INmune Bio Inc (INMB) 2019 Q4 法說會逐字稿

Greetings, and welcome to the INmune Bio's Fourth Quarter and Full Year 2019 Earning's Call.

(Operator Instructions) As a reminder, this conference is being recorded.

A transcript will follow within 24 hours of this conference call.

At this time, it is my pleasure to introduce your host, [Lyndon Britto].

[Lyndon], the floor is yours.

Thank you, Christine.

Good morning, good afternoon, everyone.

We thank all of you for joining us for the INmune Bio Fourth Quarter and Full Year 2019 Financial Results Call.

Of note, this is the company's first such call.

With me on the call are CEO, RJ Tesi, MD; and CFO, David Moss.

Before we begin, I remind everyone that except for statements of historical facts, the statements made by management and responses to questions on this conference call are forward-looking statements under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.

These statements involve risks and uncertainties that can cause actual results to differ materially from those in such forward-looking statements.

Please see the forward-looking statement disclaimer on the company's earnings press release as well as the risk factors in the company's SEC filings included in our most recent quarterly filings filed with the SEC.

There is no assurance of any specific outcome.

Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made, as the facts and circumstances underlying these forward-looking statements may change.

Except as required by law, INmune Bio disclaims any obligation to update these forward-looking statements to reflect future information, events or circumstances.

Now I would like to turn the call over to RJ Tesi, MD, the Chief Executive Officer of INmune Bio.

RJ, please proceed.

Thank you, [Lyndon], and thanks, everyone, for joining today.

I'll arrange my remarks for highlights and key takeaways from INmune Bio's first year as a public company to ensure operational updates on our programs.

Then I will introduce David Moss to discuss our financial results, upcoming milestones before we open the lines for Q&A.

But first, we would be remiss not to acknowledge the remarkable speed at which coronavirus or COVID-19 is changing our lives.

At INmune Bio, we are carefully assessing the impact of the pandemic on our business, our capital market strategy and our clinical development programs.

To date, the impact is measured, manageable, but that may change.

Just yesterday 2 major medical meetings, the AACR in San Diego was canceled or rescheduled and the Alzheimer's/Parkinson's disease annual meeting in Vienna was converted to a virtual meeting.

On a more, shall we say, optimistic note, although our DN-TNF platform does not have a role in neutralizing or treating COVID-19 directly, many of the complications related to the coronavirus infection relates to inflammation.

Often, it is worse in the vulnerable elderly population.

INmune Bio understands inflammation, and we understand the unique immunology of this high risk population.

They are the group that we are treating in an Alzheimer's disease program.

We are actively assessing if and what role we can play in response to this national emergency.

Once the assessment is complete, we will communicate our plans to you.

Now on to our busy last year.

2019 was eventful with significant developments for the company.

We started the year with 3 programs across 2 drug platforms, dedicated to the treatment of cancer and ended the year with 5 programs across those 2 drug platforms, including the 3 in cancer -- or now 3 in cancer and 1 each in Alzheimer's disease and NASH.

Hard work in 2019 sets the stage for a busy 2020, where we plan to initiate Phase II programs in oncology and NASH Phase I programs in ovarian cancer and high-risk MDS, a form of AML, and report the results of our ongoing Alzheimer's disease Phase I program.

The foundation for the progress has been the 2 therapeutic platforms.

The first platform is our Natural Killer Cell Priming platform that makes the patient's own NK cells better, and I emphasize the patient's own NK cells.

The second platform is the dominant negative TNF platform, a novel next-generation selective inhibitor of the bad TNF that generates 3 of the programs: Xpro for Alzheimer's disease; INB03 for cancer; and LIVNate for NASH.

I cannot overemphasize the fact that the MTNF platform is unique and very different from the currently approved nonselective TNF inhibitors.

The DN-TNF platform neutralizes bad TNF, while promoting the function of the good TNF.

To put these biological differences in perspective, extensive third-party preclinical data show that DN-TNF platform causes less immunosuppression, promotes remyelination and improves their immune response against cancer and infection, a set of biologic characteristics that does not occur with the current but very good TNF inhibitors like HUMIRA and Enbrel, and others.

Those cause immunosuppression and remyelination.

The unique attributes of our DN-TNF platform allows INmune Bio to initiate programs in therapeutic areas that are off-limits for the currently approved first-generation TNF inhibitors, namely immuno-oncology, where immunosuppressants has disastrous consequences to the patient, and CNS indications, where demyelination may worsen the patient's disease.

We have many, and I emphasize, many publications on our website to support these findings, and I encourage you to review them.

When INmune Bio completed our IPO in February 4 -- on February 4, the company had 2 immuno-oncology programs: INB03 for cancer, with the DN-TNF platform; and INKmune, for cancer in the NK priming platform.

Now we have matured into 5 programs in therapeutic areas that are both in malignant disease and diseases that do not involve cancer like Alzheimer's and NASH.

I will now highlight into the programs, starting with XPro1595, our flagship program for the treatment of Alzheimer's disease.

One week after our IPO in February 2019, we were awarded a $1 million grant from the -- called the Part the Cloud award from The Alzheimer's Association to advance XPro1595, our novel therapy targeting neuroinflammation and synaptic dysfunction, into a Phase I clinical trial.

That Phase I trial enrolled its first patient last year and continues to move forward with a unique biomarker-directed trial design.

In addition to assessing the safety of XPro1595 in Alzheimer's disease patients, the trial is designed to demonstrate that the drug decreases neuroinflammation, neurodegeneration and affects the symptoms of this devastating disease.

This is the first of a 2-step program studying XPro1595 in Alzheimer's disease.

The ongoing first step is to show that XPro safely decreases neuroinflammation in patients with Alzheimer's disease.

The second step, a larger and longer Phase II clinical trial will demonstrate if the drug, by decreasing neuroinflammation in patients with Alzheimer's disease, can slow or prevent cognitive decline.

To be clear, this approach differs from the therapeutic strategies targeting plaques and tangles of amyloid and tau, respectively.

