Equillium, Inc. (EQ) Earnings Call Transcript & Summary

And thank you for joining the H.C. Wainwright 2021 Global Life Sciences Conference. My name is Boobalan Pachaiyappan. I'm Wainwright Research Associate. While we are virtual this year, we are confident we are going to be able to provide value to you with over 425 companies presenting at this conference as well as via your interactions through one-on-one meetings. H.C. Wainwright is a full-service investment bank, dedicated to providing corporate finance, strategic advisory and related services to public and private companies across multiple sectors and regions. We have a total of 18 publishing senior analysts and 493 companies covered across all sectors. Please visit hcwco.com for more information. From a logistics standpoint, please make sure to reference your virtual conference online portal that gives your individual links to your meetings and all presentations. Panelists and all presentations are live and on-demand from March 9 to 10. With that said, have a productive and enjoyable day, and I'd like to introduce our next presenter. I'd like to welcome Jason Keyes, CFO of Equillium. Equillium is focused on developing new drugs to treat autoimmune and inflammatory disorders. Jason, the floor is yours.

Thanks, Boobalan, and hello, everyone. I appreciate your interest in Equillium, and I'm excited to be providing this update on the company today. Before I start, please note that I'll be making forward-looking statements. I want to point out that there are risks and uncertainties associated with those forward-looking statements. You can find more information about those risks in our SEC filings that are posted on our corporate website. For those of you who are new to the story, Equillium is a clinical-stage biotech company whose mission is to develop novel immunotherapies to dramatically improve the lives of patients who are suffering from autoimmune and inflammatory disorders with high unmet need. Our lead asset called itolizumab is a first-in-class antibody that targets CD6. Itolizumab is highly differentiated from anything else in developments or on the market and that is the only drug that targets the CD6 pathway. By binding to CD6, itolizumab inhibits both the activity and the trafficking of certain T cells that are at the root of many autoimmune diseases. And importantly, itolizumab is a validated therapeutic agent and that has already demonstrated efficacy and safety in a variety of human clinical trials. And in fact, our partner, Biocon, has received approval for itolizumab in India for psoriasis as well as Emergency Use Authorization as a therapy for COVID-19. At Equillium, we're currently advancing clinical development in 3 indications all with high unmet need and where we think the biology of each of these diseases is especially well suited for itolizumab's novel mechanism of action. Those include acute graft-versus-host disease, lupus/lupus nephritis and uncontrolled asthma. There's a growing body of research and clinical data now that suggest that the CD6 pathway has wide-ranging therapeutic potential. Although we're currently focused on advancing our 3 initial clinical programs, the potential opportunity for itolizumab could be much bigger as there's a large number of other T cell-mediated autoimmune and inflammatory diseases where CD6 pathway could be relevant as a viable and differentiated therapeutic approach. And many of these T cell-mediated diseases already have research implicating the CD6 pathway in disease pathogenesis. So this wheel really represents a big opportunity in front of us to potentially expand our clinical development of itolizumab into a number of other indications. But currently, we're very much focused on advancing itolizumab through our existing clinical development programs that span 3 distinct indications. The first is an acute graft-versus-host disease where we've been granted Fast Track and Orphan Designations by the FDA, and we're nearing completion of an open-label Phase Ib in the first line setting of acute GVHD. That study is called the EQUATE study. We've begun to report positive interim data from that study, which I'll talk more about in a bit. And we expect to report top line data from the Phase Ib study in the first half of this year. We're also making plans to meet with the FDA midyear. We'll be reviewing the data from the Phase Ib study and discussing the design of the next phase of development and the path forward approval. And coming out of that meeting, we should be in a position to initiate that next study before the end of the year. In lupus nephritis, we've also been granted Fast Track Designation by the FDA. We are currently conducting a Phase Ib study called the EQUALISE study. That study is comprised of 2 parts. The first part consists of lupus patients without kidney involvement, and the second part consists of lupus nephritis patients. We expect to report top line data from the lupus part of that study by the end of this quarter. And we expect to report interim data from the lupus nephritis part of that study in the second half of this year. In uncontrolled asthma, we are progressing a Phase Ib study called the EQUIP study, where we expect to report top line data in the second half of this year. Now let's spend just a minute summarizing the novel mechanism of action of itolizumab. As I mentioned earlier, CD6 is a co-stimulatory receptor that's differentially expressed on certain pro-inflammatory T cells called T effector cells. By binding to CD6, itolizumab essentially hysterically hinders the binding of its natural ligand called activated leukocyte cell adhesion model, or ALCAM, to CD6. And by doing so, it inhibits the activation of those T cells in terms of reducing the production of a number of different pro-inflammatory cytokines as well as inhibiting the trafficking of those T cells into a variety of tissues where ALCAM is expressed. However, certain types of T cells called the T regulatory cells that are important for proper immune system