Eledon Pharmaceuticals, Inc. (NASDAQ:ELDN) Q1 2023 Earnings Call Transcript May 12, 2023

Operator: Good afternoon, ladies and gentlemen and welcome to Eledon Pharmaceuticals first quarter 2023 earnings conference call. At this time, all lines are listen-only mode. [Operator Instructions] This call is being recorded on Thursday, May 11, 2023. I would now like to turn the conference over to your host, Paul Little, CFO. Please go ahead.

Paul Little: Good afternoon, everyone, and thank you for joining Eledon’s first quarter 2023 operating and financial results conference call. I am joined today on today’s call by David-Alexandre Gros, Chief Executive Officer, and Steve Perrin, our President and Chief Scientific Officer. Jeff Bornstein, our Chief Medical Officer, is traveling today. Earlier today, Eledon issued a press release announcing financial results for the first quarter ended March 31, 2023. You may access the release under the Investors tab on our company’s website at eledon.com. I would like to remind everyone that statements made during this conference call relating to Eledon’s expected future performance, future business prospects, or future events or plans may include forward-looking statements as defined under the Private Securities Litigation Reform Act of 1995.

All such forward-looking statements are intended to be subject to the Safe Harbor protection provided by the Reform Act. Actual outcomes and results could differ materially from these forecasts due to the impact of many factors beyond the control of Eledon. Eledon expressly disclaims any duty to provide updates to its forward-looking statements, whether as a result of new information, future events, or otherwise. Participants are directed to the risk factors set forth in Eledon’s reports filed with the US Securities and Exchange Commission. Now it is my pleasure to pass the call to our CEO, Dr. David-Alexandre Gros. DA?

David-Alexandre Gros: Thank you, Paul, and thank you all for joining us today. We began the year by announcing our primary organizational focus on our kidney transplantation program, and have since directed our resources and efforts to advance this program forward. We believe that Tegoprubart, our anti-CD40 ligand antibody, can address a significant unmet need in patients undergoing kidney transplants through its potential to prevent rejection, maintain high graft function, and reduce the many toxicities associated with calcineurin inhibitors or CNIs. We believe there is a profound urgency for new treatment options to benefit patients receiving solid organ transplants and kidneys in particular. According to the United Network for Organ Sharing, there are now over 25,000 annual kidney transplants in the US, the most in history, and yet the standard of care first-line chronic immunosuppression for this growing market has not changed since the approval of tacrolimus in 1994.

Our goal is for Tegoprubart to ultimately replace tacrolimus as the standard of care post transplant immunomodulator, significantly reducing the broad number of side effects associated with that drug and thus improving graft function and survival. This in turn should result in fewer patients requiring repeat transplants, thereby freeing more kidneys to be allocated to first time recipients and thus allowing more people to receive the kidneys that they need to live. At the end of March, we presented open label data from our ongoing Phase 1b trial, evaluating Tegoprubart in kidney transplantation at the World Congress of Nephrology. Our initial three participants did not show any evidence of acute rejection at measured time points, which is important since most rejection in the first year occurs within the first 90 days post transplant.

In addition, we observed strong graft function in our participants with mean eGFRs above 70 at measured time points as far out as week 31. These results were highly encouraging and suggest early clinical proof of concept for Tegoprubart in this indication. And we look forward to reporting updated data from this study at a medical meeting in the latter part of the year. In addition to the clinical progress we made this year, we also strengthened our balance sheet through the execution of a private placement financing of up to $185 million, including $35 million upfront. Subject to achievement of our milestones, this financing will enable us to execute our kidney transplant clinical development plan, including our Phase 2 BESTOW trial in kidney transplantation.

We were particularly proud to have this financing co-led by one of our historical investors, BVF Partners, as well as by new investor, Armistice Capital. Of note, Sanofi, the global pharmaceutical company also participated in the financing, as did a number of private individuals and families that believe in Eledon’s missions and have done so and invested in our company since our early days. With the financing completed, we are now laser focused on execution. We continue to enroll our Phase 1b trial, in which we have now enrolled six participants and expect to initiate our Phase 2 BESTOW trial midyear. With that, I would now like to hand over the call to Steve Perrin, our President and Chief Scientific Officer, to provide more details on our development programs.

