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Edited Transcript of INNT earnings conference call or presentation 29-Apr-19 12:00pm GMT

Q1 2019 Innovate Biopharmaceuticals Inc Earnings Call

SIMI VALLEY May 1, 2019 (Thomson StreetEvents) -- Edited Transcript of Innovate Biopharmaceuticals Inc earnings conference call or presentation Monday, April 29, 2019 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Jennifer K. Zimmons

Strategic Growth International, Inc. - MD

* Patrick H. Griffin

Innovate Biopharmaceuticals, Inc. - Chief Medical Officer

* Sandeep Laumas

Innovate Biopharmaceuticals, Inc. - CEO & Executive Chairman of the Board

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Presentation

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Operator [1]

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Greetings, welcome to Innovate Biopharmaceuticals First Quarter 2019 Financial Results and to Provide Operational Progress Conference Call. I will now turn the conference over to your host, Jen Zimmons. Thank you. You may begin.

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Jennifer K. Zimmons, Strategic Growth International, Inc. - MD [2]

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Thank you, operator. Good morning, and thank you for joining us to discuss our recent business progress and Innovate Biopharmaceuticals' 2019 First Quarter Results and Operational Progress Updates Conference Call. The press release containing the company's financial results for Q1 2019 was issued earlier this morning. Joining our call are Dr. Steve Laumas, Chairman and CEO; and Dr. Griffin, Chief Medical Officer. Jay Madan, President and Chief business Officer will be joining the Q&A session.

Before we begin, I'd like to remind everyone that this conference call includes forward-looking statements. Each forward-looking statement contained in this call is subject to risks and uncertainties that could cause actual results to differ materially from those described in the statements. Additional information regarding these factors are described in the risk factors in Management's Discussion and Analysis section of our most recent quarterly and annual financial reports. The forward-looking statements on this call speak only as of the original date of this call, and we do not undertake any obligation to update or revise any of these statements. With that, I'd like to turn the call over to our CEO, Dr. Laumas.

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Sandeep Laumas, Innovate Biopharmaceuticals, Inc. - CEO & Executive Chairman of the Board [3]

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Thank you, Jennifer. Good morning, everyone, and thank you for joining us today. We are really excited to announce not just the progress updates regarding our celiac program, as well we're very excited about the NASH data that we highlighted in our earnings release this morning. This data gives us confidence we potentially have an active drug, as one of the leading NASH experts, Dr. Stephen Harrison mentioned, we really need to study larazotide in NASH patients soon. Our first quarter 2019 has been a very busy time for the company to prepare for the launch of our first Phase III celiac trial, and Dr. Griffin will get into more details as we approach the first patient in. As we've highlighted previously, celiac disease remains a large unmet need as the only current therapy is a gluten-free diet, which has several well-recognized shortcomings such as contamination and difficult adherence. Launch of this first-ever Phase III trial in celiac disease is a major milestone for the patient community who've been waiting for the first ever drug as well as for Innovate as a company. Due to the well-established safety profile of larazotide, it's very suitable as a long-term chronic therapy for celiac disease as well as diseases such as NASH.

In addition, due to its unique mechanism of action, which we have been actively studying, and its potential application in multiple diseases such as NASH, type 1 diabetes, chronic kidney disease and others, we can rapidly move to the clinic after gathering adequate translational data. We've been studying larazotide and NASH over the past year or so due to the recognized body of literature linking increased intestinal permeability to translocation of bacterial antigens and toxins from the gut bacteria or the microbiome, which can have a direct toxic effect on liver cells. Several scientists have tested gene knockout models, which create a leaking intestinal barrier, leading to development on NASH and fibrosis in several translation models. If -- we tested larazotide on the leaky intestinal barrier in the diamond NASH model last year and showed we could reverse permeability in that model. The data was press released last fall and presented both at the AASLD in November last year as well as in an oral presentation at EASL this month in Vienna.

