Q4 2019 Earnings Call

Good morning, and welcome to levels conference call to discuss the fourth quarter and full year 2019 financial result in business highlights at this time all participants are in listen only mode.

Operator: Good morning, and welcome to Avelo's conference call to discuss the fourth quarter and full year 2019 financial results and business highlights. At this time, all participants are in a listen-only mode. Following the formal remarks, we will open the call for your questions. Please be advised that this call is being recorded at the company's request. At this time, I'd like to turn the call over to Jessica Cutrone of Avelo. Please proceed.

Following the formal remarks, well open the call for your question. Please.

Please be advised that this call's being recorded at the company's request.

At this time I like to turn the call over to Jessica drone.

Hello. Please proceed thank.

Jessica Cutrone: Thank you, Sarah. This morning, we issued a press release that outlines the topics we plan to discuss today. This release is available at www. EveloBios.com under the Investors tab. Today on our call, Cinda Gill, Chief Executive Officer, Duncan McHale, Chief Medical Officer, Mark Bodmer, President of R&D and Chief Scientific Officer, and Jonathan Poole, Chief Financial Officer, will review the fourth quarter and full year 2019 financial results and some recent business highlights. Before we begin, I would like to remind everyone that statements made during this conference call that do not relate to matters of historical fact, including statements about our objectives and anticipated clinical milestones for 2020, the impact of any of our monoclonal microbials, the timing and results of any clinical studies, and the sufficiency of cash to fund operations should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.

Thank you Sarah this morning, we issued a press release that outlines the topics we plan to discuss today. This release is available at Www Dot Avella bio dotcom under the Investor job today, and our call Center Gil Chief Executive Officer stuck in Macau, Chief Medical Officer.

Our partner President of R&D in Chief Scientific Officer, and Jonathan Poole, Chief Financial Officer overview, the fourth quarter and full year 2019 financial result, and some recent business highlights.

Before we begin I'd like to remind everyone that statements made during this conference call that do not relate to merits of historical facts, including statements about our objectives and anticipated clinical milestone for 2020, the impact if any of our monoclonal microbials and the timing and results of any clinical studies and the sufficiency of cash to fund operation.

And should be considered forward looking statements within the meaning of the private Securities Litigation Reform Act of 1995.

Jessica Cutrone: Such forward-looking statements are intended to be subject to the safe harbor protection provided by the Reform Act. However, actual results could differ materially from those indicated by the forward-looking statements due to the impact of many factors. Participants are directed to the risk factors set forth in Avelo's quarterly report on Form 10-Q for the quarter ended September 30th, 2019, and the company's other filings with the Securities and Exchange Commission. Any forward-looking statements made today speak only to Avelo's operations as of today. Avelo disclaims any duty to provide updates to its forward-looking statements even if subsequent events cause the company's view to change. It is now my pleasure to pass the call over to Simba.

Such forward looking statements are intended to be subject to the safe Harbor protection provided by the Reform Act actual results could differ materially from those indicated by the forward looking statements due to the impact of many factory.

Participants are directed to the risks factors set forth in Ovelar quarterly report on form 10-Q for the quarter ended September Thirtyth 29 team and the company's other filings with the Securities and Exchange Commission any forward looking statements made today speak only two fellows operations as of today Ovelar disclaims any duty to provide updates.

Sure its forward looking statements even if subsequent events cause the company's view to change. It is now my pleasure to pass the call over to sum up.

Simba: Thank you, Jessica. Good morning, everyone, and thank you for joining us.

Thank you Justin.

Good morning, everyone and thank you for joining us.

As you know we're focused on the small intestinal axis.

Simba: As you know, we are focused on the small intestinal axis, a newly uncovered area of biology with the potential to transform the treatment of many major diseases. Evelo is harnessing the ability of the small intestinal axis, or syntax, to govern biology throughout the body. We are developing a new type of medicine that acts locally in the small intestine for effects throughout the body. We believe our medicines will be superior to alternatives in terms of efficacy, safety, convenience, and affordability. Slide four highlights our accomplishments during 2019. In the second and third quarter of 2019, we reported positive clinical data for EDP1815, our lead inflammation candidate, in two cohorts of individuals with psoriasis. These data are important for two reasons.

A newly uncovered area of biology.

With the potential to transform the treatment.

Many major diseases.

It is harnessing the ability of the small interest to access or syntax.

To go in biology throughout the body.

We are developing a new type of medicine, which acts locally in the small intestine for effects throughout the body.

We believe I mentioned, we'll be superior to alternatives in terms of efficacy safety convenient and affordability.

Slide four highlights our accomplishment during 2019.

During the second and third quarter of 29 team.

We reported positive clinical data.

D. P 18, 15, Oh lead inflammation candidate into cohorts of individuals with psoriasis.

These data are important for two reasons.

Simba: Firstly, they validate our core hypothesis that we can target the small intestinal axis to develop a unique profile of orally delivered, effective, and safe immunomodulatory medicines. Secondly, they provide proof of mechanism for EDP1815 as a new medicine. EDP 1815 has the potential to address the needs of millions of people with psoriasis as well as other inflammatory diseases for which effective, safe, convenient, and affordable treatment options are not readily available. After discussions with global regulatory agencies, we are advancing EDP 1815 into Phase 2 with the improved formulation. Moving to slide five, in 2020, we anticipate several readouts from our existing inflammation and oncology clinical programs. We expect to have additional Phase 1b data and interim Phase 2 data for EDP1815 in psoriasis.

Firstly, they validate a cool hypothesis that we can target the small intestinal access to develop a unique profile.

Already delivered effective and safe immuno Modulatory medicines.

Secondly, they provide a proof of mechanism, but ATP 18 15.

New medicine.

DDP 18, 15 has the potential to address the needs of millions of people with psoriasis as well as other inflammatory diseases for which are effective safe.

Convenient and affordable treatment options or not readily available.

Oh, the discussions with global regulatory agencies, we are advancing GDP 18 15.

Interface to with the improved formulation.

We expect to initiate the phase two trial in the second quarter this year.

Moving to slide five.

And Twentytwenty, we anticipate several read outs from our existing inflammation and oncology clinical programs.

We expect to have additional phase one be data and interim phase two data for GDP 18, 15 in psoriasis.

