Palisade Bio, Inc. (PALI) Earnings Call Transcript & Summary

The other thing we haven't mentioned is that taking oral intake, as opposed to intravenous nutrition or no nutrition, helps the immune system on top of that and that there is definitely a benefit to patients having oral alimentation as soon as possible after surgery. Quite honestly, some of the enhanced recovery protocols, more commonly practiced in Europe than in the U.S., entail carbohydrate-loading prior to surgery. Anesthesiologists now allow patients to eat with less of a break in eating prior to surgery and particularly prior to endoscopy than they used to. I mean you can't underestimate the importance of keeping oral alimentation in the gut.

Yes. I think that's an important -- a really important comment. And one of the key items of LB1148 is it actually includes a key carbohydrate source to help promote that, the health of the gut prior to surgery and make sure that the patient is adequately -- has that -- adequate levels of carbohydrates in their GI tract.

Gentlemen, this has been such a great discussion so far. We have a great participation from our audience and a lot of wonderful information. So we talked about the clinical problem. We talked about the patient journey, from the lens of the surgeon, the medical team, the hospitals. We also talked about the extremely positive clinical data so far with LB1148. Let's turn to what's next for this program. You recently announced clearance from the FDA to move forward with the Phase III program. Rob, can you describe the Phase III program and when [ we're starting them ] on patients?

Sure, absolutely. So one of the things, as I'll take this from Tom, is that he likes to say, is that basically, if you run a successful Phase II study, your Phase III study should look very similar, if not, exactly identical to that successful Phase II. And so we've really taken that to heart here. And I think that's really important, right? You see, in some drug development programs, when they ran a Phase II study and they had made some alterations, be it for maybe potentially scientific reasons or recruitment reasons or other reasons, and they don't get the outcome that they would expect to see. And so what we've done in designing the Phase III study, and Mike and Tom and the team, have really sort of mirrored the successful Phase II in what we're going to be doing in Phase III. So the Phase III study is designed as a randomized double-blind, placebo-controlled multisite trial, where we'll enroll 600 patients, randomized 1:1 of placebo to LB1148, and these patients will be undergoing either type of medical procedure that was just described by Dr. Dawson, either minimally invasive approaches or the laparotomy approach, the more open approach. And we'll be looking at patients that are having bowel resection as part of their therapy. A lot of these patients will be prior -- patients that have received prior treatment for cancer in their disease and are now having bowel resection as followup to that treatment. The primary end point will be the same. It's defined as GI2. And GI2 is basically the time from the completion of that surgery until the patient is able to tolerate solid food as well as have their first bowel movement. And secondary end points will be similar as well, where we'll be investigating the length of stay of these patients and really evaluating that patient experience. So -- but as far as the time line goes, as you said, Jenene, we did receive a Study May Proceed letter about a month ago from the FDA, which was very exciting, and the clinical team is working hard to get this study up and running. And we'll be enrolling in this Phase III trial in the second half of this year, and so there will be continued updates to come on that.

Congratulations and very exciting. So Dr. Dawson, I would love to hear from you. Rob has described what the Phase III study looks like. How has this been setup for successful conduct and expected outcome of the Phase III study?

Well, Rob alluded to the most important point, is that since we've had safety and efficacy throughout multiple studies, we're keeping the study the same. We're really just increasing the number of sites and the number of patients. We'll probably end up with somewhere around 65 sites, with about 6 -- to enroll 600 patients. The surgeries, we didn't -- our inclusion, exclusion criteria do not say that the patients have to have cancer, but it turns out, in both of our studies that we've done, most of the capture that we're getting is colorectal surgeries. So we're getting patients that are having a resection, with usually an anastomosis. So we're also going to be examining our patient data based on the types of surgeries performed, such as a right hemicolectomy or low anterior resection, left hemicolectomy, et cetera. And then we think that in terms of the timing, having that number of sites in the U.S., we can complete that study in a quick time frame as we projected.

And one additional, just a clarifying point on the time line, is that in this study, since we're looking at return of bowel function, we're not going to have the longer follow-up that we look for, we'll be looking for an adhesions program, which we'll be talking about next. So the time from last patient enrolled until that last patient reaches that end point will be rather short, rather than having to wait the 7 months for the ostomy. So as far as the total conduct of the study and the time line to achieve that, that should -- kind of shortens things on the back end to get that initial data readout as well.

