Eledon Pharmaceuticals, Inc. (ELDN) Earnings Call Transcript & Summary

Good day, and welcome to the Novus Therapeutics Third Quarter 2020 Earnings Conference Call. [Operator Instructions] And as a reminder, this conference is being recorded. I'd now like to turn the call over to Jon Kuwahara, Senior Vice President of Finance. Please go ahead.

Good afternoon, and thank you all for joining Novus Therapeutics Fiscal 2020 Third Quarter Financial Results Conference Call. With me today are 2 members of our leadership team: David-Alexandre Gros, Chief Executive Officer; and Steve Perrin, President and Chief Scientific Officer. Today, after market close, we issued a press release containing detailed information on our quarterly results. You may access our release under our Investors tab on our company website, novustherapeutics.com. Before we begin, I would like to remind everyone that statements made during this conference call relating to Novus' expected future performance, future business prospects or future events or plans may include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995. All such forward-looking statements are intended to be subject to the safe harbor protection provided by the Reform Act. Actual outcomes and results could differ materially from these forecasts due to the impact of many factors beyond the control of Novus. Novus expressly disclaims any duty to provide updates to its forward-looking statements, whether as a result of new information, future events or otherwise. Participants are directed to the risk factors set forth in Novus' reports filed with the Securities and Exchange Commission. It is now my pleasure to pass the call to our CEO, David-Alexandre Gros. DA?

Thank you, Jon, and good afternoon, everyone. This has been a very exciting and transformational quarter for Novus, marked by key milestones across all aspects of our business. As we communicated back in June, we initiated the process of exploring a range of strategic alternatives to maximize shareholder value. To that end, in mid-September, we announced the conclusion of that process with the acquisition of Anelixis Therapeutics. After carefully evaluating several alternatives, we concluded that this transaction represented the highest potential value creation opportunity for our shareholders as well as created the most promising path for Novus' future. Concurrent with the acquisition of Anelixis, we entered into a definitive agreement for the sale of approximately $108 million of Series A nonvoting convertible preferred stock in a private placement to a group of accredited investors before deducting placement agent and other offering expenses. The acquisition of Anelixis gives us access to AT-1501, a next-generation, anti-CD40 ligand antibody with broad therapeutic potential, which we believe has the ability to be the best molecule in its class. With AT-1501 as the cornerstone of our pipeline, we see ourselves poised to grow Novus around this target and to develop therapies to help patients undergoing organ or cellular transplantation as well as those living with serious immunological diseases, all of whom face limited treatment options. The proceeds from our private placement will, therefore, be used to advance the Phase II clinical trials of AT-1501 in up to 4 indications: renal transplantation, pilot cell transplantation, autoimmune nephritis and amyotrophic lateral sclerosis, or ALS. We are integrating Anelixis into Novus expeditiously. In late October, we commenced patient enrollment into a Phase IIa clinical trial of AT-1501 in adults living with ALS. Of note, AT-1501 had previously received orphan drug designation from the U.S. Food and Drug Administration for the treatment of ALS. We currently anticipate top line data from this important trial in 2022. Before turning the call over to Steve Perrin, our President and Chief Scientific Officer, I'd like to make a brief comment on the ongoing COVID-19 pandemic. The pandemic has had the unfortunate effect of disrupting drug development time lines around the world. Clinical trials across many indications and all stages of development have experienced enrollment challenges and delays resulting from COVID-related restrictions and concerns. As mentioned, we are preparing to initiate up to 4 clinical trials and with COVID case counts once again on the rise in the United States and elsewhere, we are monitoring these developments carefully. We have been and remain in close contact with our investigators and trial sites. At this point in time, we are advancing our clinical development activities, particularly our ALS trial, according to our internal time line. A possible worsening of the global COVID situation thus presents an execution risk for us. But in part due to the specific indications that we are targeting, we currently believe we can continue to successfully navigate through this global crisis with relatively minimal disruption. I'll now turn over the call to Steve, who will provide more detail on our clinical programs. Afterwards, Jon Kuwahara will provide a financial update. Steve?