We believe the key pathologic elements of dementia of any cause are nerve cell death and synaptic dysfunction.

In preclinical models, XPro prevents nerve cell death and improves synaptic dysfunction.

We expect to report the clinical trial results in the second half of the year, and we have already begun planning the Phase II program.

Our goal, assuming positive data, is to initiate the Phase II program quickly.

You all know that Alzheimer's is both debilitating and deadly.

According to The Alzheimer's Association, Alzheimer's disease is the sixth leading cause of death in the United States, with almost 6 million Americans living with the disease, costing roughly $290 billion in 2019.

The Alzheimer's Association forecasts that this number will more than double and the cost will more than triple by 2050.

There are currently no disease-modifying therapies, but we think that may change in the near future.

The trial met -- INB03 is the name of our second or, I guess, maybe it was actually our first DN-TNF program because it went into patients first.

It was -- is a program in immuno-oncology, and we announced or completed the Phase I trial of INB03 in patients with advanced solid tumors last year.

The trial is an open-label, dose-escalation trial in patients with solid tumors who had had failed multiple lines of previous therapy and the trial met all of its goals that demonstrated INB03 was safe and well tolerated at the doses tested.

We determined the dose to be used in the upcoming Phase II trial and demonstrated a downstream pharmacodynamic effect by demonstrating a decrease in IL-6, one of the inflammatory cytokines, whose up-regulation depends on soluble TNF.

After the successful Phase I trial and due to the unique effects of INB03 on the tumor microenvironment, there were actually many avenues where we could have followed as part of a Phase II program.

The planned Phase II clinical trial will enroll women with HER2-positive breast cancer who have brain metastasis.

The women will receive INB03 as part of combination therapy.

Most, if not all, of these women will be resistant to trastuzumab, also called Herceptin, and will most likely express MUC4, a glycoprotein on the cell -- cancer cell surface that is expressed in the presence of soluble TNF.

This program is based on the work by Professor Roxana Schillaci, who first recorded the role of MUC4 in trastuzumab resistance at the San Antonio Breast Cancer Symposium in 2018.

Professor Schillaci's work can be summarized in 2 simple points.

Women expressing MUC4 who have HER2 positive breast cancer have worse survival than those who do not express MUC4, and MUC4 can be easily stained for on biopsy.

And that MUC4 expression requires soluble TNF, and that treatment with INB03 or neutralization of that soluble TNF with INB03 decreases MUC4 expression to allow trastuzumab sensitivity to be reestablished.

Put simply, MUC4 expressing HER2-positive breast cancers appear to be resistant to all forms of trastuzumab based on your immunotherapy and INB03 reverses that resistance.

This is not a small problem in many women who have HER2-positive breast cancer.

The treatment options for those who have failed trastuzumab or have developed metastatic disease, either before or after trastuzumab treatment, are poor, and we have identified a novel combination that uses INB03 with -- to treat these brain metastases in these women.

We're being a little coy, I mean, originally, quite frankly, we were planning to announce what that drug was when AACR released the abstracts for the upcoming AACR.

That was supposed to occur March 17.

I mentioned earlier that, that meeting has been delayed.

We have not been told yet when they plan to release those abstracts.

We -- that information is embargoed, shall we say, until those abstracts are released.

As soon it becomes available, we'll tell you what that combination therapy is, and we think that you'll be intrigued.

How big is this market?

According to the American Cancer Society, breast cancer is the largest, most common cancer in women in U.S. and actually all women, with expecting over 400,000 new cases in 2030.

HER2-positive breast cancers are approximately 1/4 of these women and the global data service expects the HER2-positive breast cancer market across the major 8 countries to grow at CAGR of more than 4% with a value of approximately $10 billion in 2025.

So HER2-positive breast cancer is common.

It is a large market and there is a need for improved therapy for patients who develop resistance to first-line therapy with trastuzumab.

Our third drug candidate on the DN-TNF platform is LIVNate.

This is our newest program, so to speak, and we are focused on the treatment of nonalcoholic steatohepatitis or NASH.

As of today, there are no approved treatments for NASH, a disease that in the next decade will be the most common cause of end-stage liver disease in the U.S. as hepatitis C decreases.

By any standard, NASH represents a significant unmet need.

We are not the only company pursuing a therapy for NASH, but our approach is different.

LIVNate or the DN-TNF program by targeting metabolic, intestinal and immunologic pathologies that combine to cause hepatosteatosis, liver cell death, inflammation and fibrosis, may provide a unique solution to this difficult disease.

Let me give you an example of how our thinking difference -- differs from others.

An underappreciated cause of NASH or a contributor to NASH is intestinal leak.

Obesity, a common, so to say, metabolic problem associated with the disease causes intestinal inflammation that decreases the function of the tight junction proteins causing a leaky gut.

In response to the leaky gut, there is an increase in mesenteric fat, also known as the pot belly.

Pot belly fat is very different than, let's call it, love handle fat.

It is a primed adipose tissue that actually mainlines inflammatory cytokines directly into the vein, the portal vein, for wreak havoc with the liver.

There has been little discussion of this pathologic mechanism in many of the conversations regarding NASH.

We think that is an important oversight.

The NASH clinical trial is designed to give a clinical signal quickly and efficiently.

The Phase IIa open-label trial will enroll patients with F2/F3 NASH using noninvasive testing, both blood and imaging, to stage patients and determine treatment effects.

LIVNate will be delivered as a once-a-week subcutaneous injection for 3 months and steatosis inflammation and fibrosis will be evaluated twice, at 6 weeks and 12 weeks.

Moving on to INKmune.

It is the name of our NK cell priming platform, and it was really the program -- the country was -- the company was formed around in September of 2015.

Two clinical programs are expected to begin enrolling patients in 2020: INKmune for the treatment of high-risk MDS, a hematologic malignancy; and INKmune for the treatment of refractory and resistant ovarian cancer with solid tumor.