Phase one be data for ATP 18, 15 in a topic dermatitis.

Simba: Phase 1B data for EDP1815 in atopic dermatitis, which would potentially expand our opportunity in inflammatory diseases, and further clinical data in our ongoing Phase 1-2 clinical trial, evaluating EDP-1503 in combination with Merck's Anti-PD-1 Contruder, in individuals with microsatellite-stable colorectal cancer, triple negative breast cancer, and patients with other tumor types who have relapsed, after prior PD-1 slash L-1 inhibitor treatment, alongside these clinical programs.

Which would potentially expand our opportunity in inflammatory diseases.

And further clinical data you know ongoing phase one two clinical trial evaluating eat a P 50, no three.

In combination with Mercks anti PD, one could truda.

In individuals with microsatellite stable colorectal cancer.

Triple negative breast cancer and patients with other tumor types, who relapsed.

Oh, the prior PD, one slash L. One inhibitor treatment.

Alongside these clinical programs.

Simba: We are continuing our research into the full potential of syntax. Now, I will now turn the call over to Duncan.

We're continuing our research into the full potential of syntax.

Let me now turn the call over to Duncan.

Thank you to invest I'm pleased to be able to tortue today about the opportunities ahead of us as we progress how phase two program 80 ph in 15.

Duncan McHale: Thank you, Simba. I'm pleased to be able to talk to you today about the opportunities ahead of us as we progress our Phase 2 program for EDP1850. So moving to slide six, and before focusing on psoriasis, I wanted to highlight that chronic inflammation is the central driver of some of the most burdensome diseases we face today. As you know, many important and common chronic diseases, including the different forms of arthritis and atherosclerosis, as well as neurodegenerative diseases such as Alzheimer's and Parkinson's disease, and metabolic syndrome, are linked to chronic inflammation. Worldwide, one in seven people suffer from a chronic inflammatory disease. By targeting Syntax with the Velo platform, we have the potential to develop novel oral biologic therapies to treat many of these people. Moving to slide 7.

So moving to slide six before focusing on psoriasis I wanted to highlight the chronic inflammation is a central driver. So it's nice that at some diseases, we face today.

As you know many important and common chronic diseases, including the different forms walked right just an h. piece as well as neuro degenerative diseases, such as Alzheimer's and Parkinson's disease.

Metabolic syndrome are linked to chronic inflammation.

Worldwide, one in seven people suffer from a chronic inflammatory disease.

By targeting syntax with the vendors platform, we have the potential to develop novel oral biologic therapies to treat many of these people.

Moving to slide seven.

Duncan McHale: So we chose to start with psoriasis as it enables rapid and informative clinical trial readouts which have broad relevance in inflammation. It also provides the potential for rapid approval of EDP1815 for the treatment of mild to moderate psoriasis, for which there are currently limited treatment options. Now this slide shows some examples of what would be termed mild psoriasis. Although characterized as mild to moderate in terms of body surface area, as you can see from these pictures, the individual psoriatic lesions can be severe and distressing. And in addition to the skin features, there are also serious comorbidities associated with psoriasis.

So we chose to start in psoriasis as it enables rapid and informative clinical trial, readouts, which have broad relevance and information.

It also provides the potential for rapid approval really pay to 15 for the treatment of mild to moderate psoriasis, which they were currently limited treatment options.

At this slide has some examples of what would be termed mile psoriasis.

Although characterized as mild to moderate in terms of body surface area. As you can see from these pictures the individual sorry, I think lesions can be severe and distressing.

And in addition to the skin features there are also serious co morbidities associated with psoriasis.

Duncan McHale: There is a need for an effective, safe, and affordable oral therapy, and Avelo's platform allows us to develop medicines with this unparalleled profile. Slide 8 provides a snapshot of the psoriasis data we reported last year in two separate cohorts receiving EDP1815. The primary endpoint of this trial was safety and tolerability, and EDP1815 was well tolerated with no overall difference reported from placebo in either cohort. The study also looked at a number of secondary and exploratory endpoints to evaluate potential pharmacodynamic responses, including PASI scores and lesion severity scores. We saw reductions in PASI score and lesion severity score in both cohorts dosed with EDP-18. And in the high-dose cohort, we saw continued improvement to day 42 beyond the 28-day dosing period, suggesting sustained clinical activity and a dose response.

There is a need for an effective safe affordable all therapy and if those platform allows us to develop medicines with this unparalleled profile.

On slide eight provides a snapshot psoriasis data we reported last year in two separate cohorts, receiving GDP 18 15.

The primary endpoint of this trial with safety and Tolerability and ATP 18, 15 was well tolerated with no overall difference reported from placebo in either cohort.

The study also looked at a number of secondary and exploratory endpoints to evaluate potential pharmacodynamic responses, including policy scores allegiance about two schools.

We saw reductions in Pozzi school allegiance veggie score in both cohorts dose we need to be eighteenfifty.

I did a high dose cohort we saw continued improvement today 42 beyond the 28 day dosing period, suggesting sustained clinical activity and a dose response.

Duncan McHale: EDP1815 is showing the clinical and pharmacodynamic activity we'd hoped for as we look to develop an effective, safe, convenient, and affordable medicine for psoriasis. The data from the high- and low-dose cohorts provide a clear rationale for us to advance the interfaces. Slide 9 shows the design of our Phase 2 dose-ranging study. We have agreed on the design of this trial with the FDA and MHRA. The study will evaluate three doses of a new formulation of VDP-1815 versus placebo in approximately 180 individuals. The new formulation uses the same API as the original trial but has an improved release profile to more specifically target syntax, which Mark will discuss in more detail later. The primary endpoint will be the main reduction in PASI score at week 16.

PDP 18, 15, showing the clinical and Pharmacodynamic activity, we'd hoped for as we look to develop an effective safe convenient and affordable medicine for psoriasis.

The data from the high and low dose cohorts, but a clear rationale for us would funds into phase two.

Slide nine shows the design of our phase two dose ranging study we've agreed on the design of this trial with the FDA MH all right.

The study will evaluate three doses of a new formulation of EDI ph in 15 versus placebo in approximately 180 individual.

The new formulation uses the same applies the original trial, but hasn't improved release profile to more specifically target syntax, which mark will discuss in more detail later.

