Galmed Pharmaceuticals Ltd.

Good day and welcome to the GOMED conference call to discuss financial results for the third quarter 2021. Today's conference is being recorded. Before we begin, please note that we will be making 34 statements on today's call, including those regarding financial results, statements and forecasts regarding anticipated timelines and expectations with respect to our regulatory and clinical development programs, as well as other statements that relate to future events. These statements are based on the beliefs and expectations of management as of today, and actual results, trends, timelines, and projections relating to our financial position and projected development programs and pipeline could differ materially. We urge all investors to read carefully the risks and uncertainties disclosed in our filings with the SEC, including without limitation the risk under the heading risk factors described in our annual report on Form 20-F filed with the SEC. and the risks and uncertainties, including in the form 6-3, filed with the SEC earlier today. GOMID assumes no obligation to update any further statement or information, which speak as of their respective dates only. I would now like to turn the call over to Alan Barra, President and Chief Executive Officer.

Alan, please go ahead. Thank you, Shamali. Good morning, and thank you for joining us on today's conference call. I'm pleased to be here today with our Chief Scientific Officer, Dr. Liat Hayar-Deni, and our Chief Financial Officer, Yochai Stensler. We are also grateful to have with us today our guest KOL, Professor Vlad Ratio, from the Sorbonne University and RMO Study Co-Principal Investigator. Professor Ratio will present the results from the first dataset of the open-label part of our Phase III RMO Study also referred as the ARCON cohort. Professor Rassio will be happy to take questions following his presentation. As the second part of our today's call, we will report to you on our financial results for the third quarter of 2021, and we'll be happy to take questions addressed to management. As you know, early this year, an open-label part was added to the phase three RMO study designed to provide effect size on a higher dose of Aramcol 300 mg BID with 153% elevation in exposure and optimized treatment duration for Aramcol. GALMED also added to the study a rigorous and robust pathology reading process confirmed and designed in consultation with the FDA, including a committee of three independent experienced liver pathologists. Biopsies are read by each pathologist individually, followed by a consensus reading. The data, which will be soon presented by Professor Razzio, is aligned with the hypothesis that higher Aramcol dose results in an improved efficacy profile and that a direct anti-fibrotic effect of Aramcol may occur as early as 24 weeks. This is demonstrated by histology and corroborated by fibrosis biomarkers. Analysis of biomarkers in the larger ARCon cohort support anticipation that further biopsy analysis will continue to show that Aramcol treatment provides a highly meaningful effect on fibrosis. Importantly, Aramcol continues to show excellent safety and tolerability profile. Now let me transfer the call to Professor Razio. Professor Razio, please.

Thank you, Alan. I'm always honored and very happy when I can get to present positive results. So, thank you for inviting me to do so today. So, hello, everyone. I hope you can see the slides we have prepared for you here. I would like to start by reiterating what Alain Beharoff explained very well, which is that this is an innovative study which was designed within the randomized control trial, the phase three trial of the ARMOR study. And this is an open-label part which tests three different durations of exposure to Armco, as explained, a six-month duration, a 12-month duration, and the 18-month duration in three groups of patients of 50 patients each. It is an open-label study. We know basically the rate of response in terms of fibrosis reduction of the placebo arm from the many studies that have been conducted and reported so far. So the interest of this study is not the comparison with placebo, but rather to understand whether changing the pharmacopresentation of the drug by delivering it twice a day, which increases, as you were told, considerably the exposure in blood, if this results in higher level of histological effect, than what was previously tested and published in the Phase IIb trial. Moreover, this study will try to understand what would be the optimal period of treatment that results in a strong antifibrotic effect, and for that reason, the three lengths of the three durations are being compared simultaneously. Now, the study will continue after the respective 6, 12, or 18 months time where a control liver biopsy has been performed. It will continue in the same open-label fashion, and it is scheduled to end around the same time as the randomized control phase three trial R-more will end. And the only difference here being that only patients who are non-responders will have a third biopsy in order to understand whether