Skye Bioscience, Inc. (SKYE) Earnings Call Transcript & Summary

All right, I think, we are getting started here. My name is Eric Musonza, I am one of the new SMID biotech analyst here at UBS. We are pleased to be joined with Skye Biosciences CEO, Punit Dhillon. And we're happy to have him tell us a bit about the story. So maybe to get us started for those less familiar, could you just give us an overview of Skye Biosciences and the assets you have?

Yes. Thanks, Eric. I really appreciate UBS inviting us to the conference. Yes, we're developing a metabolic pipeline more broadly in terms of the overall clinical plan. Our lead program is focused on CB1 inhibition. So it's an antibody that we're developing for obesity. That's in Phase II development. And then there's been a lot that's been accomplished over the last year in terms of a broader investment thesis. Certainly, it's exciting to be a mid-stage development now with having a Phase II asset. We have been really focused on derisking along the way with several important kind of data points. Most recently, last week, had another important data point that addresses from the efficacy standpoint, and we believe we're really well differentiated with our approach from a safety standpoint and the landscape. And then there's, I think, a broader appreciation here, in terms of, just the non-incretin part of anti-obesity is starting to take shape and CB1 being a very validated target has a really important role to play there. So we're continuing to build on that franchise. And then there -- we'll see in 2025, we'll talk more about there's other combinations. We have a combination readout in our clinical trial that will inform some of the other pipeline decisions we're making.

And I guess before we go any further, could you give us some more detail on the CB1 receptor and its involvement in obesity?

Yes. So CB1 is expressed in all of different tissues and organs. And specifically in terms of adipose tissue, what we're doing is basically inhibiting that signal in adipose and fat where it's reversing the signal to store the fat. So we're able to target that metabolism that's really driving towards the broader energy expenditure. You're getting other mechanisms that are really working in conjunction with that in a coordinated way where reduction in fat helps to improve leptin sensitivity, so you're reducing leptin levels and then you're also improving insulin sensitivity. So you have the glucose regulation and uptake in muscle that plays really well in that mechanism. So there's a really cool coordinated effect that's happening with this particular pathway. We think it's complementary to the GLP-1 class, there GLP-1 and other incretins are really only focused on appetite suppression and insulin secretion. So there's a gap there in terms of addressing leptin insensitivity and other appetite regulating hormones and insulin sensitivity. As well as coming really well from a tolerability standpoint, CB1 has established itself as a very safe and tolerable approach so far. That's what clinical data that we've been generating, and we're hoping to capture that same signal in Phase II.

And just 1 more on this. Could you explain the difference between the central versus peripheral signaling and what that role -- what role that plays?

Yes. So that's an interesting great segue there, coming back to the point I was making about there's been a very good body of evidence of validation with CB1. So if we go back in time, there was a drug that was approved. It was developed by rimonabant -- sorry, developed by Sanofi called rimonabant or Acomplia, that's what it was marketed as. And it was centrally acting. So it was a pathway that was really focused on the same appetite regulation or appetite suppression and anorexic pathway that we are familiar with, with the GLP-1 class. In fact, other large pharma was also working on that target, Merck, Pfizer. Acomplia was marketed in Europe and ended up coming off market or taken off market as well as the FDA never approved it because they had severe adverse events and neuropsychiatric adverse events. And you can imagine because you're targeting the receptor in the brain, you can push the patients down a worse path here, including, in this case, it was creating suicide ideation and depression. So the next generation of CB1 inhibitors have been really focused on the next -- staying out of the brain. So what they're referring to is peripherally acting. So outside of the brain and only targeting the receptors in the periphery outside of the central nervous system. And small molecules have been coming and making quite a next -- the first data sets in that. So monlunabant, which is a drug that's being developed by NOVO, has recently read out some early data from their Phase II program. And then Skye is working on a different mechanism. It's an antibody that's also peripherally restricted, and we would argue more exquisitely peripherally restricted than small molecules. Because being a large molecule, we're not crossing the blood-brain barrier.