The primary endpoint will be the main reduction in policy school and weak 16.

Duncan McHale: We expect to initiate the trial in the second quarter of 2020 and to announce interim data by the end of 2020. Clinical data from this study could enable us to advance into Phase III registration studies in 2021, subject to end-of-Phase II discussions with regulatory agencies. Now, moving to slide 10, you can see we have a broad clinical and preclinical pipeline across multiple therapeutic areas.

We expect to initiate the trial in the second quarter of Twentytwenty to announce interim data by the end of Twentytwenty.

[noise] clinical data from this study could enable us to advance into phase three Registrational studies in 2021 subject to end of phase two discussions with regulatory agencies.

Now moving to slide 10, you can see we have a broad clinical and preclinical pipeline across multiple therapeutic areas.

Duncan McHale: Inflammation, we've already talked about the Phase 2 trial of EDP1815 in psoriasis. I now want to spend a few moments talking about the opportunity for EDP1815 to treat atopic dermatitis, another condition with unmet need. Atopic dermatitis is a chronic inflammatory skin disease characterized by patches of oozing red skin, pain, swelling, and an unrelenting itch that can severely affect quality of life. In the U.S., atopic dermatitis affects 18 to 25 million people, and 90% of these people are mild or moderate. Whilst atopic dermatitis is more prevalent than psoriasis, there are few systemic treatments available to patients.

In inflammation, we've already talked about the phase two trial in GDP 18, 15 in psoriasis, then I will spend a few moments talking about the opportunity freebie pitching 15 to treat atopic dermatitis, another condition with unmet needs.

I would give a title is a chronic inflammatory skin disease characterized by patches of losing redskin time, swelling and an unrelenting age the conservatively effect quality of life.

In the U.S. HR dermatitis effects 18 to 25 million people, a 90% of these subjects a mild or moderate.

Well I'll say topic dermatitis is more prevalent in psoriasis there are few systemic therapies available to patients.

ATP 18, 15 is currently in phase one redevelopment for miles Madre topic dermatitis, we expect initial data from a cohort of approximately 24 subjects in the second quarter of this year.

Duncan McHale: EDP1815 is currently in Phase 1b development for mild to moderate atopic dermatitis, and we expect initial data from a cohort of approximately 24 subjects in the second quarter of this year. EDP1815 also has the potential to treat other inflammatory diseases, and our preclinical data demonstrates clear effects on Th17, Th1 and Th2 biologies. Based on this preclinical data and EDP1815's activity in psoriasis in man, we envisage exploring EDP1815 in other Th17-driven diseases such as psoriatic arthritis and axial spondyloarthritis. Preclinical data for EDP1815 also support its potential in atopic diseases based on its modulation of the IL-4 and IL-13 pathway and Th1-driven This year sees it advancing 1867, our first non-replicating monoclonal antibody, into the clinic.

Any ph in 15 also has the potential in other inflammatory diseases I don't preclinical data demonstrates clear effects on tier 17, Chitwan th to biology.

Based on this preclinical data and ATP 18, fifteens activity in psoriasis in man, we envisage exploring ATP 18, 15, and other th 17, driven diseases, such as sorry, I forgot Freitas ANEXIO Spano arthritis.

Preclinical data for ATP Eighteenfifty also supports that potential in a topic diseases based on its modulation of the IR for aisle 13 pathway I'm, just wondering diseases, such as rheumatoid arthritis.

This year ceases advancing 18, 67, I'll first non replicating monoclonal microbial into the clinic.

Mark Bodmer: We're planning to initiate a Phase 1B trial in asthma in the second half of the year, and we will continue to build our preclinical pipeline in inflammation. However, we have decided to discontinue development of EDP1066 following completion of the final cohort of the Phase 1B trial due to its less marked effect on systemic immunology than EDP1815. The phase 1B trial evaluated EDP1066 in both mild to moderate atopic dermatitis and mild to moderate psoriasis and was well tolerated with no overall difference reported from placebo. In the cohort of individuals with mild to moderate atopic dermatitis treated with the high dose of the new formulation of EDP1066, we again observed changes in biomarkers of inflammation consistent with a positive pharmacodynamic effect. The biomarker changes were greater in this cohort than those we observed with the high dose of the original formulation.

We're planning to initiate a phase won't be trial in asthma and the second half of the year, we will continue to build our preclinical pipeline and inflammation.

We've decided to discontinue development to be Tensixty six following completion of the final cohort of the phase won't be trial due to its less marked effect on systemic immunology that ATP 18 15.

Phase won't be trial evaluated ATP tensixty six in both mild to moderate atopic dermatitis and mild to moderate psoriasis and was well tolerated with no overall different supported from placebo.

In the code of individuals at mass murder, atopic dermatitis treated with a high dose of the new formulation BDP Tensixty six we again observed changes in Biomarkers of information consistent with a positive pharmacodynamic effect.

Biomarker changes with greater this cohort than those we observed with a high dose of the original formulation.

In our oncology portfolio, we expect to have further clinical data in the first half of the year from our ongoing phase one two clinical trial evaluating GDP 15, or three in combination with Mercks anti PD one antibody Katrina.

Mark Bodmer: In our Oncology Portfolio, we expect to have further clinical data in the first half of the year from our ongoing Phase 1-2 clinical trial evaluating EDP-1503 in combination with Merck's Anti-PD-1 antibody, Keytruda. The study includes individuals with microsatellite-stable colorectal cancer, triple negative breast cancer, and individuals with other tumor types who've relapsed following an initial response to a checkpoint inhibitor With that, I'd now like to turn the call over to Mark. Thank you, Duncan.

The study includes individuals with microsatellite stable colorectal cancer triple negative breast cancer.

The individuals with other tumor types, who relapsed following an initial response to a checkpoint inhibitor.

With that I'd now like turn the call over to Mark.

Uhhuh Duncan.

Mark Bodmer: We've learned a great deal about how to make medicines that target the small intestine axis. One of our key discoveries is the importance of formulation for release of the drug in the right place. Different parts of the small intestine have different effects on the state of inflammation in the body. Academic publications show that responses in the upper part are more anti-inflammatory than further down.

We've learned a great deal about couple of make medicines, which targets the small intestine Lexus one of our key discoveries its importance of formulation.

