Q3 2022 Axcella Health Inc Earnings Call

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Good morning, ladies and gentlemen, and welcome to the excellent fourth quarter 2022 conference calls.

Please be advised that todays call is being recorded and that all participants will be in.

Mode.

Christian amortization.

After todays presentation, there will be an opportunity to ask questions.

You asked a question here at the start and then one on your touch there tied.

To withdraw your question. Please press star two.

Now for opening remarks, I would like to hand.

Crane Chief Financial Officer. Please go ahead.

Thank you very much operator, and good morning, everyone.

We'd like to advise that certain remarks, we will make on <unk>.

Today's conference call such as those relating to our cash runway and our ongoing clinical trials of Exa 11 25, including include forward looking statements that are subject to various risks and uncertainties. These risks and uncertainties are detailed in our SEC filings, including our most recent form.

<unk> 10-Q, which we plan to file later today.

These filings can be accessed on our website.

Excel at TX dot com or on the SEC website.

All forward looking statements represent our views as of today November 1st 2022, it should not be relied upon as representing representing our views as of any subsequent date, we undertake no obligation to update these forward looking statements.

With that let.

Let me turn the call over to our President and CEO Bill in shock to begin the discussion bill.

Thank you Bob and good morning, everyone. It's a pleasure to be speaking with you again. This has been an extremely exciting period for <unk> and today I will briefly review the progress we've made during the past quarter.

In my opening remarks, Bob will then update you on the financials.

Through the third quarter, we made important progress in our clinical development of Axa, 11, 25, and strengthened our balance sheet with a new financing.

Now in August 2nd we announced positive topline results from our Phase Iia study of Axa 11, 25 in long Covid.

While COVID-19 is a persistent and growing challenge of the pandemic affecting an estimated 100 million patients worldwide with fatigue as the most common symptom reported.

Indeed time magazine has described long COVID-19 as the greatest mass disabling event in history.

The fatigue that is experienced by long COVID-19 patients just both mental and physical is often so severe that they are unable to work exercise or engage in normal activities of daily life.

And until our study no premium previous pharmaceutical agent and demonstrated the ability to improve outcomes for patients with long COVID-19 in a randomized control trial.

So we set out to develop actually 11 25.

After treatment options to seriously ill long COVID-19 patients, who previously had none.

And we found that subjects, who received actually 11 25 had improvements in measures of mental and physical fatigue that were both highly statistically significant and clinically relevant compared to those who received placebo.

The main changes in total physical and mental scores in the <unk> 11 versus placebo or <unk>.

<unk> 4.30, with a P value of 0.0039.

As to <unk> 94, with a P value of 0.0 or zero.

0.0097.

And minus 1.32, but the P value of 0.00 97, respectively.

And finally, there was a statistically significant correlation between improvement in fatigue score.

And increase in distance achieved in the six minute walk time with a P value of 0.0027. This is an objective measure of physical ability that was only observed in subjects, who received actually 11 25.

And on September 29, we reported results of a preplanned interim analysis of data from our phase two B trial of acts 11, 25 in the treatment of non alcoholic Seattle hepatitis or Nash.

Well Nash as its primary manifestation in the liver it as a systemic disease driven by multi factorial dysregulation of pathways associated with metabolism inflammation and fibrosis.

An estimated 40 million people in the U S, including approximately 10% of U S. Children are afflicted by this disease.

When Nash worsens it can cause scarring of the liver, which leads to cirrhosis and.

Nash is one of the most common causes of end stage liver disease worldwide.

The results of the interim analysis outlined the effects of <unk> 11, 25 administration on selected outcome measures after 12 and 24 weeks of treatment.

The findings were extremely encouraging.

At 24 weeks, there were statistically significant improvements in the liver stiffness measurements are L. S M compared to placebo subjects in the high dose arm.

Absolute changes in L. S M.

0.13.

Minus 2.01 for P value of 0.09 92 compared to placebo.

And minus 4.07, kilo Pascal's RK P. A R. A P value of 0.0096 compared to placebo in the placebo low and high dose arms.

These results were supported by statistically significant improvements in other noninvasive measures of liver fibrosis, Elk and then four.

We also saw statistically significant improvements in a L. T at both weeks 12, and 24 and all subjects.

And all subjects experienced significantly greater changes from baseline and MRI P. D. F F at 12 weeks compared to the baseline from our change from baseline in placebo.

And a placebo adjusted difference of minus $18 nine 8% for a P value of 0.0082.

And minus 21.24% for P value of 0.0014 at the low and high dose arms, respectively.

In sum these findings indicate that administration of Axa 11, 24, excuse me 25 over 24 weeks leads to a statistically significant improvements compared to placebo and biomarkers for metabolism inflammation and fibrosis.

