseases, we are also looking at additional multiple indications and develop formulations accordingly.

Before concluding, during February, we raised approximately $18.4 million in gross dollars -- in gross proceeds in an underwritten public offering and through our ad and market facility. We intend to use the net proceeds of these offerings for the continued development of our pipeline products as well as the advancement of new programs, business development activities and general corporate purposes.

Last but not least, is the publication of our recent paper entitled, Aramchol Downregulates Stearoyl CoA-Desaturase 1 (SCD1) in Hepatic Stellate Cells to Attenuate Cellular Fibrogenesis in JHEP Reports. The paper summarized a long-standing research collaboration by Professor Scott Friedman, Chief of the Division of Liver Diseases, Icahn School of Medicine at Mount Sinai, New York; and Prof. Jose Mato of the Precision Medicine and Metabolism Laboratory, CIC bioGUNE in Spain. Describing for the first time, the role of SCD1 in hepatic fibrogenesis and outlining the mechanism by which Aramchol exerts its anti-fibrotic effect directly by down-regulation of SCD1 in hepatic stellate cells. Data further support Aramchol's role in fibrosis reversal, including the potential anti-fibrotic activity in the ongoing Phase III ARMOR study in patients with NASH and fibrosis.

Now let me transfer the call to our CFO, Yohai Stenzler. Yohai?

Thank you, Allen. Good morning, and thanks for joining our call today. This morning, I will be providing you with our financial results for the fourth quarter and year ended December 31, 2020. For more information, please refer to our report on Form 20-F filed earlier today with the SEC, which, among other things, provide a summary of such financial results.

Our net loss for the 3 and 12 months ended December 31, 2020, was $10.3 million and $28.8 million, respectively, compared with a net loss of $8.3 million and $20.5 million for the corresponding period in 2019. As a result, our loss per share for the 3 and 12 months ended December 31, 2020, was $0.48 per share and $1.35 per share as compared $0.39 per share and $0.97 for the corresponding period in 2019.

Research and development expenses 3 and 12 months ended December 31, 2020, totaled $9 million and $26.1 million. This compared with $7.4 million and $18.2 million for the corresponding period in 2019. The increase primarily resulted from an increase in clinical trial expenses in connection with the ARMOR study and an increase in drug development expenses in connection with the manufacturing of Aramchol to support our clinical studies.

Turning now to G&A., our general and administrative expenses for the 3 and 12 months ended December 31, 2020, are pretty consistent with the corresponding period in 2019. The expenses totaled $1.3 million and $4.1 million respectively versus $1.3 million and $4.2 million for 2019. During the 3 and 12 months ended December 31, 2020, we had a net financial income of $0.1 million and $1.4 million versus $0.3 million and $1.9 million in 2019.

Our cash balance as of December 31, 2020, which includes cash, cash equivalents, restricted cash, short-term deposits and marketable debt securities totaled $51 million. This amount does not include the $17.5 million of net proceeds raised during February in an underwritten public offering and from our ATM equity facility.

With that said, operator, please provide instructions for the Q&A portion of our call.

(Operator Instructions)

Our first question is coming from the line of Ed Arce with H.C. Wainwright.

Congrats on the recent progress. First question for me is, Allen, if you could remind us of the timeline now as you look to switch in the ARMOR study to the meglumine, beginning with the actual switch of dosing and then, ultimately, full enrollment and expected data readout?

Okay. So thank you, Ed. So as I said, we are now expecting to reinitiate the double-blind part of the ARMOR study by Q1 2022. If all goes well, and there's no reason to believe that things, I mean as far as we can see, everything is going as planned. We are expecting that to enroll 1,000 patients in 18 months. So that will take us to Q3 2023. Then there is a -- very much would depend on the open-label study, whether it will be 48 weeks of treatment or 72 weeks of treatment. This data we'll be able to generate from the open-label kinetics -- efficacy kinetic study. We are still hoping that 48 weeks will be sufficient. There will be no difference between the 48 and 72 weeks in terms of efficacy. So that's 1 year later, so we are talking about Q2 2024. So around that time, we should be able to submit the Aramchol for sub age conditional approval. Of course, we will continue at that time, we will continue the recruitment of the additional 1,000 patients, which are needed for the outcome part of the study.