Yes. Let's turn to this antibody you have, the CB1 inhibitor nimacimab? Could you tell us about its origin and its mechanism and how it came to development?

Yes. So the origin, we -- Skye acquired the asset and the company that proceeded in terms of developing nimacimab. It was previously being developed for NASH. And in 2023, we completed a transaction where we took that entire data set, the nonclinical package, the clinical package and submitted an IND for obesity. And that's the program that we're running now. So there's been quite a bit of body of work that helps kind of support the thesis of what we're working on from legacy CB1 data and Skye over this -- course of this year has just been focused on executing on the clinical side. So the trial that we're running now will be the first new major data set for this particular molecule.

And could you explain on the mechanism of this molecule, how it works as both an inverse agonist and as an antagonist.

Yes. So it's different than the small molecules in terms of its mechanism, but it is achieving the same outcome in terms of acting as an antagonist as well as an inverse agonist. So small molecules are unique where they're binding specifically to the orthosteric pocket of CB1. And in the case of obesity and even in a fasting state, you have a higher density of CB1 as well as the components that come and compete with that site. So small molecules have to bind there, but they have this competition over that receptor. Nimacimab is a negative allosteric modulating antibody. So it's binding away from the orthosteric pocket, binding allosterically and still able to drive that antagonism. So keeping these other endogenous endocannabinoids away. But also able to drive the inverse agonism as well, and that's unique because it's changing the confirmation of the CB1 receptor. So we're, I think, what the takeaway there is between the small molecule and antibody approach is that it does enable a larger therapeutic window. And if we kind of segue in terms of the -- why that's relevant. I think what we've been able to show over the last few weeks is an interesting PK profile that really demonstrates that we're saturating the receptor really well in the periphery, but we're also avoiding the exposure in the brain. And we've shown that we're 600-fold below inhibitory concentration that would be therapeutic relative to the small molecules.

And looking at the construct of this antibody, what unique modifications have you made that's allowed it to be so exclusively restricted, as you said?

Yes. So it's basically, it's been modified on the FC region that makes it unique. And we're able to bind allosterically that allows that to happen. So going back, I think, it's evident that GPCRs are really hard to develop antibodies against and this is what is proprietary to nimacimab.

And with that in mind, how do you plan to insert yourself in this increasingly competitive obesity landscape. Where do you see nimacimab fitting?

Yes. So that's a great question. So I think for us, the non-incretin space is really interesting because there's other mechanisms out there that are different than GLP-1s that are somewhat addressing the gaps. Maybe safety, perhaps lean mass preservation, maybe muscle stimulation. But the opportunity for CB1, I think, is that it's a much more comprehensive metabolic pathway, and we're able to drive that meaningful weight loss as well as see these other improvements in terms of metabolic gains. And again, when you go back and you look at the evidence of CB1 to do this, in fact, in the presentation we had last week, we talked about the rimonabant data at the 2 different doses that were evaluated in the large trials, the 5-milligram dose actually didn't show much efficacy, only showed about a kilogram drop in weight after 52 weeks. The 20-milligram dose showed about -- showed about a 3-kilogram drop in weight after 52 weeks. But the takeaway there is that the 5-milligram only, it definitely was centrally acting in terms of showing that it was well above IC90. It showed that there was activity there, but it didn't have any activity in the periphery. And going back to the efficacy outcome. The 1 kilogram, obviously wasn't an efficacious enough dose. But the 20 milligram, it was actually also not only active in the brain, but it also was active in the periphery. So we're really I think well positioned to demonstrate that there is this peripheral mechanism that's different than the current landscape. If you -- kind of going back to your question. Today, the market is pretty much dominated by at least the 7 drugs that have been approved are really focused on caloric restriction. Not to say that, that's not a requirement to lose weight, but there is obviously, like these orthogonal mechanisms that make a lot of sense in terms of addressing the gap. And if you can -- if you're thinking about this as long-term treatment for patients, then we want to keep patients comfortable and on drug over a longer period of time. So there's where I think the nimacimab or CB1 becomes a very attractive target to be complementary and additive to GLP-1s.

