Evelo Biosciences, Inc.

Good morning, and welcome to Avalo Biosciences conference call. Discussed is third quarter 2021 business highlights. At this time, all participants are in listen-only mode. Following the formal remarks, we will open the call up for your questions. Please be advised that this call is being recorded at the company's quest. At this time, I would like to turn the call over to Kendra Sweeney of Avalo. Please proceed.

Thank you. This morning, we issued a press release that outlines the topics we plan to discuss today. This release is available at www.ivelobio.com under the Investors tab. Today on our call, Simba Gill, Chief Executive Officer, Mark Bodmer, President of R&D and Chief Scientific Officer, and Jonathan Zung, Chief Development Officer, will review our recent business highlights and third quarter 2021 financial results. Before I begin, I would like to remind everyone that statements made during this conference call that do not relate to matters of historical fact, including statements about our objectives and anticipated clinical milestones, the impact of any of our product candidates, and the timing and results of any clinical studies should be considered forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are intended to be subject to the safe harbor protection provided by the Reform Act. Actual results could differ materially from those indicated by the forward-looking statements due to their impact of many factors. Participants are directed to the risk factors set forth in Avello's quarterly report on Form 10-Q for the quarter ended September 30, 2021, and the company's other filings with the Securities and Exchange Commission. Any forward-looking statements made today speak only to Avello's operations as of today. Avello disclaims any duty to provide updates to its forward-looking statements, even if subsequent events cause the company's views to change. It is now my pleasure to pass the call over to Simba.

Thank you, Kendra. Good morning, everyone, and thank you for joining us to review our progress during the third quarter. A major news for the last quarter was, of course, the positive top-line results of our Phase II trial of EDP1815 in patients with mild and moderate psoriasis. The Phase II clinical data prove, beyond reasonable doubt, that we can indeed harness syntax to create medicines. I can't emphasize enough the importance and value of these data. The trial addressed a central question we have been asking since we first started to develop, Can targeting syntax be the foundation for a new profile of medicine? The answer is yes. With EDP1815, we have now shown in a well-controlled phase two clinical trial that we can harness syntax to make a clinical impact on patients with an oral product candidate with safety and tolerability data comparable to placebo. Together with affordable manufacturing, These data support the potential of syntax medicines to address an enormous unmet need in the global treatment of patients with mild and moderate inflammatory disease. The data from the phase two trial underscore two drivers of value. The first is the potential of EDP1815 as an important new medicine in the treatment of psoriasis. Based on the data, we are advancing EDP 1815 towards registration trials in mild and moderate psoriasis. The primary unmet need in psoriasis is for this segment of patients. There are over 55 million patients with psoriasis worldwide, and patients with mild and moderate disease represent over 90% of this patient population. The second driver of value is that this is proof of concept for the Syntax platform in a phase two clinical trial. The potential implications of this are immense. It reveals a previously unknown branch of biology which touches on a broad mechanism for the resolution of inflammation which impacts a considerable number of diseases and for which we have shown a new type of medicine that works in humans. In dermatology alone, there are globally over 200 million people who suffer from mild to moderate diseases for which there are limited treatment options. In broader inflammatory diseases, including arthritis, asthma, and chronic obstructive pulmonary disease, there are about a billion people worldwide in need of better treatment. I'd like to touch on one specific aspect of syntax-based products as a new type of medicine. We are developing orally delivered microbial products that are non-live biotherapeutics. This is a completely different concept, the live biotherapeutics and the microbiome. There is no colonization or modification of the microbiome. They have a direct pharmacological effect through interactions with host cells in the gut, which in turn modulates systemic inflammatory responses throughout the body via the small intestinal axis. The clinical responses to EDP 1815 opened the door both to EDP 1815 as a potentially important medicine in dermatology and to the broader potential of the platform. Our aim has always been to develop an entirely new profile of medicine that will transform healthcare rather than another incremental improvement to what already exists. We did not invent the small intestinal axis. We discovered it by inventing syntax medicines which harness this extraordinary natural system which controls inflammation throughout the body. What we have discovered is how to harness nature to create something that has never existed before. We have discovered and pioneered new principles and new approaches for developing and manufacturing syntax medicines. Our phase two data, together with other clinical and preclinical data we have generated, gives us high confidence that we will realize our vision to transform global healthcare. Let me repeat the core point. We have demonstrated that we can harness syntax to drive clinical effects throughout the body with an orally delivered gut-restricted agent. Syntax medicines are a substantial new platform in our industry with the potential to help hundreds of millions of patients globally at all stages of disease. Most of these patients have so far not received the benefits of biotech innovation. Think of this in terms of combining the discovery of cytokine biology with the discovery of therapeutic antibodies. Newly discovered biology underpinning many diseases together with the means to do something about it, and then delivering it to patients as a convenient oral pill. With that, I will hand over to Mark.