Yes. Most of the data that we are going to be capturing is going to be in that 14-day experience. They don't have to be 14 days. It's been in the 0- to 14-day experience during the hospitalization when the surgery actually happened. We will do some follow-up, but it's a limited time frame followup. So this study should enroll fast and complete fast.

Well, this is certainly exciting, definitely for your current investors, for future investors, a lot going on. So we talked about return of bowel function. That indication alone seems like an exciting opportunity. But you had mentioned you are also advancing the LB1148 program to prevent adhesion formation. So let's turn our focus to that. So Dr. Dawson, can you please describe what adhesions are?

Certainly. So unfortunately, abdominal adhesions form at a very high rate. And in the laparotomy world, where most of the work has been done, it's in the over-90 percentile range. The problem with adhesions is adhesions can be very robust and very organized and vascular, they can be over the entire adjuvant and cause a huge number of problems. But even one well-placed adhesion near, say, a mesenteric bed, can cause obstruction, ischemia and death. So it's hard for us as physicians to know what is the adhesion that's going to cause us a problem. We all know that if you go into an abdomen and there's lots of adhesions, that's a big problem. But we also know that just having one adhesion can cause physiological problems related to even in fertility or bowel obstructions that have to be treated, as you would expect, coming to the hospital, possibly getting an NG tube and in some cases, going back to surgery for adhesiolysis. But we know, in the U.S., that we're performing at least 400,000 adhesiolysis surgeries per year at a cost to the U.S. health care system of at least $2.3 billion. And we know that it's the tenth most common cause of emergency surgery and it causes female infertility. So the adhesions are a big problem. And taking care of adhesions are not something that we've solved. We do know that, we believe at least, that laparoscopically, we are improving our rate of adhesion formation, but we know the problem still exists and it's still important. In our study group, in our placebo group, we formed adhesions with scopes. So we know that these problems are still occurring. The products that are available, such as Seprafilm and ADEPT are not products that are used in huge numbers, and they have limitations. Seprafilm, in particular, is -- has been approved for laparotomies, and we're moving towards a laparoscopic world, so that has limited application.

Thank you. So Drs. Hoyt and Wexner, as a surgeon, how have you encountered adhesions in your practice?

Yes. Well, if you encounter somebody with severe adhesions, the thoughts that go through your mind is how can I refer this patient to my partner, why didn't this patient go to another hospital. You may be in for an hour procedure, but there are times that I've spent all night taking care of a patient with adhesions. So adhesion [ has been ] something that's been the real bane of the GI surgeon. And probably, we don't really understand the cause of them very well. But one of the things that contributes is if there's something like talc from gloves that causes an inflammatory focus, probably if there's a wound to the peritoneal lining of the abdomen, that creates a surface that allows for bowel coming in contact out to become inflamed. And then the inflammatory process that occurs during wound healing leads to laying down, first of all, fiber and then all of the more dense adhesive molecules that form an adhesion follow. So if you can inhibit that first step by limiting the inflammation, and what contributes to that probably is earlier return of function. If the bowel is sitting there, not moving and then contact with each other, you're much more likely to form adhesions and if it's resuming peristalsis normally. We also know that the injury that occurs, if it's severe, and could be then made worse because of the pancreatic enzymes we're inhibiting, that, that inflammation that occurs, to what we would call [ transluminally ] or across the wall, then 2 loops of bowel touching each other are going to have inflammation, and that's going to become the nidus for sticking together and then becoming part of an adhesion. So I've struggled with trying to understand, this was an observation later in the science and development of this drug, but it actually has made a lot of sense to me, the adhesions would be less, when you think about the mechanism by which the drug is actually working. So I'm very encouraged to see this. And as a surgeon, it's a nightmare we all live with, and anything we can do to remove that is going to be progress.

