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Edited Transcript of SYBX earnings conference call or presentation 12-Mar-19 12:00pm GMT

Q4 2018 Synlogic Inc Earnings Call

Austin Mar 18, 2019 (Thomson StreetEvents) -- Edited Transcript of Synlogic Inc earnings conference call or presentation Tuesday, March 12, 2019 at 12:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Aoife M. Brennan

Synlogic, Inc. - President, CEO & Chief Medical Officer

* Elizabeth Wolffe

Synlogic, Inc. - Head of IR & Corporate Communications

* Todd E. Shegog

Synlogic, Inc. - CFO

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Conference Call Participants

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* Edward Andrew Tenthoff

Piper Jaffray Companies, Research Division - MD & Senior Research Analyst

* Joseph Patrick Schwartz

SVB Leerink LLC, Research Division - MD of Rare Diseases & Senior Analyst

* Julian Reed Harrison

BTIG, LLC, Research Division - Analyst

* Mark Alan Breidenbach

Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst

* Raghuram Selvaraju

H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst

* Samantha Lynn Semenkow

Citigroup Inc, Research Division - Senior Associate

* Taylor Josephine Feehley

Chardan Capital Markets, LLC, Research Division - Senior Research Analyst of Biotechnology and Pharmaceuticals

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Presentation

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Operator [1]

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Good morning. Welcome to Synlogic's Fourth Quarter and Full Year 2018 Conference Call. (Operator Instructions) Please be advised that this call is being recorded.

I would now like to turn the call over to Dr. Elizabeth Wolffe, Head of Investor Relations and Corporate Communications. Please proceed.

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Elizabeth Wolffe, Synlogic, Inc. - Head of IR & Corporate Communications [2]

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Thank you, Michelle. Good morning, and thanks for joining us on today's conference call. Earlier this morning, we issued a press release, which outlines our fourth quarter and full year 2018 financial results and several other topics that we plan to discuss today. The release is available on the Investors section of our website. Joining me on this call are Aoife Brennan, President and Chief Executive Officer; and Todd Shegog, Chief Financial Officer. Aoife will provide a brief outline of our recent progress; Todd will summarize our financial results for the quarter and the full year for 2018; and finally, Aoife will cover our upcoming milestones. Following our prepared remarks, we'll open the call for questions.

As we begin, I'd like to remind everyone that comments from today may include forward-looking statements made under the Private Securities Litigation Reform Act of 1995. These forward-looking statements are made as of the date hereof and are subject to numerous factors, assumptions, risks and uncertainties, which will change over time. Actual results could differ materially from those contained in any forward-looking statements as a result of various factors, including those described under the heading Forward-looking Statements in Synlogic's press release from earlier today or under the heading Risk Factors in Synlogic's most recent Form 10-K, or in later filings with the SEC. Synlogic cautions you to not place undue reliance on any forward-looking statements.

Now I'd like to turn the call over to Aoife.

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Aoife M. Brennan, Synlogic, Inc. - President, CEO & Chief Medical Officer [3]

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Thanks, Liz. Good morning, everyone, and thank you for joining us on our first quarterly update call of 2019, where will be discussing our financial results, progress in 2018 and what's shaping up to be a busy year for Synlogic in 2019.

At Synlogic, our mission is to design for life. To rationally engineer living medicines that have potential to dramatically change the life of patients. We're developing a novel class of living medicines using synthetic biology to engineered nonpathogenic bacteria to perform therapeutic functions that may be missing or impaired in a patient. There is a growing appreciation that there are notable advantages to living medicines, which can act catalytically like little bioreactors, and in the case of Synthetic Biotic medicines, can be programmed with more than one therapeutic function. We believe that there are many patients today with diseases for which there are no or inadequate treatments. This may be because the disease biology is too complex to be addressed with a single molecule. These diseases provide opportunities that may be uniquely addressed by our cellular therapies programmed for efficacy and control, allowing us to fulfill our mission of making a difference in patients' lives. While we believe that the opportunities for our platform are very broad, we're focused near term in 2 areas of biology, namely, metabolic diseases and immunomodulations.

Our initial strategy has been to select internal programs for which there is well-validated biology that provide us with a clear idea of the metabolic function that we need to engineer into the bacteria in order to have a therapeutic effect. We work with a nonpathogenic strain called E. coli Nissle that is well understood, readily engineerable and grows quickly. We use a core principle of synthetic biology in the development of our Synthetic Biotic medicines. A concept known as design-build-test. This is an approach in which we rapidly create and test rationally designed strains and then iterate on them to optimize their activity and potency. Our platform is incredibly-tastic. We can rapidly engineer candidate strains and have created over 40 strains that have different functionality in vitro. From a platform perspective, we have recently been focusing on 2 areas to realize the therapeutic potential of our Synthetic Biotic medicines.

The first is predictive pharmacology. We need to be able to predict activity at the site of action in humans by developing preclinical model systems that we can continue to validate and optimize as we learn more in the clinic. Secondly, we focus on learning how to optimize the activity of our strains in vivo. To achieve this second platform objective, we have ongoing collaborations to evaluate complementary technologies that may help us to improve strain activity. Our collaboration with Ginkgo Bioworks leverages their massively parallel approach to screening genetic construct. We have also recently initiated a collaboration with a technology company called enEvolv to evaluate the use of a directed evolution approach. I'm not going to go in too much details about this now, however, this is part of our continued development of the platform and particularly important, as we learn from our initial programs and establish activity parameters and standards for the advancement of additional Synthetic Biotic medicines into our pipeline.

We made a decision to take our technology into clinical trials and into patients as rapidly as possible in our first design-build-test cycle. We wanted to confirm that this approach was safe, that our engineered bacteria were doing what they were programmed to do in the human body and to gain a better understanding of the predictive value of our preclinical model systems and how they translate to the clinical experience. In addition, we're also learning the platform strengths and what's the sweet spot for our technology by prosecuting programs that are active in different parts of the body, small intestines, colon and tumor. In tandem, we've been developing, manufacturing an appropriate formulation processes and capabilities. I'm very pleased to share that the last year has been a period of significant progress and learning for Synlogic, regarding the safety and translation of our lead programs, manufacturing and platform positioning.

