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Altimmune, Inc. beats earnings expectations. Reported EPS is $-0.32, expectations were $-0.44.

Operator: Good day, ladies and gentlemen, and welcome to the Altimmune, Inc. Second Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will follow at that time. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today’s conference call, Rich Eisenstadt, Chief Financial Officer of Altimmune. Rich, You may begin.

Rich Eisenstadt: Thank you, Gigi, and good morning, everyone. Thank you for participating in Altimmune’s second quarter 2023 financial results and business update conference call. Members of the Altimmune team joining me on the call today are Vipin Garg, our Chief Executive Officer; Scot Roberts, our Chief Scientific Officer; and Scott Harris, our Chief Medical Officer. Following the prepared remarks, we will hold a question-and-answer session. A press release with our second quarter 2023 financial results was issued this morning and could be found on the Investor Relations section of the company’s website. Before we begin, I’d like to remind everyone that remarks about future expectations, plans and prospects constitute forward-looking statements for purposes of safe harbor provisions under the Private Securities Litigation Reform Act of 1995.

Altimmune cautions that these forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those indicated. For a discussion of some of the risks and factors that could affect the company’s future results and operations, please see the risk factors and other cautionary statements contained in the company’s filings with the SEC. I would also direct you to read the forward-looking statement disclosure in our press release issued this morning, and now available on our website. These statements made on this call — conference call speak only as of today’s date, Thursday, August 10, 2023, and the company does not undertake any obligation to update any of these forward-looking statements to reflect events or circumstances that occur on or after today’s date.

As a reminder, this conference call is being recorded and will be available for audio replay on Altimmune’s website. With that, I will now turn the call over to Dr. Vipin Garg, our Chief Executive Officer.

Vipin Garg: Thank you, Rich, and good morning, everyone. We appreciate you joining us today for a discussion of our second quarter 2023 financial results and business update. We are excited about the progress of our lead product candidate, pemvidutide, a GLP-1/glucagon dual receptor agonist, in development for both obesity and NASH. We recently announced the initiation of our Phase 2b IMPACT biopsy driven trial to evaluate the efficacy and safety of pemvidutide in NASH. Given the compelling 12-week and 24-week data from our Phase 1b trials in subjects with NAFLD, we expect to achieve significant rates of NASH resolution and fibrosis improvement at data readout from the IMPACT trial, which is anticipated in Q1 2025. The data from our NAFLD trial demonstrated a greater than 75% relative reduction in liver fat at 24 weeks, with over 50% of subjects achieving the high bar of normalization of liver fat in the 1.8 milligram dose group.

Subjects also had a mean weight loss of up to 7.2% at 24 weeks in the 1.8 milligram dose group with weight loss continuing at the end of treatment. We also achieved significant reduction in serum ALT and MRI based corrected T1 imaging, both important markers of NASH improvement. We believe that a robust reduction in NASH activity combined with fibrosis improvement and meaningful weight loss will be essential for a competitive product in the NASH marketplace. With regards to obesity, we look forward to reporting top-line 48-week data from our Phase 2 MOMENTUM trial in the fourth quarter of this year. The MOMENTUM interim results of 160 subjects reported earlier this year showed weight loss of 10.7% at the 2.4 milligram dose and 9.4% at the 1.8 milligram dose compared to a 1% weight loss in subjects receiving placebo after only 24 weeks of treatment.

These robust reductions in body weight, together with the effects of pemvidutide on serum lipids, and blood pressure, without cardiovascular safety signals suggest that if approved, pemvidutide can be an important treatment option for patients with obesity, especially those with NAFLD or dyslipidemia. It’s important to point out that these two comorbidities are prevalent in 60% to 75% of the obesity population. Finally, we have to have a data readout from our Phase 2 clinical trial of HepTcell in chronic hepatitis B in the first quarter of 2024. Recall that this trial is designed to show evidence of antiviral effects against hepatitis B virus and establish the role of HepTcell in combination therapy for the treatment of this unmet need. We’re excited about the progress of pemvidutide and HepTcell and the upcoming results of these ongoing trials.