INmune Bio's NK cell priming platform delivers essential priming signals to the patient's NK cells, so they will attack their cancer.

And I emphasize this is priming the patient's own NK cells to attack their cancer.

That is, the patient's NK cells have all the machinery they need to cure cancer, but they don't use it.

They need to be reactivated or woken up.

INKmune provides the missing priming signals, one of the 2 switches that must be, so to say, triggered or tripped for a resting NK to attack the cancer.

This biologically and pharmacologically unique platform, our priming process, was described in detail recently in a Class 1 article.

The difference of INKmune compared to other programs that focus on NK cells for cancer is real.

INKmune enables the patient's own NK cells to attack the cancer.

We aren't giving somebody else's NK cells or NK cells that are preproduced in a master cell bank.

That is not what INKmune is.

This is not a replacement therapy.

We give a therapy, a biologic, that actually is an on-switch that turns the own -- patient's own NK cells on.

The simple difference is important when looking beyond efficacy to drive strong distribution, that is, we believe, INKmune will be less complicated to give, less complicated to make and will be highly cost-effective in the treatment of both a variety of solid tumors and hematologic malignancies.

The programs that INKmune is being targeted for initially, will -- is that it will eliminate residual disease.

Why is that?

Residual disease causes relapse, and relapse is one of the most heart-breaking events that a cancer patient and their family must have built.

Once patient's relapsed, the chance of dying from the disease goes up dramatically.

Most do not realize that it is actually NK cells, not T cells, that are responsible for eliminating residual disease.

Thus to eliminate residual disease and give patients a chance, they need an NK cell that is fully engaged in the job of killing cancer.

We believe INKmune should patient's NK cells go from apathetic to a ferocious cancer killing machine.

To highlight the flexibility of INKmune to treat both solid and liquid tumors, we chose to initiate one in each, ovarian and high-risk MDS, a form of pre-AML.

MDS is -- stands for myelodysplastic syndrome.

It is a disease of the bone marrow, primarily seen in elderly patients.

High-risk MDS is best described as a pre-leukemia, and if left untreated, progresses to bone marrow failure and become acute leukemia.

These elderly patients are poorly served by current therapies and the disease is incurable in most cases.

We believe INKmune may be an excellent solution.

This trial is expected to start in the second half of 2020.

The second INKmune program will treat women with refractory ovarian cancer.

As you know, most women diagnosed with the disease die of the disease despite repeated reduction of tumor burden by a combination of surgery and chemotherapy.

That is, the residual disease often invisible to clinical teams with times to cause progression, relapse and death.

That trial is also expected to initiate in the second half of 2020.

Both trials -- in both trials, the INKmune will be given as a monotherapy over several weeks in the patients who have a low burden of disease, ideally, just with residual disease.

Other than determining safety and tolerability of the INKmune therapy, patients will be monitored closely to determine if their previous quiescent NK cells have woken up and begun to attack the tumor.

Tumor burden will be monitored when possible.

2019 was a busy year.

We became a public company.

We started our second clinical trial.

We expanded our pipeline dramatically with clinical programs.

We -- in some of the most important diseases of our time.

We published data supporting our clinical programs.

We've spoken at meetings, and we have gotten to know many of you in the financial community.

New IP has been issued, and we remain very active in filing an intellectual property, even as a small company of 7 employees.

One of our employees is in-house IP counsel.

We added 2 new directors to our Board, who will help us to be the best company possible.

In 2020, you should see further advancement of programs in our pipeline.

In closing, I started my career as a transplant surgeon caring for patients.

My goals have not changed.

At INmune Bio, we strive to make a difference at the bedside.

Patient care is what we are all about.

Now I'll turn it over to David Moss, our CFO, to discuss our financial results and those upcoming milestones.

David?

Thank you, RJ.

I'll provide a brief overview of our financial results and upcoming milestones.

Net loss attributed to common stockholders for the fourth quarter ended December 31, 2019 was $2.3 million compared to $1.9 million for the quarter ended December 31, 2018.

We have not had any revenue in the past, and the company does not expect to have any material revenue in the near future.

Research and development expense totaled approximately $0.9 million for the fourth quarter ended December 31, 2019, compared with approximately $1 million for the quarter ended December 31, 2018.

During the quarter ended December 31, 2019, the company received $0.3 million of grants from The Alzheimer's Association, which the company recorded as a reduction of research and development expense.

Excluding the $0.3 million of grants, research and development expenses increased during the 3 months ended December 31, 2019, as a result of the further advancement of our drug platforms.

General and administrative expense was approximately $1.5 million in the quarter ended December 31, 2019, compared to approximately $0.9 million in the quarter ended December 31, 2018.

The $0.6 million increase in general and administrative expense is largely due to costs associated with being a public company and higher compensation costs, including higher stock-based compensation.

At December 31, 2019, the company had cash and cash equivalents of approximately $7 million with no debt.

During 2019, the company received $0.4 million of cash proceeds from Australia and $0.4 million of cash proceeds from the United Kingdom pursuant to the R&D tax rebates.

As of March 9, 2020, the company had approximately 10.7 million shares outstanding.

I'd like to list our upcoming milestones, which are: first, for 2020, we expect to report the results of the ongoing Phase I XPro1595 trial in Alzheimer's disease, expected to complete in second half of 2020; second, initiate a Phase II INB03 program in women with CNS metastases from HER2-positive breast cancer.

INB03 will be part of a combination therapy.

The trial is expected to begin in the second half of 2020; third, initiate a Phase II LIVNate trial in NASH, expected mid-2020; fourth, initiate a Phase I INKmune trial in high-risk MDS cancer, expected second half of 2020; five, initiate a Phase I INKmune trial in ovarian cancer, expected second half 2020.

So we have a lot of catalysts coming up.

If you look into 2020 and further into 2021, we feel that we have an exciting time ahead of us.

I'd echo RJ's enthusiasm.

We believe our product platforms are unique.

We are working hard to show these programs will make a difference in patients' lives.