Thanks, Simba. We're often asked the reasonable question, what are the risks of success of Avello's medicines? Of course, there's one overarching risk. Is syntax biology important, and can syntax medicines work? Yes, it is important, and yes, EDP 1815 was observed to have a clinical impact on patients with psoriasis. There are also the risks around manufacturing and regulatory path to the clinic, both potentially significant hurdles for new modality. These, too, have been overcome. The Phase II results take us past these fundamental risks onto the practical challenges of making syntax medicines work for the largest numbers of people as effectively as possible. The breadth of opportunity that Simba talks about comes directly from the breadth of the mechanism of action, that is, the coordinated resolution of multiple pathways involved in the inflammatory response. Now that we have shown syntax functions in humans to modulate systemic immunity, it's reasonable to expect that syntax medicines may be beneficial in almost any condition in which inflammation plays an adverse role, which is most diseases. As an example, Two weeks ago, the effects of EDP-1867 in a mouse model of neuroinflammation were presented at a European multiple sclerosis conference. These were extraordinary data showing the gut immune system reaching into the central nervous system under the influence of one of our drug candidates. It is the same principle that allows the gut to reach into the skin. The apparently disparate effects in skin and CNS are the result of the pleiotropic mechanism which are the glue that holds together this whole concept that the small intestinal axis can impact inflammation throughout the body. I'm now going to turn to two related topics that are part of making EDP1815 and future syntax medicines work as effectively as possible. The first topic is to do with the responder rate to EDP1815 that we observed in the phase two psoriasis trial. As you recall, Approximately 30% of patients who received EDP-1815 in the trial achieved a PASI-50 response by the 16-week endpoint. However, this does not mean that EDP-1815 does not have any effect in the other 70% of people. There was a continuous distribution of PASI responses. The 30% who were reported as PASI-50 responders is simply a cut of that overall distribution after 16 weeks of treatment. The Phase II study showed that efficacy accrued as patients continued to take EDP-1815. This suggests that treating for longer could result in higher response rates. A rising tide lifts all boats. Anything that increases overall response rates has the potential to benefit more patients. We have also done further sensitivity analyses since the Phase II data were released last month, and I'd like to highlight one of them. The proportion of patients who achieved IgA 0 or 1 after stratifying their baseline body surface area psoriasis was evaluated. IgA 0 and 1 are respectively clear and nearly clear skin. These are the targets of treatment in patients with mild and moderate psoriasis. Mild disease is defined as body surface area less than or equal to 5%. Moderate disease is greater than 5%. The proportion of patients with moderate disease, that is greater than 5%, who reached IgA 0 or 1 compared to placebo had a p-value of less than p0.05. Patients with mild disease also trended to efficacy with a p-value that was not significant. Across the entire study population, stratifying by BSA group at baseline, EDP 1815 was also found to be significantly better than placebo in the number of PGA0 or 1 responders with a p-value less than 0.05. This is an important result. It does not mean that EDP1815 doesn't work in milder patients. It does mean that the effect is more readily detected in patients with more extensive disease. Not surprising, since there is a larger window for reading the effect of the treatment. The observed response rate in the Phase II study was already within a clinically and commercially attractive range for mild and moderate disease, reinforced by placebo-like safety and tolerability. These further analyses are evidence for additional improvement of efficacy in future studies based on clinical data that we already have. The second broad point about making syntax medicines work as effectively as possible is based on the observation in the Phase II psoriasis trial but we saw continued improvements in some patients after the end of the treatment period. Generally, drug levels need to be maintained to suppress the target pathway. When dosing is stopped, there's often a rebound in disease symptoms. The mechanism of action that allows this continued effect with EDP-1815 ties into broad inflammation resolution that I was talking about a moment ago. EDP-1815 and several of our other product candidates induce a regulatory phenotype in circulating immune cells. We can show this experimentally in preclinical studies by isolating peripheral immune cells from animals that have been treated with drug. If we then transfer these isolated cells into animals that are not treated with drug, then these non-drug treated animals have the same anti-inflammatory inflammation resolution as if they had been treated. The transferred cells mediate the inflammation resolving effect of the drug. This is called adoptive cell transfer, and it is a core proof of mechanism for the therapeutic cellular phenotype induced by a syntax. Consider what this means. The efficacy of a gut-restricted drug is carried out by modified immune cells in the periphery. Our evidence for this in mice is the adoptive cell transfer. Our evidence for this in humans is the continuing effect after the drug is stopped. Induced regulatory cells continue to overcome the effects of the inflammatory cells resident in the skin, leading to skin healing after administration of the drug is ended. The modified immune cells can last for weeks in circulation, perhaps longer. We don't know the duration of response yet. So consider again what this means. We've created a regulatory cell phenotype which is induced in situ by product candidate EEP1815 but it's been observed to have placebo-like tolerability and safety, and it can be manufactured at scale. Compare this to the current interest in cellular therapies with ex vivo condition regulatory T cells. We've skipped that entire process step and gone straight to in situ generation with an all-product candidate which uses the body's natural programming. This is one of those scientific results that profoundly alters one's frame of reference. The gut-restricted agent can create active regulation of systemic inflammation. This is not immunosuppression. It is restoration of the normal, non-inflamed state. I'd like to finish with some more forward-looking comments about our aspirations for the future of the Syntax platform. EDP-1815 is now nicely set up as a treatment for mild to moderate psoriasis, and that should also be true for other inflammatory diseases. We have reported repeatedly that in preclinical studies, our drug candidates are as effective as the best standard of care biologics and orals. This suggests potential also in severe inflammatory disease. Our goal for future versions of syntax medicines is to reach biologic levels of efficacy in humans to take syntax medicines beyond mild to moderate and into severe disease. The preclinical data suggests this is biologically feasible. Getting effective target engagement in humans is harder than in mice. The physics of the delivery of syntax medicines for the target in the larger human gut provides some particular challenges. We think that extracellular vesicles with their volume 1,000th that of a microbe have helped to address these challenges. The small size advantage of EDs allows them to diffuse more readily in the gut milieu and allows us to pack a higher concentration into each pill. These size advantages will be combined with formulations that ensure that the drugs bathe as much of the small intestine as possible. It's a reasonable prediction that these factors, size, packing, and formulation, will combine to increase efficacy. It's how we get the high levels of efficacy preclinically, and we are now learning how to do it in humans. Our vision for the future of syntax medicines is efficacy which is competitive for the best standard of care for all stages of disease with oral delivery and the safety and tolerability seen with EDP-1815. The scientific platform, which we have constructed methodically over the last five years, supports this possibility. With that, I'll hand over to Jonathan to update you on our clinical programs.