With that, I’ll now turn the call over to our Chief Medical Officer, Dr. Scott Harris to discuss our clinical plans. Scott?

Scott Harris: Thank you, Vipin, and good morning, everyone. First, let me tell you about the initiation of our IMPACT Phase 2b NASH trial. This biopsy driven trial is being conducted at approximately 60 sites in the United States with Dr. Stephen Harrison, Medical Director, Pinnacle Research, an adjunct Professor of Medicine, Oxford University, serving as the principal investigator. We are planning for approximately 190 subjects, both with and without diabetes, to be enrolled. Subjects will be randomized to pemvidutide 1.2 milligrams, pemvidutide 1.8 milligrams or placebo in a 1:2:2 ratio that will be stratified for fibrosis stage in the presence or absence of diabetes. Therefore, approximately 38 subjects are expected to receive pemvidutide 1.2 milligrams, 76 subjects pemvidutide 1.8 milligrams, and 76 subjects placebo.

To be eligible for study participation, subjects will be required to have a BMI of at least 27 kilograms per meter squared, a liver fat content by MRI-PDFF of at least 8% and an NAFLD activity score of at least 4 on a pretreatment liver biopsy. We also expect it to have either F2 or F3 fibrosis with at least 50% of subjects required to have F3 fibrosis. The primary endpoints of the IMPACT trial will be the dual endpoints of achieving either NASH resolution with no worsening of fibrosis or fibrosis improvement with no worsening of NASH with the primary treatment comparison being the 1.8 milligram dose versus placebo. Secondary endpoints will include achievement of both NASH resolution and fibrosis improvement, liver fat reduction by MRI-PDFF, corrected T1 or CT1 response rate, serum lipids and non-invasive biomarkers of disease activity.

Importantly, weight loss will also be assessed as a key endpoint. All endpoints will be evaluated at week 24 of treatment and subjects will continue to be dosed and followed for an additional 24 weeks to a total of 48 weeks for safety and additional biomarker responses. We plan to employ a consensus read between two pathologists with a third who will adjudicate if consensus is not reached. A plan has also been developed to correlate non-invasive tests with NASH resolution and fibrosis improvement, the biopsy endpoints, and to commence discussions with FDA regarding the use of these biomarkers as primary endpoints in Phase 3. We anticipate reporting top line results at 24 weeks in the first quarter of 2025. Now let me talk about the Phase 2 MOMENTUM trial of pemvidutide in obesity.

The trial was designed to enroll approximately 320 subjects without diabetes but with obesity or overweight with at least one obesity associated comorbidity. Dr. Louis Aronne from Weill Cornell Medical School, a leading authority in obesity and obesity clinical trials, is serving as the principal investigators. Subjects were randomized 1:1:1:1 to pemvidutide 1.2 milligrams, pemvidutide 1.8 milligrams, pemvidutide 2.4 milligrams or placebo administered weekly for 48 weeks in conjunction with diet and exercise. Pre-specified interim analysis was performed when 160 subjects completed 24 weeks of treatment. Weight loss of 10.7% at the 2.4 milligram dose and 9.4% at the 1.8 milligram dose was achieved compared to a weight loss of 1% in subjects receiving placebo.

Approximately 50% of subjects achieved at least 10% weight loss and approximately 20% of subjects achieved at least 15% weight loss by week 24 at the 2.4 milligram and 1.8 milligram doses. Significant improvements or positive trends in cardiometabolic risk factors were observed. Importantly, these effects were achieved without arrhythmias, clinically meaningful heart rate increases or other safety signals. We look forward to the top line 48-week results from the MOMENTUM trial in the fourth quarter of this year. We expect to see continued weight loss beyond the double-digit levels noted in our 24-week interim analysis. Other top line readout parameters will include subject disposition, adverse events, vital signs, serum lipids, and glucose control.

