Eloxx Pharmaceuticals, Inc.

webcast and conference call. Today's call is being recorded. At this time, I would like to turn the call over to Barbara Ryan, ELOX Investor Relations. Please begin.

Thank you, Victor. Welcome and thank you for joining us this afternoon for a review of ELOX Pharmaceutical's fourth quarter and full year 2020 financial results and business update. Joining me this afternoon are Dr. Greg Williams, our Chief Executive Officer, Neil Beloff, Chief Operating Officer and General Counsel, Dr. Tom Haverty, our Chief Medical Officer, Dr. Matthew Guderis, Vice President of Research, and Stephen McDonald, our Vice President of Finance and Accounting. Before we begin, I would like to remind you that any statements made during this call that are not historical are considered to be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these statements as a result of various important factors, including those discussed in the risk factors section in our most recent annual report on Form 10-K, filed with the Securities and Exchange Commission, as well as our other reports filed with the SEC. Any forward-looking statements represent our views as of today, March 11, 2021 only. A replay of this call will be available on the company's website, www.eloxpharma.com, following the call. It is now my great pleasure to turn the call over to Dr. Greg Williams, Chief Executive Officer of Elox Pharmaceuticals.

Thank you, Barbara, and welcome to Elox's fourth quarter and full-year 2020 earnings webcast and conference call. We are continuing to advance our clinical and scientific programs for our ERSG library. Our highest priority is to complete our phase two clinical trials for ELXO2 in cystic fibrosis, and we are on track to report top line data in the first half of this year. We believe that these proof of concept data will be a substantial value inflection point for our company. As we previously shared, we are pleased that ELXO2 phase two clinical trials independent safety review committees have concluded several planned meetings and will have dose escalation up to the fourth and highest dose level. To date, no drug-related serious adverse events have been reported. We are conducting these global trials at top CF clinical trial sites and are grateful that the Cystic Fibrosis Foundation has recently expanded their financial support beyond the U.S. to provide increased funding for our global ELXO2 Phase II clinical trial program. The expressed level of interest and support from top investigators, trial sites, and patient advocacy groups has been a fantastic benefit to the program. Previously, we've shared that we continue to evaluate additional clinical trial sites in other countries where patient enrollment may be feasible. We are pleased to report that we are opening additional clinical trial sites in Australia and Canada. As you know, the Cystic Fibrosis Foundation has launched a $500 million Path to a Cure initiative aimed at finding cures for all CF patients. The foundation's initiative is prioritizing innovative approaches for individuals who do not respond to currently available treatments. This includes those with non-sense mutations, such as G542X, which is the focus of our ELXO2 Phase II clinical trials. Patients with nonsense-mediated cystic fibrosis represent about 12% of the CF population, according to the Cystic Fibrosis Foundation. The potential ability of an investigational drug, such as ELXO2, to restore functional CFTR protein production in these patients could be a major advance and substantially improve the length and quality of their lives. We believe that ELXO2 has the potential to be an important disease-modifying therapy for these patients who feel left behind and have few, if any, treatment options. We are committed to advancing the development of ELXO2 as quickly as possible. Substantial advances have been made in the treatment of patients with cystic fibrosis with the introduction of disease-modifying therapies, including the recent triple combination Trikafta from Vertex. While the benefits to patients have evolved as monotherapy transitions to combinations and most recently to the triple combo, there remains a high unmet medical need among the 12% of patients with nonsense mediated disease for whom there is no approved therapy. These difficult to treat patients are often the most severely afflicted by this disease. Patients with an F508 del allele are another difficult to treat population where a single agent Kalydeco was not effective. The next generation combination products, Orkambi and Syndeco, demonstrated a clinically important benefit in these patients. There was a 5 to 11 millimole per liter reduction in sweat chloride concentration for Orkambi and a reduction of 10 millimole per liter for Syndeco. These changes were associated with increases in FEV1 in the low to mid single digits. Trikafta, the triple combo therapy, has moved the needle even higher with sweat chloride concentration reductions from 42 to 45 millimole per liter, which were associated with 10 to 14% increases in FEV1. We're evaluating Elexo-2 as a single agent for another difficult-to-treat cystic fibrosis patient population, those with a G542X mutation on one or both alleles. Our CF Phase II program consists of two open-label trials, one for clinical investigators enrolling patients at sites in Europe, Israel, and Australia, the second enrolling patients in the United States and Canada. Both trials focus on CF patients with at least one G542X nonsense mutation. As I mentioned earlier, our global trials are being partially funded by the Cystic Fibrosis Foundation, and our protocol has been endorsed by the CFF Foundation the Therapeutic Development Network, the largest cystic fibrosis clinical trials network in the world. In Europe, our protocol has been endorsed by the ECFS Clinical Trial Network. The FDA has granted ELXO2 an orphan designation for cystic fibrosis, which confers certain important benefits to support development of medicines for underserved patient populations. ELXO2 has demonstrated pronounced CFTR read-through in plasmid, HBE, FRT, and transgenic mouse models. We've worked extensively with the hub, Hubrecht Organoid Technology, to better understand Elexo2's activity across the cystic fibrosis nonsense patient population in their library of patient-derived organoids. Elexo2 demonstrates significant restoration of CFTR activity in patient-derived organoids, representing over 75% of all nonsense alleles. Our screening programs continue to evaluate opportunities to advance ELXO2 and other novel molecules from our ERSG library for new indications. As our R&D team continues to advance these programs, we expect an acceleration in the pace of publishing our results in important scientific and medical journals. As a result of our progress, we've had six scientific manuscripts published since April 2020, and we expect the steady cadence of publications for ELXO2 and our ERSG library to continue. In January, the results of our renal impairment trial were published in the Journal of Clinical Pharmacology, and the results of our Phase 1b multiple ascending dose trial evaluating the safety and pharmacokinetics of ELXO2 in healthy subjects were published in the journal Clinical Pharmacology and Drug Development. In February, a scientific manuscript was published in the journal of cystic fibrosis on the results of our evaluation of ELXO2-mediated read-through using the CFTR-dependent forskolin-induced swelling assay across a selection of G542X homozygous and heterozygous patient-derived organoids. In October 2020, our senior medical consultant, Professor Ethan Karam, MD, a globally renowned cystic fibrosis expert, published a review of ELXO2 in the journal Expert Opinion on Investigational Drugs. We also had a scientific manuscript published in the Journal of Experimental Eye Research, which demonstrated the achievement of an important proof-of-concept milestone from our ongoing IND-enabling studies demonstrating restoration of protein production in the eye when injected intravitrally in a mouse model. In a few moments, Dr. Matt Goderis, our Vice President of Research, will provide you with some highlights from these most recent publications. We continue to be focused on delivering value to shareholders while fulfilling our mission to provide treatment options to patients with high unmet medical needs in the most safe and expeditious manner. We are the most advanced company tackling the great challenge of developing potential therapies for non-sense mutations and there's a high level of interest and enthusiasm in the scientific and clinical community for our programs as well as in the business community. We will continue to pursue partnerships where appropriate to expand our therapeutic footprint accelerate our progress, and advance our pipeline. We ended the fourth quarter of 2020 with $24.7 million in cash and cash equivalents, and we are on target to deliver top-line data for ELX02 in cystic fibrosis in the first half of this year. We have a strong and experienced team with expertise in clinical drug development, basic research, and regulatory affairs. I'm highly confident that we have the capabilities and the resources needed to deliver on our goals. I would now like to turn the call over to Dr. Matt Guderis, our Vice President of Research, who will expand on our recent publications and ongoing research activities.

