Q3 2020 Novus Therapeutics Inc Earnings Call

Good day and welcome to the Novus Therapeutics third quarter 2020 earnings Conference call.

This time, all participants are in a listen only mode.

A brief question and answer session will follow the formal presentation.

Should anyone require operator assistance during the conference. Please press Star then zero on your telephone keypad and that's a reminder, this conference is being recorded a non.

Now I'd like to turn the call over to John Kuwahara Senior Vice President Finance. Please go ahead.

Good afternoon, and thank you all for joining Novus therapeutics fiscal 2023rd quarter Financial results Conference call with me today are two members of our leadership team David Other Alexander growth Chief Executive Officer, Steve correct.

Chief Scientific officer.

Good day after market closed we issued a press release containing detailed information on our quarterly results you may access our release under our investors tab on our company website Novus Therapeutics Dot com.

Before we begin I would like to remind everyone that statements made during this conference call relating to Novus is expected future performance future business prospects for future events or plans may include forward looking statements as defined.

On under the private Securities Litigation Reform Act of 1995.

All such forward looking statements are intended to be subject to the safe Harbor protection provided by the Reform Act.

Actual outcomes and results could differ materially from these forecasts due to the impact of many factors beyond the control of Novus Novus expressly disclaims any duty to provide updates to its forward looking statements whether other result of new information future events or otherwise participants are directed to the risk factors set forth and Novus his report.

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It is now my pleasure to pass the call to our CEO, David Alexander growth Yeah.

Thank you John and good afternoon, everyone.

This has been a very exciting and transformational quarter for Novus marked by key milestones across all aspects of our business.

As we communicated back in June we initiated the process of exploring a range of strategic alternatives to maximize shareholder value.

To that end in mid September we announced the completion of that process with the acquisition of analysts this therapeutics after.

After carefully evaluating several alternatives. We concluded that this transaction represented the highest potential value creation opportunity for shareholders as well that's created the most promising path for novus its future.

Concurrent with the acquisition of found on Texas, we entered into a definitive agreement for the sale of approximately $108 million of series a non voting convertible preferred stock in a private placement to group that's accredited investors before deducting.

Placement agent and other offering expenses.

The acquisition to fan Alexis gives us access to 80 15, a one a next generation anti CD 40, ligature anti body with broad therapeutic potential, which we believe has the ability to be the best molecule in its class.

Eightyfifty no one asked a cornerstone of our pipeline, we see ourselves poised to grow novus around this target that's a develop therapies to help patients undergoing Oregon, where selover transplantation as well as those living with serious immunological diseases all of whom.

Face limited treatment options.

The proceeds from our private placement will therefore be used to advance the phase two clinical trials of Eightyfifty, no one and up to four indications.

Renal transplantations pilot cell transplantation, autoimmune nephritis, and a my trophic lateral cirrhosis or a less.

We are integrating analytics this into Novus expeditiously.

In late October we commenced patient enrollment into a phase two way clinical trial of 80 15, no one in adults living with day less.

Oh no Eightyfifty no. One had previously received orphan drug designation from the U.S. food and drug administration for the treatment of fail less.

We currently anticipate top line data from this important trial in 2022.

Before turning the call over to Steve Perrin, our President and Chief Scientific Officer.

Like to make a brief comment on the ongoing COVID-19 pandemic.

The pandemic that's had just on fortunate effect of disrupting drug development timelines around the world clinic.

Clinical trials across many indications and all stages of development have experienced enrollment challenges and delays, resulting from co bid related restrictions and concerns.

As mentioned, we are preparing to initiate up to four clinical trials and with Covance case counts once again on the rise in the United States and elsewhere.

We are monitoring these developments carefully we.

We have been and remain in close contact with our investigators and trial sites.

At this point in time, we are advancing our clinical development activities, particularly our LSW trial, according to our internal timelines.

A possible worsening of the global Cobot situation does present, an execution risk for us.

But in part due to the specific indications that we're targeting we currently believe we can continue to successfully navigate through this global crisis with relatively minimal disruption.

I'll now turn over the call to Steve will provide more detail on our clinical programs afterwards, John core.

We will provide a financial update.

Steve.

Thank you Dee.

I'll start by giving you a bit of background around 80 15 on one's target.

C. D 40, C. 40 like in receptor is have been viewed as an attractive therapeutic target for decades since the engagements of these free suppers plays a pivotal role and immune system activation pardon me de thing both antibody and so your immune responses from modulation of germinal sole function b cell responses.

As opposed to the polarization of pro inflammatory T cells.

The inhibition of a robust immune responses mitigated by customer tourist signaling when city 40 volume Barnes cost too much where your scepter such a CD 40 on answered from presenting cells. As these answers on percent true presenting cells are simultaneously presenting foreign peptides on there I mean, she receptors to the.