Also as we have previously announced, we have completed enrollment in our Phase 2 multicenter clinical trial of HepTcell in patients with chronic hepatitis B. Chronic hepatitis B continues to represent a serious unmet need in the United States and worldwide and represents a significant commercial opportunity. HepTcell is an immunotherapeutic designed to activate T-cells to fight the hepatitis B virus infection. The HepTcell trial was designed to enroll approximately 80 subjects with an active chronic hepatitis B and low hepatitis B surface antigen. The primary endpoint of the trial is a 1-log reduction or clearance of the hepatitis B surface antigen. We expect to announce the results of this trial in the first quarter of 2024 once all subjects complete the six-month treatment period.

It’s general believed that an effective therapy for chronic hepatitis B infection will require both direct acting antivirals and immunotherapy. And we believe that HepTcell is highly differentiated and may provide for a functional cure of chronic hepatitis B infection with combined with novel direct acting antivirals. I’ll now turn the call over to Rich Eisenstadt to give an update on our third quarter financial results. Rich?

Rich Eisenstadt: Thank you, Scott, and good morning again. For today’s call, I’ll be providing a brief update on Altimmune’s second quarter 2023 financial and operating results. More comprehensive information will be available on our Form 10-Q to be filed with the SEC later today. Altimmune ended the second quarter of 2023 with approximately $160 million of cash, cash equivalents and short-term investments compared to $184.9 million at the end of 2022. Research and development expenses were $13.3 million in the second quarter of 2023 compared to $16 million in the same period in 2022. Approximately $7.4 million of this total for the second quarter of 2023 were direct expenses for the conduct of our clinical programs, including $5.6 million in direct costs related to development activities for pemvidutide and $1.8 million of direct costs related to development activities for HepTcell.

General and administrative expenses were $4.8 million for the three months ended June 30, 2023 compared to $4.4 million in the same period in 2022. The change was primarily attributable to increased stock compensation and other labor related expenses. Approximately $3 million of our quarterly operating expenses, non-cash expense, primarily stock compensation. Interest income was $1.8 million in the second quarter of 2023, compared to $300,000 in the same period of 2022. Net loss for the three months ended June 30, 2023 was $16.1 million or $0.32 net loss per share compared to net loss of $20.1 million or $0.42 net loss per share for the second quarter of 2022. We estimate that our existing cash funds us through the 24-week biopsy results from our IMPACT Phase 2b NASH trial expected in the first quarter of 2025.

Our financing also funds completion of the 48-week MOMENTUM trial and the HepTcell trial. I will now turn it back over to Vipin for his closing remarks. Vipin?

Vipin Garg: Operator, that concludes our formal remarks, and we would like to open the lines to take questions. Could you please instruct the audience on the Q&A procedure?

Operator: Thank you. [Operator Instructions] Our first question comes from the line of Seamus Fernandez from Guggenheim.

Unidentified Analyst: Hi there. This is [Ilana] (ph), on for Seamus from Guggenheim. Thanks for taking our question. We were just curious as far as your expectations for weight loss at 48 weeks. Are you still targeting mid to upper teens? And secondly, any thoughts on what Merck presented with respect to their GLP glucagon EASL recently? Thank you.

Vipin Garg: Sure, Ilana. Good morning. Scott, do you want to take that?

Scott Harris: Yes, thank you for the question. Yes, we still are expecting weight loss in the mid to upper teens. We think that in view of the SELECT readouts, which showed that to be associated with a significant reduction in cardiovascular risk, that’s a very significant point to achieve. But with regards to SELECT, I would point out that that was achieved with GLP-1 monotherapy alone. And with the glucagon effects, we believe that with the reduction in serum lipids and also hepatic fat, that we can achieve even better results than those achieved by semaglutide in that trial. With regards to Merck, we believe that the findings validate our continued hypothesis and results that glucagon is extremely important for reducing liver fat.

