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Edited Transcript of CATB earnings conference call or presentation 10-May-18 12:30pm GMT

Q1 2018 Catabasis Pharmaceuticals Inc Earnings Call

CAMBRIDGE May 11, 2018 (Thomson StreetEvents) -- Edited Transcript of Catabasis Pharmaceuticals Inc earnings conference call or presentation Thursday, May 10, 2018 at 12:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Andrea Matthews

Catabasis - VP, Corporate Affairs

* Jill Milne

Catabasis - Founder, CEO

* Joanne Donovan

Catabasis - CMO, SVP Clinical Development

* Andrew Nichols

Catabasis - CSO

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Conference Call Participants

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* Joel Beatty

Citi - Analyst

* Liana Moussatos

Wedbush - Analyst

* Emma Nealon

Oppenheimer - Analyst

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Presentation

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Operator [1]

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Welcome to the First Quarter 2018 Catabasis Pharmaceuticals Incorporated Earnings Conference Call.

(Operator Instructions)

I would now like to introduce your host for today's conference, Ms. Andrea Matthews, Vice President of Corporate Affairs. Ma'am, you may begin.

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Andrea Matthews, Catabasis - VP, Corporate Affairs [2]

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Thank you, Bruce. Welcome to today's Catabasis Pharmaceuticals' conference call where we will provide a corporate update and review our first quarter 2018 financial results. With me today are Jill Milne, Chief Executive Officer; Joanne Donovan, Chief Medical Officer; and Andrew Nichols, Chief Scientific Officer.

We issued a press release this morning summarizing our corporate update and our Q1 2018 financial results, which we will reference on today's call. This press release is available on our website.

We will also be using slides during today's call that are available on our website in the Events and Presentations section in the Investors part of our website.

I would like to note that during today's call, we will make statements related to our business based on current and future expectations that may be considered forward-looking statements under federal securities laws.

Actual results may differ materially from those indicated by these statements as a result of a variety of risks and uncertainties including uncertainties related to the final trial design of our Phase Three trial in DMD and our ability to obtain financing on acceptable terms in a timely manner to fund the trial and other factors discussed in our most recent quarterly report on Form 10-Q, which we filed this morning with the SEC and is also available on our website.

Such statements represent our judgment as of today and Catabasis undertakes no obligation to publicly update any forward-looking statements except as required by law.

With that, let me pass the call over to Jill Milne, Chief Executive Officer, who will provide a corporate update. Joanne Donovan, our Chief Medical Officer will review our clinical programs for edasalonexent and will be followed by Andy Nichols, our Chief Scientific Officer, who will provide a research update. Jill will then wrap things up with the financial update. Jill?

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Jill Milne, Catabasis - Founder, CEO [3]

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Thank you, Andrea. Good morning, everyone, and thank you for joining us today for our first quarter 2018 financial results and an update on progress so far this year. We are pleased to have the opportunities to talk about additional and positive data that support edasalonexent potential as a disease modifying therapy for Duchenne, a disease with no cure available.

Slowing the progression of this disease is the most important outcome to patients, physicians and families of boys that are affected by Duchenne.

Slide three outlines the topics for today's call. Overall, through a year of treatment in the MoveDMD trial, edasalonexent slowed the progression of Duchenne based on improvements in all assessments of physical function, as well as in biomarkers of muscle health and inflammation.

We believe that these effects ultimately will translate to boys with Duchenne maintaining functional abilities longer. Last month, we announced new MRI data through one year of edasalonexent treatment.

This is the latest in the growing dataset that reinforces the potential of edasalonexent as a foundational disease modifying therapy for Duchenne. Shortly, Joanne will speak to the importance of these MRI data presented recently at the American Academy of Neurology Annual Meeting.

We recently focused our resources on our edasalonexent program to maximize value to patients and shareholders and we are poised to begin the Phase Three trial with edasalonexent once funding is in place. Our strategy is to initially focus on boys' ages four to seven as an efficient path to registration.

However, we see broad clinical potential for edasalonexent to benefit all boys and men that are affected by Duchenne across their lifetimes regardless of mutation. And as Andy will talk about shortly, we also see potential for edasalonexent beyond DMD in another form of muscular dystrophy that also stems from mutations in the dystrophin gene, Becker muscular dystrophy.

Duchenne is a rapidly progressing disease. Boys are typically diagnosed at age three or four as they begin to miss developmental milestones. And as you can see on Slide four, they are declining in their functional abilities such as their speed to stand up and climb stairs.