Yes. I'll just add to amplify what Dr. Hoyt said because we all, as surgeons, go though the pain of lysing adhesions, and the only difference between a trauma surgeon and a colorectal surgeon is he's doing it all night and I'm doing it all day. But outside of that, it's the same. But not only is it the problem for us, but the patients can have significant problems. Number one, if you're dividing scar tissue -- I mean, start simple, even on an elective case, somebody who just had prior surgery, you may have to first divide scar tissue just to access the abdomen. It may limit the chance for you to perform laparoscopy or robotics because of the density of adhesions. So automatically, you're starting the patient off behind the 8 ball. If those adhesions are severe enough, you may end up having to remove segments of bowel, which puts the patient at risk of all kinds of problems later on, and you may end up damaging the bowel in trying to divide the scar tissue, the adhesions and such, where the patient has a fistula postop, where they can have essentially stool leaking out the incision because of an enterocutaneous fistula. So it can be quite horrific, depending upon the adhesions. And those are just the ones we encounter. Then as was mentioned, there's decreased fertility, but there's also chronic pain. And it's debilitating for the patient, and it's frustrating for us because we have no solution. And the patient is like, well, why can't you go in and divide the scar tissue. Well, unfortunately, because we're going to create more scar tissue. So there's no way to get around that. Every time we operate, there's more scar tissue. Laparoscopy, robotics, although it definitely decreases adhesions by performing a minimally invasive surgery, it's not a panacea. As you heard, adhesions still do form. You can do an operation through one single port, and some subsequent date, the patient presents with an adhesion to that port, which is cause to complete bowel obstruction or maybe even gangrene of that loop of bowel because it was placed in such a fashion that it caused the bowel to [ tear ]. So we really, really need to avoid adhesions for multiple reasons, at surgery, avoiding surgery, avoiding hospitalizations. You heard the cost, $2.3 billion. It increases length of hospital stay, morbidity, time of work, all kinds of problems.

Well, I appreciate that. So we talked about what it's like for the patients to suffer with the adhesions and what you do to try and prevent adhesions. Dr. Wexner, can you talk about the products you have used in your practice to prevent adhesion formation?

Yes. As I mentioned earlier, I was one of the investigators in the Seprafilm study back in the early to mid-1990s and did demonstrate a 50% reduction in adhesions at the site of application. But number one, that was laparotomy. Number two is the site of application. And to this day, as you heard from Dr. Dawson, it's only applicable for laparotomies, and most surgery is minimally invasive. So if I'm performing an open operation, which generally means it's somebody who's had multiple prior surgeries and therefore we can't do it laparoscopically, we often try but we're unsuccessful, that patient, I'm going to put Seprafilm. But it's only useful at the site of application, which means, as you also heard, we can't do it laparoscopically at all. And I would love to. So one thing that very much excites me about this new opportunity is it could be given to patients, it could be beneficial in patients who had laparoscopy and robotics. It's not a product which requires placement to work. It doesn't require a placement to work. It's also not a cost that the hospital has to absorb because the patient is going to be taking an oral formulation, which is very different than me having to do, [ or in the presence of fellows, placing it, the ] Seprafilm, during surgery. So right now, the only FDA-approved opportunity I have is -- can only be offered to a very small number of patients who are still undergoing incisions.

Well, it certainly sounds like LB1148 has the potential to be an important solution here. And we all know that data drives everything. So Dr. Dawson, last month at SAGES' scientific congress, you presented a pool data analysis showing LB1148 reduce postsurgical adhesion formation. Can you describe how adhesions are measured and describe the data that was from this pooled analysis?

Certainly. So let me talk also about kind of the adhesions and our strategy as a company and how we perceive them as physicians as well. So what we did is we look at 2 different measurements. We measured incidents of adhesions, and we also looked at extent and severity. Extent and severity are a grading system of the adhesion. So we grade how much of the -- and it's a 9-quadrant grading system of the abdomen, and we grade how much of the quadrant is covered, is the extent, and the severity is the adhesion can be really like a Grade 1 as a filmy band that you can take down with blunt dissection versus a Grade 3, which is an organized vascular bundle of knotted and cordlike adhesions. So what we did is we -- as a medical community, we understand that the more adhesions you have and the more organized your adhesions are, the more likely or the greater risk you have of having a complication. This complication doesn't go away. It actually stays with you your whole life. And after your first complication, the likelihood of you having a second complication goes up exponentially instead of [ lessening ]. So this is something unfortunate, that a patient owns their whole life with it. So back to incidents. For us, we define incidents as having one adhesion. So it's just a binary. It's either you have no adhesions or you have just one adhesion. There are other studies where they define the incidents by a certain number of adhesions. But we're going with a very, very tough milestone to hit, in my opinion. We're going with just one adhesion, and you have an adhesion and you don't -- you get that score. So for incidents in the study in our pooled analysis, what we showed is a 72% relative risk reduction between drug-treated patients and placebo. We also showed that the absolute risk reduction was reduced by 64%. Now going back to what I call the adhesion burden score, which is the combination of extent and severity graded by surgeons in the abdominal cavity, we demonstrated a 93% reduction in extent and severity in our drug-treated group versus our placebo group.