In the near term, we remain focused on meeting our milestones and delivering data and rewarding investors' faith in our business.

Thank you for your time and attention.

I'd now like to turn it back to questions -- I'd like to turn it back to Christine, the operator, for Q&A.

Christine, can you please poll for questions?

(Operator Instructions) Our first question comes from the line of Jonathan Aschoff with Roth Capital Partners.

I was wondering -- I have 3 questions.

I was wondering how you justify going down the COVID-19 route with the current balance sheet?

And then the other 2 are what's happening on the ALS front?

I know that's quite new, but I was just still curious.

And the last one was, how to only burn $400,000 over the fourth quarter?

So thank you, Jonathan.

This is RJ Tesi.

I'll take the first 2 and I'll leave the financial question to David.

So I think the question about why we'd even think about COVID-19 is an excellent one.

And in fact, we are thinking about how we can play a role.

But we aren't just going to throw our hat in the ring because there is a big need for COVID-19 therapies or solutions.

We're only going to throw our hat in the ring if, in fact, our solution for COVID-19 also has commercial value beyond a COVID-19 application.

And let me be a little more specific there.

If you look at how most of these novel pandemics play out, they have a shelf life.

I mean that they have, the pandemic-related virus, 24 months after the first patient has virtually disappeared.

So for a company of our size, it doesn't make sense to just dive into something because we can.

Because it may not be commercially relevant by the time the program reaches the market.

We will only dive into the program if and, in fact, can be translated into a non-COVID-19 application.

And we've got a couple of those in mind.

I don't want to expand beyond that at this point.

But if you kind of take a hard look at what our therapies do, you'll probably come up with some ideas.

So the other thing is, obviously, we will try to get nondilutive financing for these activities, either through the NIH, the DOD, BARDA.

There's money kicking around.

It's competitive.

But we're not going to waste a lot of time just focusing on COVID-19.

We're going to focus on diseases related to COVID-19 that have commercial applications.

With the ALS, this is not a surprise, obviously, we applied for the grant.

Once again, we were successful getting the grant.

But just to be clear, it's a preclinical grant.

This is IND-enabling studies.

Those studies should last 18 to 24 months.

And at the end of that period, we are going to be teed up to initiate a ALS clinical trial if: one, the data from the preclinical work supports that; and two, we have investor support, either through a clear signal from the capital markets or actually, we get nondilutive financing to carry the trial forward.

So as we did with Alzheimer's disease, our plan is to move carefully in expanding indications.

Because right now, we don't have a budget for that.

But all of the work that we're doing in ALS is supported by these funds from the ALS foundation.

So I'll let David answer the financial question and then see if there's a follow-up from Jonathan.

Yes.

Thanks, Jonathan, for the question.

So you'll note that we ended Q3 with about $7.0 million in cash -- the year with $7 million, you're correct.

We didn't burn a lot of cash, and yet we moved all of our programs forward.

How did we do that?

So we received about $700,000 in nondilutive funding from the R&D rebates that we -- did take place, mainly in the U.K. and primarily in Australia, where a lot of hard work is being done on the clinical programs.

That -- we also received approximately $250,000 from The Alzheimer's Association on top of that.

That really reduced our burden and allowed us to move forward.

To give you an example, the money that we received from The Alzheimer's Association, it's USD 1 million.

When you convert that to Australian dollars, the exchange rate is roughly $0.65 to $0.75 -- to $0.70, in that range.

It comes out to about AUD 1.4 million.

We got a rebate of close to -- it varies, but it's between 35% and 45% of that.

That takes it close to AUD 2 million.

And the total trial runs close to AUD 2.4 million, AUD 2.3 million.

It will be somewhere around that range.

So the company had to come up with another, call it, AUD 400,000, which is like USD 300,000.

And then I'll point out that our burn from a G&A level, if you just take out the stock-based compensation, it's relatively low.

I think management doesn't pay itself extravagant salaries.

Our interest is that we're really large stock -- shareholders and stockholders of this business.

I'll point out, we've invested in every single round.

And our belief is in the value of the equity.

So we believe that we're very much aligned with shareholders by virtue of our ownership in the equity because we're very smitten by our programs.

We like our programs.

And I'll also point out, the first few years of this company, we didn't even take salaries.

We just -- we contributed obviously our time because we're well compensated in equity.

So we run a lean shop.

We don't have a lot of high fixed costs is the message.

We're pretty tight with our capital, and we're always trying to do as many nondilutive activities as we possibly can.

We're very sensitive to what I would say is both capital -- capitalization dilution and also asset dilution.

So I hope that answers your question, Jonathan.

(Operator Instructions) Our next question comes from the line of Jason McCarthy with Maxim.

This is Naureen, on for Jason.

Actually, jumping back to the cash burn question first.

So you were starting a lot of studies this year.

And I understand you have nondilutive financing and so forth.

But what do you expect the burn to be for the year or even on a quarterly rate?

Could you give some thought on that?

Yes.

No, I appreciate that, Naureen.

We do expect our burn to increase towards the second half of this year.

Currently, we're burning, not including the nondilutive activities, we're burning about $500,000 a month.

I expect that to increase around June, July time frame.

And I would expect that to close to double or triple towards the end of the month -- towards the second half in that range.

Great.

Got it.

So switching over to your Alzheimer's study with XPro95, can you comment on how enrollment is going?

And as an extension of that, you did say that the first patient was enrolled in December, which means the readout from that patient would be about now.

So -- and I know you mentioned that you'll be reporting data in the second half, but would you report maybe some of the initial patient data earlier?

Okay.

Thanks, Naureen.

This is RJ.

2 points.

First of all, enrollment, I don't want to use the word gangbusters, but was very enthusiastic.

As you recall, the trial came online almost exactly at the same time the biogens basically pulled the rug out from the aducanumab study and before they restarted enrolling patients.

So we sell right into that void.

And quite honestly -- now just the technical aspects, when a patient's identified, there's a several week process of testing, et cetera, to make sure that they qualify, and it's typical of many clinical trial.

