Good morning, everyone. Welcome to our third day of our 37th Piper Sandler Healthcare Conference. My name is Yas Rahimi. I'm a senior biotech analyst here at Piper Sandler. So excited to have the team from Palisade Bio here. Thank you for being with us here, JD and Mitch. Thank you.
Yeah, thanks for inviting us.
Of course.
Thank you.
I think, obviously, this year is coming to an end, and so many investors who are listening to webcasts and meeting with companies are just trying to think of good ideas for 2026. So help us understand, to kick off the discussion, what are some of the key milestones or catalysts upcoming in 2026 and 2027?
Sure.
A good opportunity to buy now?
Yeah, no, we would love people to buy now. We think it's a good opportunity. We are finishing up a Phase 1b cohort in fibrostenotic Crohn's disease. It'll be between six and 12 patients, and that'll read out in early Q1 of next year. So that'll be kind of the first milestone. And for anyone who's watched our stock, we had a very successful readout on a very small patient cohort in July. And we're hopeful that we'll get some good data from this readout as well. And then beyond that, we'll be working on filing our IND for a UC study, a definitive UC study that will kick off mid-year. And then we'll be wrapping up some safety tox work that we'll be reporting out.
And then beyond that, we still haven't come up with the final design yet for the Phase 2 for the fibrostenotic Crohn's disease, but we hope that that'll be a more adaptive design where it'll allow us for some interim readouts throughout 2026 and 2027. Final top-line readout on our UC study is scheduled for roughly end of 2027.
Wonderful. And team, for investors who are maybe newer to Palisade Bio, help us understand 2108's mechanism of action and also maybe help us understand, put into context, the importance of having a prodrug to really optimize local delivery in the gut.
Yeah, and I'll let our Chief Medical Officer, Mitch, here get into some of the details. But high level, our drug is a PDE4 inhibitor, and there's been a lot of success in the market with PDE4 inhibitors across various therapeutic areas. But what we think makes our drug special and where it's had problems really addressing the UC population is intolerability. You've got a couple of analogs out there, like Apremilast, who did some studies with their PDE4 inhibitor. And then most recently, you have a Chinese company, I think it's Tianjin Hemay, that reported on Mufemilast, and that had some extraordinary efficacy readouts.
We're still not sure on the details of some of their safety data, but the key for us in creating a prodrug formulation is the delayed release mechanism, which then, I think, bypasses and avoids a lot of the adverse events that you normally see with PDE4 inhibitors. Mitch, anything you want to add to that?
Yeah, no, I mean, so we're formulated as a tablet. We're once daily. There's no other PDE4s that are once daily. We're targeting the only drug targeting the terminal ileum and colon. The drug is a prodrug that is activated by the bacteria in the gut. All the bacteria in the gut produce an enzyme called beta-glucuronidase that releases the active PDE4 inhibitor from this otherwise gut-restricted molecule. And so when that gut-restricted molecule reaches the terminal ileum and colon, the active PDE4 inhibitor is released locally. Kind of a misnomer is that the drug itself is not gut-restricted. The PDE4 is well absorbed through the disease tissue and circulates systemically. We can achieve IC90 with our drug and avoid some of the toxicities that JD pointed out. We avoid the upper gut, which is where the secretory diarrhea is coming from.
We limit the Cmax, which is driving the nausea and headache, and so we've improved the pharmacology. That's why we call it a next-gen PDE4 inhibitor.
And obviously, because of these systemic exposures you get, they're also very much limited on how high dosing they could go at, which gives you quite a bit of flexibility for a much thicker, larger therapeutic window as one thinks about it. Maybe you alluded to a little bit around some of the data to support mechanistically PDE4 inhibition and UC in IBD, but maybe walk us through what did they show across clinical responses, mucosal healing, and maybe biomarkers improvements in sort of in context of the totality of the data that has been seen?
Sure. Mitch, you want to take that?
Yeah. So historically, PDE4s have been used for inflammatory indications. There's commercial examples for Behçet's, psoriasis, psoriatic arthritis. On the fibrosis side, there are more specific PDE4 inhibitors, and there is nerandomilast that is approved now in idiopathic pulmonary fibrosis. So it's truly kind of the only proven, commercially proven antifibrotic and anti-inflammatory. There was a study of Apremilast that was well controlled and designed and powered in ulcerative colitis that showed roughly a 31% clinical remission rate at 12 weeks. Placebo-corrected, that was 20%. The most recent Mufemilast data showed a 57% clinical remission rate at 12 weeks and 44% placebo-corrected. Our data in a five-patient cohort, something similar, 100% clinical response and 40% clinical remission with two other patients, pretty close. So I think it's fairly consistent on the clinical outcome side. In terms of biomarkers, we saw a 70% reduction in fecal calprotectin.