Thank you, Mark, and good morning, everyone. I will provide an update on our ongoing clinical trials, upcoming readouts, as well as planned studies. Part B of our Phase II trial in mild and moderate psoriasis is ongoing and assessing the durability of treatment response following completion of 16 weeks of dosing in 124 patients. These participants are being evaluated monthly, and we look forward to learning more about the lasting effects of EDP1815. We expect to report top-line results in the first quarter of 2022. The results from Part A and Part B of the Phase 2 trial will allow us to refine our next phase clinical plans for EDP1815 and psoriasis, as well as seek feedback from health authorities. Our Phase 1B trial of EDP1867 in a cohort of patients with moderate atopic dermatitis is ongoing. Trial participants are being dosed for six days with a 14-day follow-up period. We anticipate results from this trial in the first half of 2022 based on slower than projected recruitment. We previously reported that the US FDA had requested additional information in a clinical hold letter in the EDP 1815 phase two atopic dermatitis trial in patients with mild, moderate, and severe disease. We have satisfactorily responded to the FDA request and the hold has been lifted. The IND is now open, and we anticipate dosing late in the fourth quarter. This trial will be 16 weeks in duration with the primary endpoint of percent of patients who achieve an eczema area and severity index EZ50 score at week 16. In addition, we'll be collecting various physician and patient-reported outcomes. We anticipate reporting results from this trial in the fourth quarter of 2022. Patients on active and placebo from this trial will have the opportunity to join an open-label extension once they complete 16 weeks of dosing. All patients in the open-label extension will receive EDP 1815 for up to 52 weeks. We remain on track to bring our first extracellular vesicle or EV candidate, EDP 2939, for inflammatory diseases into the clinic in 2022. We continue to recruit patients in the Phase 2-3 TACTIC-E trial for the prevention and treatment of life-threatening complications associated with COVID-19 in hospitalized patients in the UK, Brazil, Mexico, and India. TACTIC-E is progressing well and is very close to the initial recruitment goal of 125 patients in each of the initial three arms of the trial, including EDP-1815. Hitting this recruitment target will trigger an interim safety and futility analysis by the Independent Data Monitoring Committee. Based on the progress and scale of TACTIC-E, we have decided to focus our efforts on this trial and to close our smaller U.S. Phase II trial evaluating the safety and efficacy of EDP-1815 in the treatment of patients hospitalized with COVID-19 infections. It is now clear the smaller trial will not make a meaningful contribution to our understanding of EDP 1815 in hospitalized COVID-19 patients. I'll hand it back to Simba for closing remarks.

Thank you, Jonathan. This is a pivotal moment for Avello. We now have proof of concept from a Phase II study for syntax. we are advancing EDP1815 in psoriasis towards later stage development and potential commercialization. In parallel, we are advancing EDP1815 in a phase two study in atopic dermatitis. And our second anti-inflammatory microbial product, EDP1867, is in the clinic. Our EV development platform is making strong technical progress towards the clinic and we have shown preclinically the potential of syntax medicines in neuroinflammation. All of this is only the beginning. We have a better and better understanding of how to capture the full breadth of our syntax platform, and you can expect much more from our platform as we continue to grow Avelo towards our vision. Thank you for your attention, and we will now open for questions.