We actually had to close enrollment because we had kind of -- we had lined up all those patients we needed for a reasonable period of time or else those -- all that testing would go stale.

So we are well on schedule.

We are very confident of the readout date.

And you did hint that we may be able to get a peek at the data since this is an open-label trial that uses biomarkers.

And your answer is, yes.

We are hoping to get a peek at that.

We're in the process of working with our imaging CRO AMITA and the clinicians at the sites as the first and second cohorts become mature, so to speak.

So I don't want to promise this, but we are hopeful.

As soon as we have data we're comfortable with, we will share it with you.

Because we understand the importance of the trial to the investor community, and we also appreciate the inexhaustible appetite that investors have for clinical data.

So the answer is, yes.

We hope to have something sooner than later.

Great.

That's helpful.

And one last one.

With regards to your study in the trastuzumab resistant breast cancer study.

I know you can't share what you'll be combining INB03 with, but can you provide some color on the expected study design, possibly?

Yes.

So -- yes, thank you.

So obviously, I'll just -- I'll make a single comment that the combination drug will be a drug that is currently approved for second-line therapy in trastuzumab-resistant women.

So it's not going to be kind of an off-label use.

We'll begin combining it with a drug, and obviously, both INB03 and that drug cross the blood-brain barrier, which is an important problem for trastuzumab.

It will be open label.

The goal is basically to demonstrate a clinical response, whether it be by tumor size or the failure of progression.

And as you know, use of corticosteroids or development of seizures is a common or a biomarker, shall we say, a progression in these women.

So we will use the composite endpoint.

And our hope is that with some clinical data we can use -- and this will occur in Australia, we'll use this as a way to initiate a dialogue with the FDA to start treating patients in the U.S. and hopefully, we'll do that under some form of the expedited programs, whether it be a fast track or breakthrough therapy that the FDA offers.

It's hard to know whether it will be eligible for any of that stuff because we're talking about a year down the line.

And holy cow!, the cancer world is moving very fast these days.

But if you look at the availability of effective therapies for women with metastatic breast cancer that have CNS lesions, those options are not that great.

So we are throwing our hat into that ring.

(Operator Instructions) Our next question comes from the line of Swayampakula Ramakanth with H.C. Wainwright.

This is RK with Wainwright.

A couple of questions from me.

Continuing on the topic of trastuzumab-resistant HER2-positive breast cancer.

Is it possible for you to give us some color regarding what percentage of patients have them up for over-expression?

And I think you stated this, but I just want to double check with you, has the work done by the academician able to show that INB03 actually decreases MUC4 expression in breast cancer cells in the preclinical models?

Yes.

Thank you, RK.

So currently, at least at the time of diagnosis, about 1/3 of the women had our MUC4 over-expresses.

We are in the process of trying to determine if that expression goes up in the setting of metastatic diseases, particularly brain mets.

As you know, they don't frequently biopsy brain mets, but they frequently biopsy other mets.

But one of the things that MUC4 does is it makes, to be euphemistic, it makes the breast cancer cells greasy so they can sneak out of the tumor and basically seed sites that are beyond the primary tumor.

So one of the biologic purposes of MUC4 is: one, to protect the tumor from the immune system; and two, to promote metastatic disease.

So most of women with metastatic HER2-positive breast cancer are going to be MUC4-positive, if not all of them.

She has shown unequivocally that the -- that MUC4 expression depends on soluble TNF.

And if you neutralize soluble TNF with INB03, you actually reverse expression of MUC4.

So that is an unequivocal connection.

The question is, where the heck is the soluble TNF coming from?

It turns out that if you look at most of these women, they don't have sky-high levels of TNF in their blood, which would be soluble TNF, it turns out that the tumors basically express transmembrane TNF and the warm up for they make a more transmembrane TNF they make.

And as you know, transmembrane TNF is converted to soluble TNF by an enzyme called PACE or ADAM-17, which is in the tumor microenvironment.

So actually, the tumor is feeding itself.

It's a very interesting bit of biology that we actually can intervene with, with INB03.

So it's a perfect setup.

There are additional tumors that express MUC4.

She's already shown in preclinical models that in gastric carcinoma that where about 20% of gastric carcinoma tumors express HER2, the same thing goes, and I'll remind everyone that Herceptin is approved to treat HER2-positive gastric carcinoma.

And the most famous tumor with MUC4 is pancreatic cancer.

About -- more than 90% of all pancreatic cancers express MUC4.

We are in the process of exploring that biology.

So I can't give you any answers yet.

But I will say, stay tuned.

We expect to have those results sometime this year.

Okay.

Regarding the Phase I study, where are you with the design?

And is there any additional color that you can give on that?

Phase I, for which program, RK?

Or Phase II, which are you referring to here?

Yes, for the breast cancer study?

Well, as I said with Naureen, I mean, the program is -- we're expecting to perform it in Australia.

It will be women with HER2-positive brain mets, and they will receive combination therapy with INB03 plus this other drug, which crosses the blood-brain barrier.

So we really think it's a good trial.

And there may be some additional elements.

I will say, just in passing, because it is relevant, Australia has instituted a pandemic program.

They actually had a plan in place for the pandemic in the health care system.

So we are already, scrambling is not the right word, but we are being informed of changes that must occur in the way we do our ongoing clinical trials and what impact this will have on future clinical trials is difficult to predict.

So right now, let me give you an example.

For instance, the moderators are not allowed to do personal visits to the clinic sites any longer.

They have to do telephone visits, which doesn't cause a problem in our trials, but it is a change in the way business is done.

So this trial is slated to begin in June.

Currently, we're moving in that direction.

And -- but I don't want to -- I can't predict what's going to happen with coronavirus in Australia or the U.S. for that matter.

And RK I just want -- David here.

I just want to highlight it is the Phase II study, the Phase I was already complete.

Okay.

Sorry about that.

Then when you put out your expected milestones for 2020, I didn't see anything on the CPI-resistant solid tumors.