In summary, we've completed and reported data from clinical trials in healthy volunteers of 2 of our orally administered Synthetic Biotic medicines. SYNB1020 to address hyperammonemia and SYNB1618 for phenylketonuria, or PKU. We have demonstrated the both are safe cleared from the GI tract on cessation of dosing and are performing the function they were designed to perform. We're currently evaluating both strains in patients and expect that the data that we will obtain from each some time in the middle of this year will provide important information for further development of these programs, as I will discuss later as well as valuable inputs at how we select, design and build the next set of clinical programs.

We've published supporting preclinical data from both programs in high-impact journals. More recently, data from our SYNB1020 program does include a preclinical data and data from our Phase I healthy volunteer study were published in Science Translational Medicine. As we explore building strains for immunomodulation in our AbbVie collaboration, it became evident that there were opportunities for our Synthetic Biotic platform in cancer immunotherapy. Late last year, we announced the selection of our first immuno-oncology candidate SYNB1891. A strain designed to have multiple effects on the immune system in the tumor, based on properties of our chassis and a circuit designed to express a STING agonist.

Our approach is to use intratumoral administration to understand safety and the potential of our Synthetic Biotic approach in IO. SYNB1891 is currently in IND-enabling studies with the goal of filing an IND in the second half of 2019. We're on track to meet that goal and expect to have more details to share around the development path for that program on future calls.

As I mentioned earlier, we've been investing in process development in parallel with our ongoing clinical work, and last year, announced an agreement that provided a cost-effective solution that enabled us to expand manufacturing capabilities and allow in-house manufacturing of liquid and solid forms of our drugs for early and mid-stage clinical trials. This is game-changing for us as we advance into our next stage of clinical testing, as it maximizes our ability to move quickly and with our own developers running the process with a higher degree of confidence in the product.

We began our clinical testing with a liquid formulation of our bacteria. However, going forward, all studies of our orally administered therapy will use a solid formulation which is more patient-friendly and one that could be developed for commercialization. An important part of our investment was the hiring of a Head of Technical Operations Tony Awad. Tony has an -- had an immediate impact on the organization based on his experience at process development, manufacturing and regulatory affairs. He has built out the GMP Manufacturing team and they are already operating in our clean-room suite.

On a similar note, we added a new member of our board -- to our Board of Directors, Dr. Patricia Hurter, Senior Vice President of Pharmaceutical and Preclinical Sciences at Vertex Pharmaceuticals. Trish is a well-recognized innovator in the area of product development and manufacturing, and has successfully led the development of several impact -- high-impact medicines that have required paradigm-changing approaches in pharmaceutical science. We're looking forward to benefiting from her pioneering spirit and console.

Before I provide more detail on our expectations for each of our 2 clinical trials that will read out later this year, let me hand over to Todd, who will briefly summarize our financial results for the fourth quarter and full year of 2018. Todd?

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Todd E. Shegog, Synlogic, Inc. - CFO [4]

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Great. Thank you, Aoife, and good morning, everyone. As you know, earlier today, we released our financial results for the fourth quarter and full year ended December 31, 2018. And I am pleased to review the highlights of those results with you now.

Revenue was $0.1 million for the fourth quarter of 2008 (sic) [2018] and the same for the -- same -- in the same period in 2017. Revenue is associated with payments received for services performed under Synlogic's collaboration with AbbVie to develop a Synthetic Biotic medicine for the treatment of IBD.

Total operating expenses for the fourth quarter of 2018 were $12.8 million compared to $12.0 million for the same period in 2017. Research and development expenses were $8.9 million for the fourth quarter 2018 compared to $7.7 million for the corresponding period in 2017. The increase was primarily due to an increase in compensated -- compensation-related expenses associated with our increased headcount and increases in expenses related to the lease of our facility at 301 Binney Street in Cambridge, which Synlogic occupied in January of 2018.

General and administrative expenses for the fourth quarter ended December 31, 2018 were $4.0 million compared to $4.3 million for the corresponding period in 2017. The decrease was primarily due to decreases in professional fees, partially offset by increases in compensation-related expenses associated with increased headcount and increases in expenses related to the lease of Synlogic's facility at 301 Binney Street.

For the fourth quarter ended December 31, 2018, Synlogic reported a consolidated net loss of $11.9 million or $0.47 per share compared to a net loss of $11.7 million or $0.74 per share for the corresponding period in 2017.

For the full year 2018, revenues were $2.5 million compared to $2.4 million for the same period in 2017. Total operating expenses were $53.8 million in 2018 compared to $43.3 million in 2017, with the increase primarily attributed to compensation-related expenses associated with increased headcount, increased expenses related to the lease of Synlogic's facility at 301 Binney Street, and increased external costs associated with the development of Synlogic's Synthetic Biotic programs. The net loss for the full year of 2018 was $48.4 million or $2.03 per share compared to a net loss of $40.4 million or $6.00 per share for 2017.

Turning to the balance sheet. Synlogic ended the fourth quarter of 2018 with $122.7 million in cash, cash equivalents and short-term investments. This number does not include the payment from AbbVie that was triggered as a result of the milestone that we announced just last week. I'm pleased to say that Synlogic is in a solid financial position as we begin 2019 with cash that will take us through 2020 under the current plans. We look forward to an exciting and busy year ahead as we continue to advance our pipeline of Synthetic Biotic medicines. Thank you.

I will now turn the call back over to Aoife.

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Aoife M. Brennan, Synlogic, Inc. - President, CEO & Chief Medical Officer [5]

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Thank you, Todd. 2019 will be a year of significant progress for the company with patient data from 2 metabolic disease programs in mid-2019 as well as our immunomodulation programs, our IO program advancing towards the clinical and continued advancement of our IBD program in collaboration with AbbVie. As I mentioned earlier, lessons learned from our lead programs allow us to iterate on our platform in terms of advancing platform capabilities and rationally designing our next wave of Synthetic Biotic medicines.