Ladies and gentlemen, to ask a question, you will need to press the star, then the one key on your touch-tone telephone. To withdraw your question, press the pound key. Please stand by while we compile the Q&A roster. Now, first question coming from the lineup. Chris Howerton with Jefferies. Your line is open.

Hi. Good morning, everybody, and thank you very much for taking the questions. For me, I think the first would be You know, with respect to atopic dermatitis, you know, I'd be curious to hear the company's thoughts on both kind of the regulatory path of using EZ50 as a primary endpoint, if that would be possible, and then secondarily, you know, what would be a clinically meaningful effect size on such an endpoint within, I guess, the mild to moderate patient population? So that would be question one. And then question two is with respect to cohort B of the psoriasis study, you know, maybe if you could just compare and contrast that to cohort A and how that's going to inform, you know, the phase three design moving forward. Thank you.

Chris, it's Simba. Thanks for your question. Sorry, could you just repeat the last question?

Yeah, I'm so sorry. The last question was, you know, compare and contrast cohort A and cohort B for the psoriasis study. And, you know, what exactly in the cohort B results is going to help you kind of figure out the phase three design moving forward?

Okay. All right. Thanks. So let me take the middle one first, which was what would be a clinically meaningful effect on the EZ50 side. As you know, Chris, atopic dermatitis for mild and moderate patients does not have any approved oral treatments. And atopic dermatitis patients essentially with mild and moderate disease are limited to taking a range of topicals, including topical steroids, which have a number of limitations. The reason I'm leading with that, Chris, is the bar is actually very low for a safe, well-tolerated oral drug. And as long as we continue to confirm safety and tolerability, if we see easy 50 responses or equivalent, and I'll hand over to Duncan in a moment who can answer your first question, in a reasonable percentage of patients, we have a very attractive drug. I would say somewhat similar to psoriasis if we have effects at ET50 or greater in 25 to 30% of patients or more, then we have an attractive drug as a general guidance for you, Chris. We expect we have a good probability of doing better than that. If you look at our phase 1B data in atopic dermatitis, we already had 7 out of 16 patients patients who were plus or minus at that easy 50 level after only eight weeks of treatment. So we're feeling confident right now that we'll get to that level or better, Chris, that I talked about. I'd also emphasize that in psoriasis, we did already see some patients at PASI 75 or even greater, PASI 90. Different diseases, different biology, but it's certainly encouraging in terms of where we think we may end up. So that's the first point, Chris. And then I'll let Duncan ask your question on EC50 as a regulatory endpoint.

Yeah, good question. So easy is a well-established scale. It's a scale that the authorities are very familiar with. In terms of the 50 benchmark itself, it is a clinically meaningful change that patients with mild to moderate and severe disease will clearly notice and benefit from. So we have no concerns about that as a scale from a regulated perspective. Remember, this is the Phase II study. We also will have SCORAD. We will have IgA times BSA. BSA is sort of key secondary endpoints. So what we will do is we will look at all of that data. We will understand which of those endpoints actually is the best endpoint to capture the benefit of EDPHC. 15 in mild to moderate atopic dermatitis, and then we'll go and have those discussions with the health authorities. But all of those are pretty well established, and particularly E is a very well-validated endpoint that we don't expect to have any concerns from the regulators with using.

And then, Jonathan, do you want to do the Part B versus Part A?

Sure. So, Chris, for the Phase 2 psoriasis study, you know, from the Part A, you know, we clearly learned that dosing longer is going to be a important to capture the full breadth of activity of 18-15. When we think about the Part B data, you know, Part B data will inform us around relapse, how long is benefit maintained. Obviously, that'll be incorporated in our thinking, but certainly as we think about the next study in the registration pathway, it'll be longer dosing, right? We'll be looking at an endpoint, you know, as we've mentioned before, most likely at six months and then extending out for another six months so you get a full year of data. So the real, I think, data that will support the thinking behind that is part A. Okay.

There's one point for clarity that cohort B is not a separate cohort. It's the same patients from part A of the study carried over I just wanted to make sure you weren't under the impression that we had a separate cohort of patients that we were looking at for longer.

Yeah, no, that is helpful. I appreciate the clarification. And maybe I'll hop back in the queue and give other people the chance, but I appreciate you taking my questions.

Thanks, Chris.

Thank you. And our next question, and coming from the line of Matthew Lucchini with BMO Capital, Yolanda Selfins.

Hi. Good morning, guys. Thank you very much for taking the questions, and congrats on the continued progress. So maybe first on the Part B psoriasis, given everything that you've just talked about and the importance of looking beyond 16 weeks, Are you able to provide some preliminary perspective on the level of additional follow up you expect to have beyond that 16 week data point when you release data? Will everyone be at six months or will the median be somewhere below that and if so, around where? And then secondarily, want to know if you're able to provide any incremental color on the formulation work since the last update and when you may be able to have something more concrete to say about your efforts here. And then maybe lastly, if I could, on 1867, just understand a little bit more of the recruitment challenges that you're seeing and maybe more broadly how the AD data will inform your development strategy not only for this drug but for EDP 1815 as well. Thank you so much.

