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

Thank you. Good morning, everyone. My name is Frank Tang, and I'm with the Investment Banking Division at Morgan Stanley. Thank you all for joining us for the Fireside Chat with Palisade Bio. I'm joined today by CEO JD Finley and President and Chief Medical Officer Mitch Jones. Welcome. For those who are not as familiar with Palisade Bio, could you give us an overview of where the company sits today, including a description and give us an overview of PALI-2108, the thesis behind the once-daily gut-targeted, locally-activated oral PDE4 inhibitor project?

Sure, thanks, Frank. So the PALI-2108 is a drug that we acquired from a Canadian company, Giant Pharma, out of Montreal. That company was founded by some medicinal chemists from the Merck Frosst Labs in Montreal. When they closed that down in 2010, these guys took some of the science with them and developed this PDE4 prodrug formulation. It was in preclinical status when we acquired it. We've taken it through, completed the preclinical and the Phase 1, and we are now about to start a Phase 2 study in both ulcerative colitis and Crohn's. And one of the interesting things about the design of the molecule, it was designed as a prodrug, which was intended to be specifically engineered for IBD. And they've seen the efficacy with other PDE4s in the IBD space, but the problem has typically been the adverse events and the prodrug formulation, which we can get into a little bit further, really avoids some of those additional AEs that you normally would see with a PDE4.

Great. Thank you for that. And, you know, you're pursuing the two largest IBD indications, both ulcerative colitis and Crohn's in parallel. How do you think about the sequencing of that potential risk?

So it's interesting, when we were much smaller in terms of market cap, we had focused on FSCD because it was a niche opportunity where we thought we could win and do it most cost effectively. When we completed our $140 million financing last October, we had a clear mandate from investors to pursue the broader UC market, so we've ramped up for that. But we also have switched from focusing on FSCD, fibro-stenotic Crohn's disease, to broader Crohn's disease. And the reason for that is because of feedback we've gotten from our experts, clinical advisory board, et cetera, that have told us that right now, the regulatory pathway is still, we're still murky enough for fibrostenotic Crohn's that we're better served by pursuing a smaller, broad Crohn's treatment and then circling back into in fibrostenotic Crohn's once that regulatory landscape has been cleared up. But clearly, we think pursuing both Crohn's and UC is in the best interest of building shareholder value.

So I'd love to dig in more around 2108. This quarter marks your transition into Phase 2. Could you, and in the clearance of the IND, could you walk us through the design of the trial?

Yes, I think I can take that. So it's a double-blinded RCT, actually quadruple-blinded on the induction phase, pretty standard study, built like a registrational study, but really a definitive study. So 12-week induction phase, three groups, randomized, 1 to 1 to 1. A target of about 50 mg for the target dosing group. The high-dose group is 30 mg, the placebo group as well. So treated straight through the 12-week induction endpoint with a clinical remission primary endpoint, and then a double-blinded extension through maintenance out to 48 weeks. So patients will be treated straight through. If you're on 15 and responding, stay on 15; then same thing for 30; same thing for placebo. If you're not responding, then you get randomized or placed actually into a high-dose group in the maintenance phase. And then, of course, responders keep going and non-responders are terminated. Yes, so the study is designed to see a pretty healthy difference between placebo and treatment of about 20%. We have a 90% chance or 90% power to see a 20% difference between treatment groups, and 80% power to see a 17.5% difference. Sorry, it's the other way around. No, that was right. Okay.

Exciting trial to look forward to. I'd say, looking backwards a little bit, your Phase 1 signals were highly encouraging. 5 of 5 UC patients responding, roughly 47% reduction in CD and Crohn's. How do you interpret the strength of that early data? And what did the translational data tell you about the potential impact on both inflammatory and fibrotic pathways?

I think there's another one I can take. I mean, historically, obviously, Apremilast was evaluated in a UC study, let's say, you know, combined around 20% clinical remission at 12 weeks over placebo. As well, Mifemilast with a 90-patient double-blinded RCT, China-only study, demonstrated best in indication. 44% remission over placebo in the high-dose group and a dose response. So I think there's, you know, we're not, we weren't trying to prove that PDE4s are effective in treating UC patients. What we did want to show is safety obviously, but also that biomarkers would potentially predict, you know, when we achieved a high enough dose to show an effect. So we demonstrated through our Phase 1 program that we could go to once-daily dosing. We also demonstrated that we could get enough drug to ileum, to ascending, to descending colon. We demonstrated an adequate, superior actually, PDE effect in the ileum for Crohn's and in the ascending/descending colon for colitis, as well as a whole host of biomarkers. Those biomarkers were, you know, lymphocytes going in the right direction, fecal calpro improvements, CRP, et cetera. As well as in both the CD and UC study, we saw endoscopic improvements. In the UC study, we saw 100% response, 40% remission, and in the CD study, we saw a 40% response and remission. So really, smaller studies, open label, non-comparative controlled studies, but really the biomarkers all went in the right direction. And so it gave us the ability to collect information that we could use in our population PK models that were predictive.

Maybe you could expand on that a little, the PK tissue exposure and biomarker data. How does it help you differentiate versus the prior PDE4 inhibitors?

Yes, so in the world of PDE4, almost all, if not most, PDE4s are twice daily dosed. Ours has a terminal half-life of 12 to 13 hours with an effective half-life of 27. So we're once-daily dosed molecules, so that's one point of differentiation. We have 7 times the amount of drug in tissue as measured 4 to 8 hours post-dosing or at steady state. So you've got 7 times the drug in tissue as compared to plasma while at steady state. That's, you know, 1 to 1 at best for immediate dose, immediate release molecules. So those are two reasons. The other two differentiators are the tolerability issues for PDE4s come from direct exposure of the drug to upper gut. We are delayed-release, local-release, and bioactivation, so we avoid the upper gut, which is the source of secretory diarrhea, one of the tolerability issues. And the other is the low blood probability on the peak-to-trough ratio is pretty significantly reduced with our slow-release profile, and so that improves the therapeutic index.

That's great to hear. Maybe moving on a little bit from the from the UC, on Crohn's, I believe you planned to submit the IND for the trial in the second half of this year with the trial targeted to start in first quarter '27. Could you talk more about 2108's ileal and colon activation fit, and specifically within Crohn's biology?

I mean, maybe we can start with the timing. Do you have any? Yes. Well, the timing is we are on track to submit the IND or to get IND approval in this half of the year. I think our current guidance on the Crohn's study is based on our FSCD guidance that we put out when we thought we were going to do an FSCD study. We plan to update that guidance once we actually get the IND approved, and at that point we'll be able to, you know, not only update timing on the guidance, but also update kind of, or we'll be able to provide the details of the study design as well.