Now I'd like to take this opportunity to briefly run through the type of data that you can expect from the 2 clinical studies that will read out later this year and how these data will inform our plans and pipeline. First, let me outline the SYNB1020 study. We are evaluating SYNB1020 in patients with cirrhosis and elevated blood ammonia level, who have not yet been hospitalized with the crisis. This strain was designed to consume ammonia, which when elevated in the blood contributes to cognitive impairment and crisis. The primary endpoint of the study are safety and tolerability. And we began, at the FDA's request, by treating a sentinel cohort of 6 patients with mild liver damage to ensure that SYNB1020 was well tolerated in this population, which often has impaired gut barrier function and is susceptible to infections. The data were assessed by a safety committee and we proceeded with our planned, randomized placebo-controlled double-blind study.

In addition to safety and tolerability, we're also evaluating the effects of SYNB1020 treatment on blood ammonia levels. Knowing the variability of this measure, we've done a significant amount of work with each of the sites to ensure that they have a good baseline for normal blood ammonia and that the ammonia testing, which is done locally, is carried out rapidly on fresh samples. Patients also do not enter the 6-day study unless they are determined to have elevated blood ammonia levels after a 5-day run-in period of a standardized diet in an in-patient setting. We made certain assumptions about the variability of the ammonia measurements in the powering of this study, and as an interim time point, we'll have an independent observer assess the ammonia data and inform us if we have treated a sufficient number of subjects for the results to be informative.

We are also evaluating a number of exploratory endpoints that are relevant to hepatic encephalopathy, including inflammatory markers and cognition. The question we want to answer is whether the strain's activity, which we demonstrated in the healthy volunteer trials, is sufficient to be clinically meaningful in patients.

With ammonia-lowering data and other supportive outcomes in this population, which we expect to have in the middle of this year, we will make a decision as to the development path for SYNB1020. We expect that top line data will be released by press release and that the full data set will be presented at an appropriate medical meeting. We look forward to updating you all later this year.

Our second ongoing clinical trial is to evaluate SYNB1618, our Synthetic Biotic medicine for the treatment of PKU. This is an expansion of the study that we reported last year in healthy volunteers, and is now evaluating SYNB1618 in a single-dose and multiple-dose cohort in patients with disease. SYNB1618 was designed to consume phenylalanine, or Phe, which when elevated in the blood results in cognitive impairment. Again, this is a randomized placebo-controlled double-blind study and will provide us with important information regarding the activity of SYNB1618 in patients.

Specifically, we will learn if and how the pharmacodynamics of this medicine differ in patients with PKU, who have elevated Phe. Our 1618 strain has more sophisticated engineering than 1020, and we've engineered 2 mechanisms for consuming Phe into the bacteria. The first is a phenylalanine lyase gene that expresses an enzyme PAL, and the second is L-amino acid deaminase gene that expresses the enzyme LAAD. While both consume Phe, PAL is particularly useful because it consumes 1 molecule of Phe and leads to the production of an equivalent amount of the useful biomarker called trans-cinnamic acid, or TCA. This biomarker can be detected in the serum and can be metabolized in the liver to produce hippuric acid, which is excreted in the urine. Based on these biomarkers, we were able to determine that the strain was working as designed in healthy volunteers.

In our current study, we would be looking at biomarkers for both enzymes in order to build an understanding of SYNB1618's impact on patient Phe level. When we analyzed and presented data from our healthy volunteer cohorts in the study, we reported dose-dependent increases in TCA and hippuric acid from both a protein meal and a stable-isotope tracer. However, we did not have a good assay for LAAD in vivo and so could not confirm that it was contributing to Phe consumption. The LAAD enzyme product, phenylpyruvate, is difficult to measure unless useful as a biomarker if it can be converted into multiple different products, and if so -- and so is not quantitative. In parallel with the execution of the clinical study, we've been working on developing an assay that will allow us to determine if LAAD is consuming Phe in human. In addition, we've been working on quantitative models that allow us to determine the relationship between these biomarkers and the approvable endpoint in patients with PKU which is Phe-lowering.

While we will, of course, measure Phe levels in patients in the current study, this is a small study, and so not powered to demonstrate a statistically significant Phe lowering. To answer that question, we expect to carry out a larger patient study in which subjects are evaluated over a longer period of time and do not have to be dosed in an in-patient setting. Our new manufacturing capabilities will also enable us to shift from a liquid formulation to a solid oral formulation for patients to use at home. And we see potential for that to enable dosing in this next study.

In summary, we will measure Phe in the ongoing Phase I/IIa study, and we'll measure TCA, hippurate and LAAD metabolites with a goal of understanding how SYNB1618's activity in patients compared to its activity in healthy volunteers. We're on track to have data from this study midyear, and I look forward to updating you. Again, we expect to release top line data in a press release and to provide a more detailed data set at an appropriate medical or scientific meeting later.

In terms of our other milestones for 2019, in the second half of 2019, we expect to file an IND application for our first IO program, SYNB1891. A bacterial strain that expresses a STING agonist and will be intratumorally administered. Our expanding -- our expanded manufacturing capability allows us to manufacture clinical trial material for Phase I study in-house. I look forward to providing more detail to our clinical trial design on a future call.

As you may have seen from our recent announcement, we've also made significant progress in our collaboration with AbbVie to develop Synthetic Biotic medicines to treat inflammatory bowel disease, which triggered a milestone payment to Synlogic. This collaboration has enabled us to broaden the reach of our platform in inflammatory and autoimmune conditions, while advancing our internal pipeline. AbbVie, who'll provide adaptive expertise in the biology of IBD, exemplified a type of partner that we would look for, again, to help us explore larger therapeutic areas. In this collaboration, we designed and evaluated Synthetic Biotic strains to address certain targets. The recent milestone was triggered as per the agreement by advancing the program to a stage where, with AbbVie, we moved certain Synthetic Biotic strains into lead optimization. The collaboration has been a great learning experience for us, allowing us to explore other targets in immunomodulation, in fact, prompting our own IO program. Again, I hope to share more details on our collaboration with AbbVie in future calls.