For lease of the drug in the right place different parts of the small intestine of different effects on the state of inflammation of the body academic publication show that responses in the upper part.

Inflammatory even further down so the bulk of the drug is released after passing from the Starbucks.

Mark Bodmer: So the faster the drug is released after passing from the stomach, the better the anti-inflammatory effect. Slide 11 shows the rate of release of the drug from our existing enteric capsule formulation on the left and the new formulation on the right. This is an in vitro simulation of conditions in the small intestine. The new formulation reduces the release time from 90 to 5 minutes.

So the anti inflammatory effect.

Slide 11 shows the rate of release of drug from our existing its hurt capsule formulation of left on the new formulation on the right. This is an in vitro simulation of conditions in the small intestine.

The formulation reduces the release time from 92 five minutes. This will maximize the amount of drugs, which targets the actually inflammatory up of syntax. The same drug substance is used in both formulations. We previously show the benefit of approved dose response in preclinical models.

Mark Bodmer: This will maximize the amount of drug that targets the anti-inflammatory upper syntax. The same drug substance is used in both formulations, and we've previously shown the benefit of improved dose response in preclinical models. We're taking full advantage of this in our future clinical studies in inflammatory diseases, as you've heard from Simba and Duncan. The clinical data we've reported over the last few months confirm the preclinical discoveries that underpin our new drug platform. We're using single strains of microbes, hence monoclonal microbials. Their distribution is limited to the gut, and yet they have striking pharmacological effects throughout the body. They don't modify the microbiome or persist in the gut.

We're taking full advantage of this or future clinical studies in furniture diseases as you've heard from somebody on Duncan.

The clinical data we've reported over the last few months confirm a preclinical discoveries of depend on new drug platform.

We are using single strains of microbes have smaller total microbials distribution has limited for Todd and yet they have striking pharmacological effects throughout the body.

Modify the microbiome offer system or dot.

In fact, they work women on replicating directly modifying post cells of the lining up a small intestine, but sabal whats parsing bar.

This has led us to a completely new notion of how a medicine can work.

Mark Bodmer: In fact, they work when they're non-replicating, directly modifying host cells in the lining of the small intestine that sample what's passing by. This has led us to a completely new notion of how a medicine can work. The inside of the gut is actually part of the outside of the body.

So I have a tough is actually possibly outside the poly.

Our medicines are signaling from the outside.

As well as a huge range of potential and inflammatory diseases and transfer we have monoclonal microbial candidates, which in animal models resolve central nervous system inflammation why the action in the testing.

Mark Bodmer: Our medicines are signalling from the outside in. As well as the huge range of potential inflammatory diseases and cancer, we have monoclonal microbial candidates which, in animal models, resolve central nervous system inflammation by their action in the intestine. Think about that for a moment.

Think about our performance, it's an extraordinary statement, we can resolve inflammation in the CMS with a monoclonal microbial mcus.

We also have a discovery program and metabolism, which is finally, new microbes will shortly a couple of metabolism, but information viable small intestine.

Mark Bodmer: It's an extraordinary statement. We can resolve inflammation in the CNS with a monoclonal antibody in the gut. We also have a discovery program in metabolism, which is finding new microbes that will surely couple metabolism back to inflammation via the small intestine. All of this work, clinical and discovery, is building a picture of the central importance of the small intestine as a motherboard regulating physiology throughout the body. Now I'll hand it to Jonathan.

All of US work clinical of discovery is building a picture of the central importance of the small intestine as a motherboard regulating physiology throughout the body.

Well have to John.

Thanks Mark.

We ended 2019 with cash and cash equivalents $77.8 million compared to cash cash equivalents in investments of $147.9 million at the end of 2018.

The decrease in cash was due to operating spend between 90 and was partially offset by net proceeds from our debt refinancing with K to help inches July 29 team.

Jonathan Poole: Thanks Mark. We ended 2019 with cash and cash equivalents of 77.8 million dollars compared to cash, cash equivalents, and investments of 147.9 million dollars at the end of 2018. The decrease in cash was due to operating expenditure for 2019 and was partially offset by net proceeds from our debt refinancing with K2 Health Ventures in July 2019. We expect that our cash and cash equivalents will enable us to fund our planned operating expenses and capital expenditure requirements through the end of 2020.

We expect that our cash and cash equivalents will enable us to fund our planned operating expenses and capital expenditure requirements to the end of Twentytwenty.

R&D expenses were $16.4 million, the fourth quarter and $63.1 million for the full year compared to $11.3 million for the fourth quarter 2080, and $39 million the full year Twentytwenty.

The increase of $23.2 million for 2019 with few primarily increases in costs relates to our clinical programs and inflammation.

Simba: R&D expenses were $16.4 million for the fourth quarter and $63.1 million for the full year, compared to $11.3 million for the fourth quarter of 2018 and $39 million for the full year 2018. The increase of $23.2 million for 2019 was due primarily to increases in costs related to our clinical programs in inflammation, our R&D platform, and personnel. GNA expenses were $6.3 million for the fourth quarter and $23.2 million for the full year, compared to $4.7 million for the fourth quarter of 2018 and $18.2 million for the full year of 2018. The increase of $5 million for 2019 was due primarily to increased personnel costs, professional, and consulting fees to support our R&D pipeline and a full year of public company infrastructure costs following our IPO in May of 2018. The net loss was $22.6 million for the fourth quarter and $85.5 million for the full year, as compared to a net loss of $15.4 million for the fourth quarter of 2018 and $60.9 million for the full year 2017. And with that, I'll hand it over to Simba.

R&D platform and personnel.

Today expenses was $6.3 million for the fourth quarter and $23.2 million for the full year compared to $4.7 million the fourth quarter 2080.

$1.2 million for the full year 20.

The increase of $5 million Btwenty 19 was due primarily to increased personnel costs.

Professional and consulting fees supports our R&D pipeline and the full year public company infrastructure costs. Following our IPO in may of 2018.

Net loss was $22.6 million for the fourth quarter $95.5 million, the full year as compared to a net loss of $15.4 million for the fourth quarter 2080, and $60.9 million for the full year 20.

With that I'll hand, it over December.

Thank you Jonathan.

What we've highlighted today is only possible because of the exceptional work of our exceptional team.

Thanks to all of you.