So let me take a couple of those. I'll let Jonathan take the detailed questions on Part B. On formulation, we expect we'll have next level of data and understanding of the next wave of activity in Q1 next year. So I think we should be in track for that on that front. Matt, on recruitment of 1867, We're trying to understand exactly why recruitment is slower than we had expected. It may be because of COVID. That study has been recruited in the UK, and you probably know there's been a rise of COVID patients. We don't know that, Matt. It's definitely puzzling for us, but we're trying to understand that right now, and we don't really have any additional information. at this stage on that recruitment situation. And then Jonathan, do you wanna talk about the details on Part B?

Yeah, so in Part B, we have 124 subjects who have rolled into that portion of the study. It goes out for an additional 20 weeks. We expect to have a fair number of those subjects who will be completing the 20 weeks. We've got about 70 plus percent subjects who are now completing that and we'll report the data in first quarter of next year, and we'll have a large proportion of those subjects who will go out for the whole 20 weeks.

Great. And then actually, Duncan, do you want to comment on the 1867 atopic dermatitis?

Yeah, that is a good question. So just to be clear, we're using atopic dermatitis here because actually it's a very useful and valuable kind of, if you like, early indication that we've got good anti-inflammatory We will, you know, obviously have the 1815 data as well, but the intent here is not to say that 1867 is another drug that will follow in exactly the same footsteps as 1815. This is the phase 1b study. We want to demonstrate an anti-inflammatory effect, and then actually there's obviously a whole range of indications that we talked about before that could range from classic immunoinflammatory diseases like inflammatory bowel disease, some of the alternatives to diseases such as neuroinflammation. The key here is to just demonstrate the safety, tolerability, and the anti-inflammatory effect, and then the future development plan will involve other indications.

Great. Thank you for taking the questions. Thank you, Ben.

Our next question coming from the line of Kristen and Kristen with Cancer Fitzgerald. Your line is open.

Hi. Good morning, everyone. Thanks for taking the questions. The first one I have is I noticed that your most recent corporate deck expands and further emphasizes some of the comorbidities that are specifically associated with psoriasis and atopic dermatitis. So as your recent data set was important for your broad understanding of the potential syntax medicines, curiously, as you are near starting the Phase II study in atopic dermatitis, if you will look to enroll some patients where perhaps some of these comorbidities are more apparent to even better understand some of the systemic impact.

Yeah. So, Kristen, thanks for picking up on that point. We won't be specifically looking to recruit patients with comorbidities. Obviously, to the degree we pick it up anyway in the detailed analysis will obviously be looking for those things in that context. But beyond the phase two, I think the more fundamental point that you're picking up on, Kristin, is there's huge breadth of opportunity with 1815 and with this impact platform to treat many different types of inflammation, A, and B, both psoriasis and atopic dermatitis are systemic diseases that, as your question suggests, impact not just skin, but have comorbid conditions in multiple different dimensions. So we won't be looking specifically for that in your treatment in Phase II, but your point is an important one in terms of the potential treatment as we go forward.

Okay, thanks. And looking at the profile differences between EDP 1815 and EDP 1867, Based off some of these trends you've observed post-dosage and longer term with EDP 1815, wondering if based on the differences with vPARVULA, whether you might expect or look to see something similar with EDP 1867. And then, you know, as you think longer term here, how do you think about expansion opportunities for EDP 1867? in light of these recent preclinical findings you had, as well as the greater focus on EV candidates, given the recent patent could address both?

Yeah, so I think three levels of questions. So first of all, we need the human clinical data to see if we see similar or different responses with 1867 versus 1815. They're different. And certainly preclinically, they're different. So we'll be able to answer that question with data in the not too distant future, hopefully, Kristen. In terms of how we think about 1815, 1867, expansion, and the EV side of things, let me take that together. What we've talked about historically is that we see where we are now, I talked about it earlier today even, as the equivalent of uncovering cytokine biology and discovery of antibodies. I happen to have worked with Alex Zaffaroni decades ago, Kristen, who started Deenax, the first cytokine biology company in the world. Fairly remarkable uncovering of a central area of human biology. Mark Bodmer and I worked, as you know, in the earlier stages of antibodies when Mark headed up one of the world's first antibody engineering groups. And we're very much in the early days of uncovering the potential of syntax platform And pushing things forward, I'll ask Mark to say a little bit more about this right now. But as we start to understand more and more how the biology works, what the potential of EVs is, as Mark said, we see EVs and the ultimate future of syntax platform as being an opportunity to have orally delivered agents that have antibody-like efficacy whilst being safe, well-polarated, and affordable. And all of the science right now points us in the direction of that being a very real possibility, and it's not too far away. We'll have our first EV data sometime in the not too distant future. As we said on the call, we are on track to go into the clinic with EVs next year in inflammation, and we haven't given formal guidance on when that data will read out, but it won't be too far away. And so that's where we see this going pretty quickly, actually. Right now, we have, as you know, 1815 that's looking like an attractive drug in psoriasis and quite probably in atopic dermatitis. But that's really the first wave, and we look at EVs as rapid follow-ons that can have dramatically better potency. In terms then of 1867 and 1815, or indeed any of our other microbes and microbial extracellular vesicles versus 1815, As you know, and again, as Mark talked about today, the neuroinflammatory side of 1867 is already looking very interesting. As Duncan said, we don't see 1867 as an atopic dermatitis drug. Necessarily, atopic dermatitis is a quick way of getting clinical information in human patients, and then we'll figure out how we move it forward depending on that data, but we see potential for 1867, for example, in neuroinflammation, as well as in a number of other areas. And then Mark always likes to remind everybody how lucky would we be to have 1815 and 1867 as great products. So we look forward to that possibility, obviously, Kristen, and it's a great luxury if we do end up there. So hopefully that was helpful. I'll have Mark say a little bit more about actually your EV side of things. Because, as I said, all the science right now is pointing us to that being an incredibly exciting possibility.