As Todd outlined earlier, we ended 2018 with $123 million, which puts us in a solid financial position to execute on all of our planned activities in 2019. In the year ahead, we believe that we will gain additional insights into the potential of our lead programs to treat human disease, and that this will greatly inform the promise of our platform across metabolic, immune, and oncology indications, and our potential -- and potentially enable us to realize our goal of significantly changing the lives of patients. We will be presenting at the following upcoming conference; Oppenheimer's Annual Healthcare Conference later this month, and the Needham Annual Healthcare Conference in April. And we look forward to keeping you updated on our progress throughout 2019.

I'd like to thank you all for joining us, and we'll now open the call for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Yigal Nochomovitz of Citi.

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Samantha Lynn Semenkow, Citigroup Inc, Research Division - Senior Associate [2]

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This is actually Samantha on for Yigal. I wonder if you could tell us what your -- are your expectations for the degree of ammonia reduction you think you could achieve in the cirrhosis patients based on your preclinical data and the data you've generated so far in healthy volunteers?

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Aoife M. Brennan, Synlogic, Inc. - President, CEO & Chief Medical Officer [3]

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Great. So I think the degree of ammonia lowering that we would like to see is really based less on our preclinical experience and more on our understanding of patients with hyperammonemia. So the study was designed on enroll patients who have an elevated ammonia above 1.2, the upper limit of normal. And based on prior studies that have been performed on this indication, we feel that an ammonia lowering of between 15% and 20% is likely to lead to decreased hospitalizations and other clinical endpoints later, so it was really designed around those considerations rather than our preclinical animal models, most of which are a little artificial in terms of predicting and -- or in terms of the predicting clinical disease, there are lots of important differences there. So it was really based on prior clinical experience and information from other trials.

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Samantha Lynn Semenkow, Citigroup Inc, Research Division - Senior Associate [4]

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Great. And you think that 15% to 20% can maybe -- you mentioned translating into some clinical factors such as...

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Aoife M. Brennan, Synlogic, Inc. - President, CEO & Chief Medical Officer [5]

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Yes, correct. Yes.

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Samantha Lynn Semenkow, Citigroup Inc, Research Division - Senior Associate [6]

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These inflammatory and cognition biomarkers, are you able to tell us what some of those are?

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Aoife M. Brennan, Synlogic, Inc. - President, CEO & Chief Medical Officer [7]

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Sure. So just to be clear, there are 2 different presentations of elevated ammonia that we achieved, presentation -- for a patient presents to hospital with very elevated ammonia and it's kind of a crisis situation, their ammonia can be very, very elevated. What we're targeting is actually the chronic administration where we're intending to prevent those acute crisis and to improve cognition and quality-of-life in patient's chronically as opposed to the acute setting. And when we look at prior studies that have been performed in the chronic setting, what we see is that those patients have an ammonia levels that were about 1 to 1.5x the upper limit of normal and that interventions that decreased those chronic ammonia levels by 15% to 20% lead to improvement in performance on cognitive testing and to fewer subsequent hospitalizations. So that's kind of how we've been thinking about this. Separate to ammonia, but very much related to the underlying pathophysiology of liver disease is, we know that these patients have gut barrier dysfunction, and there is a lot of recent research into the role of the GI tract in the hyperammonemia and in liver disease more generally. Because we're using a bacterial-based strain, there is reason to suspect that we may actually be able to impact some of those other biologies in terms of improving systemic inflammation, improving gut barrier integrity and then improving cognition. So the endpoints that are very exploratory, not powered. This is very early phase study. We don't yet know what we're going to see on those endpoints, but we included them based on the evolving understanding of the pathophysiology of chronic liver disease. So those will be the exploratory endpoints that we'll have when we look at the data. And here, we're not looking for statistical significance here, we're just looking for kind of arrows pointing in the same direction that makes sense based on our understanding of the pathophysiology of the disease. Does that make sense?

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Samantha Lynn Semenkow, Citigroup Inc, Research Division - Senior Associate [8]

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Yes. Very helpful. And just one more, maybe in general, is there any reason to believe based on the disease biology between cirrhosis patients and PKU patients that either 1020 or 1618 could be likely to show them like a deeper response in reducing the targeted toxic metabolites, respectively?

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Aoife M. Brennan, Synlogic, Inc. - President, CEO & Chief Medical Officer [9]

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So you're talking about patient segmentation? Is that your question? Is there subsets of patients with the disease for which our treatment may be more beneficial, is that your question?

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Samantha Lynn Semenkow, Citigroup Inc, Research Division - Senior Associate [10]

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No. No, just more broadly, upon which of the 2 -- or which are the drugs broadly in these type of disease populations would be more likely to show a deeper response?

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Aoife M. Brennan, Synlogic, Inc. - President, CEO & Chief Medical Officer [11]

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Oh, so you're asking me to handicap the clinical programs?

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Samantha Lynn Semenkow, Citigroup Inc, Research Division - Senior Associate [12]

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[Like a child]...