prolonged exposure beyond the initial timelines will result in an antifibrotic response, a delayed antifibrotic response in people who are initially non-responders. So this is a very exciting design because it tests several things at the same time, and usually things that are not being tested in traditional phase 2b or phase 312 because, like always, everybody wants to rush to take the shorter route to success. but here it is important to understand very well how to use this drug. Now, another thing that Mr. Baharov explained is that nowadays a single pathologist is no longer sufficient, so therefore it is important to have a very strong histological adjudication process, and in agreement with the FDA, what was decided and what is being implemented for this trial is to have a committee of three pathologists So it's no longer just one deciding whether it works or not, but the three of them need to agree and provide a total consensus on the staging and the grading of the disease. And that is, of course, done blindly, not to the allocation, because this is open label, but to the sequence of the biopsies. So the pathologists do not know whether they're reading the first or the control biopsy. So all this is explained here on the slide. I'm going to move on now to present you the preliminary results on the first patients that have completed their assigned allotted time of exposure. And we're very happy to tell you that the results that will, part of the results that we'll present here have been accepted for presentation as a late breaker at the liver meeting, the American Association Study of the Liver Disease meeting that will be held later this week. So the part that has been submitted and accepted as a late breaker concerns 20 patients and is labeled here late breaker ASLD. But then we'll also present the data available today of the larger cohort of patients that participate in this open label study, which by the way is called ARCOM, ARAM called open label. and this is the ARCon cohort, and this concerns 139 patients. So the 20 patients that are being presented at ASLD are part of this 139. So you can see here on this slide that basically the epidemiology and the demographics are pretty much the same between the first 20 and the subsequent 119. You can see here that females are a majority of the patients. Mean age is around 58 years. BMI is rather high, 32 to 33. And then ethnicity, there's a majority of Caucasians. Most patients have advanced bridging fibrosis with stage three between 57 and 65%. And then there are some patients that are F2 and others that are stage one. So this is as far as the baseline characteristics. And now is the main result. You can see here the proportion of patients that had an improvement by one stage or more after exposure to Aramcol. And apologies. The good news is that actually out of 20 patients that had a control liver biopsy, 12 of them had a fibrosis reduction by one stage or more, and actually seven by one stage and five by two stages. which is a quite remarkable result because that places the level of response in terms of fibrosis improvement at 60%. And of course, this is very impressive compared to the figures that are available in the literature because by all accounts, the placebo rate in the different studies is between 15 or 13, even in the phase three trial, and I would say 30% maximum. So 60% goes way beyond that. Of course, These are preliminary results on a small number of patients, but this high level of fibrosis reduction has not been seen so far in other studies. What is interesting here, you can see on the right part of the diagram how these biopsies are distributed in regards to the length of exposure. So basically half of the patients, at least an equal number, nine of them have been biopsied after one year and other nine of them have been biopsied after six months, and two of them only have been biopsied at week 72. And so you can see that. And for the moment, numbers are too small to see a trend, but it looks like 48 weeks would have the best response rate in terms of fibrosis, with 67% of them, six out of nine, improving fibrosis by one stage or more. But this, of course, needs to be confirmed as the trial continues. So these are the very exciting histological results. A more visual way to see the changes in the liver of patients with IRM call are these pie charts. So on the left side before a baseline, on the right side after treatment. And two things are quite striking here. If you look at the proportion of patients with bridging fibrosis, those in orange, you go from 65%, it shrinks down to 25%. So that's what the numbers indicate, 13 here and five there. Now, conversely, if you look at the number of patients with very early fibrosis stages, so the blue ones, F1s, this goes from, this increases from 15% to 45% when you put together F0 and F1. So clearly there's a shift here in terms of fibrotic severity. that is being induced by exposure to Aramco. Now if we're looking at converging evidence from biomarkers, which is always very important because we would like to see all needles moving in the same direction. Now