CRP was down 15%. Just upstream of PDE4 inhibition is cyclic AMP. That was up 70%. We saw a 40% reduction in the number of tissue lymphocytes when counted. And this is just after one week of treatment with PALI-2108. And we also saw PDE4B down 70%.
Wow. Team, when we think about, you alluded to 2108 having the prodrug to deliver locally to the gut and the importance of that to avoid systemic exposure, but maybe help us understand the differentiation versus other PDE inhibitors when it comes to potency. I think we understood the selectivity really key and important, but any other differentiations that I may have missed in context.
Yeah, I mean, generally speaking, our active PDE4 inhibitor, which was developed out of the labs in Montreal from Merck before they shut that down, it is about 20 times more potent than, say, Apremilast, for example. And I think because we're able to then deliver it the way that we described with the prodrug formulation, we're able to get more drug directly into the local tissue as a result of that. There's still systemic exposure as well, which is important in the healing process, but that's really the big difference. Mitch?
Yeah, I mean, our preclinical data is pretty clear that as you dose more and more with PDE4 inhibitors, you get more efficacy. And so I think Apremilast in their study was limited by dose-limiting toxicities. They were able to achieve a predose trough value with 30 mg twice daily. We can achieve an IC90 at doses where there's excellent tolerability. So I think being able to push the dose in PDE4 inhibition is key. And the way that we do that, again, is by avoiding absorption through the upper gut and then minimizing the Cmax.
Yeah, and the key here is pushing the dose and avoiding the adverse events. You look at what Mufemilast, what the data on Mufemilast showed from Tianjin Hemay, and they were able to push the dose and achieve some extraordinary efficacy numbers there. But what we don't have clarity in is the adverse events. And there were adverse events reported there, so it was not clean. We just don't have enough information from them to know. But we do know, based on our experience with other PDE4 inhibitors, that they should be experiencing, their patients should be experiencing a lot of the adverse events like nausea, vomiting, headaches, and so forth.
Yeah, and they did have two withdrawals in their high-dose group.
Yeah, good point.
Team, when we step back and we think about some of this PDE4 inhibitor data, can you put it into context what the differentiation is present versus other modalities approved or in development in UC and maybe focus on UC before we go into fibrostenotic Crohn's disease?
Yeah, I mean, so differentiation-wise, obviously, we're oral once daily. The other two orals that are approved in the indication are the JAK inhibitors, which have black box warnings, safety issues, same thing with the S1Ps. So I think that a safe oral once-daily drug in IBD is highly differentiating.
I think it's also important to point out that PDE4 inhibitors are targeting sort of upstream indications. When you basically are boosting the cyclic AMP levels by eliminating PDE4, that has a lot of downstream effects that a lot of these other drugs are targeting specifically. We can get to those same targets through the increase in cyclic AMP.
Perfect. Team, earlier in the year, you showed really in the fall phenomenal unprecedented data, right, of a 100% clinical response in UC patients as well as 40% clinical remission after seven days, right? This is not only its profound effects, but it's really rapid, which honestly, we have not seen. So maybe help us, yes, it's a small number of patients, right, five. So if you could put into context these findings and maybe others that you want to highlight to us, and then maybe put it into context of that translation into a later larger study.
Yeah, I mean, I think some of the questions we get have to do with the rapid onset. I think most experts agree that PDE4 inhibitors are a very rapid onset class of drugs. When you look at the way S1Ps behave and the number of tissue lymphocytes, you see profound changes in one week, so our 40% reduction in all patients over one week with PDE4 inhibition wasn't sort of surprising to us. The increase in cyclic AMP was something that's fast-acting just downstream of PDE4 inhibition, and the lymphocytes leaving results in a reduction in PDE4B expression. I think fecal calprotectin is sort of responding to the number of tissue lymphocytes that are releasing cytokine proteins. Fecal calprotectin into the histologic changes can be driven by some of the inflammatory changes that we're seeing.
And then on the Mayo score, I mean, some of the patient-reported changes in bowel frequency and rectal bleeding, obviously coming from patients, and then the tissue itself by endoscopy. So I think, and if you look at the Phase II for a Apremilast, there were pretty significant changes even at the two-week point in fecal calprotectin and CRP. So I think that the changes are in alignment with either the Mufemilast data or the Phase II by Danese et al with the Apremilast.