Steve?

Steve Perrin: Thank you, DA. I’d like to begin by touching upon the opportunity we see in kidney transplantation and why we made the decision to focus our resources on the development of Tegoprubart for this indication. Kidney transplantation is a growing space which has had limited innovation in decades. The National Kidney Foundation estimates that 660,000 people live with kidney failure in the United States. And out of those are over 100,000 people on the kidney transplant waiting list with about 5,000 individuals dying annually while waiting for a transplant. Since the average deceased donor transplanted kidney only functions for an average of 10 to 12 years, and the mean age of transplantation is 50 years old, most patients will require multiple kidney transplants if they are to live a normal lifespan.

Therefore, the need has never been greater to pursue a new treatment option that can prolong the functional life of a transplanted kidney. That is our goal. And we believe this can be achieved with Tegoprubart, allowing transplanted kidneys to last the duration of recipients lives and thereby freeing a precious kidney so that a greater percentage of patients on the waiting list can receive a kidney. As DA mentioned, we reported open-label data from our ongoing Phase 1b kidney transplant study at the World Congress of Nephrology in March. At the time of data submission, three patients have been enrolled in the trial, which has sites enrolling in Canada, Australia and the UK. To evaluate signals of clinical efficacy, we reported the estimated glomerular filtration rate, or eGFR, of each patient at specified time points.

From large retrospective studies conducted in transplant recipients taking CNIs, we know that a 50th percentile eGFR falls around 50 during the 1st year post transplant. 12 month eGFR has been shown to be the most significant single predictor of future graft failure, and as eGFR values decrease, the risk of graft failure and hospitalization increases exponentially. Importantly, studies have shown that the 12 month eGFR is correlated with eGFR value seen as early as 90 days. And thus, we believe that the eGFR data we shared at 90 days is highly relevant and potentially predictive in determining graft function and outcome. At the time of our data submission for the conference, we had three subjects enrolled in the trial. Results from the first three participants demonstrated no incidence of acute rejection at 56, 167, and 232 days, respectively.

Graft function was very good in all three participants with the participants having eGFR as a 54, 85 and 77 at the latest available time point of 49, 154 and 217 days, respectively. Given the correlation between eGFR levels at 90 days and 12 months, we feel encouraged by these early results and their potential to translate into longer-term graft functionality. Long term graft function is critical, but not the only part of meaningful outcomes we are looking for in kidney transplant recipients. The current standard of care calcineurin inhibitors help preserve graft survival. But they are also associated with significant side effects such as hypertension, dyslipidemia, nuances of diabetes, and tremors. Moreover, research shows that 10 year post transplants, almost all transplanted kidneys will demonstrate evidence of CNI induced nephrotoxicity.

We believe based on the evidence generated to date that Tegoprubart has the potential to reduce or even potentially eliminate these side effects while also providing improved graft function. Turning to the safety results we observed in the study, we’re among the three participants Tegoprubart showed good tolerability, especially among a difficult-to-treat population. None of the participants experienced acute rejection, and there was no evidence of new onset diabetes after transplant or any impact on glucose level levels and to participants without diabetes at baseline. One participant was discontinued from the study on day 55 after developing BK viremia, a common occurrence following a kidney transplant, which occurs in 20% or more of transplant recipients.

An additional participants elected to discontinue from the study after 33 weeks reporting mild alopecia and mild insomnia, which the investigator did not attribute to to Tegoprubart. The adverse events continued once the patient was switched from Tegoprubart to CNIs. We continue to make progress with this ongoing trial and have since enrolled an additional two participants who both remain on study. We expect to report updated data at a medical conference later this year. Building off our results from the ongoing Phase 1b trial, we remain on track to initiate our randomized open label Phase 2 BESTOW study to assess the safety and efficacy of Tegoprubart compared to tacrolimus and the preservation of allograft function after kidney transplantation.