Yeah, thanks, Simba. Kristen, let me play into that with the first bit of your question about 1815 and 1867 and the duration of effect. As Simba said, we don't know clinically, but pre-clinically we do. So EDP 1867 induces this regulatory phenotype in treated animals that could be transferred to untreated animals in exactly the same way as EDP 1815 does it. but it does it with a different molecular background, which is fascinating as she's driving a lot of our research and discovery because there's some common parts of the pharmacological pathway here which are induced by different molecular pathways in the primary action of the drugs. It's not to say that we've identified specific targets, but we can look at differences in binding toll-like receptors. We can look at differences in induction of various transcripts in the gut by the different agents. We then take that to the EV part. We've been doing a lot of work on the exercise of the vesicle of the microbe that underlies EDP1867, and that also does these things. It doesn't look molecularly exactly like the parent microbe, but pharmacologically it does on a much lower level. So if you think about this from a dose point of view, which I think was driving some of my comments about efficiency of movement of these things in the milieu to get to the target in the gut, and also packing. So we give typically a dose of about 10 to the nine microbial cells per day in an animal model with the EV from EDP 1867, we can take that down several orders of magnitude, 10 to the sixth, 10 to the seventh, and they're smaller at the same time. So the differential is about a million fold. I mean, this is quite an extraordinary effect. That's why we're so excited about the future of the EV platform, because we've got a base of efficacy with the microbial preparations, and then we have this additional, way to go forward, which is why I talked about the potential to get into severe disease. I suspect this is all about dosimetry and where we are on the dose response curve in relation to formulation, in relation to the concentration of drug that's given to the target. Then just very briefly beyond that, most of our discovery work is now focused on looking at extracellular vesicles from quite a wide taxonomic range of microbes. comparing their pharmacology, their underlying molecular mechanisms to get a spectrum which is gonna support the future of the pipeline. And by the way, critically importantly, it supports the breadth patent claim that we get around this and just to re-emphasize that the patenting around the use of extracellular vesicles from mucosal anaerobic microbes as oral treatments is virgin territory and so we're filing very broadly on that nothing issued yet of course but the discovery work which gives us the product candidates also gives us the breadth of support for those patent filings. So I hope that helps to give a bit of context to the whole thing.

Yes, thank you, Simba and Mark.

Thanks, Kristen.

And our next question coming from the lineup, Covencing with JMP, Yolana Solpin.

Hi, thanks for taking the question. So just a few from me. I think, Mark, you had a – I wanted to bring – conversation back to those results that I think you had mentioned with the BSA greater than 5% and below 5%. And, you know, I'm just trying to figure out what the comparator is, if there is any. And it just seems like the way Amgen has presented results from the advanced trial, it looks really different compared to how they've kind of done things with other trials. I don't even think there's a PASI 50 or a PASI 75 or any kind of traditional PASI ever presented from the advanced trial. So, Can you maybe give us some context to how to kind of view those results and then one follow-up after that?

Yeah, Kevin, thanks for the question. So I can't really comment on why Amgen chose a particular endpoint that they chose. Obviously, they had their own data sets with Unveil and then went to Advanced. In terms of the body surface area threshold of 5%, That's one of the ways in which people can sort of classify psoriasis into mild and moderate disease. It's not necessarily true from a patient perspective, but certainly from the physician perspective, we tend to sort of say if the body surface area is less than 5%, it's mild. If it's greater than 5%, that it's moderate. And I am assuming that is the reason that they cut that data at 5%. And as you saw, we've done something similar and looked at that. PGA 0 and 1, so the ability to get clear or nearly clear skin, both in the mild and the moderate disease. We've also actually done it using PGA 2 and PGA 3, which is another way of categorizing mild to moderate disease. In both of those settings, we have a statistically significant result in terms of EDP 1815 versus placebo and reaching clear or nearly clear skin. So from our perspective, it's just another way of looking at the clinical benefit that we're getting with EDP 1815 and seeing sort of a clinically meaningful benefit to patients there because that's usually the target for patients. They want to get to the clear skin or, you know, virtually clear skin because it's quite hard to get truly clear skin. But we used the 5%. It does reflect some of what Amgen did, but I can't tell you why they used PASI or didn't use PASI during that case. We used it because we used it early and it's a well-established well-validated endpoint. We will look at, obviously, all the endpoints in 201, and we will decide which one, you know, we view is the best in terms of capturing EDP1815's activity, and that's what we'll propose to the health authorities in terms of thinking about later phase development studies.