With that in mind, I guess, looking at some of the other data you've considered -- what are the key learnings you've seen from your single ascending and multiple ascending dose studies?

Yes. So I think the key takeaways for us from the recent -- so what you're referring to is from the SAD, MAD, those -- the Phase I study was primarily driven based on safety and tolerability outcomes. So that was the primary endpoint. So the takeaways there was we did see improvements in other biomarkers like LDL and triglyceride markers. But the key new data that has helped support just kind of the broader metabolic signal that we saw from the Phase I is that there's a need for a peripheral mechanism that really drives the efficacy that there's a sufficiency of CB1 inhibition in the periphery that can drive weight loss. And that's what the data that we presented last week and this early DIO model. It was the first time kind of demonstrating that with nimacimab in a proprietary humanized CB1 knock-in model that we were able to show truly peripheral weight loss and dose-dependent weight loss in both the doses that we measured. So that's what we were expecting to translate in the clinic in addition to the safety. I think for us, the bar is still safety is #1 in this whole class, then efficacy is what we're expecting. And then the critical role of really the peripheral CB1 inhibition to drive that overall weight loss plus the metabolic gains.

And I guess thinking a bit about some of the data you've already seen, both on the neuropsychiatric side effects and any other potential safety issues you might have come across? How do you expect this to translate to some of the more human data and Phase II data as you move forward?

Yes. So far, the Phase I data was unique that it showed 0 neuropsychiatric adverse events. So we -- knock on wood, we expect us to recapitulate in Phase II in terms of the broader assessment though is because it's a larger study. We're also looking at a whole range of different assessments. So that's important. So I think based on the preclinical evidence and the Phase I, we're well, I think, situated in terms of staying outside of the brain and the data is pointing us in that right direction. The Phase II -- the other thing I would add is the Phase I was a pretty large data set. When you look at it relative to the landscape, I believe it is the benchmark in terms of what the class should be focused on. So now with 3 active groups in the current trial that we have, we hope that we continue to see the same safety profile.

Could you give us a bit more detail about the trial that you have ongoing and just the study design and how you select the patients and what you hope to show?

Yes, that's a great question. So we are working on basically a 2-arm study. I'll just simplify it that way. The first arm is looking at 40 patients in -- with monotherapy nimacimab compared against placebo. And that's the arm that's powered that we're looking to show 8% weight loss at 26 weeks. So that's the -- it's a long duration study. We're also doing a follow-up of 13 -- for 13 weeks on these patients to see the durability of that. So the primary endpoint there is to show weight loss. Then we're also looking at body composition as well as some exploratory end points. In addition to that, we have another arm where we're looking at combination with Wegovy or semaglutide. So there it's a 20-patient study in combination and then there's Wegovy arm alone. So you have kind of all the comparators that really we would want to see. I would think that this is the most robust study, and we're not being shy about that, saying look, these are the questions that we need to answer. If you look across the incretin space, it's been a real mishmash of data and different trial sizes. So here, we're getting all the questions answered that we need across 3 different active groups compared against placebo. We'll see what the additive weight loss is in the combination arm as well as if we see the lean mass preservation we expect with this mechanism.

Actually wanted to ask on the lean muscle mass next. How do you think about preserving lean muscle mass in this context? And I guess, is it too early to say what you hope to show versus maybe like a Wegovy alone or, I guess, semaglutide alone.

Well, interestingly, the mechanism has already proven to show lean mass preservation. So it's done that in preclinical models. There's really good body of evidence to show that there's a good lean mass preservation. But also, if you go back to rimonabant data, it's -- there's no real clear numbers to support this. But in the FDA briefing, it says based on a subset of patients that they did have statistically significant lean mass preservation relative to placebo. So the mechanism and it makes sense because targeting fat and converting that to energy, you would suspect to see that there's better preservation of lean mass. Also, I guess, if you're thinking about it broadly in terms of the antiobesity medication landscape, this is an unmet need that the GLP-1 drugs aren't really addressing very well. So there's, I think, that wider opportunity that patients -- doctors looking for these type of orthogonal mechanisms that make a lot of sense for the patients.