And consistent with prior clinical trials type two diabetics showed results comparable to non diabetics.

In addition, and consistent with all previous results actually 11, 25 was found to be extremely safe and well tolerated.

Now I'd like to take a moment and place these findings in context.

Given the Covid trial results 11, 25 has become the first therapeutic to improve patient fatigue in a randomized trial.

The Nash trial results indicate that 11, 25 has market leading levels on effects on liver stiffness and.

And across both indications the overall safety and Tolerability profile of 11 25 is also best in the market.

Collectively the trial results provide further support of our view that Axa 11, 25 is extremely effective and safe multi targeted impact on pathways that are dysregulation and complex conditions, such as long Covid and Nash.

Now here at XL, we are heartened to be playing a leading role in the effort to provide treatment options for patients suffering from these difficult to treat diseases.

Our extensive research and incurring gene trial results along with our E. M. M platform gives us an attractive and differentiated profile and position us as the leading company in treating complex multifactorial conditions.

And investors found these trial results very attractive yes.

This past quarter, we completed a new round of financing about which Bob Crane, our CFO will provide details shortly.

Simultaneous with the financing we made two new appointments to our board of directors.

Robert Routh, CLO and Torben straight Neeson have become board members and Mr. Ausiello has also become chairman of the board.

As the company advances towards late stage clinical trials. We are pleased to have the additions of Mr. CLO and Mr straight Nissan to our board.

And after five years of service, David Epstein has stepped off the board and we thank him for his many contributions and he will continue to support the company as a consultant.

Now in the coming months, we will continue to pursue a focused strategy of executing on our clinical program and engaging with investors. We are also intent on broadening our pipeline by leveraging key insights we have gained from our clinical trials and the emerging science.

Now, let me invite bobs and provide a review of the details of the financing and our overall financials for the quarter.

Yeah.

Thank you Bill and good morning, everyone.

We finished the quarter.

Ending September 30th 2022, with approximately $25 $4 million in cash and marketable securities, which compares to $55 million as of December 31, 2021.

On October 13th 2022, we announced a registered direct financing of approximately $34 2 million.

This amount included 6 million received as the cancellation of indebtedness upon the conversion of promissory notes held by flagship pioneering.

The financing occurred at a market price of $1 64, and the company sold $20 million 847888 shares of common stock.

A combination of current investors, new investors company directors and management.

This financing helps to further bolster our balance sheet.

We expect that our current cash balance will be sufficient to meet our operating needs into 2023.

Turning to the income statement.

Our research and development expenses were $13 3 million and $43 7 million for the quarter and nine months ended September 30th 2022.

This compares to 10.1 and $30 7 million for the comparable periods of 2021.

With the year to year increase primarily related to the initiation of our long COVID-19 and impact clinical trials.

General and administrative expenses were $3 9 million and $12 3 million.

For the quarter and nine months ended June 30 September 32022. This compares to $4 8 million and $14 million for the same periods of 2021.

These decreases are primarily the result of lower noncash stock based compensation expenses.

<unk> net loss for the quarter and nine months ended September 32022 was $17 $8 million or 34 cents per basic and diluted share.

And $58 $2 million or $1 19 per share respectively.

Our net loss for the third quarter.

And nine months ended September 32021 was $15 6 million or <unk> 41.

Per share and $46 $7 million or $1 23 per share.

This concludes the review of our finances, let me turn the call back to Bill.

Bill.

Alright, Thank you Bob and operator at this point in time, we will move over to questions from the attendees.

Thank you very much.

Ladies and gentlemen, we will now begin the question answer session.

I would like to ask a question. Please press Star then one on your telephone keypad.

Confirmation tone will indicate your line has into the question queue.

You May press Star then two if you would like to me your question.

All participants using speaker equipment, it might be nice to see what you pick up your handset before pressing the stocky.

My first question is from Thomas Smith VP Securities. Please go ahead.

Good morning, this is natural and Arthur pumps Smith, Congrats on the progress at the quarter you have a few questions first could you provide additional color on deal, but that's how it interacts and disregarding the 125 for the long haul then.

And when can we expect more details on the <unk> side and I'm not telling pass.

And have a follow up.

Okay, great. So thank you.

In General rule, we don't comment on details of regulatory interactions in this case, we're in a very good position. We've already had initial engagement with the MH or a and we are in a position to communicate and receive appropriate feedback this year and we look forward to being in a position to advance the clinical program.

In the near term next year, so we're very well.

Well positioned and continue to have excellent interactions with the governments as they understand how important an issue long COVID-19 is.

Okay, and what's the progress on the enrollment of the phase <unk> impact study in Nash.

We expect enrollment completion by year end to meet him.

So again, we don't comment on specifics of enrollment on an ongoing basis, we will update you appropriately enrollment is continuing well.