Can I just add one comment, Gobind, as I'm sure you understand very well, what was important in this was that an orthogonal analysis to the PASI 50 showed robustness of the underlying data. So unlike the comparison of the primary mean PASI with the PASI 50, this is a different data set that was collected looking at BSA and looking at IGA, and it reinforced the fact that there is an effect of EDP 1815. This is separate from the question of the proportion of responders. But the orthogonal analysis picked it up as well. So it really, for us in our evaluation of the study, added a deal of robustness in our estimation of the effect of EDP 1815.

That's helpful. And I know there was a mention about the lower, I guess less than 5% BSA population being statistically significant with the orthogonal analysis. If I'm, is that, I mean, I'm just eyeballing it. It's about, what, 10%, 20% of your population? So I'm assuming the numbers are probably pretty small there anyway. Can I confirm that with you guys? And then maybe the follow-up would be, I'm looking at those pictures that you guys presented earlier with like PASI and PGA and DLQI and PSI. And is the, like the clinical effect, you know, clearly we're having a microbiome drug. It's not shutting off the pathway. We're more normalizing the underlying disease process. So one might imagine the time to kind of see the peak effect here might be different than a small molecule like a Tesla or a Jack. Is there any rationale or any precedent for how long this could take? Like, for example, would 20 weeks, for example, be enough time for us to be able to see this? And then maybe is PGA the right way of looking at this, not PASI, or maybe DLQI? I don't know if you can comment, because those DLQI responses that you guys presented, was pretty good, and I think in advance they are focusing more on PGA and these other metrics, not PASI.

Let me say a few things and then Duncan can expand. So first of all, you raise a really important point on small molecules versus our mechanism of action. And in Mark's comments today, he talked about the fact that we've done very elegant adoptive cell transfer studies preclinically that show that our effects are driven from immune cell impact versus classic impact of antibodies or small molecules. So we're pushing the immune system back to a homeostatic regulatory status through cellular effects on the immune system. It's completely distinct, as you're saying, go into anything else. It's got very positive potential implications because obviously having a healthy homeostatic immune system is a lot better than shutting down part of the immune system, which is essentially what antibodies and small molecules do. It, as you suggest, also likely means it will take a little bit longer for effects to kick in, but then effects, and that's part of what we're looking for in part B, may well be sustained for longer. So all of those things are very positive for us. We can't quantitatively answer your question now as to, you know, is 20 weeks the right time? We've certainly already seen at 20 weeks, and we've reported out on this with the initial data released from the Phase II psoriasis study, that we see continued depth of response post-dosing. So that is already indicative of a likely cellular effect that persists and continues for presumably weeks after we've stopped dosing. But we don't have it quantified yet. So just a few initial comments there, and then Duncan, you can answer the other parts first.

Yeah, just a couple of points going on there. So just to be clear, when we talked about that data being statistically significant, what we were looking at that is when we looked at the PGA 0 and 1 across both the groups, either split by BSA or actually split by their starting PGA, a baseline of being two or three. This is still a phase two study. It's a reasonable size, but as you start to look at the various subsets, they come down a bit. So it's not that we looked at each of those individual subsets. What we've done is we looked at the total population but divided into either being PGA2 or PGA3 baseline or less than 5% or greater than 5% of baseline in the two analyses. And when you analyze all of the data with that as a stratification variable in either of those two cases, we see a statistically significant result. In terms of what will be the best endpoints as we go forward, we'll keep continuing to look at the data. The one thing I would say is that, you know, if we look at the photos where we get very nice, clear kind of kinetics of response to EDP1815, the psoriasis plaques, you can see them actually clearing sort of earlier on, and they tend to clear centrally, which means that BSA is one of the later things to actually shift. And we'll take that into account as we think about what the later so what the endpoints are for later trials. It's a well-established way of actually clearing, and actually Benny's our chief investigator, you know, what it is, as well as our in-house dermatologists, and it's a fascinating way in which actually the PHD-15 drives its effect, essentially clearing, and the last thing to clear is the edge of the plaque.