And I guess 1 other thing we haven't touched on yet is your dosing strategy and potential frequency and what you think you can do to differentiate there.

Yes. So I think that from a competitive standpoint, there's been a long debate about orals versus injectables and certainly in different interactions that we've had with buy side, there has been, I think, less of an appreciation of the compliance with orals versus the ease of use of the injectables. That's what's the dominant market to date. There's certainly acceptability of that approach. But we want to take it further. I think we're currently evaluating a weekly injection in the current trial. We've modeled some additional dosing in our slide deck where it shows that we still achieve a nice PK profile and an adequate therapeutic window by going to a monthly dosing even with the current concentration that we have. So ultimately, from a product profile standpoint, we're looking at evaluating a bimonthly or monthly dosing, and we'll evaluate that in a subsequent study.

Got it. Moving to the beyond or CBeyond Phase II clinical trials. I know you touched a bit on some of the trial design there, but those were starting August of 2024. What can we think about in terms of when we might see the primary secondary endpoint data, if there's any interim analysis we can hope to see?

Yes. So that's a good question. So I think we're enrolling really well on that trial. So we had our earnings call last week, and that's the guidance we've given. But important takeaway there is that it's setting up us for data point in Q2 based on 50% enrollment across all 4 of those arms. And then kind of digging a bit deeper, when you're looking at the landscape, we think that this is a really exciting data point because this is the first non-incretin data point, that's, I think, different than what the market has seen. I mean certainly, there's other ones outstanding. We're still waiting for bimagrumab data, and I think maybe CagriSema data and others. But this is interesting because it will show 26-week data for CB1 inhibition in a first-in-class molecule with an antibody as well as the data point with GLP-1. So that's geared up and lining up for Q2. That's informing all of our development decisions. So behind the scenes, there's a lot of work underway in terms of us keeping the pressure on in terms of our clinical development strategy. Given our unique safety profile, I think, we have an advantage there to move quickly from a clinical development standpoint and the team's working on being prepared for launching the Phase IIB as soon as possible after we see the signal from the interim data.

Got it. Just quickly, do you -- in terms of enrollment, do you see like the holiday season or anything like that affecting how fast you can move?

No, I don't think -- I don't think that's going to be a factor. I think generally, our trial is well positioned. We have 18 sites across the U.S. We also have a high degree of interest, even with the Novo data that was -- that came out on September 20. Operationally, we followed up with our sites, educated everybody just like we've been doing on the street about the difference. And we've actually had no issues. We also had an investigator meeting. So enrollment wise, we don't see the holiday season impacting. The other advantage here is this trial is also unique where it has 3 different active arms. So there's a good pull there from a recruitment standpoint.

And of the patients you have been recruiting so far, are there certain patient types that maybe are more common or who see more -- attract this type of therapy?

I don't have that data point, unfortunately. So still we're blinded. It's a double-blinded study. So we don't have all of that detail. But we expect there to be just the same kind of -- it's enrolling patients that are obese or overweight with at least 1 other comorbid condition and going -- so -- and the overweight population is higher than 27 BMI and the obese population over 30. So we'll see in terms of when the data comes out.

And I mean, we'll see, as you said, but what's the minimum amount of weight loss or, I guess, some form of efficacy that we'd want to see for us to think this is a competitive asset.