Okay. And team, the company has guided IND clearance and Phase II start expected in 1H26. Maybe what is left to do to kick off the study and get ready for?
We're, yeah, a lot, right? I mean, we're working hard and diligently, but if you want to kind of summarize, do a high summary of some of the things we're still waiting on.
Sure, yeah. I mean, we're busy. We have an FDA meeting in December. We've got our safety and tox readouts quarter one. We expect to have FDA approval for the Phase II in quarter two and then to enroll a patient. So yeah, so most of the CMC work's done, but obviously the IND readiness, we're just waiting on the safety and tox and then some regulatory work as well.
Okay. Maybe help us understand the proposed Phase 2 is also very novel. This is in 195 patients where the dosing strategy enables really individual patient dosing adaptation after the first three weeks. Maybe let's pause there and maybe walk us through how that would work, yeah.
Yeah, so I think some of that information comes from an earlier study design prior to our recent sort of transformational fundraising. I think with our recent fundraising with a lot of sort of top-tier blue-chip investors, it was clear that we should run a definitive study. So we've now designed a definitive Phase II. One could imagine that it could be registrational, but certainly definitive. 65 patients per arm, high, low versus placebo out to the 12-week induction endpoint. The study will be powered to see a 20% difference with an 80% chance of seeing a 20% difference with an estimated placebo response rate of 12.5%. We have a blinded maintenance extension out to 52 weeks. All patients in the study will either be in remission or have access to high-dose study drug.
And all patients that are responders or on high dose will be able to get drug for 52 weeks. So really, the study could be a registrational study, and so we expect that we won't be necessarily required to choose dose and adapt the study early in the study.
And then there's also an element of a dose selection based on a blinded data safety monitoring committee that reviews PK and tolerability, maybe also the rationalizing.
Yeah, no, that's really from earlier studies. So yeah, we're going with sort of more traditional Phase 2 registration-like study. There won't be dose selection based on blinded DSMB.
Perfect. And then for the Phase 2 key secondaries, maybe what are some of the things that you're really focused on wanting to also establish maybe a differentiation or a product? I think everybody's usually very focused on clinical remission, but definitely based on the mechanism, there are a hierarchy of secondaries that might be of importance.
Yeah, well, I think, and Mitch jump in on this as well, but clearly a major focus for us is safety and tolerability. I mean, that's really what's going to set us apart in the marketplace is showing that not only are we achieving efficacy rates that you haven't seen before prior to Mufemilast, but doing it in a way where you avoid all the toxicity that you normally see with the drug.
Yeah, and as well, I think that our data showed in our patients in our small cohort were more sort of in the moderately active patient active disease. So we expect to see pretty good data independent of severity of disease. Also, I think there's some good data that biologically naive versus biologically experienced patients should be treated, should respond in a similar way. So I think we're excited to see even patients that are sort of failing multiple modalities of therapy respond to our drug.
Wonderful. Team, I want to spend the next few minutes to understand fibrostenotic Crohn's. So 2108 is currently being run in a Phase 1b study, and you said you were going to provide data here in, did you say early 1Q? Did you said 1Q? Did I do it?
Early Q1.
Early Q1. Okay, perfect. Maybe help us understand first what the mechanistic rationale of PDE4 inhibition in this population is. And maybe also help us understand how big that population is versus the Crohn's. I think investors do recognize that this is a high unmet medical need. Nothing is approved.
Yeah, exactly. And there really are only two other companies that we're aware of developing a therapy for fibrostenotic Crohn's. And I think what's nice about our drug is that it's pleiotropic and that it's both anti-inflammatory as well as antifibrotic. And that's a big deal in addressing the fibrostenotic Crohn's. We had originally, if you go back two years ago, I think our strategy at that point was to actually create a separate prodrug formulation for fibrostenotic Crohn's. As we continued to do all of the clinical and preclinical research on our current drug, we realized there's enough active drug being released in the terminal ileum to allow us to use the same drug for both indications.
Yeah, and so, yeah, I mean, mechanistically, it's sort of not different than the recent approval of nerandomilast, which is a PDE4B inhibitor, specific inhibitor by Boehringer that just got an approval in IPF. So basically, lymphocytes express PDE4B in the case of lung. They're infiltrating pulmonary tissue. In the case of bowel, they're infiltrating GI tissue. And so the sort of target isn't necessarily the same. I think the fact that there are both clinical and commercially proven anti-inflammatory, antifibrotic indications for our drug suggests that, and the target is the same, suggests that our drug can be used in fibrostenotic Crohn's. And I think it's a really exciting indication because it's probably the highest unmet need in inflammatory bowel disease. There's no approvals in this space. There's limited competition. I think when you look at the potential candidates, we're the only anti-inflammatory, antifibrotic candidate.