Wonderful. So Dr. Wexner, can you talk about this level of reduction of adhesions and what this would mean as a surgeon?

I can start off, like as I mentioned, I use Seprafilm now in the few cases in which I can use it, the minority, a small minority or open cases. And I do that knowing that our data showed a 50% reduction to the site of application with the same grading system that was just described by Dr. Dawson. So the adhesions were filmier and less expensive and less surface, is all of those things. So far, I'm willing to accept 50% in something that I have to apply. I will [ want ] 100%, accept 93% as a huge bonus. So to me, it's -- that's what I call a no-brainer.

Anything to add, Dr. Hoyt?

Yes. I guess only that if this data supports that there's a real reduction in adhesions, that would be a huge, huge breakthrough for intestinal surgery. Because right now, other than what Dr. Wexner was talking about, Seprafilm, which is a really small number of patients that actually get it, we don't have anything. And if we could avoid adhesions and shorten the return of bowel function, those are 2 significant inroads that this drug is targeted at. So that would be a huge, huge breakthrough. And yes, we'll see what the data shows, but we've never really had any major breakthrough in adhesion formation, with the exception of the introduction of laparoscopy and now, robotics.

And just one other thing to emphasize, Dr. Wexner pointed this out very astutely, and that is that with scopes and robotics, we do think we're making a difference. But unfortunately, we are not solving the problem. And in our clinical trials, our placebo group formed adhesions with scopes.

And one thing I would add, and Mike did mention this. But one thing that was striking to me in the review of this data initially was the number of patients that actually did not have an adhesion, right? So when you talk about changing the severity of adhesions, that you have -- when you're looking at one patient, I got this patient with a lot of adhesions, this patient had less adhesions, right, we know that adhesions don't necessarily form equally in everybody. I can't remember if it was Dr. Wexner or Dr. Hoyt that alluded to, you get a patient that comes in with all these adhesions, and I've heard those patients referred to as like adhesion formers, right? You know you have these patients at different degrees of severity. And so we can measure severity and certainly have an impact on patients. But I think the thing that was striking, and it was presented at the SAGES conference about a month ago, was that the number of patients, 6 out of the 8 patients that were -- received LB1148 actually did not form adhesions at all in that first surgery, which is pretty amazing, right? Because when you think about creating something on a scale that's a continuous scale of severity, you can look at, well, like maybe this patient wouldn't have formed as many as this other patient and things like this with the small numbers. But one of the things that's very impressive to me about that data, despite being a relatively small number of patients, is the actual patients that had -- did not form any adhesions at all. So I just wanted to highlight that for the group.

And an important point to make also is that we do think that patients, there may be a genetic component and some patients may form adhesions more than others. But it also relates to the type of surgery, for instance, if you have a perforation and if you have peritonitis, if you're doing an acute diverticulitis surgery, those patients, we know, have a greater risk of forming adhesions. But what we don't completely know is if we have someone coming in that never had a surgery before and they're being scheduled for a colorectal resection. We don't know. We can't predict if they're going to have an adhesion at this point. So we have to apply this drug equally across the landscape. We can't just subselect out people that have had prior adhesions. We have to treat all of our patients prophylactically to prevent these from happening.

Very helpful. So Rob, just to continue on with you here. Can you talk about the Palisade Phase II program for reducing abdominal adhesions?