what you can see on this slide here is the response on aminotransferase levels. So ALT on the left side, AST on the right side, Top graph is from the late breaker cohort, 20 patients. And the bottom part, and this is interesting, is all patients included so far, so which have been now looked at at different lengths of exposure. Not all of them completed the study, but the results are cumulative of the different times of exposure. And the important part here is that both enzymes, both amino transferase go down, as you can see here, clearly, significantly. And this is true whether you're looking at the first 20 patients or at the subsequent 139 patients that were included and analyzed in total so far. So quite robust reduction, which is confirmed beyond the initial 20 patients, which are reported at the liver medium. Now, if we look specifically at some very popular fibrosis markers, let's look at P4. Here again, the results are very encouraging in the sense that they go in the same direction as the results observed by histology. If you look on the left side, you have the ASLD late breaker cohort, the 20 patients a clear drop in PIP4, and this is replicated in the larger cohort of 139 patients. Their behavior is the same. So one can surmise from that that the histological result when this will be available from the entire cohort will be quite similar to the one obtained in the small earlier cohort of 20 patients. Of course, the needs to be seen, but the fact that FIB4 goes down in all the patients, if this is an indicator of fibrosis reduction, the histological results should be the same on the larger number of patients, which is, of course, the final result that we're looking for in this study. Now, looking at another very emergent biomarker of fibrosis, which is PROC3, it is a a marker of not only of established fibrosis, but also of active fibrogenesis, because it is a fragment of procollagen that is being released as collagen is being deposited in the tissue. So ProC3, now every trial measures ProC3, and what is here also reassuring is that in the 20 late breaker cohort, 20 patients where histological regression of fibrosis has been documented by liver biopsy, you can see a strong reduction in ProC3. But that is also replicated as for FIP4 in the larger cohort of 139 patients for which not everyone has a liver biopsy yet. But the fact that this biomarker of fibrogenesis goes down makes us think that the histological trend will be the same in the larger cohort. And whether you look at absolute change or relative change, the results are quite consistent. What is interesting here is that ProC3 was measured by Nordic Bioscience, which is the biotech company that initially invented and created this biomarker. However, they did change the methodology for measuring it, the assay precisely, and that results in a more robust and more reproducible assay according to Nordic Biosciences, and also to a higher baseline level, which is explained here, 48.8 micrograms per liter. Now, if we look at the statistical significance of the results that I've just shown you, whether you're looking at aminotransferases and the two most popular fibrosis markers, you can see that there's a significant drop from baseline, which is shown here on this slide. And this is true at week 24, and it is maintained at week 48, with a high level of significance for all of the biomarkers that are being presented on this slide. So again, aminotransferases, FIB4, and PROC3. And as a reminder, the ASID Lead Breaker cohort, the documented proportion of patients who had a reversal of fibrosis was 60%. So why are these results important? It is because they confirm and actually go beyond what was demonstrated in the Phase IIb trial, which was called the ARES study, and the results of which has been published in extenso in a very prestigious medical journal, which is Nature Medicine, less than one month ago. So the results that we're presenting currently today are sort of reinforcing the optimism in the ability of this molecule to induce histological improvement and, in particular, fibrosis reversal. So that's why it is always good to have the same results coming from a different cohort. So this is why this study is important to conduct. And also, they do support the effect of a higher dose of Aramco. which is the one actually that will be used in the Phase III R-more study. So the practical implication of these results, if they are confirmed on the larger cohort of the open-label trial, is that they will enable us to conduct discussions with the FDA so that the interim analysis of the Phase III trial, which is the analysis that, if positive, allows for conditional marketing authorization. So it allows us to negotiate that this interim analysis is performed on a smaller number of patients and maybe after a shorter period of exposure, say for instance instead of 72, 48 weeks, which will of course be an important thing because that will help bring the drug earlier to the market. So very positive initial results so far from this open label trial. And I'll pass it over to you, Alan, for the question and answer session.