And so we're pretty excited about that.
Team, I think this data disclosure is what, six to 12 patients? This is after two weeks, open label. Help us understand, I mean, this is another very comprehensive study design of lots of CD biomarker analyses. Maybe help us put into details, what do you hope to gain, right? What are some parameters that are important and what's the bar for success to warrant to move forward to a late-stage development?
Right. Yeah, so this is an early study in a fibrostenotic Crohn's patient population. The FDA has been clear with the work of the STAR consortium that a first approval should be in patients that are symptomatic and patients that have a confirmed lesion in the ileum. 85% of all fibrostenotic Crohn's patients have the lesion in the ileum and the terminal part of the ileum. 46.1% of all fibrostenotic Crohn's patients are both symptomatic and have an ileal lesion. And so a first, I think a first study would be in these symptomatic patients with a lesion. And so in that first study, the study that we're conducting now, we want to demonstrate safety and tolerability in that patient population. We want to look at, JD pointed out, pharmacokinetics, including how much drug is in the ileum, ascending, descending colon. Are we achieving IC90 in tissue?
What about in plasma? We're doing some histology with superficial and deep, so deep more sort of for fibrotic and superficial more for the inflammatory component as well. We're doing endoscopy, so we'll get a look at the lesion. We'll look at passability of the endoscope as well as finally intestinal ultrasound, and in the intestinal ultrasound, it's a way of looking at the thickness of the tissue, and so we'll be able to see if we reduce the edema, muscularis mucosae as an example, or start to improve the peristaltic wave that is sort of attenuated in these patients through the fibrostenotic lesion. Those are the things we're looking for.
Yeah, and then the other piece of that, which is also important, is we'll learn a lot more about dosing, right? The prior study that we did in the cohort in UC patients was a QD dosing or, I'm sorry, BID dosing. And this one is once a day at various levels, 20 mg up to, I think we're going to 30 mg eventually. And so that'll help inform our dosing for our final dosing selection for the UC study as well.
Okay. And, team, will you be getting all this, the histology as well, like the PR, like what will we get in 1 Q? How comprehensive will this data be just because there's a lot of different measures and the year's wrapping up and the holidays are around? What could the CRO provide or the sites provide?
Yeah, no, top line data will be the safety tolerability. I think we have PK, plasma, and tissue. Not sure if we limited it to ileum or we'll also get ascending, descending colon. There's a few PD biomarkers, things like fecal calprotectin. There's a couple of those that I think that we'll get. Obviously, the intestinal ultrasound is something that Motilent is helping us with, and they have a platform to do the central reads and analysis. So that's probably the data set. But some of those measures like the histology will take a little bit of time.
Maybe after this data, obviously, you'll be getting ready to design a Phase II study. Help us understand how you're thinking about development path there.
Yeah, and we're already pretty far along in the study design for the UC Phase II study, and this will, I think, help us just refine some of those parameters. But do you want to cover a high level on that?
Yeah, there's sort of the pathway that others are taking is really an accelerated approval where there might be a single registrational. If you take an accelerated approval approach with surrogate biomarkers, it would be in patients that are symptomatic with a lesion, you would use something called the Stricture- PRO, which looks at patient symptoms and frequency of symptoms and severity. And then there's an imaging modality, MRE, which can be used to measure the size of the lesion. And so a first approval might look like improved symptoms or severity and the size of the lesion, and there's three measures for that. And then it would be accelerated approval, and you could commit to post-marketing safety and clinical outcome measures.
Wonderful. Team, what is the current cash position? I know you guys did a very successful fundraising with blue-chip investors, and what allows that to cover in terms of the Phase II development?
Yeah, we couldn't be happier with the success of our recent fundraising. We closed on $138 million, and as Mitch had pointed out, these are blue-chip institutional healthcare investors. It gives us plenty of cash to complete Phase II studies in both UC and FSCD with at least a year and a half of runway following the conclusion of those studies.
Wow. Team, congrats on an incredible data set, fundraising, and a very exciting 2026 ahead. So let's applaud JD and Mitch for being part here and sharing the story with us. So thank you.