Good morning, welcome to Evelo Biosciences conference call to discuss its fourth quarter and full year 2022 financial results and business updates. At this time, all participants are on a listen-only mode. Following the formal remarks, we will open the call for your questions. Please be advised this call is being recorded at the company's request. At this time, I'd like to turn the call over to Shamira Shariffudin of Evelo. Please proceed.
Thank you. This morning, we issued our fourth quarter and year 2022 financial results and business updates. This release is available at evelobio.com under the Investors tab. Today on the call we have
This durability of clinical effect is differentiated from standard of care anti-inflammatory medicines. It is consistent with the mechanism of action that we have elucidated, showing that SINTAX medicine acts locally in the small intestine to activate a non-canonical regulatory T cell population. This is a fundamental breakthrough in the treatment of inflammatory diseases, which suggests great potential for SINTAX medicines. In November 2022, we published a scientific review in Frontiers in Immunology, explaining the science behind the small intestinal axis based on this growing understanding of the mechanism of action of SINTAX medicines. A core EDP1815 program goal for 2022 was to advance interactions with regulators regarding a potential phase 3 program for EDP1815 in psoriasis. Interactions were completed with the FDA, EMA, and MHRA over the past few months, providing a path to phase 3.
Advancing EDP1815 into Phase 3 will be dependent on availability, financing, portfolio prioritization. As you know, we are also investigating the potential of EDP1815 in a Phase 2 atopic dermatitis study. The first 3 cohorts of this study missed the primary endpoint due to an unusually high placebo rate, which we cannot explain. The 4th cohort results using the faster release capsule are expected in the second quarter of 2023. Beyond clinical scientific side, I want to also remind everyone of our accomplishments on the financial side in 2022. In May 2022, we raised $79.2 million through a registered direct offering with participation from key existing and new investors. In December 2022, we refinanced our existing $45 million debt with a loan agreement with Horizon Technology Finance.
The term loan is by three years of interest-only payments, followed by a two-year amortization period. I'll now turn over to our Chief Scientific Officer and President of R&D, Mark Bodmer, to provide detail on our EV platform and report recent updates from our EDP2939 clinical programs.
Thank you, Simba. Excuse me. Bacterial extracellular vesicles, or EVs, are naturally occurring lipid nanostructures by bacteria. They're thought to be the main means of communication amongst bacteria and between bacteria and host cells. Now, in some ways, makes them well-suited as potential drugs, engaging the small intestinal axis when given orally to induce regulatory T cell and immunologic inflammation throughout the body. This leads to striking efficacy that has matched anti-cytokine biologics and JAK inhibitors in preclinical studies. As Simba mentioned, the EV product candidate, EDP2939, derives from EDP1815. They're both prepared from fermentation of the same single-strain commensal bacteria. EDP1815, a microbial product prepared from the cell pellet of the fermentation. EDP2939 is the EV product prepared from supernatant.
EDP1815 provided proof of concept of the underlying SINTAX biology, that drug action in the small intestine could lead to clinical benefit around the body in some applications, as well as a result of biologics and JAK inhibitors. Those were the results that Simba described earlier. The overall level of response that we've seen in clinical studies so far has actually not been as great as that had been promised. We propose that this is most likely due to limitations in the dose response that can be achieved with EDP1815. The critical factor in understanding why we expect EDP2939 to improve on EDP1815 in psoriasis is experimental evidence that the main active substance in EDP1815 is the EVs that co-purified in the drug substance.
That is EDP1815 contains extracellular vesicles as well as the microbial content. Preparations of EVs like EDP2939 with the free of microbial cells have consistently shown higher preclinical potency of up to two orders of magnitude in preclinical experiments. To give some comparison for what that could mean clinically, published dose-response modeling of tofacitinib, the broad JAK inhibitor in psoriasis patients, suggests there's about a five-fold range of dose from no response to the maximum response at the maximum tolerated dose. This five-fold range is actually much smaller than the range that we think we can achieve with the potency improvements between EDP2939 and EDP1815. The Phase 2 efficacy that Simba described that we saw with EDP1815 in the Phase 2 psoriasis study was evidence of the dose-response curve for clinical response.