Their contractile muscle tissue is being replaced with fat. They have inflammation and tachycardia, an elevated resting heart rate. Our goal with edasalonexent is to slow these rates of decline in ability and slow the accumulation of fat in muscle, so boys and men with Duchenne can maintain their functional abilities longer.

In our clinical developments, we have observed that edasalonexent inhibited NF-kappaB, improved biomarkers of inflammation, had positive effects on muscle and together, these translated to improvements and stabilization of muscle function. We have focused on NF-kappaB as a target because of its importance in muscle disease such as Duchenne.

NF-kappaB has been shown to be activated in DMD patients starting at infancy. NF-kappaB activates multiple processes leading to inflammation and muscle degeneration. As outlined on Slide five, we have seen NF-kappaB inhibition demonstrating target engagement in both adult normal healthy volunteers, as well as in boys with Duchenne.

After edasalonexent treatment for more than 12 weeks, we saw significant decreases in a global marker of inflammation c-reactive protein, as well as muscle enzymes that reflects myocyte damage. We then saw very clear changes in magnetic resonance imaging of the muscle. There were significant improvements in MRI T2 rate of change compared to the off-treatment control period.

With edasalonexent treatment, we also saw decreases in the rate of fat accumulation in boys' muscles, which is key since fat accumulation correlates with impaired functional abilities. Importantly, we have seen slowing in the decline of all four assessments of physical functions performed in the MoveDMD trial.

On their own, each of these results is extremely encouraging. Together, we believe they tell a compelling story of edasalonexent as a foundational disease modifying therapy with a potential to change the way we treat Duchenne for all those affected regardless of mutation.

I will now turn the call over to Joanne Donovan, our Chief Medical Officer, who will discuss the latest edasalonexent data through a year of treatment and our plans to advance edasalonexent as quickly as possible to help the thousands of boys affected by the disease. Joanne?

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Joanne Donovan, Catabasis - CMO, SVP Clinical Development [4]

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Thank you, Jill and good morning, everyone. A couple of weeks ago, at the American Academy of Neurology Annual Meeting, we presented new MRI data through 48 weeks of treatment with edasalonexent.

We were delighted to see significantly slowed DMD disease progression as measured by MRI through one year of edasalonexent treatment compared to the off-treatment control period.

We are excited about these MRI results, since MRI is a really valuable tool for assessing muscle health and disease progression. FDA also recently confirmed the utility of MRI as an informative endpoint in their final guidance for developing therapies for muscular dystrophies published earlier this year.

In the MoveDMD trial, we enrolled boys' age four to seven who are not on corticosteroid. In the trial, we measured changes in MRI over a period prior to the Phase Two treatment period and pre-specified our analysis plans to compare the rates of change during this control period to the treatment period on edasalonexent.

We know from natural history studies that boys with Duchenne in this age group are slowing down in their speeds to perform activities such as standing up, climbing stairs, as well as the amount of fat in their muscle which is increasing.

Slide six provides an overview of the MRI measurements we used in the MoveDMD trial including both MRI T2 and Magnetic Resonance Spectroscopy. MRI T2 measures both inflammation and fat in muscle. MRS provides an independent measure of fat fraction in the muscle. Both MRI T2 and fat fraction are known to increase with age in boys with Duchenne.

Importantly, MRI T2, as well as MRS fat fraction has been shown to strongly correlate with functional abilities. Increased MRI T2 and MRI fat fraction correlate with worst performance or decreased speed on time function test.

And a more recent data emerging from the ImagingDMD Group, these measures have also been shown to predict future loss of functional abilities.

Slide seven shows the annualized change in MRI T2 for our pre-specified endpoint, the composite of the five lower leg muscles through 48 weeks of oral 100 milligram per kilograms edasalonexent treatment.

Off-treatment as shown by the grey bar, MRI T2 increased at a rate of 3.8 milliseconds per year, which is consistent with the observations that the boys have functional declines during the off-treatment control period.

After almost a year of treatment, the MRI T2 change was essentially stabilized and the comparison before and after treatment was statistically significant. This stabilization of muscle as assessed by MRI T2 is consistent with the slowing of disease progression that we also observed in the functional assessment.

Slide eight shows the rate of fat accumulation in both of the muscles assessed, the soleus and vastus lateralis through 48-weeks of edasalonexent treatment. The soleus is in the lower leg, the calf muscle and the vastus lateralis is a component of the quad, quadriceps in the upper legs.