We expect to cashless rich Twentytwenty and we look forward to updating you further as our programs progress during the year.

We'd now like to open the call to take any questions that you may have.

Thank you to ask a question you need to press Star then one on your telephone to withdraw your question. Please press the pound key.

Please standby, while we compile the culinary roster.

Our first question comes from the line of Matthew Harrison with Morgan Stanley. Your line is now open.

Hi, all thanks for taking my question. This is Carter on for Matthew.

Operator: Thank you, Jonathan. What we've highlighted today is only possible because of the exceptional work of our exceptional team. Thanks to all of you. We expect a catalyst-rich 2020, and we look forward to updating you further as our programs progress during the year. We'd now like to open the call to take any questions that you may have.

We were just wondering about how many patients and what sort of data we should expect regarding the interim for each in 15.

Before the end of the year and if you just give us a little background on that and sort of what to expect there.

Morning color this December OLED Duncan onto that.

Okay. Thanks for the question. So we have designed.

The trial flex be so we can perform the interim at any point beyond which 50% of the subjects have reached 12 weeks of treatment and we'll make a decision as to.

Operator: Thank you. To ask a question, you will need to press star and then 1 on your telephone. To withdraw your question, please press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from the line of Matthew Harrison with Morgan Stanley. Your line is now open. Hi all, thanks for taking the question. This is Connor on behalf of Matthew.

When we ask you look at that interim later on in the year in terms of the endpoints the endpoints for the for the trial, which look I mean trim include EASI score ad.

And body surface area. So we're going to look at a range of the endpoints as well.

Connor: We were just wondering about how many patients and what sort of data we should expect regarding the interim for 18-15.

Hi, Patrick I, Thank you for battery Rodney.

Great. Thanks.

Sorry.

Operator: and sort of what to expect there.

Our next question comes from the line of Chris Shibutani with Cowen and company. Your line is now open.

Simba: Morning, Conor. This is Simba. I'll let Duncan answer that.

Good morning, everyone. This is CJ on for Chris. Thanks for taking the question curious with the difference in baseline severity for the patient population in phase two versus one be for it seems that team what sort of effect would you be looking forward to be confident to move a dose level forward and if there's not much of a dose response, how will secondary endpoints factor into that.

Duncan McHale: Thanks, Conor, for the question. We have designed the trial flexibly so we can perform the interim at any point beyond which 50% of the subjects have reached 12 weeks of treatment, and we'll make a decision as to when we actually look at that interim later in the year. In terms of the endpoints, the endpoints for the trial which we look at at the interim include ED, SCORAD, IGA, and body surface area, so we're going to look at a range of other endpoints as well.

Thanks.

Thanks, Vijay So I think two questions.

One is what level of response would give us confidence to move into phase three anything that was your first question. The second is.

Around dose response, let me take the first.

Operator: Pardee, I beg your pardon. Pardee Rothenberg.

Operator: Thank you. Great. Our next question comes from the line of Chris Shibutani with Cowin and Company. Your line is now open. Good morning, everyone. This is CJ on behalf of Chris.

And put it into the context of the current treatment regimens, which are available to patients.

So as you know CJ the the fundamental.

Unmet need that we're aiming to address broadly is related to the fact that for mild to moderate patients. There are a very few therapies available today.

CJ: Thanks for taking the question. I'm curious, with the difference in baseline severity for the patient population in Phase 2 versus 1B for 18-15, what sort of effect would you be looking for to be confident to move a dose level forward? And if there's not much of a dose response, how will secondary endpoints factor into the decision-making?

So very different to the situation in moderate to severe weather. For example antibodies are used extensively with different levels of effect. There were very few therapies available for mild to moderate so patients typically.

After use.

Creams, and lotions, with which have or do not have some sort of pharmaceutical active component in them.

Operator: Thanks, CJ. So I think there are two questions. One is, what level of response would give us confidence to move into phase three? I think that was your first question.

So the bar is actually quite low.

So we've not given formal guidance as to exactly what level of response, well, we're looking for but I'll emphasize that.

Simba: The second is around dose response. Let me take the first and put it into the context of the current treatment regimens which are available for patients. So, as you know, C.J., the fundamental... unmet need that we're aiming to address broadly is related to the fact that for mild to moderate patients, there are very few therapies available today. Very different to the situation in moderate to severe, where, for example, antibodies are used extensively with different levels of effect, there are very few therapies available for mild to moderate. Patients typically...

It's a low ball.

Because there is such a.

Paul currently available therapy, but what's very important safety and tolerability.

We have clearly demonstrated in the studies, we push forward so far that we have something.

The from a data perspective appears to be very safe and well tolerated, we're not seeing any differences.

Between patients on drug and patients on placebo in terms of adverse events portability safety parameters, what we have seen already actually with the data we've reported.

Oh effects.

Duncan McHale: The bar is actually quite low, so we've not given formal guidance as to exactly what level of response we're looking for, but I'll emphasize that it's a low bar because there is such a large number of people who have been exposed to this type of drug, which from a data perspective appears to be very safe and well tolerated. We're not seeing any differences between patients on the drug and patients on placebo in terms of adverse events, tolerability, and safety parameters. What we have seen already, with the data we've reported, as far as we can compare, are at least as good as the oral agents which are being investigated, such as tesla, when we try and look at like-to-like based on what they've published. So we believe we already have very compelling data from the efficacy perspective. And as I said, we're not giving specific guidance, but I'll leave it with those comments. In terms of the dosing question, I'll let Duncan answer that question.

That.

As far as we can compare our leased as good as the oral agents, which are being investigated such as a tesla.

When we try and look at like to like based on what they published.

So we believe we already have very compelling data.

From a from the efficacy perspective.

And as I said, we're not giving specific guidance, but ill leave it with those comment in terms of the dosing question.

I'll, let duncan onto the dosing question.

So everything in terms of the dose response, we've got three active doses that cover the dose range. We looked at in our phase won't be study and we will.

Look across that whole dose range.

And make a choice and of doses that we can take further in development.

Great. Thanks.

Thank you. Our next question comes from the line of Matthews machining with BMO capital markets. Your line is now open.

Great. Good morning, guys. Thanks for taking the questions. So a shoe from me on 18 15, and then one an 18 67.

First on 18 15 I.