On the basic principles of pharmacology, the increased potency of hopefully just EDP2939 is predicted to be more than adequate for a meaningful shift up that dose response curve. EDP2939 enables the possibility of improved clinical activity while maintaining the potential for the placebo-like safety and tolerability in recent studies expected. The two clinical developments reported last month from EDP2939 in its phase 1 trial were milestones in the progress of the product candidate. The first, as Simba mentioned, was the outcome of phase 1 safety cohort of EDP2939 in the human volunteers at the initial therapeutic dose level. The Trial Safety Review Committee determined that EDP2939 met the safety and tolerability criteria at this therapeutic dose proposed progression to phase 2 in patients with moderate psoriasis.
recruitment of psoriasis patients began recently in the phase 2 study and is now progressing well. Based on the current recruitment ramp, we anticipate reporting with the psoriasis results in the second half of 2023. The safety review was important. EDP2939 is differentiated from Evelo's prior generation microbial product candidates by the high intrinsic potency of EVs and the number of concentration of EVs that can be packed into a single capsule. This first safety evaluation is clinical evidence that at the proposed therapeutic dose, EDP2939, with these properties, maintains the placebo-like tolerability we previously observed with EDP1815. I'll now hand back to Simba.
Thanks, Mark. The current environment for small cap biotech at a time of increasing potential platform and medicines. Bringing EDP2939 to the clinic is the culmination of years of discovery in the lab, building on our previous experience with EDP1815. Working out new modalities based on new biology. Some challenging and some offering the potential for great advances. All our data suggested discovery of the pharmacology of bacterial EVs as an example of the latter, a step change in opportunity and potential value. In closing, I'd like to thank patients involved in our studies, our partners, our shareholders, and our remarkable team for their commitment and efforts to enable the progress we have discussed today. I'll now open for questions.
As a reminder, if you'd like to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Gary Nachman with BMO.
Hi, guys. Good morning. first for the fourth cohort in the atopic derm trial, looking at the faster release capsule, was there anything you were able to do to modify that cohort to manage the high placebo response you saw with the first three cohorts, or was that locked already? Is there anything you were able to do to modify it?
Hi, Gary. Two things. One, we obviously have engaged very deeply with the site at which the study is being run to ensure as much as possible that the study is being run according to protocol, that patients are respecting the protocol design. I raise that because one of the possible explanations for the high placebo rate could be off-protocol use of topical steroids, for example, in placebo patients. We've done that. Beyond that, the fourth cohort was already underway, and there's not a lot more we can do than what I've just described.
Okay, great. Depending on the results of the fourth cohort, are there any other tweaks you could potentially do to the faster release capsule if necessary, if you don't have the exact data that you're hoping for, or is that profile fully optimized? If the fast release capsule looks good in atopic derm, is there anything you would need to do before using it in a phase three psoriasis trial, assuming that's still the plan?
Yeah. Let me take those in reverse order. If what we get with the faster release, there's nothing further that we need to do to take it into the phase 3 trial in psoriasis. In terms of whether or not it's optimized, the clinical data, as you know, I remind everybody else, in humans on the release profile with the faster release is very positive. We're releasing the vast majority of product in the right place in the proximal small intestine with the current capsule release. I think it is very well-positioned. There's always ways to optimize, but I don't think we'll need them.
Okay. You guys are breaking up a little bit, but I think you had said that you wouldn't be able to start the phase 3 in psoriasis until you have the appropriate financing. Maybe just comment, Simba, about partnership discussions, if those are ongoing for both...
EDP1815 or EDP2939, and the timing of that potentially. Just, you know, what's the expected cash burn for this year, given what you have in front of you? Thanks.
Thanks, Gary. I'll take the first question on partnering. Then I'll hand over to Marela, our Chief Financial Officer, to discuss cash burn. On partnering, we're in a significant number of discussions around different partnering possibilities that fall into the obvious buckets. Our exploration on EDP1815 from a clinical development and commercialization perspective, both in psoriasis as well as in atopic dermatitis. Then partnership discussions on EDP2939 and the broader EV platform. Multiple discussions going on across the breadth. Our fundamental goal is to get a partnership over the course of this year. I think I'll hand over to Marela to talk about the cash burn.
Good morning, Gary. Thanks for the question. We have this year and following, a number of the cash preservation that we earlier this year, we are prioritizing our investment in our two key clinical programs and milestones this year, which are for our AD program and advancing EDP2939 in a moderate psoriasis study. We'll be out in the second half of this year.
Okay, great. Appreciate that. Thank you.
Thanks, Gary.
Our next question comes from the line of Vikram Purohit with Morgan Stanley.
Hi, everyone. Good morning. This is Gospel for Vikram. We have 2 questions. For the AD data expected in 2Q, I guess what is the efficacy hurdle that you are looking to cross? Also to same for the EDP2939 data in psoriasis expected in the second half, what do you see as the bar for success in terms of efficacy and safety?