Can I just add one comment, Govind, related to what Simba said about the mechanism of action? Because you're actually asking a question about the duration and the timescale of the cellular effects versus factor inhibition. So if one imagines, for instance, an inflammatory response driven by IL-17 or TNF, one puts a direct inhibitor in and takes that inflammatory drive out. And as long as the inhibitor is there, the inflammatory drive is taken away. but it's not generating a remapping of the immune system and its function. So while the effect may be a bit quicker, the durability of the effect will be less. So one of the things to imagine here from an immunological point of view is that if you've got inflamed skin, whether it's psoriasis or atopic dermatitis or an inflamed joint or an inflamed spinal cord, whatever it is, you've got a bunch of resident pro-inflammatory cells in there which need to be suppressed and displaced. Now, if you've got a direct inhibitor of that inflammatory effect, sure, it'll act on those inflammatory cells. What we're looking at here is a different process where there is a steady replacement over time of the inflammatory cells that are resident in the inflamed tissue with the anti-inflammatory regulatory cells that are being induced by the drug. And that's why Simba talks about the reprogramming or the long-term effects. This has been the holy grail of anti-inflammatory therapy for years, and we haven't known how to get at it. So you can imagine when we saw the adoptive cell transfer effect in mice, and then we saw the continuing accrual of effects in humans, this was a real eye-opener for us. It was why I made the comment in the scripted remarks about profoundly changing the way one thinks about an area of science. Suddenly we can do something in this system which we've known we've wanted to do for decades but haven't figured out how to do it. That is not just to suppress the inflammatory response but to reprogram the immune system so that it controls its own response. And that is what the data are telling us are happening very clearly pre-clinically, because we can show it by direct experimental methods, and it reads off what we're seeing clinically, which is consistent with what we're seeing pre-clinically.

Thank you. Okay.

Thanks, Govind. Appreciate the question.

And our next question, coming from the line of Hina K.

Yes, thank you. Maybe just a further drill down on the effort to improve the release kinetics. You know, obviously I think the enteric coating chemistries are well understood. So, you know, what's really the gating item of that initiative?

So we're just generating supply key for the next wave formulations to test in the scintigraphy model that we touched on briefly on the last learning score. So we're just generating supply, and as I said, we should be ready to test different formulations in Q1 of next year.

Okay. Yeah. All my other questions were answered, so thank you.

Thank you very much.

Now, next question coming from the line of Joseph Stone at Cowan. Your line is open.

Good morning, and thank you for taking our questions. Maybe the first one, just a clarification on the Phase II atypothermatitis data readout that we're going to be able to see. I know with the Phase II, we saw the Bayesian analysis for superiority, but then also maybe more of a traditional p-value comparison on those that reached a certain PASI cutoff. what should we expect in terms of the data readout for the atopic dermatitis? Will this be sort of a traditional disproportion of patients throughout the EV50 on drug versus placebo, or is there a Bayesian comparison that would be appropriate here as well? And then second, in terms of the novel formulation work, you can move that into clinic in the Q1, the phase two for atopic dermatitis is starting in Q4. Is there any way to expand the phase two if what you're seeing with the novel formulations is interesting to add that cohort, or will these novel formulations be used kind of ready for the pivotal studies if that path is supported? Thanks.

Yeah, I'm going to let Duncan answer both those questions.

So, for the first question, that would be straightforward because it is a proportion analysis of the number of subjects who reach EZ50. Actually, the Bayesian approaches are less well-established and validated for that, so we will use the more traditional frequentist approach from that side of things. In terms of the potential to add a new formulation partway through the Phase II study, I think very difficult to sort of do that and be able to sort of have a robust interpretable analysis for that. So we will run any potential new formulations in a separate study rather than try and complicate the current study in parallel. Yeah, in parallel.

Great. Thank you.

So, Joe, I hope that hasn't stopped you from becoming an expert on Bayesian statistical analysis, which I will. It is not only the future, it's the past. So part of what we try to do at Avello is educate people on something that is 300 years old, which is Bayesian statistics. But anyway, that's just my humorous comment for the day, Joe.

Thank you very much.

I'm showing no further questions at this time. I would now like to turn the call back over to our speakers for any closing remarks.

Thank you, everybody, for your attention. Thanks to our wonderful analysts for their attention and their excellent questions. As we said in the scripted marks, this is a pivotal moment for us. We are thrilled with the Phase II data in psoriasis, but that is absolutely just the beginning. of what we see as an incredibly exciting future for the Syntax platform. I will remind everybody that we are true pioneers. Mark Bodmer talked about the extracellular vesicle intellectual property, but we were the first company to uncover the small intestinal axis. We were the first company to think of using non-live microbes as orally delivered therapeutics. We are the first company to think about using orally delivered microbial extracellular vesicles. So our goal has always been to be the pioneer and the leader forever in thinking about how to capture the value of the small intestinal axis, which we now absolutely know plays a central role in human biology, still not widely appreciated by the scientific or clinical community. And we now know that we can harness the small intestinal axis for clinical effects with something that is very safe and well-polarated. So an extremely exciting moment for us. Thank you very much, everybody.

Ladies and gentlemen, that does encompass for today. Thank you for your participation. You may now disconnect.