Absolutely. So we do have an ongoing clinical trial right now. The clinical trial was initially started with return of bowel function and adhesions, both being end points in the study. And those patients that were enrolled at the onset of the program did not require something called an ostomy takedown. So basically, in order to measure adhesions, Dr. Dawson described having to get that second look, right? And so when the initial study was launched, there was going to be a subset of patients that were going to be required to have this ostomy and this takedown so that we would get that second look. And that was the data. Doing it this way, you're going to receive a subset of patients that receive -- that have that takedown. And so the protocol was recently amended, just at the end of last year, basically, where now, going forward, we are only enrolling patients that do require that second surgery or plan to have that second surgery, have an ostomy and have the planned takedown. And so that will allow us to further develop the dataset, specifically in adhesions. So the trial overall is designed to enroll up to 200 patients, and we anticipate at least about 70% of those patients will receive -- we will have adhesions data. So at least 70% of those patients will be undergoing that second surgery so that we can continue to grow that dataset. Similar to the other program, this is a randomized double-blind, placebo-controlled multicenter study, ongoing at centers around the United States. And the randomization, similarly to the other study, is 1:1, so placebo to active, LB1148. And one of the things that will be really interesting is, the physicians have noted today, that we're still receiving -- we're still seeing adhesions in patients that are undergoing these minimally invasive approaches. And so we will have a supportive dataset in patients where we were able to see what the current practices have done for reduction of adhesions. And as Dr. Dawson has stated in the initial data that we've seen from these placebo patients, we are still seeing adhesions and we have been able to see a pretty significant improvement in adhesions on these patients that receive LB1148. So yes, that's the outline of the Phase II that's currently ongoing with the program with -- at Palisade right now.

Great. Very helpful, Rob. Thank you. So Dr. Wexner, if LB1148 were to be approved, how might a drug like this be incorporated into your practice?

It would be routine. I think anybody scheduled for intestinal surgery, which you heard the numbers, in terms of 400,000 plus a year, I mean, in my mind, certainly in my practice, in my department, it would be part of our enhanced recovery protocol. And given to everybody, whether their surgery is going to be minimally invasive or open, I think it's fairly straightforward.

And then from a hospital's perspective, how excited would they be to add this type of oral therapy as part of their toolbox for accelerating return of bowel function and reducing adhesions for their patients? Dr. Wexner, Dr. Hoyt, I would love to hear from you both.

Well, again, I can't speak in -- on behalf of the hospital, I can only speak on behalf of me. And I would certainly hope that the hospital recognizes the value, all hospitals, that we hope that all hospitals recognize the value for all the reasons we have enumerated during the last hour, that it improves outcomes, it improves patient satisfaction, is going to reflect in our scores. It's going to decrease morbidity. It's not an add-on cost during the hospitalization. And it's efficacious, but it's efficacious in 2 ways. So there's a short-term payoff that the patient is going to be out at least a day sooner, as Dr. Dawson said, perhaps more than a day sooner. And that they're less likely to be back later on with adhesions. And if they do need surgery for something other than adhesions, they're not going to have adhesions, precluding us doing successful minimally invasive surgery and increasing the morbidity and time and cost of that subsequent surgery. So to me, I would hope hospitals share my opinion.

And I'll just add to that and say that quality outcomes have been the focus of a lot of things in the last 10 years. But as we shift to what we call value, which means quality over cost, people are going to be much more conscious about measuring cost, and we now have tools to be able to measure costs. And as those things become more prominent, contributions like shaving a day off of a return of function is going to be a significant contribution. So hospitals are going to support it and promote it, and because ultimately, their reimbursement is connected to showing true value.

And also, to go back to one last point that was emphasized, but I just want to say it again because it's very important, and that is a nightmare for us physicians is having a nosocomial or a hospital-based complication, whether it's a fall, a deep vein thrombosis, a pneumonia. And the whole point to ERAS and to getting patients out of the hospital sooner is to prevent those complications that we know are going to happen the more you're exposed to the hospital setting. So it's really important for overall patient outcomes, for patient care and for overall reduction in complications.

Thank you, Dr. Dawson. This is very, very exciting. Look, I know our audience is loving what they're hearing today. Great, great feedback, great interaction. Rob, before we transition to the Q&A, and I think we will have time to take a couple of questions from our audience, I did want to stop the discussion because there was a lot to cover, but I would like to hear a little bit about what the market looks like for LB1148. Can you touch on that for us?