Is that still an indication that you're planning to pursue?

Or will that come later?

No, good question.

And you're right.

We were optimistic or hopeful that we would get MDSC or myeloid-derived suppressor data out of the Phase I trial.

We have assays in place by 2 vendors.

And there were technical problems.

It was just difficult to do.

So it was very hard for us to actually build, because I didn't have data at my fingertips, I was a little nervous about building a clinical program around MDSCs, circulating MDSCs.

As you know, that was based on preclinical work out of a fibrosarcoma model.

We have not abandoned that by any stretch of the imagination.

In fact, one of the things that the combination of INB03 plus this drug does, or let me rephrase that, one of the things that when you eliminate MUC4 expression by INB03, you change the immunobiology of the tumor microenvironment.

You decrease myeloid cells, MDSCs and TAMs and you increase lymphocytes in the tumor.

So we are actually very hopeful that the combination of INB03 with this other drug will actually make cold tumors hot and give us the opportunity as a third step or actually adding a CPI or a checkpoint inhibitor to this therapy.

Currently, breast cancer is not an area that is really, for the most part, effectively managed with checkpoint inhibitors because they are immune deserts.

It's an area we think we may have a leg up.

But the first step is to get rid of trastuzumab or the resistance associated with the MUC4 expression.

The second step will be to add a checkpoint inhibitor.

(Operator Instructions) Our next question comes from the line of Carl Byrnes with Northland Securities.

Congratulations on the progress.

What are your expectations with respect to grant and other grant funding receipts in 2020 that would be recognized in offsetting overall R&D spend at this juncture?

And actually then I have a follow-up as well.

So as David mentioned, we are aggressive in filing for a nondilutive funding.

Some of that is directly with the NIH due to things like SDIRs, some of that is directly with foundations, such as The Alzheimer's Association and ADDF, Alzheimer's Drug Development Foundation, The Parkinson's Disease Foundation and J. Fox, et cetera, ALS Foundation.

So we are submitting grants all the time.

And in fact, some of you have met CJ Barnum, who is our Director of Neuroscience, and that is sort of his area.

I will say that most of the grant activity is in the neurosciences because we have a pretty attractive asset, and we compete very well there.

I don't want to give you an exact list at this point because it's just a little bit about managing expectations.

We have been successful so far.

We continue to put out grants, and we expect to be successful in the future.

I just don't want to put a number on that because as it stands and we're disciplined within the company that we don't assume we receive the money until we actually get the first check.

David, anything you want to add there?

No.

I mean I'll just add that we have some -- we have 2 third-party resources that we use to continually monitor and apply for nondilutive type funding activities.

And the other one thing, Carl, that I think you should keep in mind is we're very sensitive, again, to both the asset dilution and capital dilution.

What do I mean by that?

I mean if we partner an asset -- we hear a lot about investors about how do you partner an asset?

When you're going to partner, et cetera, et cetera.

The way we look at it is that we want to generate as much data as we can about the assets.

And then we partner the assets.

So you can dilute the asset base of the company or you can dilute the capital base.

And we're just very sensitive, and we're doing our best to try and manage that as we go forward.

And we do that through nondilutive financing activities.

And the typical business development discussions that a lot of companies of our size do.

Great.

And then just a follow-up on the Phase I Alzheimer's trial.

What are the key aspects and key secondary endpoints is changing baseline of hsCRP.

Just remind me if you can, is that measured by blood or cerebral fluid or both?

Good question.

We're actually measuring both.

hsCRP is known to be elevated.

It'll correlate with the blood.

We'll also measure inflammatory cytokines and neurodegenerative biomarkers in those patients, both blood and CSF.

I can tell you that the 2 biomarkers or the 3 set of biomarkers we're most excited about are actually the noninvasive ones, including looking for white matter free water.

It's an MRI technique, which I think holds tremendous promise.

It's been developed by AMITA, our imaging CRO, based out of Canada.

It is -- we are -- have the breast test, which most of you have -- we've talked to you about.

And then obviously, these behavioral biomarkers of sleep, depression, aggression, psychosis and apathy.

So it's a unique design.

We think that going beyond the typical blood and CSF biomarkers is going to be very helpful, and we are optimistic.

Great.

Congratulations, once again, on your progress.

(Operator Instructions) Our next question comes from the line of Daniel Carlson with Tailwinds Research.

Question I had regarding your INKmune program.

I'm just wondering, it's getting a lot of press, people approaching NK cells.

I'm wondering if you could talk about how your strategy differs from what else is happening out there.

Yes.

Thanks, Dan.

The main difference is that we think the patient's NK cells are just fine.

And what I mean by that, they have all the guns, knives and missiles that they need to kill cancer cells, but they're apathetic or they're blind.

They for whatever reason do not attack the cancer cells.

Actually, we know the reason.

It's actually the cancer has figured out a way to avoid the immune surveillance that NK cells do.

But it turns out, if you flip that switch, that on-switch, you can turn that NK cell from an apathetic NK cell into a cancer killing machine.

Now there's a number of ways to do this.

You can do it with cytokines IL-2, IL-15.

They actually turn the NK cell on.

You can do it with INKmune.

We have shown in this public work that I mentioned that those are not equivalent.

It turns out when you turn it on with INKmune, you upregulated some very specific, shall we say, cell killing -- bits of cell killing machinery that you don't do with -- when you turn them on with cytokines.

Furthermore, the cytokines have to be present.

As soon as you remove the cytokines from the environment, those NK cells go back to sleep.

That's certainly a problem with many of the companies that actually think that you need to replace the NK cells.

So just to reinforce, all of our competitors, as far as we can tell, actually think that the patient's NK cells aren't good enough, they're diseased.

And hence, you got to give them new ones.

Now we admit there are some patients who just after being beat up with chemotherapy, just don't have enough NK cells.

And yes, you must replace those NK cells.

But that's a minority of cancer patients.

Most cancer patients have normal amounts of NK cells.

In fact, NK cells comes storming back after the leucopenia associated with chemotherapy.