She receptor on lymphocytes.

The interaction of CD 40, login and CD 40 results from clonal expansion antibody production and secretion of pro inflammatory cytokine <unk> amplify immune response.

Our lead program Beachy 15 on one as a first in class aren't you true one anti CD 40 input body locking up see effector function it.

It has high affinity binding to CD 40 login.

As shown very very good manufacturability and biological activity and has a half life of 18 to 26 days in humans.

We are focusing our efforts on the development of an antagonist antibody targeting the lie again, rather than a receptor since targeting the why again has been shown to be more efficacious <unk> is efficacious in preclinical models of body immunity and on the prevention of acute on long term allograph transplant rejection.

This preclinical efficacy maybe mediated by several factors, including differences on the so your distribution of the receptor versus the login anti.

Anti CD 40, Wigan antibodies also on Hibbett bolt CD 40, as well, let's see do you love and co stimulatory suppliers on antigen presenting cells.

Gross inhibiting the pro inflammatory polarization of C. D. Four positive you can see the positive lymphocytes.

Block in the low again also polarize the C D four positive lymphocytes.

The Fox P. Three positive T regs, which functionally secrete idle time, and other cytokines, creating a <unk> environment and the context of preventing allograph transplant rejection and auto immunity.

Importantly, however modulation of the pathway just not cost on mcmullen for Pinedale.

Block on the activation of the CD 40, login pathway has been shown to ameliorate disease progression on pathology in preclinical models of auto immunity.

On prevents a cute on long term allograft transplant rejection and multiple species.

To date, we have completed the single ascending dose phase one study of H.T. 50, no one in both how we vote healthy volunteers as well as people will pay a loss.

In this study the T 15 on one showed a good safety profile with low anti drug antibody responses that were not dose related.

We observed linear dose proportionality across the dose range for us and a half life of up to 26 days.

This data suggests the potential for extended dosing intervals and for the development of more convenient administration methods, such a subcutaneous formulation.

'cause D.A. mentioned, we're planning to advance a T 15 on one and up to four phase two clinical trials for renal Transplantations I, what's all transportation auto immune to fright us and admire trophic lateral sclerosis or rail loss.

We selected the indications based on preclinical data that was generated with either our molecule historical anti CD 40, CD 40 million molecules.

Preclinical data in rodents pigs, and non human primates interest the blocking city 40, like and it's the most efficacious way to prevent acute and long term transplant rejection in Reno corneal and I would tell transplantation and in some cases can even duce long term transplant tolerance.

Walking City 40 like end has also been shown to be more effective on preventing allograph transplant rejection compare to blocking CD 40.

The ability to prevent acute and chronic transplant rejection and the absence of kelsen earn as neighbors has the potential to transform the clinical management of preventing graft restructuring mitigating mitigating nephrotoxicity increased opportunistic infections and increased malignancies that are associated with calciner on a heparin jurors were seeing on.

Yes.

I Wetsel transplants has the same upside is to strive for organ transplant with the additional ability to eliminate the toxicity of see nice specifically on the transplanted high what sells.

Chronic exposure to see a nice an organ transplant is associated with an increase a nuance on diabetes.

This is due to the toxicity of see nice on beta cells on the pancreas. Similarly, seeing eyes are toxic to transplanted islet cells up to 50% of transplanted I what sales may die within three days of transplantation in part due to see an eye toxicity, thus exposing subjects to risk or transplant rejection and requiring multiple on.

Let's all transplants in order to obtain a sufficient sold mouse to eliminate the requirement for exhaustion of insulin.

An auto immunity, we are focusing on auto immune from US there was a long history of preclinical and clinical data demonstrating that blocking CD 40 logging signaling familiar it's disease progression modifies buyer markers of disease, and improved renal function and focal segmental glomerulosclerosis or especially yes.

As well as lupus nephritis.

Soluble CD 40, Wigan off from correlates with disease flares on auto immune diseases.

The clinical development program and it was based on positive preclinical data in a rodent model of a loss that was conducted by the Aeolus therapy development Institute or Aeolus TDR loans.

Hey, It was TDR discovered the activation of the co stimulatory pathway and activation of CD 40, logins signaling apps symptom onset and skeletal muscle brain and say other Nirvana rodent model avail us.

Using a murine antibody that blocks CD 40 like on functioning in mice. They further demonstrated that blocking CD 40, lagging syndrome improved muscle function slowed disease progression and improve survival.

These clinical manifestations are due to reduced immune cell infiltration of from macrophages into skeletal muscle and they're destroying have done our weighted nerves the.