So we were happy to see confirmation of that information. But several things I would point out about that trial was, number one, that had to go through a significant titration period. We’re not doing that. We have no titration at the two doses that we’re employing in our upcoming trial — NASH trial. And the second is that compound has also been associated with significant heart rate increases, which as I mentioned in my opening remarks, those have not been seen in our program.

Unidentified Analyst: Great. Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Yasmeen Rahimi from Piper Sandler.

Yasmeen Rahimi: Good morning, team, and thank you so much for all the great updates. I think this morning, as you know, the SELECT data, this week has really emphasized how the demand for new novel therapies for obesity continued to increase. I think we saw also this morning another acquisition by Nobel. So this raises the question, sort of, if you could just kind of give us an update on how the M&A interest is evolving. I think we have seen in the last month two acquisitions of therapies of where they bring broader novelty and that it’s not just about weight loss. So I would love to get an update on how M&A interest is growing and what do you expect the impact on SELECT will be in your discussions with potential partners around obesity?

And then secondly, there are two additional key readouts upcoming in the first half of 2024, a biopsy data from tirzepatide from — as well as the GLP/glucagon compounds from BI and Zealand. So I would love to hear your thoughts on how you’re thinking about how those results could provide color or detail or translation or anything around that? I think a lot of our clients may not be — may not realizing that those two readouts are really key. So would love to hear if you could tackle M&A, tackle what do you expect to see in these two biopsy readouts with two incretins in the first half of 2024? And I’ll jump back into the queue. Thank you.

Vipin Garg: Yeah. Thank you, Yas. Thank you for the questions. Let me take the M&A question and then I’ll turn it over to Scott Harris to talk about the data coming out in the first half of next year. So as you know, we’ve been saying all along that obesity is going — the whole market is going to segment. There are going to be multiple mechanisms that people would want, the physicians want, the patients want, and they would benefit from it. And that’s basically what we’re starting to see now that this is not game over with just the first generation of obesity drugs, but we are going to need additional mechanisms. And that’s exactly what we bring to the table by adding glucagon to GLP-1, we think that really gives, provides some additional differentiation from just GLP-1 alone, the fact that we are seeing profound improvement in serum lipids, very class leading liver fat reduction.

If you look at this patient population, the first wave of diabetes treatment really designed for — of obesity treatment is designed for patients with obesity and diabetes, but there’s many more patients that don’t have diabetes but have other comorbidities such as dyslipidemia and high liver fat content. So we think we fit really nicely there. We’ve been very encouraged. There’s lots of interest, as you’ve seen already from two recent acquisitions in novel obesity mechanisms and compounds. And glucagon is going to have a seat at the table. We are seeing that from large pharma, from their internal programs, the data coming out on glucagon. So we are very encouraged with our ongoing discussions and the data from MOMENTUM, upcoming data from MOMENTUM, and the fact that we’ve initiated IMPACT is going to further catalyze those discussions.

So we’re very excited about the prospects of having a partner on board before we start Phase 3 development in obesity sometime next year.

Scott Harris: Yeah, Yasmin. And I’ll take your second question about the tirzepatide and the Boehringer Ingelheim Zealand readouts in the first half of next year. I think it’s important to point out that tirzepatide has no glucagon activity and the glucagon activity in the Boehringer Ingelheim Zealand compound is pretty minimal. It’s — the compound is highly biased to GLP-1. The ratio is 8:1. And as evidence of that, they’re not seeing meaningful effects on serum lipids. And for that matter, [there is] (ph) tirzepatide. And that tracks directly to the absence of having glucagon in contrast. We have glucagon. We’re not only seeing very significant reduction in serum lipids, but also liver fat as well. In their non-invasive study, tirzepatide at the 15 milligram dose, their top dose, only achieved a reduction in liver fat content at the end of entire year of 39%.