And I'll keep it rather brief, knowing we're running a little short on time here. But I think LB1148, right, has an incredible opportunity because as you've heard today, both -- we have an ability to both impact return of bowel function as well as impact adhesion formation, right? And our current clinical trials in these patients that are undergoing bowel resection, there's a clear overlap, right? These particular patients can receive benefit to both, right? Palisade has also completed a previous trial in patients undergoing cardiovascular surgery, showing an improvement in return of bowel function there, right? And then we do know, we haven't completed a clinical trial on it previously, but there is a subset of patients, such as those that are undergoing hysterectomies, cesarean sections, things of this nature, where they're receiving abdominal surgery, that they could benefit greatly from a reduction in adhesions. So when you look at the total market, the opportunity is very large. I think we've put out previously that the estimated total market is nearing 7 million total patients in the United States every year. A subset of those patients, a bulk of those patients, are patients that are having operations of the digestive system, but also considering those other patient groups that I just mentioned. So this is a very good market opportunity and it is a very good opportunity to impact a lot of patients with a single drug, which is really exciting.

Rob, thanks so much. So we are now going to turn to the Q&A portion of this conversation. I know we have great audience and a lot of participation for the Q&A. It seems like everyone knows how it to log in because we have got some questions already lined up. But for those that don't, if you click on the Q&A button at the bottom of your screen, you can type in your question. We are only going to get to a couple, but I will tell you that we will get back and respond to the questions that have not been answered following this event. So our first question is, "Hi, Dr. Wexner. In your practice, during your surgeries, how often do you use both ENTEREG and Seprafilm? And why do you think LB1148 could be advantageous over ENTEREG and Seprafilm? And would you say that ENTEREG and Seprafilm are current standard of care?"

I don't think either one is current standard of care, ENTEREG because of the cost in the hospital in part and because the -- when ENTEREG was undertaken, when we did the randomized controlled trials, again, it was laparotomy. It wasn't laparoscopy. Patients were receiving opioid analgesics. And in this day and age, most patients get by without opioid analgesics. Most people get by. And ENTEREG only works when patients are -- it's blocking opioids, right? But patients don't take opioids because we're giving them all of these opioid-sparing measures. So I do not believe, by any stretch of the imagination, ENTEREG is a standard of care. Seprafilm probably isn't either, although I use it routinely. Again, it's only in a very small number of patients in whom I'm making an incision, and I don't believe that's necessarily done throughout the country. I don't know that it's standard of care because of cost, because of difficulty in handling. I happen to see the way it works because I have participated in the trials since almost 30 years ago. But I would welcome the opportunity and would make standard of care in my practice and would urge others to do it, encourage others to do it, when there is an oral compound that has proven efficacy, safety and efficacy, in reducing or eliminating ileus and in reducing or eliminating adhesions. I think that, to me, would be standard of practice.

Wonderful. Gentlemen, thank you so much. And to our audience, we did receive some great, great questions. And as I mentioned, we will get back to you following this event. Unfortunately, we have just reached top of the hour. And I want to thank everyone for their participation. Before we close out, Tom, I would love to turn it back to you just for a minute for some of your closing remarks.

Well, most importantly, thank you for this roundtable discussion. We're grateful for Dr. Wexner and Dr. Hoyt participating today and for Jenene and Virtual Investor hosting this roundtable today. And this is a really fantastic discussion, and I hope it is, has helped educate kind of the community to some of these really important unmet needs and potentially how LB1148 and all the efforts we're doing here at Palisade Bio can hopefully potentially alleviate some of these complications of surgery for many, many patients.

Thank you, Tom. Such an amazing opportunity for investors, very exciting story, great for patients, great for surgeons, great for hospitals, definitely going to encourage our audience to follow Palisade Bio. As a reminder, Palisade Bio trades under the ticker PALI. This does conclude today's roundtable discussion featuring Palisade Bio. I would like to give a sincere thank you to you, Tom, Dr. Dawson, Rob. Please join us again, really appreciate you having us. And we're so grateful, Dr. Hoyt and Dr. Wexner, for your time today. Great discussion. You've provided so much information to our audience. We like to provide real wonderful stories, and this is no exception. So thank you so much. This does conclude today's event. For those that you -- of you that would like to visit virtualinvestorco.com for our latest schedule, please do. Again, Palisade Bio, thank you all for your time today.

Thank you.

Thank you.