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Aoife M. Brennan, Synlogic, Inc. - President, CEO & Chief Medical Officer [13]

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Like asking -- yes, it's asking to cheat my favorite child. So I think the rationale and the thinking behind why we selected the 3 programs that we're now moving forward into the clinic was because we felt that they were -- each was a beachhead in a different area of administration. So the -- for the PKU program, we require small and tactile activity. For the ammonia program, our understanding is that it will require colonic activity, because that's where most of the ammonia is produced. And then the IO program will involve intratumoral activity of the bacteria. And we chose those 3 programs very strategically, because they would really allow us to understand how our preclinical models can predict activity at that site of administration. And so there was -- as well as these programs being very interesting in and of their own right, we also thought that it would allow us to identify kind of where's the low-hanging fruit for this platform, where can we have more certainty at that preclinical strains as we move additional programs into the clinic. And so that was kind of the rationale for choosing each of those 3 areas. Each area of administration or theater of operation, if you will, have different pros and cons. And I think we'll learn a lot from these readouts in terms of kind of -- that will inform the next wave of programs we take forward. Because for sure, some rules of administration will be easier than others and we just need to identify kind of what those rules are to inform our next set of programs. So I wouldn't say necessarily that 1 data set is stronger than another or that I'm going to give you odds around probability of success for each of the readouts we have upcoming. But I think it is important to understand the strategy behind kind of choosing the 3 programs that we've chosen to move forward into development and how this informs subsequent pipeline and decisions.

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Operator [14]

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Our next question comes from Mark Breidenbach of Oppenheimer.

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Mark Alan Breidenbach, Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst [15]

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I won't ask you to choose between your favorite children but, I am curious about basically the plans for assuming, we see proof-of-concept in mid-year for 1020 and/or 1618, I'm wondering what you have in mind for what would be required in terms of repeating dose escalations and dose optimization as we transfer to the solid oral formulation?

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Aoife M. Brennan, Synlogic, Inc. - President, CEO & Chief Medical Officer [16]

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Yes, that's a great question. As you know, Mark, the current studies are being performed at the minus 80 liquids and we were very conscious starting off that, that formulation, while being very useful and enabling a lot of learning, would really not be suitable for the outpatient dosing that would be required subsequently for more longer-term study. So we've been working a lot in the background, in terms of coming up with an approach to bridging to kind of the next formulation. And this is no different than the procedure you would undergo if you were developing a biologic product where you're bridging to your next formulation as you go through development. And I think our approach philosophically would be very similar. It starts off with analytic comparability where we've established a lot of assays now that assess the quality and the performance and the potency and the strength of our product. And we look at our new process compared to our kind of old process side-by-side in those comparability studies, then if that looks good, we'll go into in vivo preclinical testing and the nice thing and an advantage for us is that we do have the preclinical models that we can assess kind of new versus old process head-to-head, and then depending on the magnitude of the changes between Process I and Process II, it may require clinical bridging where we would perform a Phase I study in healthy volunteers bridging to the new formulation depending on the magnitude of the changes. So very similar regulatory framework in our mind to what would be pursued for protein or any other type of biologic product where we'll be making process changes as we move forward in development. I think the important thing is to get close or to get to your commercial presentation before initiating pivotal studies and that's certainly our plan. But it's likely that we'll be doing some form of kind of bridging from one -- first gen to second gen product and potentially even third gen product as we go through development, as you would with any other program.

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Mark Alan Breidenbach, Oppenheimer & Co. Inc., Research Division - Executive Director & Senior Analyst [17]

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That's helpful. And if I'm remembering correctly, the multiple dose cohort in the PKU trial, I thought you were previously targeting 20 patients for enrollment. Was this cohort resized or was it always 10 patients?

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Aoife M. Brennan, Synlogic, Inc. - President, CEO & Chief Medical Officer [18]

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No, it was 10 to 20 initially, and it's looking like there'll be 6 active and 4 placebo. And so it's kind of approximately 10 is what we're targeting. As you know, sometimes it's difficult to switch off the spigot immediately when patients are in the work and everything else. So there may be some, a little bit of over enrollment depending on how we can -- how closely we can manage the, kind of, end of enrollment period. But 10 would be expectation, but like all of our Phase I studies, we write the protocol with some flexibility so that we don't have to amend the protocol, if patients drop out or we if we end up finding something where there's unanalyzable data for whatever reason. So if you're following along on 10trials.gov, you'll see that we have that kind of flexibility-ran numbers and baked into most of our protocols that are available on there.

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Operator [19]

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Our next question comes from Ted Tenthoff of Piper Jaffray.

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Edward Andrew Tenthoff, Piper Jaffray Companies, Research Division - MD & Senior Research Analyst [20]

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I appreciate the question and all the detail, really in terms of outlining the studies and what to be expecting this summer, super helpful. A question, if I may on 1618. I'm trying to get a sense for what is required to really help these kids, these patients with respect to Phe lowering? Do you have a sense of what sort of what the clinical threshold is or the efficacy threshold is? And ultimately, do you see this is being used in combination with other therapies, maybe to alleviate the burden or kind of provide some flexibility in meals or is this ultimately, do you think could be a replacement product for PKU. And then, I have a real quick housekeeping for Todd?

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Aoife M. Brennan, Synlogic, Inc. - President, CEO & Chief Medical Officer [21]

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Yes. Great. And that's a great question. So like every development program, often it's easier to come up with your target product profile for choosing ideally what you want to do with the product, which in this case is, we'd love to be able to allow patients to maintain Phe levels in their target range and to have an unrestricted diet. So kind of knowing what that is, is often easier. I think what's sometimes more difficult, particularly when it comes to rare diseases, is defining what's the kind of minimum threshold that really makes an impact to patients. And I think here, my personal philosophy is we all have our biases, but often, if you kind of ask the end user, what's meaningful to you, you can get really informed answer. And so we've done a lot of work on ad boards with patient groups, right from the very beginning of this development program. I've been pretty astounded by the response that we've gotten from them in terms of small amount of protein that really would be transformational in terms of their lives. So most of these 2- and 3-year-olds are taking 6 to 10 grams of protein, which is basically what my kids would spill on their face and clothes in eating a meal. So when you actually talk to these patients and find out how difficult their life is because they're managing on this knife edge, they told us that doubling the amount of protein that particularly for small kids that they're allowed to take would be transformational for them. Obviously, there'll be some regulatory back and forth, about kind of what's appropriate from an approval and an efficacy perspective, but certainly, there is big appetite from patients for interventions that really help them consume more protein upon managing their Phe levels in target. So we've been very much encouraged there and certainly, my assumptions were incorrect in terms of what's meaningful for patients, so I think, that's been very positive. On the other part of your question around combination with available or potential future products, we see this is very much complementary to the currently available products. We know that there are small proportion of patients, 20% to 30% respond well to Kuvan, but even in responders, a lot of them haven't actually achieved target Phe levels. While they have a nice decrease, they're still not in the normal range. From a mechanistic perspective, there is no reason why our product would not be combined with Kuvan, obviously, when we determined -- studied that and development will vary. Similarly, for other therapies that are early in development, we see that there is a lot of potential and synergy there. So our aim is to develop this broadly across populations, broadly across severity of disease and to make a difference in for the most patients that we possibly can as we go through development.