Thank you, Greg. We continue to advance our preclinical efforts across our ERSG library of molecules, working with our research partners to advance our programs. As Greg mentioned, we are pleased to have had several of our scientific manuscripts published in leading peer-reviewed journals. and plan to continue to present our findings at scientific conferences. In February, we published a scientific manuscript in the Journal of Cystic Fibrosis titled, Targeting G542X CFTR Nonsense Alleles with ELXO2 Restores CFTR Function in Human-Derived Intestinal Organoids. This manuscript details the work we performed using G542X patient-derived organoids. As you know, G542X is the most common nonsense mutation in the population of people living with cystic fibrosis. Like other nonsense mutations, the G542X change introduces an early translation stop in the CFTR gene, leading to a truncated and unstable protein product. Current modulator therapies designed to improve CFTR activity are ineffective when CFTR protein is not being made. To overcome this, cells must be able to ignore or read through this stop signal to produce full-length CFTR. ELXO2 is a compound that interacts with the ribosome to induce mRNA read-through. Across many experiments, we observed that ELXO2 can produce active CFTR protein in organoids with G542X mutations. While no CFTR activity is found in these G542X organoids when untreated, An increase in activity is seen with increasing amounts of ELXO2. We also observed that ELXO2 increases the CFTR mRNA transcript, the molecule used to produce the protein, about five-fold in some cases. As ELXO2 advances to the clinic for people with CF due to G542X mutations, we will continue to test the molecule with other types of nonsense mutations to determine if they too may benefit from this approach. As Greg mentioned, we also recently published results from two important trials from our ELXO2 Phase I program. In January, the results from our renal impairment study were published in the Journal of Clinical Pharmacology. The pharmacokinetics of ELXO2 tell us that the compound is excreted from the body unchanged in the urine. Recognizing that some of our potential target population may have reduced kidney function, this clinical study is a critical piece in our ability to dose adjust based on renal function. In this study, we evaluated pharmacokinetics and safety in participants with varying degrees of renal impairment, and the results demonstrate the relationship between plasma exposure and a key measure of kidney function, EGFR. The second manuscript was published in January in the journal Clinical Pharmacology and Drug Development, covering our multiple ascending dose trial. This study included 62 healthy volunteers and covered the dose range we are evaluating in our cystic fibrosis trial. We found that ELXO2 plasma exposure was dose proportional with no apparent accumulation and no severe or serious adverse events reported. Together, these clinical studies and our preclinical efforts laid the groundwork for our currently ongoing Phase II trials. Our preclinical progress applying novel compounds from our ERSG library of read-through compounds in autosomal dominant polycystic kidney disease, ADPKD, and inherited retinal disorders continue. In building the models to evaluate the ADPKD nonsense patient population, we enlisted the support of Dr. Benjamin Friedman, Associate Professor of the Division of Nephrology at the University of Washington. Dr. Friedman is an expert in differentiating induced pluripotent stem cells into three-dimensional kidney organoids, capable of modeling cyst formation observed in ADPKD. We have modeled the most prevalent ADPKD nonsense mutations in these cells, and we anticipate providing updates on ELXO2's ability to prevent or reduce cysts in these organoids along with other program progress over the coming year. Our inherited retinal disorder program continues to focus on pre-IND enabling work, sustained release formulations, and evaluation of novel disease models through research collaborations. The inherited retinal disorder landscape is genetically diverse. However, we believe that a single agent read-through approach may be able to broadly address multiple different inherited retinal disorders provided they are caused by nonsense mutations. In order to expand our ocular research footprint and ensure we are evaluating the most relevant cellular and animal models of nonsense-mediated blindness, we have established research collaborations with ocular disease experts at the University of Maryland, University of Wisconsin, and UCLA and look forward to sharing more results as the programs progress. As always, our latest publications and presentations can be found on our website. I would now like to ask Steve McDonald, our Vice President of Finance and Accounting, to provide a review of our fourth quarter and full year 2020 financial results.