They're the first lymphocyte population to come back.

So when they come back, they're still inert.

So we turn them on.

So we are different.

We are not giving NK cells.

We depend on the patient's NK cells.

We think there's ample support.

I mean -- remember, Genentech built a franchise based on rituximab and Herceptin, which is turning on the patient's own NK cells to treat lymphoma and breast cancer, respectively.

So we think Genentech got it right.

And we just think we have a better way to do it.

Got you.

Just turning over to your TNF program for a second.

With inflammation being such a problem, is there a potential at some point that instead of being a therapy to become sort of a vaccine as people get older to be proactive about inflammation?

So that's a very interesting question.

I'm not going to go deep into that on this kind of call.

I will say that we agree strongly that chronic inflammation is a major pathology in the elderly population.

It's -- in fact, the NIH has coined the term inflammaging.

And this is not acute inflammation, it's the chronic inflammation that's immunosuppressive and causes immune dysfunction.

And in fact, if you look at the way the elderly respond to the influenza vaccine, the older you are, the worse you respond.

And in fact, in the groups that die from influenza every year, who are they?

Most of them are aged greater than 65, actually most of them age greater than 80.

And a lot of people actually die from influenza every year because it's such a common disease.

The only ones that die are the elderly.

Many of them have had the vaccine.

But they all -- 85-year-olds only respond about 30% of the time.

And it's because of this chronic inflammation and immune senescence that they have.

We're pretty confident that if you get rid of that, they'll start to respond to not only vaccines but also get rid of many other of the diseases of aging.

But anyway, just to be clear, we're not pursuing an anti-aging program here.

But I want to reemphasize that chronic inflammation, which is one in our sweet spot, is a common disease in the elderly, and it does have medical consequences.

Got you.

Yes, there's very, very interesting possibilities for that going forward.

And then my last question, I found it very interesting that the company repurchased some shares recently.

I know you guys inside have put a lot of money into the common stock last year.

The market going down, your stock under pressure here, and assuming a window opens up, are you guys looking to get back into the stock?

Just out of curiosity.

Yes, very direct question, Dan.

I can only tell you is stay tuned.

I can't answer that directly.

(Operator Instructions) Our next question comes from the line of David Bautz with Zacks Investment Research.

Can you hear me all right?

Yes, David.

So I wanted to ask you about the NASH trial that's coming up.

Did I hear you correctly in that you're going to have F2/F3 NASH patients but they're going to be enrolled in the trial through noninvasive diagnosis?

RJ?

Sorry.

Yes, sorry, I was on mute.

I'm sorry.

So yes, I mean, let me just step back a little bit.

First of all, when you talk to both clinicians, patients and other companies in NASH, one of the biggest hurdles is the biopsy, right?

So you have to biopsy them going in and biopsy them coming out.

I mean, it adds cost, and it is a barrier to enrollment.

The complex noninvasive strategy using some kind of blood, FibroScan and MRI imaging to stage patients has become quite accurate, accurate enough for RMEs, which is to verify that we have a therapeutic strategy in NASH.

In other words, this is not a registration trial, it's small.

This is a trial to say, we're going to make an investment of a modest size into a disease that has tremendous potential, but where there has been a lot of failures, but has a lot of potential, and we think we have an excellent therapeutic strategy based on our preclinical mechanism of the [disease].

We're not a NASH company.

It's not our primary focus.

It is a good focus.

And that positioning may change after the Phase II trial, but this is a way for us to put our toe in the water in a fiscally responsible way, following up on what we think is still our preclinical data.

So how many patients are you planning on enrolling?

And then how many centers are you going to be at?

So we're going to enroll 20 patients, and it will be 4 or 5 centers.

So not a big trial.

But one of the advantages of the noninvasive staging is you can monitor them more frequently.

And as you increase the intensity of monitoring, you decrease the variability of the response that allows you to do smaller clinical trials.

This will be a recurrent theme in our Phase II programs.

Are you going to be looking at liver fat also?

Yes.

The one thing that MRI really does well is not look at liver fat.

Now at the end of the day, the FDA has yet to embrace noninvasive endpoints.

They still want biopsy.

Everyone in the field figures by the time that, 3 years from now, that they will be accepting noninvasive studies for these endpoints -- for approvable endpoints.

Okay.

And then lastly, for the INKmune trials, what is left that needs to be done before you can start enrolling patients?

For the INKmune trials, I mean, basically, it's just the drug is made, the protocols are written.

There's a 3-step process of regulatory and ethics and scientific review committees in the U.K. system.

And that's what we're involved in right now.

The MHRA, which is the equivalent of the FDA, there's ethics committees and then there are scientific review boards at each academic hospital.

And unfortunately, much of this goes in sequence instead of in parallel.

But it's moving forward.

Once again, I will just say that like any regulatory agency, the MHRA has it worse because they just became a freestanding agency when they left the EU.

So Brexit had an impact, and obviously, coronavirus has an impact over there, too.

They actually have more cases than we do on a per capita basis.

(Operator Instructions) Our next question comes from the line of Paul Morris with Alliance Global Partners.

You've answered this, I think, a few times.

Could you just give us a very brief description of how your TNF compares to the existing TNF?

Yes, Paul, thanks.

I'm going to really make it simple here.

Basically, TNF biology is complicated, and there's a good TNF and a bad TNF.

Now you've heard us in the past talk about soluble and transmembrane TNF.

We've really found that people really understand the good versus the bad concept much better.

The bad TNF is the one that actually causes inflammation, causes cell death, it's bad, hence the name.

The good TNF is the one nobody knows about, that's transmembrane TNF.

The good TNFs protect cells, help them live, it enhances the immune system.

So the patient or -- can respond to cancer or infection.

And it promotes synaptic function and remyelination.

Myelin is the insulation of neurons, which is essential for the neurons to work and synapses are how the neurons talk to each other.

So the good TNF is definitely good.

The current drugs, and they are great drugs, mind you.

