Palisade Bio Inc Stock

Good morning, everyone. My name is Frank Tang, and I'm with the Investment and Banking Division at Morgan Stanley. Thank you all for joining us for the fireside chat with Palisade Bio. I'm joined today by CEO J.D. Finley; and President and Chief Medical Officer Mitch Jones. Welcome.

For those who are not as familiar with Palisade Bio, could you give us an overview of where the company sits today, including a description. And give us an overview of PALI-2108, the thesis behind the once-daily gut-targeted, locally-activated oral PDE4 inhibitor project?

Sure, thanks, Frank. So the PALI-2108 is a drug that we acquired from a Canadian company, Giiant Pharma, out of Montreal. That company was founded by some medicinal chemists from the Merck Frosst Labs in Montreal. When they closed that down in 2010, these guys took some of the science with them and developed this PDE4 prodrug formulation. It was in preclinical status when we acquired it. We've taken it through, completed the preclinical and the Phase I, and we are now about to start a Phase II study in both ulcerative colitis and Crohn's. And one of the interesting things about the design of the molecule, it was designed as a prodrug, which was intended to be specifically engineered for IBD. And they've seen the efficacy with other PDE4s in the IBD space, but the problem has typically been the adverse events and the prodrug formulation, which we can get into a little bit further, really avoids some of those additional AEs that you normally would see with a PDE4.

Great. Thank you for that. And, you know, you're pursuing the two largest IBD indications, both ulcerative colitis and Crohn's in parallel, how do you think about the sequencing of that potential risk?

So it's interesting, when we were much smaller in terms of market cap, we had focused on FSCD because it was a niche opportunity where we thought we could win and do it most cost effectively. When we completed our $140 million financing last October, we had a clear mandate from investors to pursue the broader UC market, so we've ramped up for that. But we also have switched from focusing on FSCD, fibrostenotic Crohn's disease, to broader Crohn's disease. And the reason for that is because of feedback we've gotten from our experts, clinical advisory board, et cetera, that have told us that right now, the regulatory pathway is still murky enough for fibrostenotic Crohn's that we're better served by pursuing a smaller, broad Crohn's indication and then circling back into and doing fibrostenotic Crohn's once that regulatory landscape has been cleared up. But clearly, we think pursuing both Crohn's and UC is in the best interest of building shareholder value.

So I'd love to dig in more around 2108. This quarter marks your transition into Phase II. Could you, and in the clearance of the IND, could you walk us through the design of the trial?

Yes, I think I can take that. So it's a double-blinded RCT, actually quadruple-blinded on the induction phase, pretty standard study, built like a registrational study, but really a definitive study. So 12-week induction phase, three groups, randomized, 1:1:1, a target of about 15 mg for the target dosing group. The high-dose group is 30 mg, the placebo group as well. So treated straight through the 12-week induction endpoint with a clinical remission primary endpoint, and then a double-blinded extension through maintenance out to 48 weeks. So patients will be treated straight through.

If you're on 15 and responding, stay on 15; then same thing for 30, same thing for placebo. If you're not responding, then you get randomized or placed actually into a high-dose group in the maintenance phase. And then, of course, responders keep going and non-responders are terminated. Yes, so the study is designed to see a pretty healthy difference between placebo and treatment of about 20%. We have a 90% chance or 90% power to see a 20% difference between treatment groups, and 80% power to see a 17.5% difference. Sorry, it's the other way around. No, that was right. Okay.

Exciting trial to look forward to. I'd say, looking backwards a little bit, your Phase I signals were highly encouraging. Five of five UC patients responding, roughly 47% reduction in SCD in Crohn's. How do you interpret the strength of that early data? And what did the translational data tell you about the potential impact on both inflammatory and fibrotic pathways?

I think this is another one I can take. I mean, historically, obviously, apremilast was evaluated in a UC study, let's say, combined around 20% clinical remission at 12 weeks over placebo. As well, mufemilast with a 90-patient double-blinded RCT, China-only study, demonstrated best in indication, 44% remission over placebo in the high-dose group and a dose response. So I think there's -- we weren't trying to prove that PDE4s are effective in treating UC patients. What we did want to show is safety obviously, but also that biomarkers would potentially predict when we achieved a high enough dose to show an effect. So we demonstrated through our Phase I program that we could go to once-daily dosing. We also demonstrated that we could get enough drug to ileum, to ascending, to descending colon. We demonstrated an adequate, superior actually, PD effect in the ileum for Crohn's and in the ascending/descending colon for colitis, as well as a whole host of biomarkers.

Those biomarkers were lymphocytes going in the right direction, fecal calpro improvements, CRP, et cetera. As well as in both the CD and UC study, we saw endoscopic improvements. In the UC study, we saw 100% response, 40% remission, and in the CD study, we saw a 40% response and remission. So really, smaller studies, open label, non-controlled studies, but really the biomarkers all went in the right direction. And so it gave us the ability to collect information that we could use in our population PK models that were predictive.

Maybe you could expand on that a little, the PK tissue exposure and biomarker data. How does it help you differentiate versus the prior PDE4 inhibitors?

Yes, so in the world of PDE4, almost all, if not most, PDE4s are twice daily dosed. Ours has a terminal half-life of 10, 13 -- 12 to 13 hours with an effective half-life of 27. So we're once-daily dosed molecules, so that's one point of differentiation. We have seven times the amount of drug in tissue as measured 4 to 8 hours post-dosing or at steady state. So you've got seven times the drug in tissue as compared to plasma while at steady state. That's 1:1 at best for immediate dose, immediate release molecules. So those are two reasons.