Thanks, Matt. As of December 31, 2020, the company had total cash and cash equivalents of $24.7 million, which we believe will fund the company's operations through top-line data in cystic fibrosis and into the fourth quarter of 2021. For the quarter ended December 31, 2020, the company incurred a net loss of $6.1 million, or 15 cents per share, as compared to a net loss of $11.6 million, or 29 cents per share, for the same period in 2019. Non-cash stock compensation expense totaled $1.3 million, with $1.1 million allocated to G&A and $200,000 to R&D. fourth quarter 2020 R&D expense totaled $2.6 million, compared to $5.9 million for the same period in 2019. The quarter-to-quarter R&D expense decrease was driven by reduced headcount in related salaries for the 2020 period, as well as decreases in certain clinical and preclinical research costs. G&A expense for the fourth quarter of 2020 was $3.1 million. which decreased from $5.6 million for the same period in 2019 due to lower headcount and professional services costs. For the full year ended December 31, 2020, the company incurred a net loss of $34.6 million, or 86 cents per share, as compared to a net loss of $50.9 million, or $1.34 per share, for 2019. Non-cash stock compensation expense totaled $8.7 million, with $1 million allocated to R&D, $5.6 million to G&A, and $2.1 million to the corporate realignment in February 2020. Full-year 2020 R&D expense totaled $14.6 million, compared to $26.3 million for 2019. The year-to-year R&D expense decrease was driven by reduced headcount and related salaries for the 2020 period as well as reduce costs relating to certain clinical and preclinical research activities. G&A expense for the full year 2020 was $14.8 million, which decreased from $24.2 million in 2019 due to lower headcount and professional services costs. For your modeling purposes, our total shares of common stock outstanding as of December 31, 2020, were $40,157,000, This concludes the fourth quarter and full year 2020 financial comments, and I'll turn the call back to Greg. Thank you, Steve.