These two muscles are a particular interest because they are both subjected to considerable mechanical stress. In the off-treatment control period, there was an increase in the amount of fat in these muscles and this annualized rate of increase was reduced on edasalonexent.

The ImagingDMD natural history study investigators are collecting MRI including fat fraction data on a large group of boys annually. The ImagingDMD natural history study and our MoveDMD trial were performed at the same clinical sites using the same protocols for the assessments.

This allows us to put the MoveDMD results into perspective relative to their natural -- larger natural history study. We saw a greater reduction in the rate of fat accumulation in boys on edasalonexent treatment than in boys in the ImagingDMD natural history study who were largely on steroids.

This is exciting, because we know that MRI measures are correlated with functional measures starting on Slide nine. In the MoveDMD trial, we saw increasing fat accumulation off-treatment and correspondingly as you'd expect, we also saw declines in functional measures such as the North Star Ambulatory Assessment in the off-treatment control period.

North Star is a validated composite measure of 17 physical function tests with each activity assessed by a clinical evaluator.

Consistent with MRI stabilization following 48 and 60 weeks of edasalonexent treatment, the rate of decline in North Star stabilized compared to control.

Based on discussion with FDA, we plan to use the North Star test as our primary endpoint in the upcoming Phase Three trial. We also saw that the rate of decline for each of the three time function tests was stabilized through 48 and 60 weeks of edasalonexent as seen on Slide 10.

Based on the growing data to support the potential of edasalonexent as foundational therapy over the lifetime of the Duchenne patient, we are pleased to see that it continued to be safe and well-tolerated through over 40 patient years of treatment.

These data, along with input from the FDA, KOLs and families have informed a rigorous and meaningful design for our Phase Three study. We believe we have a clear path to registration. We are planning a single global Phase Three trial with many fundamental elements in common with our MoveDMD trial including the patient population and key endpoints.

The patient population for the Phase Three trial will include boys aged four through their seventh birthday regardless of mutation types and who have not been on steroids for at least six months.

We expect to enroll approximately 125 boys and plan to have the primary endpoint with the North Star Ambulatory Assessment following 12 months of edasalonexent treatment compared to placebo.

We also plan to include the same time function test as the MoveDMD trial. We are planning to differentiate the safety profile of edasalonexent by including cardiac and bone measures at baseline and following treatment.

Thank you very much to all the participants in the MoveDMD trial and their families, as well as the Duchenne community for your sustained enthusiasm and dedication. I'll now pass the call over to Andy Nichols, our CSO who will share a research update. Andy?

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Andrew Nichols, Catabasis - CSO [5]

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Thank you, Joanne, and good morning everyone. Slide 11 illustrates our pipeline. As Jill shared, we have prioritized our resources to focus on edasalonexent currently as it provides to most near-term valued patients and shareholders. The team completed important work on CAT-5571 in the first quarter and this program is not a focus right now.

An opportunity that I wanted to touch on today is the potential of edasalonexent in Becker muscular dystrophy, a rare muscular disease that is caused by mutations in the gene encoding dystrophin, that results in Becker patients expressing low levels of the dystrophin protein, but not absent as is seen in Duchenne.

In the disease setting, dystrophin protein production is reduced through NF-kappaB mediated induction of microRNAs that inhibit dystrophin translation from Messenger RNA.

It is being shown by others that inhibition of NF-kappaB in Becker directly enhances dystrophin production and we have shown pre-clinically that edasalonexent can increase dystrophin production, protein production in the presence of small amounts of dystrophin Messenger RNA production.

Additionally, the leading cause of death in Beckers is cardiomyopathy and we expect edasalonexent to be active in the heart based on preclinical exposure data, the amount reduction in cardiac fibrosis that we have seen with NF-kappaB inhibition in MDX mice and the positive effects of edasalonexent and the enhanced rate that we have seen in Duchenne patients at our MoveDMD trial.

There are currently no approved therapies in BMD. We believe that BMD represents an exciting opportunity for edasalonexent.

I'll now turn the call back over to Jill.

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Jill Milne, Catabasis - Founder, CEO [6]

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Thank you, Joanne and Andy. Turning to our financials, our first quarter 2018 press release and 10-Q provides the details. So I would give a brief summary. As of March 31, 2018, we had $17.0 million of cash and cash equivalents; we expect to be able to fund operations through December 2018.