The plasticity of the nervous system to repair itself and the absence of this immune cell attack results and improve neuromuscular junction occupancy and improve muscle function.

Blocking cdforty login signaling also prevents proinflammatory pull the visitation of lymphocytes.

Reduced non inflammation and improved motoring on survival in rodent they lost models finally.

Finally, similarly to how soluble CD 40 like income correlate with flares on auto immune diseases soluble city for you like and it's also correlated with disease progression in aeolus.

In October we initiated a phase two study of EG 15, no one and people living with a loss and enrolled our first patient.

As Jay mentioned, we are monitoring the covert situation carefully and are in close contact with our trial sites.

However, since on rolling our first patient the trial has from progressing according to plan. Both in terms of our ability to open up new sites and to enroll subjects, resulting in additional patients now also on rolled in the first cohort.

Yeah. It was Charles a 12 week open label dose escalating safety and biomarker study. This is the first multiple ascending dose study of a t. 50, no. One in humans. That's the primary endpoint of the study is safety and Tolerability and adults where they a loss.

Because of the nature of a true we do not currently expect to release interim data.

At the end of the study will assess exploratory endpoints for weighted to disease progression, including changes in aeolus functional rating scale or a loss on for US that's Wallace respiratory function.

Additionally, there are multiple exploratory biomarker endpoints, which will be examining after the 12 week study, including one target engagement or the binding of a T 15 on one towards targets CD 40 login.

To a comprehensive biomarker panel twin sets proinflammatory, <unk> and inflammatory signals from circulation, including TNF Alpha and I'll six.

Three nerve filament light trading levels as a surrogate marker of non health and disease progression.

Before finishing my presentation I would like to thank the analysts therapy development Institute on.

He's quest the muscular Dystrophy Association, the Aaos Association Aeolus, one aeolus, finding a cure and the Aeolus ice bucket challenge for the assistance and support over the years from getting H T 50, no one to a clinical trial and patients.

I will now finish my comments by briefly mention that we continue to consider what a path forward, maybe from an overseas historical assets, particularly strategic options for them.

With that I'll turn the call of true drawn for financial like <unk>.

Thank you Steve and.

In addition to the financial results summarized in our press release, you can find additional information in our form 10-Q, which we will file later today.

Research and development expenses were 3.1 million for the nine months ending September Thirtyth 2020.

This was a decrease of 3.7 million compared to 6.8 million for the same period last year.

The change was primarily due to decreases in clinical cost formulation development costs.

Selling expenses personnel related costs.

I'll, let medians expense and other developmental cost east.

These costs were partially offset by an increase in stock based compensation expense.

These decreases were made following the completion of our phase Twob study of our legacy lead program in acute otitis media and the subsequent suspension of many related activities as we assess strategic options and potential pass forward for the legacy programs.

We expect our research and development costs to increase in future periods. As we proceed with the development of AG 15 on what.

General and administrative expenses were 6.7 million for the nine months ending September Thirtyth 2020. This.

This was an increase of 1.6 million from 5.1 million from the same period last year.

The change was primarily due to increases in merger related costs incurred in the quarter net third quarter stock based compensation and general operating cost.

The increases were partially offset by decreases in litigation expense.

The cost associated with operating a publicly traded company personnel related costs and travel and maintenance expense due to the ongoing pandemic.

Following the completion of the analytics. This acquisition, we expect our general and administrative expenses to increase in future periods as we have a larger headcount and incur expenses relating to the development of a larger pot pipeline.

We ended the quarter with approximately on in 14, and a half million dollars in cash this.

This includes approximately $11 million added from the acquisition of excess as.

As well as the pipe financing that raised gross proceeds of approximately $108 million before deducting placement agent or the offering expenses.

Of note we.

Receipt of approximately $9 million from the financing has been deferred.

Primarily until stockholders approved the issuance of the company's common stock up on conversion of the Companys X one preferred stock and the effective registration of its common stock.

With that financial update let me turn the call back over to de expense and finally much.

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Pardon me this is the likely vote, perhaps even thank.

Thank you, both Steve and John.

The third fiscal quarter of 2019 was transformational for our company and particularly the analysts this acquisition the private placement financing and advancement of Eightyfifty No. One it's a first phase two trial in adults with day allows us.

Now with multiple additional phase two trials plan. We believe we have set the stage from numerous potentially value creating catalyst in 2021.

In closing I'd like to reiterate our excitement as we look towards the vision of developing novus into a leading targeted immunology company focused on the CD 40, CD 40 lie Gan pathway.

Our strategy is clear we will remain focused we will be agile and we will be guided by the data and by design.

With that I'd like to thank you for joining us today.

And wish you a good afternoon and evening operator, you may wrap up the call.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. Your lines at this time and have a great day.

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