Thank you, DA. I'll start by giving you a bit of background around AT-1501's target. CD40, CD40-ligand receptors have been viewed as an attractive therapeutic target for decades since the engagements of these receptors play a pivotal role at immune system activation by mediating both antibody and cellular immune responses through modulation of germinal cell function, B-cell responses as well as to the polarization of proinflammatory T cells. The inhibition of a robust immune response is mitigated by costimulatory signaling when CD40 ligand binds costimulatory receptors such as CD40 on antigen-presenting cells as these antigen-presenting cells are simultaneously presenting foreign peptides on their MHC receptors to the T receptor on lymphocytes. The interaction of CD40 ligand and CD40 results in clonal expansion, antibody production and secretion of proinflammatory cytokines that amplify an immune response. Our lead program, AT-1501, is a first-in-class IgG1 anti-CD40 antibody lacking Fc effector function. It has high affinity binding to CD40 ligand, has shown very good manufacturability and biological activity and has a half-life of 18 to 26 days in humans. We are focusing our efforts on the development of an antagonist antibody targeting the ligand rather than the receptor since targeting the ligand has been shown to be more efficacious in preclinical models of autoimmunity and in the prevention of acute and long-term allograft transplant rejection. This preclinical efficacy may be mediated by several factors, including differences in the cellular distribution of the receptor versus the ligand. Anti-CD40 ligand antibodies also inhibit both CD40 as well as CD11 costimulatory receptors on antigen presenting cells, thus inhibiting the proinflammatory polarization of CD4-positive and CD8-positive lymphocytes. Blocking the ligand also polarizes CD4-positive lymphocytes to FoxP3-positive Tregs, which functionally secrete IL-10 and other cytokines creating a tolerogenic environment in the context of preventing allograft transplant rejection and autoimmunity. Importantly, however, modulation of the pathway does not cause systemic lymphopenia. Blocking the activation of the CD40-ligand pathway has been shown to ameliorate disease progression in pathology in preclinical models of autoimmunity and prevents acute and long-term allograft transplant rejection in multiple species. To date, we have completed a single ascending dose Phase I study of AT-1501 in both healthy volunteers as well as people with ALS. In this study, AT-1501 showed a good safety profile with low antidrug antibody responses that were not dose related. We observed linear dose proportionality across the dose ranges and half-life of up to 26 days. This data suggests the potential for extended dosing intervals and for the development of more convenient administration methods such as subcutaneous formulation. As DA mentioned, we are planning to advance AT-1501 in up to 4 Phase II clinical trials for renal transplantation, pilot cell transplantation, autoimmune nephritis and amyotrophic lateral sclerosis, or ALS. We selected the indications based on preclinical data that was generated with either our molecule or historical anti-CD40, CD40-ligand molecules. Preclinical data in rodents, pigs and non-human primates suggest that blocking CD40 ligand is the most efficacious way to prevent acute and long-term transplant rejection in renal, corneal and islet cell transplantation and, in some cases, can even induce long-term transplant tolerance. Blocking CD40 ligand has also been shown to be more effective at preventing allograft transplant rejection compared to blocking CD40. The ability to prevent acute and chronic transplant rejection in the absence of calcineurin inhibitors has the potential to transform the clinical management of preventing graft rejection, mitigating nephrotoxicity, increased opportunistic infections and increased malignancies that are associated with calcineurin inhibitors, or CNIs. Pilot cell transplant has the same upside as described for organ transplant with the additional ability to eliminate the toxicity of CNIs, specifically on the transplanted islet cells. Chronic exposure to CNIs on organ transplant is associated with an increase in nuance of diabetes. This is due to the toxicity of CNIs on beta cells in the pancreas. Similarly, CNIs are toxic to transplanted islet cells. Up to 50% of transplanted islet cells may die within 3 days of transplantation, in part due to CNI toxicity, thus exposing subjects to risk of transplant rejection and requiring multiple islet cell transplants in order to obtain a sufficient cell mass to eliminate the requirement for exogenous insulin. In autoimmunity, we are focusing on autoimmune nephritis. There was a long history of preclinical and clinical data demonstrating the blocking CD40-ligand signaling ameliorates disease progression, modifies biomarkers of disease and improves renal function in focal segmental glomerulosclerosis, or FSGS, as well as lupus nephritis. Soluble CD40 ligand often correlates with disease flares on autoimmune diseases. The clinical development program in ALS is based on positive preclinical data in a rodent model of ALS that was conducted by the ALS Therapy Development Institute, or ALS TDI. ALS TDI discovered the activation of the costimulatory pathway and activation of CD40-ligand signaling at symptom onset in skeletal muscle, brain and sciatic nerve in a rodent model of ALS. Using a murine antibody to block CD40-ligand functioning in mice, they further demonstrated the blocking CD40 ligand signaling improved muscle function, slowed disease progression and improved survival. These clinical manifestations are due to reduced immune cell infiltration of macrophages into skeletal muscle and their destroying of denervated nerves. The plasticity of the nervous system to repair itself in the absence of this immune cell attack results in improved neuromuscular junction occupancy and improved muscle function. Blocking CD40-ligand signaling also prevents proinflammatory polarization of lymphocytes, reduce neuroinflammation and improve motor neuron survival in rodent ALS models. Finally, similarly to how soluble CD40 ligand can correlate with flares in autoimmune diseases, soluble CD40 ligand is also correlated with disease progression in ALS. In October, we initiated a Phase II study of AT-1501 in people living with ALS and enrolled our first patient. As DA mentioned, we are monitoring the COVID situation carefully and are in close contact with our trial sites. However, since enrolling our first patient, the trial has been progressing according to plan, both in terms of our ability to open up new sites and to enroll subjects, resulting in additional patients now also enrolled in the first cohort. The ALS trial is a 12-week, open-label, dose escalating, safety and biomarker study. This is the first multiple ascending dose study of AT-1501 in humans. Thus, the primary endpoint of the study is safety and tolerability in adults with ALS. Because of the nature of the trial, we do not currently expect to release interim data. At the end of the study, we'll assess exploratory endpoints related to disease progression, including changes in ALS functional rating scale, or ALS FRS, as well as respiratory function. Additionally, there are multiple exploratory biomarker endpoints, which we'll be examining after the 12-week study, including: one, target engagement or the binding of AT-1501 to its target CD40 ligand; two, a comprehensive biomarker panel to assess proinflammatory and inflammatory signals in circulation, including TNF alpha in IL-6; and three, neurofilament light chain levels as a surrogate marker of neuron health and disease progression. Before finishing my presentation, I'd like to thank the ALS Therapy Development Institute, Augie's Quest, The Muscular Dystrophy Association, The ALS Association, ALS One, ALS Finding a Cure and The ALS Ice Bucket Challenge for their assistance and support of the years in getting AT-1501 to a clinical trial in patients. I'll now finish my comments by briefly mentioning that we continue to consider what a path forward may be for Novus' historical assets, particularly strategic options for them. With that, I'll turn the call over to Jon for a financial update.