Fantastic. Great. And then a couple of follow-ups as well. Turning to your pipeline candidate, Amilo-5MER. Clearly, you're focused on IBD as you just started your Phase I this week. But you also mentioned that there is potential given the mechanism for other types of chronic inflammatory conditions. And I'm wondering if you could describe some of those that you think might be interesting for this compound? And then lastly, how should we think about the level or the pace of the increase of the R&D expense through 2021, given the support, the both ARMOR and then the Amilo-5MER development.

Okay. So first, with -- it's the mechanism of action of -- Amilo-5MER indicates, it is relevant for a number of chronic inflammatory diseases. The one which comes immediately to mind is RA and COVID-19, which is more relevant to nowadays. We -- as we said before, we are looking to develop this compound gradually. So the first thing we would like to see is a biomarker in a Phase Ib study. As we've described in our investment on our symposium -- on our KOL symposium a month ago, this study is going to be of 20 patients and it would, as earlier disclosed, we're expecting to initiate this study in the second half of this year. This study would initially be for IBD, but we are also, at the same time, looking for -- if simultaneously, these are very small proof-of-concept biomarker studies, we would be looking also to initiate and subject to formulation that we are simultaneously developing different formulations for different indications. We would also look for an oral -- an oral formulation for the IBD, for ulcerative colitis, that we will develop a liquid formulation and injectable formulation for RA, which is also local for the joints.

COVID-19 is a different story. It's more opportunistic. And I assume we would only go to that direction if we'd be able to secure financing from governmental regulatory such as BARDA or NIH or local financing. We will not go into that independently. So that's about the current other indications. We are not going to pursue multiple sclerosis and other indications, which are relevant for the mechanism of action. This is completely out of the scope of Galmed. But this is -- we are definitely open for collaboration. So there will be any pharma partner that would like to collaborate with us based on the 1b study for any of these indications, CNS indications, we'll be very happy to collaborate on that.

As to financing, this is, I think, one of the advantages of working from Israel. As you've seen so far, we've managed to do all the work, all the R&D work for Amilo-5MER under the radar with a very low R&D budget. So really, we are talking about single-digit, so far, we spent about USD 1 million to USD 2 million on Amilo-5MER. And early work -- with early R&D work are still in the same magnitude. A Phase I study, the Phase II studies are still in the same ballpark number between USD 1 million to USD 2 million. So with our cash balance, it doesn't really destruct our main activity, which is the initiation of the Phase III ARMOR part of the -- the registrational part of the Phase III ARMOR study.

Great, Allen. And if I may squeeze one last one in. Actually, what I was actually trying to determine, a better question really is, is there a budget in mind that you have for the overall ARMOR program in terms of R&D spend?

It varies with -- there are a number of variables. So it's very difficult. We are definitely talking of south of USD 100 million. But it will very much depends on what would be the competitive landscape at that time. We've seen today that -- again, as a reminder, we are -- 50% of the patients, at least 50% of the patients, will be recruited outside the U.S. U.S. patients are the most expensive patients. So 50% would come outside of the U.S. and we have -- we know that on average, these are about half or even 1/3 of the cost of U.S. patients. The other 50% is -- depends very much on the competitive landscape. I saw it this morning, the news about Novo and Gilead initiating another Phase II -- large Phase II study for combination. It depends how many of the Phase IIb assets would advance by next year when we start to ramp up the recruitment for the Phase III registration part into Phase III. So we still believe that this is just as a reminder, the budget for -- that we had so far for the Phase III was about $65 million, since these 150 patients that are now in the open-label are not part of the double-blind part. We still have to count the full number of $65 million. But subject to the market conditions, that may increase.

In my mind, I have somewhere between $70 million to $80 million, but these are not firm numbers. These are -- these numbers should be validated once we have all 200 centers open, and we would like to ensure that recruitment would be on time as planned with 18 months and that may require additional funding.

Our next on the line is of Steve Seedhouse with Raymond James.

First question I had was just on NASH. And I understand the FDA is open to or, in fact, encouraging sponsors to run Phase III programs now with histology data in, let's say, F3 patients, but also looking at F4 patients to collect outcomes data as part of a sort of broader pivotal program. I'm curious if that's something you expect to discuss at the Type C meeting that you have scheduled or Galmed's thinking about incorporating F4 patients into a Phase III design?