Due to the complex and multifactorial etiology of NASH, most experts agree combination therapy will be the ultimate solution with different mechanisms producing a synergistic effect. This has also been shown with a increasing number of clinical collaboration amongst companies such as recently between Gilead and Novo Nordisk for Gilead's FXR agonist and ACC inhibitor, combined with Novo's GLP-1 semaglutide. Due to the anti-inflammatory nature of larazotide in preventing translocation of known toxins, we tested in combination with acid or OCA. OCA is an FXR agonist and is currently approved and marketed as Ocaliva for primary biliary cirrhosis by Intercept Pharmaceuticals. OCA was granted breakthrough designation for NASH and the Phase III NASH trial recently met its primary end point based on Intercept's recent guidance, the expectation is for them to file their NDA later in the second half of 2019. If approved for NASH, OCA would be the first drug in a very large market. We tested larazotide in the AMLN-diet Gubra NASH model and found some very exciting data that we released this morning in our earnings released, specifically, in the 12-week preclinical study, combining larazotide with a obeticholic acid. The data demonstrated statistically significant reductions in plasma cholesterol, both absolute and relative liver weights, relative and total liver cholesterol, relative and absolute liver triglycerides when compared between vehicle as well as a obeticholic acid alone.

The nonalcoholic fatty liver disease activity score, NAS score, the clinical measure of NASH activity, improved in the majority of animals tested with the combination of larazotide in OCA. Histological steatosis scores as well trended positively and lobular inflammation was statistically significant with improvement in the combination drug group as well.

We'll further discuss some of those data at an Analyst Meeting we'll be holding at the DDW, Digestive Disease Week conference in San Diego on May 20.

In summary, we now have a drug with positive data in a NASH -- in a known NASH preclinical model with an entirely novel mechanism. In addition to the celiac and NASH areas, we are testing larazotide in alcoholic steatohepatitis, which we discussed several months ago later -- in the fall of last year. As well as a more recent collaboration in immuno-oncology, from which we are waiting data from the microbiome immuno-oncology study.

We are studying larazotide's effect on converting checkpoint inhibitors, or PD-1 nonresponders to responders via modulation of gut permeability and the microbiome. This has, more recently over the past 18 months, become a very highly studied area.

It's well known in spite of the great success of checkpoint inhibitors, they only tend to work in 20% of the time, therefore, understanding why majority of patients don't respond would further solving potentially a major unmet need.

In terms of our financials, we ended the quarter -- the first quarter with $11.5 million of cash after an equity raise last month. Our guidance is unchanged with respect to funding the interim readout of the first Phase III celiac trial. And now let me pass the call on to Dr. Griffin regarding more details about the execution and the start of our first celiac Phase III clinical program.

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Patrick H. Griffin, Innovate Biopharmaceuticals, Inc. - Chief Medical Officer [4]

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Thank you, Steve. As we updated you all a few weeks ago on our last earnings call, we are actively working on preparing for the first patient to be screened in our Phase III celiac disease trial. We have laid the groundwork with more than 150 sites identified and selected. IRB approval for the study protocol is expected shortly. We've established a great working relationship with our CRO and are fortunate to have a very experienced team in place, both internally and externally. All data collection instruments, including the electronic diary as well as data analytics have been established, and we have a robust process in place ready for patient screening. We look forward to discussing further at the next investor event. Thank you. And with that, I'll turn it back to Dr. Laumas for additional remarks.

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Sandeep Laumas, Innovate Biopharmaceuticals, Inc. - CEO & Executive Chairman of the Board [5]

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Thank you. We look forward to seeing you all if you can attend the Analyst Meeting at Digestive Disease Week on Monday, May 20. It will also be web-casted, and we'll discuss more details about our clinical path forward for NASH as well as more details on the progress on the celiac trial. With that, let's open it up for Q&A.

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Questions and Answers

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Operator [1]

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(Operator Instructions) This concludes today's conference. You may disconnect your lines at this time. Thank you.