And we are obviously encouraged by the results that we saw across liver stiffness inflammation and metabolism and continuing to show a first line safety profile as are the investigators we had projected enrollment closure in 'twenty three and that's that's where we still plan to be so we're consistent with that.

Got it and Okay and last question and I'll hop back on the queue.

What's U S Robertson.

Dancing overhang in 2023.

So Bob.

Yes. Thank you.

So we are a you know as as you know we've we've recently raised in the registered direct $34 $2 million and yeah. As we stated in the past we're engaged in both the business development discussions with possible collaborators.

As well as our discussions with investors going forward I can assure you that what we'll be doing is what's in the best interest of the company and stakeholders.

As we go forward, although I can't offer any specifics at this time.

Yeah.

Got it. Thank you so much and congrats on the progress.

Thank you.

Okay.

Thank you very much. The next question is from Seth Okay of H C. Wainwright.

Hi, Good morning. This is Thomas Yip asking a couple of questions for Ed. Thank you very much for its got no questions. Our first.

First question S. K can you discuss current thoughts on primary endpoint for a long Covid phase III study or a registrational study or whether it includes any endpoints from the phase two a specifically the 50 question here or the six minute walk test.

Okay. So good morning Thomas.

We will have Margaret our CMO answer that questions that Margaret.

Good morning, Thanks for the question.

Anticipate carrying forward measurement is the key again this is a validated.

Patient reported outcome that is.

So well accepted by the FDA and other health authority.

We intend to carry forward and.

I think a function Chris.

Chris site tour that where do you think for that will be.

Discussion with the agency.

It is unlikely that we'd like to continue with the six minute walk as feedback we have gotten indicates it is not reflective of the patient experience.

Yes.

But in general we're in a very good position to move our endpoint forward into phase III.

Yeah, Thomas the six minute walk.

Represents a certain impact on physical function, but this is a post exertion fatigue that these patients really feel so they're more sophisticated ways to demonstrate the impact of $11 25 going forward at scale.

Got it thank.

Thank you for the additional details and then Ah stay in a non COVID-19 given the size of the opportunity or what are your current plans to to fund the phase III study and also any both U S and ex U S as well.

Yeah. So as you note the size here is quite significant we believe theres blockbuster potential in the United States.

And unfortunately, because of the size of need very rapidly to achieve that as we're leading in this field and really have the opportunity and it could be the only product in the market for a long COVID-19 fatigue for some time in terms of the approach we are well positioned to execute the next trial in terms of our capabilities and our ongoing support we will.

Of course look at the optimal way strategically as Bob alluded to as to how we can either accelerate or expand our ability to reach more patients faster and we're in active engagements.

Both with potential collaborators as well as governments as to the best way to bring this program forward to reach beyond the U S.

In the U K, where we obviously already have work ongoing and as you know we have a global phase two b in Nash. So we've demonstrated our ability to execute on that scale.

Got it that perhaps the last question from US are switching to mash Ah we saw at the interim data was quite encouraging but.

Not see by the results in our type two diabetes type two diabetes patients as we said in the 16 week study Oh, what are your thoughts on the main reasons behind that and.

You are stupid leaf there is a opportunity in the type two diabetes a subpopulation.

And in the Nash space for 11 25.

Yeah. So Thomas Thank you. It's an important question because type two diabetics are roughly 40% or more of Nash patients and their historically difficult to treat and actually what we did see is that the results in type two diabetics, we're consistent with the overall results so far in the trial and that's encouraging for us already.

And as you know this is an interim analysis with 30% of the patients or subjects, reaching 30 are 12 weeks. So we're actually encouraged and we have as you know to previous studies, where we demonstrated impact in type two diabetics and.

And we will continue to evaluate if this is an important differentiator like we believe our overall profile sets us up for first line position because of the multi targeted the safety and well tolerated the oral dosing and we think populations like type two diabetics and adolescent pediatrics offer potential.

Differentiation for the asset.

Got it.

Thank you again for taking my questions and looking forward to progress on both our progress.

Thank you Thomas.

Thank you very much ladies and gentlemen, again, if you wish to ask any question. Please press star and then one on your touch times.

We will pose amendments as we've seen with any publicly.

So would it be able to hypothetical questions and would like to turn the call back to Mr. Trucco for closing remarks.

Okay. Thank you operator, and thanks to everyone who tuned in today, we are certainly energized by the opportunity to help address the substantial needs of patients who have long COVID-19 fatigue, and Nash looking forward to our upcoming milestones and progress that we'll make across the programs and we expect to help drive Val.

For our shareholders. So we look forward to speaking with you again. So operator. This concludes our call. Thank you and everybody would be well.

Okay.

Thank you very much sir.

<unk> that concludes today's conference.

I'll disconnect your lines at this time, thank you for your participation.

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