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Edward Andrew Tenthoff, Piper Jaffray Companies, Research Division - MD & Senior Research Analyst [22]

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Makes a ton of sense. Todd, I want to make sure I get you involved, just from the AbbVie collaboration. I don't believe it was disclosed what the amount was, but any guidance you can give us on the amount of the milestone? And what is sort of the process towards getting the AbbVie compound into the clinic?

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Todd E. Shegog, Synlogic, Inc. - CFO [23]

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Certainly, Ted. So later today, we'll release our 10-K and you'll see it noted in the Subsequent Events section that the milestone earned and which will be received in cash is $2.5 million. So that will be in the disclosure later today. The progress towards IND into getting the product in the clinic is a sort of the normal step-wise process of candidate selection, identification, in partnership with AbbVie. And as you know, that's the objective, is to deliver an IND candidate that then they will take and develop in the clinic with our support.

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Edward Andrew Tenthoff, Piper Jaffray Companies, Research Division - MD & Senior Research Analyst [24]

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And then, last question, if I may. How will that $2.5 million milestone be recognized. Will it be all within the quarter or will it be amortized?

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Todd E. Shegog, Synlogic, Inc. - CFO [25]

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Yes, sure. It will be allocated over the period of performance between when this milestone was earned and when we anticipate completing the next step in that process towards IND.

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Operator [26]

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Our next question comes from Raghuram Selvaraju of H.C. Wainwright.

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Raghuram Selvaraju, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [27]

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I also really appreciate the compressive detail here. First question is with respect to the hyperammonemia situation. If you could give us some additional color on what specifically you're going to be using to evaluate cognition function in these patients? And what you expect the likelihood of being able to detect an impact on cognition?

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Aoife M. Brennan, Synlogic, Inc. - President, CEO & Chief Medical Officer [28]

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Yes. So Ram, I think, that's a great question, and the 2 that we're using in this study is called a PheS. It's basically a battery of performance tests, where patients are asked to perform specific tasks and they're timed in the performance of those tasks. It's being used pretty extensively in studies of HE. Based on the fact that this is a very early study, short duration of treatment, we included this as an endpoint in the current trial to really get experience with it, add size to understand the test, retest and some of those other components that would be required to design a more definitive study later. So pretty low expectations for me in terms of the outcome. I think if we see something interesting, that will be great, but what it really sets us up for is to do with -- at the next study, potentially designed around the cognition as an endpoint. So we included this as exploratory. We're doing it as a way to kind of gather information, but no real expectation based on the duration of the study in this small sample size and the fact that we really don't have a lot of experience with this assessment tool at this stage. I think it truly is exploratory, so hopefully, that answers your question.

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Raghuram Selvaraju, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [29]

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Yes. No. That's very helpful. The other 2 questions I had regarding clinical development in the non-I/O space were related to the PKU program. I was wondering whether -- since your last update, there's been any further feedback from the FDA or any other regulatory agency regarding the clinical path forward in PKU, and, in particular, what the scope of a potential pivotal study might be. And also, if you could comment on whether or not we can really say there's a linear relationship between therapeutic impact and hippurate production?

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Aoife M. Brennan, Synlogic, Inc. - President, CEO & Chief Medical Officer [30]

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Yes. So to answer your first question, we don't disclose discussions with regulators, but as soon as we have agreement, and have identified a path forward, we'll certainly be sharing those plans with investors and others externally. In terms of the hippurate production, your question is around, is there a linear dose response. Certainly, in terms of the dose given and the HA production that we've seen in healthy volunteers, that appears to be the case. We've no reason to believe that the linearity would be different in patients with PKU. As you know, we're only studying a single cohort now and in the PKU patients, really to answer the question of at a given dose level and with the same study design, how different or similar are PKU patients compared to healthy volunteers, but we don't anticipate that the linear dose-response relationship will be different in PKU patients that's based on our experience in the preclinical models. So that's our assumption right now.

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Raghuram Selvaraju, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [31]

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Okay, great. And then, just a couple of other things. I was wondering if you believe that 1891 would be best studied in the particular kind of combination regimen context, in formal clinical studies. And when you expect you might have arrangements in place to actually conduct those trials, because obviously, those might involve doublet or triplet therapy combo regimens and drugs that are currently marketed by other companies, if you could give us some context on that, please?

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Aoife M. Brennan, Synlogic, Inc. - President, CEO & Chief Medical Officer [32]

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Yes. As I mentioned earlier, I think we'll be aiming to provide an update on our clinical plan on a later call and don't -- and haven't gotten into details on it now, but what we have discussed previously and similar to other early phase I/O programs, the study that we would executive would have 2 phases. Number one phase will be evaluating monotherapy, really around safety and feasibility of injecting bacteria into a tumor. And then there'll be a combo phase subsequently in terms of a combination with a checkpoint inhibitor. We've not disclosed what that checkpoint inhibitor is or what the patient characteristics would be for that trial and as soon as we're in a position to discuss those plans, we'll absolutely do that, but our plan has not changed in terms of the monotherapy, combo therapy phase I study design that we had discussed at the end of last year.

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Raghuram Selvaraju, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [33]

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Okay. Perfect. And then I wanted to ask you sort of a more philosophical platform-related question. I'm sure you are aware of this other company called Kaleido, which is focusing on microbiometabolic therapies and I only mentioned this simply because Kaleido has indicated an interest in hyperammonemia, urea cycle disorders as well as HE and I wondered if you could maybe walk us through the notable differences between their approach and your approach and where you think you might have advantages?