It's our highest priority to complete our phase two proof of concept clinical trials in cystic fibrosis. We are on track to report top line data in the first half of this year. We believe that these data will be a major value inflection point for our company. We're pleased that the independent safety review committees of our ELXO2 phase two proof of concept clinical trials have allowed dose escalation up to the highest dose level and that to date no drug related serious adverse events have been reported. The patient population we're studying has few if any treatment options and the potential for ELXO2 to restore the production of CFTR protein could be a substantial advance and meaningfully improve the quality and length of their lives. We are laser-focused on assuring that we, our investigators, and global clinical sites can accomplish these goals, and we are pleased to be opening additional clinical sites in Australia and Canada. We are also gratified that the FDA has granted orphan drug designation for ELXO2 for the treatment of cystic fibrosis, which confers several important benefits to the ELXO2 program. Beyond cystic fibrosis, we continue to advance our portfolio of novel ERSG molecules that Several of these compounds demonstrate encouraging levels of read-through activity and tolerability, supporting their further therapeutic development in multiple disease states. As we continue to advance our programs, there has been a marked acceleration in the number of scientific manuscripts being published in important journals, and we continue to present meaningful data at scientific conferences. We thank you for joining us on our fourth quarter 2020 earnings call, and we look forward to continuing to update you on our progress. Operator, you may now open the call for questions.

Thank you. As a reminder, to ask a question, you need to press star 1 on your telephone, and to withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Our first question will come from the line of Ted Tentoff from Piper Sandler. You may begin.

Great. Thank you very much. I appreciate the Update, Andy, taking my question, I want to get a sense for what would you see as a win in these read-through mutant patients or non-sense mutant patients, pardon me. You know, there's nothing really that works out well there. So what do you kind of see as sort of a threshold for success? Thanks.

Hey, Ted, thanks for the question. So When we think about patients with no meaningful therapy, no available therapies, we think about Orkambi-like and Symdeco-like performance as being the threshold for clinically meaningful changes, and those compounds also represent a reasonable threshold for regulatory approval. Just to remind you, Orkambi came in with sweat chloride concentration reductions in the 5 to 11 millimole per liter range. And in bigger studies over longer periods of time, Orkambi was associated with FEV1 increases in the range of 2.7 to about 5.6 percent. Symdeco was a little better with overall sweat chloride concentration reductions in the range of about 10. with FEV1 increases in the range of about 4%. So from our Phase II study, we would be looking for a threshold of sweat chloride concentration reductions that would be Orkambi and Syndeco-like that would be in the 5 millimole per liter concentration reduction.

Great. That's very clear and very helpful in looking for the data. Thanks, Ted.

And our next question will come from the line of Michelle Gilson from Canaccord. You may begin.

Hi. Thank you guys for taking my question. I guess kind of building on Ted's questions here, could you maybe give us a sense of what the variability is day-to-day of sweat chloride, I guess, intrapatient variability, and then And then also, you know, what are you planning to report? What are the data that we're going to get other than, I guess, sweat chloride and initial safety data? You know, how many patients and, you know, will you, obviously you're at the highest dose cohort, but will you report data from all the dose cohorts? you know, what territories as well. And then also, I guess, building on that question of what's a good result, is it important to see a dose response? Obviously, for the cystinosis data, we didn't quite see a dose response. So I'm just curious if that's going to be important in CDAS.

Thanks, Michelle. We appreciate the questions. You've asked a few there. I will try to take them in turn, see if I've captured them all. First, you asked about what would be some of the variability, maybe inter and intrapatient associated with sweat chloride concentration changes. And the literature tells us it wouldn't be surprising to see changes around eight or nine millimoles per liter, kind of up and down. So it's important to have sufficient numbers to be able to really tease out that five to 10 threshold that we'd be looking for in terms of Orkambi or Syndeco-like responses. We're not today providing updates on our exact enrollment and the details of what our top line data will consist of, but we will be providing those in the future. We will be pooling data across our clinical sites in Europe, Israel, now Australia. We'll also be adding data from the US as well as from Canada. So we'll give you a broad data set that represents the body of data that's available at that point in time. And we would anticipate seeing a dose response with cystinosis. We did see a good response at one milligram per kilogram. We didn't see any response at all at 0.5. We saw a good response at one. When we got to the higher dose of two, we had two responders, but there was an issue with the third patient. We think we identified a threshold for activity in the cystinosis trial, but with more patients in the CF trial, we would expect there to be a more clear-cut dose response across the four different doses that we're evaluating. Did I cover all your questions?

Yes, you did. You did a wonderful job covering all my questions. Thank you.

Thank you. Thank you. I'm not showing any further questions in the queue. I would just want to call back over to Greg for any closing remarks.

Well, thank you. We really appreciate your interest and your attention in ELOCS. It's an exciting time for us. We remain on target to report top line results in the first half of this year, and we're looking forward to updating you as we continue to progress. Thank you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.