Yes. So if you'd say the absolute floor a minimum, it would be 5% because that's the regulatory data point. And I think that even if we saw at that floor, we are very keen on like continuing the development. I think from a trial design standpoint, we're expecting 8% based on it being a 26-week duration. And we feel pretty confident now with the additional data point of the DIO data that we have something that is a drug that's translatable that shows that there's a broader weight loss based on a peripheral mechanism, right? So we think that there still are the limitations of a central driven in this particular class, it's because of the neuropsychiatric adverse events. But this debate about whether any central is even needed even if it's a peripheral molecule. We've tried to quash that by making it clear that central signaling is limited, peripheral is going to drive a more meaningful weight loss. So based on the fact that we didn't have the monlunabant data before we launched this trial and we powered it for showing 8% weight loss, I think, we're on a good trajectory because they showed 6% weight loss of 16 weeks on a robust study. So that was a really good efficacy signal for the class.

And thinking about the quality of this weight loss. One, do you have any, I guess, concept of the Wegovy or GLP-1-based weight loss, how much is fat versus lean muscle? And how much do you think that might skew with a new CB1?

Yes. So the historical data for GLP-1s has been about 40% of the weight loss is -- up to 40% of the weight loss is because of lean mass loss. And we definitely feel that CB1 is going to be able to bring that down. So there's 2 parts to that. On the monotherapy side, the idea is to show a safer, tolerable, long-term weight loss that may not show you that quick drop that we see with GLP-1 because I don't think anything beats some caloric restriction pure pathway. But the -- but over a longer sustainable period with good tolerability, then you would get to the same outcome. Then there's the additive effect that in the current trial, we're just evaluating it based on the high dose or the maintenance dose, either the 1.7 or the 2.4 of Wegovy. So once patients get to that level, then they have to stay on that with nimacimab. But in the real-world setting, there -- I think, there is an opportunity, and we've spoken to doctors about this about there being a potential for lowering the GLP-1 dose to overcome some of the shortcomings of GLP-1 drugs. Lean mass preservation being one, discontinuation, tolerability, safety and making up for that delta with for instance, nimacimab. And I think that's the attractive commercial opportunity is that we would be able to show additive. So that's what this Phase II proof-of-concept study is meant to do is demonstrate that there is an additive effect with GLP-1 and that you get a sustainable weight loss.

And how are you looking at deciding which dose and/or frequency to use going forward? And I guess what will be the ideal profile if maybe you were to go for a combination approach?

So I want to be clear that I think from a regulatory standpoint, we are focused on a monotherapy approach because that's what the guidelines are, and there isn't really a precedent for a combination. But it doesn't preclude us from continuing to explore a combination to expand what the indication might look like. On the dosing profile, the ideal profile for us is to go to as high dose as possible and a monthly dose that's safe and tolerable. So there's still a lot of room there. And I think that's the advantage of the mechanism is that the therapeutic window relative to small molecules is really high. So we can -- we have a lot of room to go into a higher dose, and we're going to continue exploring that.

And I guess maybe just for clarity on my part regarding the combination, would this be dosed at the same time or are they separated?

Yes. In the current trial, it's in the combination arm, it's dosed at the same time. And whatever, in a real-world setting, we would expect that to be the same case. It doesn't mean that we're going to have -- need to have a dual chamber device or anything like that. It just means that the patients will inject 2 different drugs.

One shoulder and one shoulder, something like that. Okay. Makes sense. What would you want to see in the Phase II that would excite you? I mean, obviously, that would make you happy for Phase III, but also what what's the minimum that you would still be willing to move to a Phase III?

So the next study is going to still evaluate the high dose or a dose optimization. Now just to give you some facts on why we couldn't do that in the current trial. One is we were really keen on getting this trial started. So going back and rewinding the clock to the acquisition, 1 of the advantages we had with the acquisition is we also had drug product. And that was kind of the laws of physics. We had a supply of drug that was already in prefilled syringes in a 100-milligram concentration. So we've been able to use those and go to a 200-milligram dose on a weekly injection. But the opportunity for us is ultimately to assess the higher concentration and dose as high as possible. The minimum we want to see in order to move forward, I think, would be anything higher than 5% because that means we still have an opportunity to optimize our dose because that's where the next study's plan is and then we -- that informs the Phase III. I think that the key thing for us is that if we achieve safety that there is limited or no neuropsychiatric adverse events and a really good tolerability profile then that's still a winner in terms of the current landscape because none of the other drugs that are in the pipeline or marketed achieve that kind of safety profile. So that's, I think, where I'm not as concerned about. I think if it's below 5%, then it's more of a regulatory development question. But since we still have to evaluate another dose concentration, we would want to see what that looks like before it totally informs our clinical development strategy.