I guess, you mentioned, a second ago that you're able to conduct the interim at any point once at least 50% of patients have reached.

Operator: So in terms of the dose response, we've got three active doses there that cover the dose range. We looked at them in our Phase 1B study, and we will look across that whole dose range and make a choice then of doses that we can take further in development.

Xsixteen weeks of treatment so.

Other than the fact that you've committed to having data in the fourth quarter are there any other sort of.

Considerations as to when you might actually stop the study once you cross that threshold and then related Lee.

We know that at that the 16 week time Mark.

Operator: Thank you. Our next question comes from the line of Matthew... EMO Capital Markets.

Antibodies or even though Tesla are still sort of ramping their full therapeutic impact. So how should we think about what level of sort of maximum therapeutic effect.

Matt: Your line is now open. Great. Good morning, guys. Thanks for taking the question. So, uh, two from me on 1815 and then one on 1867, uh... first on eighteen fifteen uh... I guess you mentioned a second ago that you're able to conduct the interim at any point once at least 50% of patients have reached, I think, 16 weeks of treatment. So other than the fact that you've committed to having data in the fourth quarter, are there any other sort of.., study once you cross that threshold and then relatedly we know that uh... at at the sixteen week time mark uh... you know antibodies are even a couple are still sort of ramping their full therapeutic impact so how should we think about what level of sort of maximum therapeutic effect uh... we think eighteen fifteen would have at that sixteen week time point and then i'll ask that i have one on eighteen sixty seven after this

We think 18 15 would have at that 16 week time point, and then I'll ask I have one on 86 or seven after that.

Hi, Matt so.

Let me take the first one 'cause pretty straight forward to an outlet Duncan take the second one.

So just actually one minor correction, it's a at least 50% of patients for at least 12 weeks for the interim and there's no other specific considerations.

Commenting on at this stage in terms of the 16 weeks.

And the time to optimal effect I'll, let Duncan answer that question.

Yes, thanks for that question and Youre, absolutely right that with our current unprecedented therapies that are proved out there. There is some some continued improvement out beyond 16 week. So the majority of clinical benefit is seen in 16 weeks.

We chose 16 weeks because this is an optimal time in terms of the period that subjects on placebo would need to received placebo and understanding the four clinical benefit based on feedback from some parallels and also passed and some other agents. So 16 weeks will give us a very good handle on the clinical benefit.

Simba: Hi Matt. So, let me take the first one because it's pretty straightforward, and I'll let Duncan take the second one. So, just actually one minor correction. It's at least 50% of patients for at least 12 weeks in the interim, and there's no other specific considerations that we're commenting on at this stage. In terms of the 16 weeks and the time to optimal effect, I'll let Duncan answer that question.

Eric in 15.

Okay, and then on 18 67, you've mentioned that a couple of times or to non rappel. Its first sort of non replicate in monoclonal microbial could you talk about.

Why I guess, specifically you think the fact that it's non replicating.

Earnings from a profile perspective, if anything.

Government I'll, let mark talked to that point, yeah sure. That's why we emphasize the non replicating. So there are a number of practical advantages.

Duncan McHale: Yes, thank you for that question, and you're absolutely right that with our current precedented therapies that are approved out there, there is some continued improvement out beyond 16 weeks, although the majority of clinical benefit is seen at 16 weeks. We chose 16 weeks because this is an optimal time in terms of the period that subjects on placebo would need to receive placebo and understand the full clinical benefit based on feedback from some KOLs and also precedent from other agents. So 16 weeks will give us a very good handle on the clinical benefits of EDP1815.

Here, one is just from a manufacturing and stability point of view a non regularly replicating microwave it's much easier to manage stability is easier to manage so that's one it removes any.

Theoretical possibility of infection risk although ups.

We are fairly limited risk even with a.

Viable replicating microbes.

And also actually one of the things has been very important I spoke earlier about some of the principles. We've learned about in terms of how monoclonal microbials or modifying the small entrustpermal axis and one of the big questions has been to do with the requirement or not for colonization systems in order to get the therapeutic effect the fact that.

Operator: Okay, and then on 1867, you've mentioned that it's a, a couple of times, it's non-replicating, it's your first sort of non-replicating monoclonal microbial. Could you talk about what, I guess, specifically you think the fact that it's non-replicating brings from a profile perspective, if anything?

We can get this with non replicating microbes as a full war.

Dictation of mechanism to do with the direct interaction of cells, which are targeted in the lining of the small intestine relation to the modification of systemic.

Mark Bodmer: I'll let Mark talk about that point.

Mark Bodmer: Yeah, sure, that's why we emphasize the non-replicating. So there are a number of practical advantages here. One is, just from a manufacturing and stability point of view, a non-replicating microbe is much easier to manage. Stability is easier to manage. So that's one.

We've already so it's really those things that are that are driving this consideration and just so you're going to discovery of 867, because we already had some indication, but not replicating microbes.

Pharmacologically active in fact, all of our anti Inflammatories of awkward logic reactive it turns out in that state we deliberately screamed.

Operator: It removes any theoretical possibility of infection risk, although that's probably a fairly limited risk even with a viable replicating microbe. It also, actually, one of the things that's been very important. I spoke earlier about some of the principles we've learned about in terms of how monoclonal microbials are modifying the small intestinal axis. And one of the big questions has been to do with the requirement or not for immunization and persistence in order to get the therapeutic effect. The fact that we can get this with non-replicating microbes is a formal indication of a mechanism to do with the direct interaction of cells which are targeted in the lining of the small intestine in relation to the modification of systemic immunology. So it's really those things that are driving this consideration.

Quite a large number microbes in a non replicating stayed.

In the discovery program for ATP 18, 67, so it was a determined effort for the reasons for the benefits that I outlined so have a non replicating product.

Deliberately not to replicate them.

Great. Thank you for the questions.

Thank you.

As a reminder.

To ask your question you would need to press Star then one on your telephone.

Our next question comes on the line of Chris Howerton with Jefferies. Your line is now open.

Great. Thanks, so much for taking my question.

Ian.

So I guess the the first one on just 18 15, just a clarification.

What formulation is expected to go into the phase two is this the new formulation that Mark described in terms of.