To advance edasalonexent in the Phase Three trial, we are seeking additional funds through equity or debt financings and/or through partnering or licensing transactions.

In the first quarter of 2018, our net cash used in operating activities was $6.8 million. Our R&D expense was $5.2 million in Q1 2018, compared to $5.4 million in Q1 2017, a decrease of $0.2 million.

Our G&A expense remained consistent at $2.4 million in the first quarter of 2018 and the first quarter of 2017. Our operating loss was $7.6 million in Q1 2018, a decrease of $0.2 million versus Q1 2017.

Our net loss was $7.7 million or $0.29 per share in Q1, a decrease by $0.2 million compared to our net loss in Q1, 2017.

For the first quarter, we had weighted average common shares outstanding of $26.6 million. Additional financial information is available in our 10-Q, which we filed with the SEC earlier today.

As we look at the slide I shared earlier that shows the rapid progression of Duchenne, we were reminded of how devastating this disease is for both the young boys affected and for their families. With every new set of data on edasalonexent, I am more optimistic that we can change the seemingly inevitable decline.

The MRI data are compelling on their own, but when you layer them on top of the consistent improvements seen across boys' functional abilities and the other positive biomarkers, they tell a story of edasalonexent's potential to change how we treat this disease with a hope of extending boys' functional abilities.

Our excitement around edasalonexent's potential is matched by the physicians and families impacted by Duchenne and we appreciate their continued support and encouragement.

The registration study that we have designed for edasalonexent reflects our learnings from the MoveDMD trial and feedback from physicians, advocacy, families and FDA, our team has worked hard to prepare for our Phase Three study and we look forward to initiating it as soon as possible, so that we can make edasalonexent available to boys who can benefit.

With that, I'll ask Bruce to open up the call for your questions. Bruce, can you please repeat the instructions and pool for questions? Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions)

And our first question comes from the line of Joel Beatty from Citi. Your line is now open.

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Joel Beatty, Citi - Analyst [2]

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Hi, good morning and thanks for taking the question. I noticed that the cash runway, I think, it goes to December now, which I think is longer than it was a couple of months ago. Could you discuss any changes in operational plans that go along with the change in cash runway?

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Jill Milne, Catabasis - Founder, CEO [3]

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Sure, Joel. I'll take that question. Yes, so as you know, we have focused our resources on edasalonexent as our lead program and that has positively impacted our cash runway.

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Joel Beatty, Citi - Analyst [4]

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Okay. Is there a start date that's planned for the Phase Three trial?

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Jill Milne, Catabasis - Founder, CEO [5]

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We don't have a defined start date. That start date will be dependent on raising capital and so it will be soon after that. We are in the process of preparing for the Phase Three trial.

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Joel Beatty, Citi - Analyst [6]

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Perfect. And then, on the MRI imaging data, which you shared more of the AAN and I think that eventually when you go back to the initial primary results. We saw a small trend in the T2 primary endpoint, but in the randomized portion of the trial.

But now, you know, with longer-term analysis that we are seeing a much stronger trend that's statistically significant. Could you just explain that the differences on why you think that maybe showing up now?

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Jill Milne, Catabasis - Founder, CEO [7]

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Yes, let me start and then hand it over to Joanne. So if you remember, yes, our pre-specified analysis of the MRI T2 of the composite five lower leg muscles, at 12 weeks saw directionally positive data showing a reduction on the 100 milligram per kilogram with the boys treated with 100 milligrams per kilogram.

When you do that comparison of off-treatment to on-treatment, that does hit statistical significance albeit it's a small signal at 12-weeks and indeed that difference grows over time. And maybe I'll hand it over to Joanne to touch on that.

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Joanne Donovan, Catabasis - CMO, SVP Clinical Development [8]

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The original comparison, as Jill said was, to compare the treated group to the placebo group. One of the strengths of the study is that we had a control period to look at MRI changes before the initiation of edasa treatment.

And when we look at that, the same boys before and after initiation of treatment with a 100 milligram per kilogram edasa, indeed it was statistically significant at 12-weeks, 24-weeks, 36-weeks and 48-weeks as we showed at the AAN Meeting.

And that's corroborated by the changes or the relative lack of changes that we see in the fat fraction data as well. So we are really quite pleased with the evolution of the MRI data.