Got you. Could you give us just a bit more on the manufacturing so far? And I guess, with the clinical supply and if you move forward into commercial, what would need to change and how much you need to consider manufacturing?

Yes. So we've been modeling that out. So currently, in the current drug that we're -- that we have. It's based on this 100-milligram concentration. We have 2 syringes that are given and the patients are dosing on a weekly schedule for 26 weeks. Next step is to look at evaluating -- optimizing that concentration, so having more per vial, then we'll be moving to an auto-injector unit. So all of that work is underway. So currently, new drug will come online for any future trials as early as Q1 of 2025. Then we'll have the additional drug supply for subsequent studies. So all of our manufacturing and CMC has been happening in the background. So it's moving more quickly than our clinical need, but it's positioning us well so that manufacturing never holds up any of our clinical development objectives.

Right. Right. I guess turning a bit more to your pipeline, as we get close to time here. What other indications would you consider trying to target with nimacimab.

Yes. So nimacimab and just the mechanism itself has a wider applicability. There is a -- just as we talked about, it's expressed on all of these different organs. And it can show antifibrotic mechanism or anti-inflammatory mechanism. So there are opportunities like chronic kidney disease where it can improve kidney function or liver going back to NASH perhaps. There is certainly those opportunities. So first thing is just showing that this proof of concept works. We are looking at several exploratory data points in this current trial and we have some preclinical work underway to continue to derisk and then we're going to assess how much bandwidth we have to expand. But from day 1, our goal has been to look at nimacimab as a franchise and that's the goal is to demonstrate that value.

And with this franchise mindset, I guess, in mind, what's the IP strategy look like?

Yes, it's a great question. So currently, the composition of matter for nimacimab is until 2035 and 2036 depending on the molecule and the affinity matured molecule. We are continuing to do a very active life cycle management on that. So we're going to continue to expand our IP and that also means that there's a CB1 plus story developing in the background as well. Now that's a little too early, but as I alluded to, there's an opportunity to really explore combinations and multi-targets for metabolic diseases, especially when you start to parse out the subtypes of obesity. So for us, we're exploring what those combinations could look like and being a biologic and being an antibody does give us a lot of flexibility to be able to look at those combinations.

Got it. Could you tell us a bit about your cash runway?

Yes. So we're currently sitting at -- as of our earnings call, $76 million and change, that gives us ample runway until middle of 2027. We're allowed -- I mean, not allowed, but we're focused -- based on that cash need where it gives us sufficient capital to execute quickly on our clinical program. We have this ongoing preclinical work that we're doing, and there's a little bit of research dollars allocated towards the pipeline. But the majority of our capital expenditure is really on clinical and CMC. And that runway is nicely intact. I think we're focused on being very efficient with our capital and trying to hit these inflection points, and we'll continue to assess how much additional cash we need to execute our clinical development plan.

Awesome. And I guess really quickly in like 20 seconds. What should we look forward to the next 10, 12 -- 12 to 18 months?

Yes. Like I said, so going back to our conversation what's exciting for us is that the clinical data readout in the non-incretin space, I think, is the most exciting thing. This year, certainly, there's been a lot of different data from GLP-1 drugs. So we have that as a backdrop. But in the non-incretin space, I think 26-week data for CB1 as well as having a combo should be an exciting data point for people to follow. For Skye beyond that is to get going on the next program if we see a nice readout on the interim. And then we're looking to continue to expand our R&D. So with this DIO model up and running, we're continuing to generate additional data points that we look forward to sharing over 2025.

Great. Looking forward to seeing more.

Yes. Thanks, Eric.

Thank you so much.