Operator: And just so you know, in the discovery of 1867, because we already had some indication that non-replicating microbes were pharmacologically active. In fact, all of our anti-inflammatories are pharmacologically active, it turns out, in that state. We deliberately screened quite a large number of microbes in a non-replicating state in the discovery program for EDP 1867. So it was a determined effort for the reasons that I outlined, to have a non-replicating product.

As a faster lease is someone said, we're going to see for the phase one be cohort and I guess, just how can we translate between the two if there are different.

So it is the new formulation, Chris Thanks for the question morning by the way.

And.

Just to recap some of the history at the end of last year, we had positive feedback from discussions with both the FDIC and M. HR a and.

Based on those discussions.

Our moving forward with the new formulation in a dose ranging study. So it's a dose ranging study with the new formulation into the phase two.

Chris Howerton: Great. Thank you for the question. As a reminder, to ask a question, you would need to press star then 1 on your telephone. Our next question comes from the line of Chris Howerton with Jeffreys. Your line is now open.

Which positions us assuming positive data on that we expect to go into a full registration study.

And just to remind a wheels had positive discussion with regulators.

Operator: So I guess the first one on GIST 1815, just a clarification, what formulation is expected to go into Phase 2? Is this the new formulation that Mark described in terms of the fast release? Is this the same one that we're going to see from the Phase 1B cohort? And I guess just how can we translate between the two if they're different?

On the phase three which given the inherent safety and Tolerability of ERP 18, 15, and the data driven.

Safety and Tolerability, we've seen a we believe we can move forward with a acceleration abbreviated safety database.

So something more along the lines of 800 patients versus a typical 1500, so a few points.

Simba: So, this is the new formulation, Chris. Thanks for the question. Morning, by the way.

Linked to the phase two and then obviously, we're already thinking about the phase three and the registration study the upcoming.

Simba: And, just to recap some of the history, at the end of last year, we had positive feedback from discussions with both FDA and MHRA. And, based on those discussions, we are moving forward with a new formulation in a dose-ranging study. So it's a dose-ranging study with a new formulation in terms of the Phase 2, which positions us, assuming positive data on that, we expect to go into a full registration study. And just a reminder, we also had positive discussions with regulators on the Phase 3, which, given the inherent safety and tolerability of EDP1815 and the data-driven safety and tolerability we've seen, we believe we can move forward with an So something more along the lines of 800 patients versus a typical 1,500.

Phase one be data is also with the new formulation.

So same formulation, so obviously the translation as fairly straightforward.

Got it okay. I appreciate that that's that's an interesting, but the the abbreviated safety database as well, okay and so for Mark I guess could you maybe elaborate a little bit on the data. The rationale in terms of you know the that a quick release post the gastric stomach will drive the best antenna.

Inventory effects, just maybe a little more color in terms of the rationale data driving that decision.

Chris.

Hey behind your question there are three parts to this one is.

What has become.

Published knowledge within the field independent of us but.

Responses in the upper part of the small intestine.

Tend to be anti inflammatory.

Operator: So, a few points there linked to Phase 2 and then, obviously, we're already thinking about Phase 3 in the registration study. Phase 1B data is also with the new formulation, so the translation there is fairly straightforward.

Proinflammatory attack effects tend to be further down the small in Paris that this was the academic work that I referred to in the in the earlier comments, but tallies with our preclinical observations but.

But.

Quick first release of the microphone once it passes through the Starbucks is associated with high potency. We've shown this clearly in preclinical studies with both existing and with GDP 18, 60, 70 80 to 87 by the way will also go ahead with a formulation of this might be.

Chris Howerton: Got it. Okay, I appreciate that.

Mark Bodmer: That's interesting about the abbreviated safety database as well. Okay, and so for Mark, could you maybe elaborate a little bit on the data and the rationale in terms of, you know, that a quick release after the gastric stomach will drive the best anti-inflammatory effects? Just maybe a little more color in terms of the rationale and data driving that decision.

The real important evidence is what Duncan mentioned earlier that we have direct comparative cohorts of patients with GDP 10, 66 in atopic dermatitis using the old formulation of a new formulation of a comparative systemic biomarkers inflammatory response or improve.

Mark Bodmer: Sure, Chris, I think that lies behind your question. There are three parts to this. One is what has become published knowledge within the field, independent of us, that responses in the upper part of the small intestine tend to be anti-inflammatory, while pro-inflammatory effects tend to be further down the small intestine. This is the academic work that I referred to in the earlier comments. That tallies with our preclinical observations that quick burst release of the microbe once it passes through the stomach is associated with higher potency. We've shown this clearly in preclinical studies with both EDP-1815 and with EDP-1867. So EDP-1867, by the way, will also go ahead with a formulation of this type. But the really important evidence is what Duncan mentioned earlier, that we have direct comparative cohorts of patients with EDP-1066 in atopic dermatitis using the old formulation and the new formulation, and the comparative systemic biomarkers of inflammatory response are improved even with a microbe that we didn't deem adequate from a clinical point of

Even with a microbe, we didnt deem adequate from a clinical point to a point of view so from a scientific technical perspective.

Actually a very important clinical aspects of translation actually in our minds are completely removes any risk of the of the of the formulations, which for US was pretty low anyway, because we're using the same drug substance to see leasing it more quickly.

All right.

Those are three components the independent evidence the preclinical evidence that we have about speed burst at least another clinical very different geography Bbten 66.

Okay milestones ongoing actions I wasn't will be one other question go ahead in terms of.

Loans from the 10 66 programs, obviously, you know that you'd occasions.

Well formulation work is positive laws.

Official effects.

Was there any learnings in terms of translation of preclinical the clinical that you took away from that program or any other you know learnings outside of the formulation or you can translate to further enhancing the pipeline.

Mark Bodmer: So from a scientific and technical perspective, that's actually a very important clinical aspect of translation. In fact, in our minds, it completely removes any risk of the formulation switch. I thought the risk was pretty low anyway because we're using the same drug substance, just releasing it more quickly than it passes through the stomach. But those are the three components. The independent evidence, the preclinical evidence that we have about speed and burst release, and then the clinical data that we have with EDP-1066.

Mark Yeah, let me take that as well so.

PDP Tensixty six an EPA tea.

Steve or.