120 participants will be randomized one to one to receive either Tegoprubart every 21 days or twice daily oral tacrolimus. The primary endpoint will compare the mean eGFR at 12 months for participants receiving Tegoprubart versus tacrolimus. Secondary objectives will include safety and tolerability, participants in graft survival, biopsy-proven acute rejection, and the incidence of new onset diabetes mellitus after transplant. I’d like to conclude by briefly covering our IgAN program. We’re following our announcement to de-prioritize the program at the beginning of the year. We continue to collect safety data from the patients previously enrolled to provide additional insight into Tegoprubart safety profile. The data we presented at WCN from 16 patients in the high dose cohort of 10 mgs per kg every three weeks showed Tegoprubart to be safe and well tolerated with no serious nor severe adverse events reported and no early discontinuations.

Four participants had completed at least 24 weeks on treatment and five others completed at least 12 weeks. We are encouraged by the safety profile Tegoprubart continues to display, and to date, we have now dosed approximately 100 human subjects across multiple disease indications. Given the deprioritization of the IgAN program, and having now generate key safety insights in this population, we are now winding down all IgAN study activities at our sites, and we anticipate winding down the vast majority of our IgAN activity and spend in the second quarter of 2023. With that, I’d now like to turn the call over to Paul for the financial update.

Paul Little: Thank you, Steve. The company reported a net loss of $10.8 million dollars or $0.75 per share for the three months ended March 31, 2023, compared to a net loss of $9.9 million or $0.69 per share for the same period in 2022. Research and development expenses were $8.1 million for the three months ended March 31, 2023, compared to $6.6 million for the comparable period in 2022, an increase of $1.5 million. The increase is primarily due to higher clinical development expenses, primarily with external CROs of $2.1 million and an increase in personnel costs due to increased headcount. The increase was partially offset by decreases in stock-based compensation, manufacturing, and consulting expenses. General and administrative expenses were $3 million for the three months ended March 31, 2023, compared to $3.2 million for the comparable period in 2022, a decrease of $200,000.

The decrease was primarily result — primarily related to the lower stock-based compensation costs. Earlier this month, we announced the entry into a definitive securities purchase agreement with select healthcare investors that will provide up to $185 million in gross proceeds through a private placement. The purchase agreement included an initial upfront financing of $35 million, an additional aggregate financing up to $105 million, subject to achieving clinical development milestones, volume, weighted share price levels, and trading volume conditions. Plus up to $45 million upon the full exercise of warrants being issued in connection with the agreement. The financing was led by BVF Partners and Armistice Capital and includes participation from new and existing investors, including the global pharmaceutical company, Sanofi.

Eledon ended the first quarter with approximately $46.5 million in cash and cash equivalents. With that financial update, I’ll turn the call back over to DA.

Q&A Session

David-Alexandre Gros: Thanks, Paul. I am proud of the progress that Eledon has made in the early part of 2023 and feel we are now well positioned to make significant strides in our evaluation of Tegoprubart as a potential much-needed replacement for CNIs in kidney transplantation. We are highly encouraged by the data generated to date in our ongoing Phase 1b study and look forward to both its continued enrollment and to providing a clinical update later in the year. Finally, following our financing, we now have a well-capitalized path to launch and execute our Phase 2 BESTOW trial while we continue to report data from the open-label Phase 1b study in parallel. Operator, please begin the Q&A session.

Operator: Thank you. [Operator Instructions] Pete Stavropoulos, Cantor Fitzgerald.

Operator: Thomas Smith, SVB Securities.

Operator: Rami Katkhuda, LifeSci Capital.

Operator: Vernon Bernardino, H.C. Wainwright.

Operator: [Operator Instructions] Matt Kaplan, Ladenburg Thalmann.

Operator: And there are no further questions at this time. I will turn the call back over to Mr. Gros for closing remarks.

David-Alexandre Gros: Thank you for your assistance, operator. And thank you all for joining us today on this call. Have a great evening.

Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for joining, and you may now disconnect your lines.