So yes, thank you for the question, Steve. I've seen that also -- but this is not part of the guidance we received from the FDA. We are not recruiting F4 patients to the study. Our study population has not changed in the double-blind registration part. It's F2 and F3 with risk factors. So it's really -- this new proposed structure is not relevant for Galmed.

Okay. Perfect. And then the other question I had also on NASH was just with respect to Phase I studies, hepatic impairment, cardiac repolarization. I think there were a few of these that you'd mentioned in the past. I'm curious if those are being run with Aramchol meglumine now given the transition of the program?

So basically, the study, the hepatic impairment has been progressed very well. There was some delay due to COVID-19. But in the recent weeks, we've accelerated -- we've already completed the single administrative dose, and we've almost completed the multiple administrative dose, both for moderate and mild patients. Few more patients are needed to be recruited in this severe cohort. There is Aramchol meglumine and Aramchol circulate as (inaudible), where there's no difference between the two. So what we've done, we have done. And in the future, so study that we have conducted so far will be based on Aramchol. And new studies like TQT with cardiovascular, not sure that we will need, this is another benefit that would come from the open-label study, collecting the data from these 150 patients. Based on this data, we may get an exemption from the TQT study. But future studies, of course, that are necessary for approval will be done with Aramchol meglumine.

(Operator Instructions) Our next question is from the line of Kristen Kluska with Cantor Fitzgerald.

So the first one I had was, as it relates to the upcoming ARMOR data, do you think it's possible that this could be presented at the Liver meeting during the fourth quarter? And then can you remind us about the current IPs on Aramchol meglumine. I know you recently had a U.S. patent accepted here. Is it just now that the composition of matter of patents are pending at this time?

Okay. Thank you, Kristen, for your questions. So I -- we may be just missing the deadline for AASLD for this because we're expecting the data to come early Q4, and the -- I think the cut-off date is September. So I don't think that we'll be able to get -- we'll try and get it as a late breaker, but I'm not sure that will be accepted as a late breaker. But thirdly, we are going to communicate this data as soon as we have the first -- this is an open-label study. So we are accumulating all the data on a regular basis. So we would try -- and if data would be overwhelming, maybe we will not wait for the 50 patients and report something after 30 patients or so when -- in order to meet the timelines. But I cannot promise that.

In terms of the patent, the Aramchol meglumine patent is -- its expiry date is December 2034. So we are protected before patent extension before that exclusivity, before any this kind of additional time we are protected until 2035. This is based on a new patent that was already accepted in the U.S. for low dose administration of Aramchol. We are still waiting for the composition of matter patent for Aramchol meglumine to be approved in the U.S. in the same way it was approved in the rest of the world. And I'm sure this will come very soon, but the protection -- the patent protection in the U.S. is already there from the patent that was accepted on the low dose administration of Aramchol.

Great. And then just on these 50 patients that you've completed enrollment for, could you speak to your level of confidence in collecting all of the key data sets sometime during the fourth quarter in light of the pandemic? And I know that things have changed quite a bit from the last earnings call just with the rollout of some of the vaccines.

We have no -- look, the system here is geared for a large Phase III study, a 1,000-patient study. The way we read boxes with 3 readers and all and the adjudication, the DMC, I mean, data collection, everything is done in a standard of registrational Phase III study. So we have no problem whatsoever in collecting the data, and I have very high confidence that, indeed, we will meet these timelines. We are -- in fact, we are seeing a surge in the number of patients that have now been randomized since there some restrictions, COVID-19 restrictions have been lifted, so numbers are very encouraging. Even new recruiters, new screenings are very, very encouraging numbers that I've seen in the last 2 weeks. And please remember that we are operating now in selected sites out of the 200 sites that we have for the double-blind part, we are only operating in 50, 5-0, 50 selected sites, which were less affected by COVID-19 to start with. So there's no -- we've been working with these sites now for 1.5 years. And it's a very good collaboration. So I don't see any interference, and I don't see any risk in this reporting of data.

At this time, I will turn the call over to Allen Baharaff for closing remarks.

So I would like to thank you all for joining the call today. As always, we are always available for follow-up calls and e-mails. And if you have any additional information that you would require, both on Aramchol, but more specifically, on Amilo-5MER, which is an exciting time in Galmed times, having a new compound now getting into the clinic, and looking forward. Keep safe. And looking forward to talking to you on the next investor call.

Thank you. This will conclude today's conference. You may disconnect your lines at this time. And thank you for your participation.