Very different microbes in a number of respect so to our original strategy. This is going back probably two and half years. When we were putting this critical program together was to pick microbes, which had a variety of properties because actually this is a new field, we didn't know what they could deal pharmaceutical the fracture.

The so it'd be tensixty six is actually a gram positive facultative anoro almost probiotic type organism it sort of type that's used in a food production. So these all types of organisms, a very prevalent and so we were interested in finding the one one that seemed to have decent preclinical activity and find out whether that would trend.

Operator: Got it. Okay. Makes sense. And actually, that was going to be one of the questions I had in terms of learnings from the 1066 program. So obviously, you know, you have adjudication that the formulation work is positive and has beneficial effects, but were there any learnings in terms of translation of preclinical to clinical that you took away from that program, or any other learnings outside of the formulation that you can translate to further enhance your pipeline?

Right, you're probably aware that there is a long history of sort of use probiotic and food organisms in clinical trials, which has had a pretty.

Modest effect.

EBITDA 18, 15 actually and.

Creating 67 have very different origins and properties. So these are both organisms that are isolated from mucosal surfaces and the small intestine ones from me integrating 15 is from the duodenal them.

Mark Bodmer: Mark? Yeah, let me take that as well.

Mark Bodmer: So, EDP-1066 and EDP-1815 are very different microbes in a number of respects. Actually, our original strategy, going back probably two and a half years when we were putting this clinical program together, was to pick microbes that had a variety of properties because, actually, this is a new field. We didn't know what the ideal pharmaceutical effect was going to be.

It's in 67 is lower down.

And they are obligor Arabs. So these are microbes are the type of matter. We live in close proximity will host cells of its turned out in the clinic.

Actually we were seeing in preclinical studies that microbes type origin or the ones that have the best that inflammatory effects and the.

Mark Bodmer: So, EDP-1066 is actually a gram-positive, facultative, anaerobic, almost probiotic type organism. It's of a type that's used in food production. So, these types of organisms are very prevalent, and so we were interested in finding the one that seemed to have decent preclinical activity and find out whether that would translate. You're probably aware that there's a long history of trying to use probiotic and food organisms in clinical trials, which have had a pretty modest effect. EDP-1815, actually, and EDP-1867 have very different origins and properties.

The discriminates read data around this from a immunological point of view is actually an extensive.

Series of work, we've done on co culturing individual strains of microbes with human.

Henry immune cells, we do this with human macrophages, and we can generate quite complex patterns have changed phenotype of themselves cytokine secretion of.

Couple of like amend plus the organisms. According to the phenotypes and those assets very interestingly.

GDP 18 theme.

Along with GDP.

50, and 67 than some of other discovery anti inflammatories cluster in a completely different place to eat if you turn 66 of Tensixty say clusters with Gram positive cycle through good robotic microorganisms, which actually have a partial pro inflammatory component as well as I've inflammatory component, which is absent.

Mark Bodmer: So, these are both organisms that are isolated from mucosal surfaces in the small intestine. One's from the duodenum, and EDP-1867 is lower down, and they are obligate anaerobes. So, these are microbes of the type that naturally live in close proximity with host cells, and it's turned out in the clinic, as we were seeing in preclinical studies, that microbes of that type and that origin are the ones that have the best anti-inflammatory effects. The discriminatory data around this, from an immunological point of view, is actually an extensive series of work that we've done on co-culturing individual strains of micro We do this with human macrophages, and we can generate quite complex patterns of change in the phenotype of those cells, cytokine secretion, and the like, and then cluster organisms according to their phenotypes in those assays.

On the.

Organisms that were better than one final comment.

Is but it turned out as we go into the deep formulation studies with the rebates in 15 was just more potent in animal models one.

We consider to be six whether that's pending on the clinical studies as well, but the long answer, but it's such a critical question because it's the difference between EBITDA and 66, an 18 15 has felt a lot of understanding into the platform and how we.

Selective develop microbes.

Right right. So essentially the ecological edge of the source organisms seems to have a profound effect.

Logical effect, but those that are more closely associated with human tissue had that those that you've observed that the best anti inflammatory effects current envelope that got it okay.

Maybe it's just that a few questions that maybe just a quick housekeeping one for Jonathan.

Mark Bodmer: And, very interestingly, EDP-1815, along with EDP-1867 and some of our other discovery anti-inflammatories, cluster in a completely different place to EDP-1066. So, 1066 clusters with gram-positive facultative anaerobe probiotic-type organisms, which actually have a partial pro-inflammatory component as well as an anti-inflammatory component, which is absent from the organisms that work better. Then, one final comment is that, as it turned out, as we got into the deep formulation studies, EDP-1815 was just more potent in the animal models than EDP-1066, and I think that's panning out in the clinical studies as well. That's a long answer, but it's actually a critical question because the difference between EDP-1066 and 1815 has fed a lot of understanding into the platform and how we select and develop microbes.

I might've missed this but is the cash runway that you mentioned is that inclusive of the remaining.

Tranche from the debt facility from K too.

Like there's no we assumption weve made in our guidance is that we have not drawn any more of the charges from the kg facilities, that's just existing cash and cash equivalents.

Understood, Okay, well I'll hop back in the queue and thanks again for taking the questions. Thanks, Chris.

Thank you.

Includes today's question and answer session I would now like to turn the call back to assemble for closing remarks.

Thank you everyone for joining us today. So I appreciate your continued interest in the Belo and.

The support and questions. Thanks very much.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.

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Chris Howerton: Right, so essentially, the ecological niche of the source organism seems to have a profound effect on their pharmacological effect, in that those that are more closely associated with human tissue have been those that you've observed have the best anti-inflammatory effects.

Operator: I've asked a few questions, but maybe just a quick housekeeping one for Jonathan. I might have missed this, but is the cash runway that you mentioned inclusive of the remaining tranche from the debt facility from K2? Hi Chris, no, the assumption we've made in our guidance is that we have not drawn any more of the tranches from the K2 facility, so that's just existing caching.

Jonathan Poole: Cash and Cash Equivalents

Operator: Thanks, Chris.

Simba: Thanks Chris. Thank you. This concludes today's question and answer session. I would now like to turn the call back to Simba for closing remarks.

Oh.

Operator: Thank you everyone for joining us today. I appreciate your continued interest in the Velo and your support and questions. Thanks very much.

Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.

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