functioning, they don't overexpress CD6, and so they're spared. So because of that selective activity itolizumab acts as a more targeted immune modulator than say corticosteroids that are much more broadly immunosuppressive and have many undesired side effects. Itolizumab is able to bring the immune system back into a healthy balance and restore immune system regulation, which we believe can lead to durable disease remission while promoting immune tolerance. Let me now turn to our initial clinical programs, starting with acute GVHD. GVHD is a really challenging complication of hematopoietic stem cell transplants where donor T cells attack the recipients' organs. This is an area of extremely high unmet need. There were roughly 10,000 hematopoietic stem cell transplants performed last year. And data indicates that somewhere on the order of half of those will develop acute GVHD. Current standard of care in the first-line setting is the use of corticosteroids. For the long-term survival of even those that respond to steroid treatment is just slightly above 50%. And for those that do not respond to steroids, they're projected mortality is as high as 95%. So again, a lot of unmet need here, big opportunity for approved therapeutics. So there are no currently approved treatments for that first-line acute GVHD setting and only 2 products in development. One of which is itolizumab, which, again, is unique in its ability to modulate both the activity and the trafficking of T effector cells. The other product in development for first-line acute GVHD is an alpha-1 antitrypsin from CSL Behring, which is in a Phase III study conducted through the BMT clinical trial network. We have been closely watching Incyte's itacitinib, but that agent recently failed its Phase III study in first-line acute GVHD. Now Incyte does have another JAK inhibitor called Jakafi that's approved for use in the steroid-refractory setting. And as we generate clinical data in the first line setting of acute GVHD, that will inform potential further development for us in other GVHD settings such as prevention and chronic GVHD. In terms of our study, our clinical study in first-line acute GVHD called the EQUATE study is an open-label, dose-escalating Phase Ib study in patients with Grade III and IV acute GVHD. In this study, itolizumab is being given together with steroids and administered on a biweekly basis in an IV formulation over 2-month period. The study's primary objectives are to evaluate the drug safety and tolerability with secondary objectives of evaluating PK/PD and clinical activity. As I mentioned earlier, we've already reported positive interim data from the first 3 doses of the study, and we expect to report top line data from the Phase Ib study in the first half of this year. So the responses that we've seen so far across those first 3 dosing levels have been highly encouraging. We've seen an overall response rate of 80% at day 29 across all 3 cohorts. And in cohorts 2 and 3, we've seen an overall response of 100%. And importantly, those day 29 responses have all been either a complete response or a very good partial response, which essentially approximates a complete response. And that's important since complete responses correlate to positive clinical patient outcomes. Also the responses we're seeing have been both rapid and durable with most patients achieving a complete response within 15 days and maintaining responses out through day 85. With respect to adverse events, they've generally been consistent with what's typically seen in this very sick patient population of Grade III and IV GVHD and with the existing safety profile of itolizumab. And just to put these interim results in a bit of context. Previous studies in high-risk patients have shown day 29 overall response rates for steroid use alone in the low 40% to 50% range. And complete responses were just in the high 20% to mid-30% range, again, for steroid use alone. The responses we've seen thus far with itolizumab have been much higher, especially in the 2 highest dose levels where we see an overall response rate of 100% and a complete response rate of 83%. What's also encouraging and important in terms of patient outcomes and quality of life is that we've seen a meaningful tapering in the amount of steroids that the investigators have been giving to their patients who are responding to itolizumab therapy. With respect to where we're headed with this program, we're planning to meet with the FDA in the first half of this year with the objective of aligning upon the dosing and design of a single pivotal trial that can support a BLA submission, and our goal would be to initiate that study before the end of the year. Let me turn to lupus nephritis program. Lupus nephritis is the most frequent and serious manifestation of systemic lupus erythematosus. We estimate there are approximately 100,000 lupus nephritis patients in the U.S. The majority of whom do not respond to current first-line treatments. And a large portion of those patients that don't respond will progress to end-stage renal disease. Despite the approvals recently 2 therapeutic agents, lupus nephritis remains an area of high unmet need. In terms of the competitive landscape, many B cell single cytokine targeted approaches have historically failed in lupus nephritis. However, there have been a couple of recent approvals in Benlysta and voclosporin. But based on data from clinical studies, complete remission rates of 52 weeks, seemed to be topping out at less than 50%, which still leaves a lot of room for more efficacious therapies. T cells play a central role in lupus. And so we believe that itolizumab's unique T cell-based mechanism represents a promising treatment approach for lupus nephritis. And also, we're highly intrigued by some recent research that has shown elevated CD6 and ALCAM expression in renal cells and lupus nephritis patients, and that research has identified ALCAM as a very strong predictive biomarker in patients with active lupus nephritis. We're