The other two differentiators are the tolerability issues for PDE4s come from direct exposure of the drug to upper gut. We are delayed-release, local-release, and bioactivation, so we avoid the upper gut, which is the source of secretory diarrhea, one of the tolerability issues. And the other is the liability on the peak-to-trough ratio is pretty significantly reduced with our slow-release profile, and so that improves the therapeutic index.

That's great to hear. Maybe moving on a little bit from the UC. On Crohn's, I believe you planned to submit the IND for the trial in the second half of this year with the trial targeted to start in first quarter '27. Could you talk more about 2108's ileal and colonic activation fit in, and specifically within Crohn's biology?

I mean, maybe we can start with the timing. Do you have any...

Yes. Well, the timing is -- we are on track to submit the IND or to get IND approval in this half of the year. I think our current guidance on the Crohn's study is based on our FSCD guidance that we put out when we thought we were going to do an FSCD study. We plan to update that guidance once we actually get the IND approved, and at that point we'll be able to not only update timing on the guidance, but also update kind of, or we'll be able to provide the details of the study design as well.

And then on the question about Crohn's versus colitis, obviously Crohn's is sort of more heterogeneous, full thickness versus superficial colonic, ileocolonic or ileal disease sort of represents the vast majority of cases. And so we were really looking for, are we able to hit the ileum, are we able to achieve the PK and PD measures in the superficial and deep tissue compartments that are sort of maximal with our 30-mg dose. So we're going to be taking the higher dose into the Crohn's study, which is fairly common. The higher tissue compartment/disease burden/inflammatory component, warrants using higher doses of drug in that indication. So we're going to use the 30 mg dose.

Great. Kind of moving beyond the data a little bit in the clinical trials, I'd love to talk a little bit about the landscape. The IBD landscape is continually shifting and increasingly competitive at times. How do you see 2108 fitting into this landscape and how would you compete in some of the differentiation aspects?

Yes, I mean, maybe I'll let you answer that, but I'll just kind of start off by saying one of the things that when we were discussing whether to go into ulcerative colitis, given how crowded that space is, as opposed to fibrostenotic Crohn's disease where there is no approved therapy. In discussing that with our key opinion leaders, they point out that the reason that ulcerative colitis is such a crowded space is that there really are no good solutions yet. And so that's part of the problem is that, yes, it's a crowded space, but no one is achieving the kinds of efficacy that people are satisfied with.

Yes, and sort of the way we see it is sort of probably not unlike the kind of analysis your team does, but a lot of the pharmaceutical companies look for injectable, infused as well as oral small molecule. Obviously with the JAK inhibitors having a black box warning or with the S1Ps having monitoring requirements as well as not being effective in Crohn's, there's sort of a paucity of potential backbone therapies in the oral small molecule space. So we see an opportunity for monotherapy that could also be used in the future as a backbone to combination therapy in oral small molecules. Companies like Spyre are doing this In large molecule space, there's the data from VEGA, from DUET, that's supporting the potential future in combinations. Clearly, we think our drug is going to be effective as a monotherapy, but we also recognize that there is an opportunity in the oral small molecule space. Clearly [indiscernible] and obefazimod are sort of the up-and-coming drugs, and we think that PDE4 is right there with them.

Excellent. As competitive as it is, your point is very much correct in the sense that it's still the treatment landscape, it's still subpar and patients are searching for better options. Moving on to the corporate side, could you please give us an overview of your cash balance and runway? You guys have a lot of exciting trials going on and planned. And what we have is you ended the quarter with $125 million. Does that fund these trials? What's the runway? How do you think of your balance sheet from a financial perspective.

Yes, $125 million, as you said, as of June 30, our last Q that we filed. And we have enough capital to get through both the UC Phase II study as well as the Crohn's Phase II study, wrapping those both up by the end of next year roughly. And then, we still have about 6 to 9 months of cash runway beyond that. Obviously, it's not our intention to run our cash balance that low, so we will plan to augment that somewhere along the way and we'll do that opportunistically.

Those are my major questions, but as Palisade is a super interesting company, we'd like you to leave us with what you think are the most important milestones investors should be focused on for the remainder of this year and into next year.

You want to talk about the milestones?

Sure. I mean, in Q2 we had successful IND clearance. Obviously, the Crohn's IND is related to the UC IND, so in the second half of the year we'll get IND clearance in Crohn's disease. Obviously we're approaching required reporting on clinicaltrials.gov of our study design, which has to be done within 21 days of screening a patient, so that will give you some idea of how close we are to enrolling and dosing the first patient in ulcerative colitis. We expect to also make really good progress in our Crohn's program. I think our guidance is IND clearance in the second half and first patient dose in Q1, but I think we're making very good progress there as well. So I would imagine we're only behind by about a quarter compared to the UC program. Our UC program has 115 sites, so the plan is to enroll the study very aggressively. And so you'll see through clinicaltrials.gov and through our reporting, the number of active sites that come online and the speed at which we do that.

Right, and we'll probably, we will likely guide as to enrollment progress at points along the way. And then the other thing is that because we're doing an open label, the CD study, we'll have line of sight into some of the data there, and there's an opportunity to share some of that data along the way as well.

That's great. We look forward to your continued progress there, and thank you for joining us today. We look forward to the continuing conversations.