They have revolutionized the care of autoimmune disease.

They're the largest pharmaceutical franchise on the planet, soon to be overtaken by checkpoint inhibitors.

But they basically block both the good and the bad TNF.

Now what they're trying to do is block the bad TNF, but the good TNF -- blocking the good TNF is an off-target effect.

And in blocking the good TNF, they increase the risk of infection, they increase the risk of cancer and they cause MS demyelination.

Those are obviously not good for the patient.

And it also means that they cannot -- are contraindicated in any setting where immunosuppression would be problematic, i.e., in treatment of cancer or treatment of infection or any case where demyelination would be problematic, and that would be treating brain diseases or CNS disease in both neurologic and psychiatric.

The DN-TNF platform is like a rifle shot.

It completely eliminates the bad TNF and doesn't touch, not even an iota, doesn't touch a bit, the good TNF.

So what you do is you polarize the whole TNF biology to the good TNF and this is why we can go after a cancer.

We can go after neurologic diseases.

Because not only is -- it's the perfect drug, the perfect anti-inflammatory strategy, it actually has benefits that improve the response of the immune system, improve the function of the neurologic system.

And they can't be there.

I don't want to have to compete with Amgen or AbbVie.

I mean they're these 800-pound gorillas.

We're just a 3-pound, even a squirrel at this point.

We'll get that size, but we are not now.

So the differences are stark, they're real.

And we are applying those differences in a way that give us a unique, both medical and marketing opportunities.

Our final question comes from the line of Michael Irwin with Univest Securities.

All right.

So I have 2 more general questions, I guess.

So the first one is, I know that chronic inflammation is becoming a much more widely known condition.

Would you say that, especially since you are one of the pioneers in this kind of scope, would you say that chronic inflammation is -- can be considered a disease now or is it just a condition?

Well, thank you.

We do believe we are one of the pioneers in bringing chronic inflammation to the forefront of thinking in both the medical and investment community.

And although it isn't there yet, our belief, and, once again, I'm speculating here.

This is not part of a business plan.

But as chronic inflammation is understood to have the impact on many facets of diseases, particularly aging and chronic diseases, it will be recognized as something that has to be measured and something that if you can measure it and have a therapy for, you should treat.

So we predict that in the future, and I don't know whether that's 5 years or 10 years from now, when you go to the doctor, and right now, they're testing your blood pressure, and they're testing your glucose level and they're testing your lipids level, to see whether they need to intervene and give you any therapies to prevent the development of diabetes or cardiovascular disease, they're also going to look to see if you have chronic inflammation.

Because if you have chronic inflammation, you have an increased risk of cancer, you have an increased risk of neurologic diseases, metabolic diseases and cardiovascular diseases.

And if we -- and if they -- and if the docs have a therapy in their hands, they're going to give it to you.

So it's up to us in biopharma to give them the tools, that is the test and the therapy because treating chronic inflammation will have, and here I will go out on the limb and say, have more of an impact than treating cholesterol for heart disease, will have more of an impact than treating glucose in patients with metabolic syndrome.

And then the second question is about the Alzheimer's, and since -- and as you said before, that this -- the beta-amyloids scorecard was being walked away because of the failed trials.

And would you say that or -- now that, that's been walked away and market has become more aggressive in search for a solution because Alzheimer's being such a big disease, as I'm sure yet.

What would you expect from your Alzheimer's disease trials?

And how would it compare to other companies that also focus on neuroinflammation?

Yes, thank you.

I think it's tragic from a patient perspective and an investor perspective.

But having finally wrung out the enthusiasm for amyloid by both biopharma and investors means that those of us that are focused on amyloid actually now have a chance.

Because it used to suck all the oxygen out of the bones.

And in fact, it's probably part of the disease, but not an important part.

So what's just you're going to see over the next 5 years is that you're going to see all the kind of innovation and diversity in drug development that occurs now in cancer and Alzheimer's disease.

Now when you ask the experts what some of the important pathologies in Alzheimer's disease are, neuroinflammation comes up.

And it's very high on their list.

And obviously, that's what we do.

And so we're way ahead of almost anybody.

I mean I don't think there's anybody ahead of us.

There are some people who are running neck and neck with us who have anti-inflammatory or anti -- or shall we say, anti-glial activation strategies.

But this will just be part of the solution.

Alzheimer's disease is complicated, just like cancer, just like cardiovascular disease.

Just think how many patients with either cardiovascular disease or cancer get one drug, almost none.

They get combination therapies.

So the future for Alzheimer's disease will be combination therapies.

We believe that neuroinflammation is a key element to the whole disease spectrum.

So although there will be some patients who benefit from just a monotherapy with XPro1595, and that group will not be small.

We think it's big as 1/3.

The other 2/3 of the patients may need other therapies and those other therapies may benefit from combinations with XPro1595.

So I don't know exactly what the future looks like.

I know that obviously, we're aggressively pursuing clinical strategies in Alzheimer's disease.

We think that both monotherapies and combination therapies are part of the future and that will be a big part of that.

We have reached the end of the question-and-answer session.

I would now like to turn the floor back over to management for closing comments.

Yes.

So this is RJ, and I'll make a quick comment before I turn it over to David for his final comments.

This is a watershed day.

This is our first really earnings call, "earnings," since we didn't -- it was more like a spending call.

But the most important thing is to give you a chance to interact with us, hear about our plans, hear what we've done and prepare yourselves for what we're going to do next year.

And we hope we've answered all those questions.

Well, guys, you know how to get a hold of us.

We like to think we're responsive.

If you have other questions that either didn't get answered or you did not think of at the time of this call, we'll make ourselves available for further discussions.

David, anything you want to add?

No, I echo what you said.

I appreciate everybody taking the time to listen in, and we will look forward to having more open communications with you.

Please do reach out to us with questions, and thank you for joining us on the call today.

Ladies and gentlemen, this does conclude today's teleconference.

You may disconnect your lines at this time.

Thank you for your participation, and have a wonderful day.