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Joel Beatty, Citi - Analyst [9]

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Okay, and then, last question is just a follow-up to that. When you compare, boys during the off-treatment period to the treatment period, is there a -- how does the use of corticosteroids compare in those two points in time? And are there any differences that need to be considered in that analysis?

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Joanne Donovan, Catabasis - CMO, SVP Clinical Development [10]

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Thanks, Joel. It is an important question and we are fortunate to be able to put the data in perspective with data from the ImagingDMD natural history study, which is now about 175 boys, 500 times at which they looked at the information on an annual basis.

Those boys are largely on steroids. So we are comparing our data in terms of the increase in fat to the increases that were observed in a group that was largely on steroids. And we are seeing that the increase in both the soleus and the vastus lateralis was actually less than that, which is extremely encouraging.

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Jill Milne, Catabasis - Founder, CEO [11]

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And Joel, just to be clear, I am not sure if you meant by your question, did our boys during the trial go on to steroids? Our boys were not on steroids throughout the MoveDMD trial, both in that pre-treatment control period, as well as once they went on edasalonexent.

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Joel Beatty, Citi - Analyst [12]

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Okay, great. Thank you. That's helpful.

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Operator [13]

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And our next question comes from the line of Liana Moussatos from Wedbush. Your line is now open.

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Liana Moussatos, Wedbush - Analyst [14]

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Thanks for taking my question. In addition to raising funding for the Phase Three, what are all the next steps before you can start dosing patients?

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Jill Milne, Catabasis - Founder, CEO [15]

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Yes, thanks, Liana for the question. So, we are currently in the process of getting the clinical sites online for the Phase Three trial. So it's a matter of finishing that. We have our drug product prepared and ready to go and are finalizing some of the operational details of that study.

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Liana Moussatos, Wedbush - Analyst [16]

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Thank you.

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Operator [17]

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And our next question comes from the line of Hartaj Singh from Oppenheimer. Your line is now open.

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Emma Nealon, Oppenheimer - Analyst [18]

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Hi, good morning. This is Emma on for Hartaj. So, based on FDA's recently published DMD guidance, particularly on the MRI endpoints, given your data at AAN, have you had the opportunity to discuss the MoveDMD dataset with regulators and just get any feedback there?

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Joanne Donovan, Catabasis - CMO, SVP Clinical Development [19]

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Yes. Hi, Emma. That's a great question. And so, well, we cannot speak about the specifics of our regulatory strategy or interactions before they happen. I will put out there that we will pursue all available options to us to expedite getting edasalonexent moved forward as quickly as possible.

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Emma Nealon, Oppenheimer - Analyst [20]

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Great. And then, just to clarify on the recent restructuring, do you still intend to bring 5571 into the clinic at some point in the future? Or is that something you would maybe consider monetizing or out-licensing in the mean time while you focus on edasa?

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Jill Milne, Catabasis - Founder, CEO [21]

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Yes, that's a great question. As you know, and as Andy pointed out, we have completed IND enabling activities with CAT-5571. So it is poised for a Phase One clinical trial. We see great potential in that molecule as a novel activator of Autophagy and see great potential not only in cystic fibrosis, but other indications.

Our intention right now, we are focused on edasalonexent and advancing this program into our Phase Three clinical trial and we will be exploring options for advancing CAT-5571 and that could involve through partnering or otherwise. But right now, our focus is on edasalonexent.

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Emma Nealon, Oppenheimer - Analyst [22]

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Great. Thanks, Jill.

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Operator [23]

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(Operator Instructions)

And at this time, I am showing no further questions.

I would like to turn the call back over to Jill Milne for any closing remarks.

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Jill Milne, Catabasis - Founder, CEO [24]

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Thank you, Bruce. We're excited about the strong and consistent edasalonexent data with assessments of muscle function, as well as non-effort based measures, such as MRI through a year of treatment and we are looking forward to initiating the Phase Three trial as we move edasalonexent towards registration.

We believe that edasalonexent represents an important and differentiated opportunity to treat everyone affected by Duchenne. At Catabasis, we are dedicated to improving the lives of people and their families affected by rare disease.

Thank you all for joining our call today and for your continued support. We look forward to speaking with you again soon and keeping you updated on our progress. Have a good day. Andrea?

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Andrea Matthews, Catabasis - VP, Corporate Affairs [25]

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That concludes today's call. A webcast replay will be available for 90 days via the Investor Relations page on our website at www.catabasis.com. Thank you.

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Operator [26]

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Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may all disconnect. Everyone have a great day.