Thank you, Steve. In addition to the financial results summarized in our press release, you can find additional information in our Form 10-Q, which we will file later today. Research and development expenses were $3.1 million for the 9 months ending September 30, 2020. This was a decrease of $3.7 million compared to $6.8 million for the same period last year. The change was primarily due to decreases in clinical costs, formulation development costs, consulting expenses, personnel-related costs, travel and meetings expense and other developmental costs. These costs were partially offset by an increase in stock-based compensation expense. These decreases were made following the completion of our Phase IIb study of our legacy lead program in acute otitis media and the subsequent suspension of many related activities as we assessed strategic options and potential paths forward for the legacy programs. We expect our research and development costs to increase in future periods as we proceed with the development of AT-1501. General and administrative expenses were $6.7 million for the 9 months ending September 30, 2020. This was an increase of $1.6 million from $5.1 million for the same period last year. The change was primarily due to increases in merger-related costs incurred in the quarter -- in the third quarter, stock-based compensation and general operating costs. The increases were partially offset by decreases in litigation expense, the costs associated with operating a publicly traded company, personnel-related costs and travel and meetings expense due to the ongoing pandemic. Following the completion of the Anelixis acquisition, we expect our general and administrative expenses to increase in future periods as we have a larger headcount and incur expenses relating to the development of a larger product pipeline. We ended the quarter with approximately $114.5 million in cash. This includes approximately $11 million added from the acquisition of Anelixis as well as the pipe financing that raised gross proceeds of approximately $108 million before deducting placement agent and other offering expenses. Of note, receipt of approximately $9 million from the financing has been deferred, primarily until stockholders approved issuance of the company's common stock upon conversion of the company's X1 preferred stock and effective registration of its common stock. With that financial update, let me turn the call back over to DA for some final remarks.

Thank you, both Steve and Jon. The third fiscal quarter of 2019 was transformational for our company, in particular the Anelixis acquisition, the private placement financing and the advancement of AT-1501 into our first Phase II trial in adults with ALS. Now with multiple additional Phase II trials planned, we believe we have set the stage for numerous potentially value-creating catalysts in 2021. In closing, I'd like to reiterate our excitement as we look towards the vision of developing Novus into a leading targeted immunology company focused on the CD40, CD40-ligand pathway. Our strategy is clear. We will remain focused. We will be agile, and we will be guided by the data and by design. With that, I'd like to thank you for joining us today and wish you a good afternoon and evening. Operator, you may wrap up the call.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time, and have a great day.