currently studying itolizumab in a Phase Ib study in lupus -- in lupus nephritis. That study is called the EQUALISE study. It's comprised of 2 parts. Type A is in patients without kidney involvement and type B is in patients with active lupus nephritis. Both parts are open-label, dose-escalating studies of itolizumab, administered subcutaneously on a biweekly basis. The Type B cohort to be dosed over a 6-month period, which we think gives us a good chance of observing potential efficacy signals. The primary objective of both parts of the study are safety and tolerability with the secondary objectives around PK/PD and evaluating changes in urinary, ALCAM and CD6 levels. Now on the Type B cohorts, we will also be looking for signals of clinical activity as measured by reductions in proteinuria and SLEDAI scores. And we expect to report top line data from the Type A portion of the study before the end of the year -- I'm sorry, before the end of this quarter and are looking to report the interim data from the Type B cohort in the second half of this year. Turning now to our development program in asthma. And asthma is a very large indication, still with high unmet need. There are roughly 2.6 million asthma patients in the U.S., we estimate that 1.3 million are uncontrolled on a current standard of care, which is typically long-acting beta agonists and steroids. And of those that are under controlled, roughly half do not respond to existing available biologic treatments. I think the scientific community, their understanding of asthma has really advanced over recent years, where we now believe that asthma is a very heterogeneous and dynamic disease that can be Th2-driven or eosinophilic asthma, but it can also be non-Th2 mediated and instead driven by Th17 and neutrophils. Currently, all the approved biologic treatments are really only capable of addressing that eosinophilic asthma segment on the left-hand side of this slide. There's really nothing approved that can address the full spectrum of both Th2 and non-Th2 or Th17-mediated asthma segments. And there are currently only 3 therapies in development that have the potential of addressing that full spectrum of asthma, with itolizumab being one of them and the only one that can modulate both the activity and trafficking of T cells. So our EQUIP study is a Phase Ib randomized, blind and placebo-controlled, dose escalation study in uncontrolled moderate-to-severe asthma patients. In the study, itolizumab is administered subcutaneously, biweekly over a 2-month period. The primary objectives of the study are again, safety and tolerability, but will also be characterizing PK/PD and assessing potential clinical activity as secondary end points. We're currently progressing the enrollment of the study, and we expect to report top line data in the second half of the year. I'd like to spend a minute now highlighting some of the company's recent financials. We believe the company is in a very healthy financial position. As of our last publicly filed financial statements, we reported over $90 million in cash on the balance sheet at the end of the third quarter of last year. And more recently, we strengthened the balance sheet and extended a runway following a $30 million registered direct offering with the same capital that we completed last month. And with respect to our use of cash, we've been able to demonstrate a very lean operating model and a rather disciplined control of spending as we average an operating burn last year of $6 million per quarter through the first 3 quarters of last year. And we haven't filed our fourth quarter and year-end financials yet. We plan to file our 10-K in a couple of weeks. We do expect that our cash burn has increased in the fourth quarter as all 3 of our clinical trials were actively enrolling after we had paused our lupus and asthma trials earlier in the year due to the COVID-19 pandemic as well as due to a few onetime cash outlays in the fourth quarter, including a ramp-up in our spending as we prepare to launch a potential registration study in COVID-19 patients. With that said, with our current cash, we believe that the company is sufficiently capitalized to complete all 3 of our current clinical trials as well as fund advancing our development programs well into later-stage trials. And just a comment on market cap and valuation. If you look at our recent market cap and the amount of cash now on our balance sheet, we believe our current enterprise value is quite modest, and we feel there's tremendous upside potential for us to create value here given the broad therapeutic potential of itolizumab and some of the encouraging early clinical data that we're beginning to see as well as some of the exciting TD and biomarker data that we're seeing as well. So 2021 should be a very important year for the company as we drive our clinical programs toward a number of key catalysts this year, which I've mentioned previously, and which were summarized here on this last slide. So in closing, we believe the company is in a strong position financially. We're encouraged by the growing body of CD6 research and clinical data that we are leading. And we're highly motivated to advance itolizumab further into the clinical development and toward an approval so that it can help patients in need of better therapeutic options. I'd like to take this opportunity to thank everyone who's watching this webcast. We really appreciate all of your support, and we look forward to keeping you all updated on our progress, which should be a very exciting year for us. Thanks.

I want to thank all our presenters for taking part in what has been a very productive and informative series of presentations. We appreciate the time and effort that went into preparing them. Hopefully, our next conference will be one that we can hold in person rather than virtually. But in the meantime, we are very grateful for your flexibility and your presence online this year. Thank you again from the H.C. Wainwright team. Thanks, Jason.

Thank you.