Yeah. Hi, Gospel. Good morning. On the AD data, we've given previous guidance that on the efficacy we'd be looking for around 40% PASI 50, oh, sorry, EASI-50 or greater. 40% of patients on active with EASI-50 or greater or placebo separation of 15%. Separation in terms of percentage of patients with EASI-50 or greater of 15%. That's what we're looking for on the cohort 4 data, and that's been consistent guidance for some time, Gospel. On the psoriasis data with EDP2939, it's useful to first a reminder of the integrated profile that underpins everything we're doing. Very uniquely, the potential we have for that which is an orally delivered drug that is very safe and well tolerated, has meaningful efficacy and can be priced with flexibility.
What we're aiming for is something that has Otezla-like efficacy or greater with safety and tolerability. Anything at that level or greater would be a big win. You're aware, Gospel, that I'm sure you guys have a forecast for it for Otezla, but I think it's most people consider it on track to be a $3 billion a year drug with significant tolerability issues. If we can get at least an Otezla-like efficacy with safety and tolerability, we've got a major drug. We're very close to that level of efficacy with what we see with EGY fifty. I think we have strong conviction that that is a likely result. What's even more exciting is what Mark Bodmer talked about, which is the fact that preclinically we're seeing JAK-like or biological efficacy.
There's a big range between a Otezla-like efficacy and getting to that level. Anywhere in that range is a win for us with EDP2939.
Awesome. Thank you very much.
Thanks, Gospel.
Our next question comes from the line of Kristen Kluska with Cantor.
Hi. Good morning. Thanks so much for taking my questions. I just have one this morning. I understand you haven't necessarily discovered what has caused the high response in placebo, but I'm curious if there's anything that you're able to rule out at this time. Thanks again.
Thanks, Kristin. Good morning. We have essentially ruled out the obvious possibility that there was a mix-up in supply of drug, i.e., the patients took active instead of placebo and vice versa. We looked like, and we've worked through all of that does not seem to be the cause of the efficacy barrier. That's the one thing we ruled out.
Thank you.
As a reminder, if you'd like to ask a question at this time, please press star one one. Our next question comes from the line of Phil Nadeau with Cowen. Peyton, your line is now open.
Oh, hi. Thanks. Thanks for taking our questions. I guess, just to start out, could you discuss what gave you the confidence to move forward with the lower dose in the psoriasis patients? Did you see any evidence of target engagement or biomarker changes in healthy volunteers in that study in the 2939?
Hi, Phil Nadeau. I'll let Mark take those questions.
We've used actually a very conservative scaling factor to get from preclinical studies to the clinical studies. The doses fall by 10 to the 12 particles of the extracellular vesicle a day. Actually, based on the scaling factor by volume, if you know your PKPD and pharmacology and allometry, that's 100 times higher than would be predicted. The ability to do that is actually based on the small size of the EVs and their potency. That's a big part of the power of EDP1815.
Actually goes back to Simba’s answer a moment ago to the question about the expected outcome in phase 2 trial EDP2939, which is the whole point of what I was saying, was to do with the estimate of the probability of getting above that baseline level of efficacy based on very, very basic principles of pharmacology in terms of potency and dose that goes forward. The first one that we spent a lot of time debating, how do we pick a single dose for a skinny study for a phase 2a? And the answer is we went, we were a bit expected to count off. We went way above what we thought was likely to be the minimum effective dose.
Great. Did you guys see target engagement or biomarker changes in the healthy volunteers?
We didn't do that. Actually, is it, you need to get me for an hour separately. These drugs work in an inflamed state. It's about anti-inflammatory antibody. There's nothing to see unless there's inflammation going on. It's the same with these. In the healthy volunteers, we don't even bother to look at that 'cause there's nothing to know.
Great. I guess, just could you kind of explain whether how you're thinking currently on whether you'd move forward with EDP1815, assuming that funding or a partnership deal is reached, or would you kinda wait for a readout from EDP2939 in the second half of this year?
We're working through all of that because there's a couple of key components. You touched on both of them really, Peyton. One is financial. Okay, thanks. Sorry, you broke up a little there. Do you mind repeating that for me? Sorry, Peyton. Actually, you broke up. If you could just say again.
Yeah, sorry. Yeah, never mind. I'll take it offline. Thank you, guys, for taking the questions.
All right. Thanks, Peyton.
That concludes today's question and answer session. I'd like to turn the call back to Simba Gill for closing remarks.
Thanks very much, everyone. Appreciate everybody continuing to follow us. This is a very exciting time for us. We look forward to updating our program on our clinical programs, and as we've talked about on this call, updates on EDP2939 and the EV program. That's really important. That's the next level of efficacy and beyond. Thanks very much, everyone.
This concludes today's conference call. Thank you for participating. You may now disconnect.