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Aoife M. Brennan, Synlogic, Inc. - President, CEO & Chief Medical Officer [34]

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Yes, absolutely. Kaleido, I think are a great company. I think they're doing very solid science and have good capabilities. You know to the extent that -- what I'm aware of in terms of the data they have is based on reading the S1, so I don't have any further insights or information than are available broadly. My understanding of their approach is they use glycans or sugars as a way to influence the population of bacteria that are growing and thriving within the GI tracts of patients with disease. And the idea is that, that will then translate into metabolic changes systemically. So I think, while there are some similarities with their approach and ours, I think, the opportunity set of diseases will overlap, I think in the case of HE, but I think, there are also lots of diseases where that approach will not be amenable for our approach maybe and vice versa will also apply. So we think they are doing interesting science, we're following the data that they generate, but for now their approach hasn't changed our plans in any way. So that's the extent to which I can comment on what they're doing.

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Raghuram Selvaraju, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Healthcare Analyst [35]

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Okay. Perfect. And then just 2 quick things for Todd. I was wondering if you could maybe give us a sense of whether the R&D spending you recorded in 4Q '18 is going to be more indicative of spending levels in 2019 or if there is going to be a significant jump. And also if you could give us a sense of how you expect stock-based comp to trend over the course of 2019 versus 2018?

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Todd E. Shegog, Synlogic, Inc. - CFO [36]

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Sure. To your first question, I think, Q4 spending in general is pretty indicative of the trend. Looking forward, I don't see it deviating dramatically from that. So I think, that, that would be a good benchmark to look at from a guidance standpoint. And stock-based compensation, we have not commented on that publicly, but I think, if you look at the, again, the trends in 2018, I think, that's a reasonable starting point to be thinking about.

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Operator [37]

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Our next question comes from Joseph Schwartz of SVB Leerink.

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Joseph Patrick Schwartz, SVB Leerink LLC, Research Division - MD of Rare Diseases & Senior Analyst [38]

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You provided some helpful insight on the target product profiles for 1020 and 1618. And I was just wondering if these are not achieved in either case, do you have any strategies to evolve your approach to optimize activity further and/or other target indications that you might consider pursuing instead that you've come along, either strategies or other indications that you're intrigued by along the way?

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Aoife M. Brennan, Synlogic, Inc. - President, CEO & Chief Medical Officer [39]

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Yes, that's a great question, Joe. Thanks for bringing that up. So I think, one of the key advantages of our platform is this ability to iterate very rapidly. And often you can be iterating till the cows come home but not necessarily understand what's good enough. So we moved into the clinic to get a handle on kind of what's our ability to predict, how good preclinically is good enough for the clinic. And I think, we'll learn a lot through these upcoming readouts, but we've absolutely been advancing the platform underneath all of that. So I think, we have continued to iterate and improve on targets that we think are interesting for us as a company going forward. We've also been advancing preclinical candidates to the stage where they're ready to be put into our new decision machine once we start to learn kind of about the clinical and how the preclinical relates to clinical activity, which as I mentioned earlier, was a key driver of our choice around these 3 programs. So I think, it's a yes, and yes, I think yes, we have follow-ons for the 2 lead programs enabled by some of the technology collaborations I've outlined earlier. And also, we have another -- all of our other strains are kind of lining up based on learnings and not all of them will meet our bar, some of them based on what we've learned from the clinic in these first 2 programs will be in the zone where we think they have good probability of success, others may require further work to key them up for advancement. And but I think, this idea of building predictive pharmacology and focusing on areas with low to moderate biology risk will really enable us to move rapidly, once we learn how to make good decisions with regard to program advancement. So that's 100% the strategy that we are pursuing right now. Does that make sense?

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Joseph Patrick Schwartz, SVB Leerink LLC, Research Division - MD of Rare Diseases & Senior Analyst [40]

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Yes, that's helpful. And just as a follow-on to that, what is your understanding about what causes the therapeutic index for your 2 lead orally-ministered agents to peak out wherever they will. The DLT was some nausea at doses which were above where you could see some attractive efficacy, but I'm wondering if you can share any thoughts about whether you have any strategies to either raise the dose at which you can -- which you see the [DLT work], perhaps extract some more efficacy at doses that are well tolerated?

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Aoife M. Brennan, Synlogic, Inc. - President, CEO & Chief Medical Officer [41]

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Yes. So basically -- to address that question, I think we work on both sides of the equation. So we work on improving tolerability and we work on increasing potency such that we see -- we achieve similar efficacy at a dose that's substantially lower than the dose we currently have in the clinic. So we're working on both fronts. In terms of the tolerability situation, we don't yet know for 100% certainty what causes that, but I think, we have a good suspicion that it's related to our process because we moved in with this very early liquid formulation that was nonoptimized where we had some dead cells and cell debris in the presentation that patient's consumed, but I think, until we get back into the clinic again with the next generation product that's been optimized, we won't be able to know that for sure. So we're also working on the kind of low end in terms of creating that bigger window by increasing the potency of the strains and are making good progress there, and understanding kind of what we need to do and where the bar is. So I think, it's been, as I mentioned earlier great learning year in 2018 and more learning to come in 2019.

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Operator [42]

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(Operator Instructions) Our next question comes from Julian Harrison of BTIG.

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Julian Reed Harrison, BTIG, LLC, Research Division - Analyst [43]

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This is Julian on for Tom. First off, just curious how we should be thinking about the potential read-through from cirrhosis to UCD assuming the cirrhosis data are positive and show activity. I guess, more specifically, are the benchmarks for efficacy comparable here or is there likely some nuance?

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Aoife M. Brennan, Synlogic, Inc. - President, CEO & Chief Medical Officer [44]

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Yes. So I think there are important differences in UCD and HE to think about from a development perspective, Julian. Both diseases result in elevated ammonia, I think, the prognosis is very different and the regulatory path is going to be different in each one. We know for UCD, the feedback from regulations has been that the ammonia lowering is the approvable endpoint in that disease. Obviously, we have to demonstrate that the ammonia lowering is clinically meaningful, but ammonia lowering is the endpoint for pivotal trials. That's not the case in HE. We would have to demonstrate an impact on something that's clinically meaningful, i.e. how a patient feels, functions or survives in order for that program to add -- to achieve regulatory approval. So that's one of the key differences. I also think just the kind of development path and commercial opportunity is quite different in each indication, so as we said before, we'll look at the data from the ongoing study, we'll look at the development path emerging competitive landscape, the opportunity, the unmet need in both indication, and make a decision about path forward, once we have data in hand from the current study. So that continues to be the plan.

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Julian Reed Harrison, BTIG, LLC, Research Division - Analyst [45]

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That's helpful. And for my last question, sorry if I missed this. But do you have any sense at this time when the transition from liquid to solid formulations for 1020 and 1618 is expected to be complete?

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Aoife M. Brennan, Synlogic, Inc. - President, CEO & Chief Medical Officer [46]

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Yes, so in terms of the transition, it depends on when -- what you call a transition. So we're certainly working. We'll be sharing some data later this year from our kind of solid oral formulation. And then, I think, when we get back into the clinic will really depend on the timing of the outcomes of these studies and discussions with regulators and an ability to get back into healthy volunteer component and as soon as we have line of sight to kind of those milestones, will certainly be sharing them with the investment community.

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Operator [47]

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Our next question comes from Taylor Feehley of Chardan.

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Taylor Josephine Feehley, Chardan Capital Markets, LLC, Research Division - Senior Research Analyst of Biotechnology and Pharmaceuticals [48]

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So most of my questions have already been answered, but maybe I'll follow-up a little bit on that last question. So is it clear that the healthy human dosing will be required for bridging between the liquid to the oral?

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Aoife M. Brennan, Synlogic, Inc. - President, CEO & Chief Medical Officer [49]

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So like my experience here is based on kind of prior products, and what I will say is that clinical bridging is not always required when making changes from one process to another. That really depends on the magnitude of the changes, how good your preclinical analytics are and how convinced regulators are that you really understand your critical quality attributes. And then how predictive your preclinical models have been to clinical activity for subsequent programs. So we don't know the answer to that yet, it's not clear that clinical bridging would be required in every case. And my assumption is that the decision process will be very similar to the decision process for other types of products, and will really depend on kind of multiple factors and be subject to regulatory buying and negotiation. So I don't think it's given that clinical bridging is always going to be required and it's really, it's kind of an "it depends" question I think, Taylor, unfortunately, which is unsatisfying but I think, the good news is from our perspective, I feel like we've been building a lot of credibility with the regulatory groups. We discussed at your panel last week, you know, the importance of kind of continuing to work closely with them. And kind of build credibility and make sure that you're doing high-quality science and I'm presenting that in a way that that enables good decision making by regulators, and we certainly plan to continue to do this.

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Taylor Josephine Feehley, Chardan Capital Markets, LLC, Research Division - Senior Research Analyst of Biotechnology and Pharmaceuticals [50]

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Great. And then one quick follow-up. Best case scenario, am I interpreting your last response correctly -- your response to the previous question asked are -- correctly thinking that it's possible to see larger patient studies by the end of this year, or is that something that's potentially a little overzealous?

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Aoife M. Brennan, Synlogic, Inc. - President, CEO & Chief Medical Officer [51]

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I think that we're getting into forward-looking statements territory there, Taylor. I think, the good news is that we'll be providing kind of more guidance in terms of what that looks like in the timing of initiating those next studies as we move closer to kind of having certainty about what the required steps are. For sure, it's enabled by having control over manufacturing because as soon as we have a process locked down, we're basically just transferring into our own manufacturing facility and starting work on that GNP batch. So we are not -- there's not a 2-year lag as we get it lost in transfer to a contract-manufacturing organization. So I think that certainly enables speed, but there are some components that just cannot be speeded up. We can't speed up stability. We can't speed up some things so for certain minimum amount of time even with all of the investments that we've made, but that are going to be required so as soon as we have that full time line locked down, we'll obviously be transparent in regard to our plans and timing.

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Taylor Josephine Feehley, Chardan Capital Markets, LLC, Research Division - Senior Research Analyst of Biotechnology and Pharmaceuticals [52]

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Okay. Great. And then one last question on the manufacturing side? How will the learnings from 1020 and 1618 help with 1891. Because, I'm imagining that the process there will be a little different given the intratumoral delivery?

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Aoife M. Brennan, Synlogic, Inc. - President, CEO & Chief Medical Officer [53]

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Correct. Yes. So that's kind of the beachhead in a different site of administration. I think there are some things related to manufacturing that are very applicable across the board. There are some things then that are related to kinetics within the tumor microenvironment and pharmacodynamics and behavior and safety obviously that will be different. So for sure, we feel like there is a shared learning around analytics and manufacturing, but I think, the clinical learnings will be very kind of unique and for 1819 when given [delusive] administration and the likely kinetics of bacteria within a tumor compared to bacteria within the GI tract. And so we really think, 1891 sets up the potential pipeline of products following the similar route of administration, but doesn't necessarily provide as much insight in terms of the oral programs from a clinical and translational perspective.

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Operator [54]

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There are no further questions. I'd like to turn the call back over to Dr. Brennan for closing remarks.

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Aoife M. Brennan, Synlogic, Inc. - President, CEO & Chief Medical Officer [55]

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Great. Thank you so much to everyone for participating, and thank you, Michelle. We'd like to thank you for joining us on today's call. We look forward to updating you on progress across our developing pipeline in the coming months and being able to answer a lot more of the questions that were asked today around timing and other components, and we'll be available later today if there are any follow-up questions. So thanks so much everyone, and thank you, Michelle again.

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Operator [56]

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