And we think that — we think that reflects what I just said about glucagon. Zealand has not come forward with any non-invasive data about the liver fat, but we think it would follow in the same pattern. So we still believe that glucagon is key to the rapid reduction of liver fat. We think the rapid reduction of liver fat is important for retrieving not only NASH resolution and fibrosis improvement on the biopsies, and we think that the results that we get from our IMPACT trial will significantly exceed those from either of those two compounds in the first half of next year.

Yasmeen Rahimi: Thank you so much team. I’m really excited on the continued progress. I’ll jump back into the queue.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Roger Song from Jefferies.

Roger Song: Great. Congrats for the progress as well. And thank you for taking the question. Maybe a couple of questions, mostly related issue to obesity. First of all, maybe can you comment on your readiness for the Phase 3 for the obesity trial in terms of the dosing and then maybe some of the consideration after you’re seeing the Phase 2 24-week data? At the minute, you’re still waiting for the 48-week, but just curious the preparation for the Phase 3 in conjunction with the partnership discussion. So that’s number one. Number two, very interesting, everything you mentioned, this comorbidity with obesity of pretty high percentage. Just curious given the very differentiated glucagon addition to the mechanism, how likely you think your — you can do some creative design for the trial, maybe enrich those comorbidity patients to demonstrate even bigger treatment effect or the benefit for those patients with the comorbidity? Thank you.

Vipin Garg: Absolutely. Scott, you want to take the comorbidity question first?

Scott Harris: Yeah, Roger. Thanks for the question. So obviously, we’re deeply in preparations for Phase 3. And, we have not been public about what those specific plans will be, but we have talked about the fact that based on the prior programs, we think the safety database will be about 5,000 subjects with about three-quarters of those receiving active drug and about one-quarter receiving placebo. It appears that it’s the size of the safety database that matters. The agency [indiscernible] want to study in non-diabetics and diabetics. Beyond that there’s been some options about looking at for example, osteoarthritis, looking at the comorbidity and the like and we’re in active discussions right now. And, we’ve been getting feedback from partners about that as well, as what their preferences would be. So as soon as we have additional information about that, we’ll share that with investors. Vipin, did you?

Vipin Garg: Yeah, I mean, couple of things. First of all, in terms of being Phase 3 ready, our plan is to be Phase 3 ready in the second half of next year. So obviously, we have to wait for the 48-week data before requesting a meeting with the FDA, which we plan to do. So we’re putting all the plans in place for that. And again, our goal is to have a partner lined up before we start Phase 3. So from a timing perspective, that kind of fits nicely, gives us the first half of next year to both line up a partner as well as have the Phase 3 ready program as soon as the — as soon as we have the end of Phase 2 meeting with the FDA. In terms of enriching patients for comorbidity — comorbidities, as Scott mentioned, it’s going to be a fairly large Phase 3 campaign anyway.

So we really don’t have to go looking for these patients. These patients are there. I mean, the prevalence of these two comorbidities is even higher than diabetes. So it’s not hard to find these patients. So we’re in a good shape in terms of having access to those patients in the obesity subpopulation, if you want to think of it that way. Scott?

Scott Harris: Yeah, Roger, what I wanted to add and I was waiting for Vipin to finish his comments, was that the best place to look at those — that enriched populations is in an outcomes trial, because actually that’s the endpoint, right? And you want to make sure that it’s adequately powered. So as I mentioned in the opening remarks, the SELECT trial is extremely important for showing that obesity improves the outcomes of patients at risk. And as I also mentioned in the opening remarks, we think that with comparable weight loss, we will do better than that because of glucagon’s effects on serum lipids and hepatic fat content. So that trial will be enriched with those patients. We think that’s probably the best place to analyze these results because of the number of subjects powering the trial and what the outcome actually is.

Roger Song: That’s great. Thanks for all the comments. I really — I really appreciate it. That’s it from us.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Corinne Jenkins from Goldman Sachs.

Unidentified Analyst: Good morning. This is [Craig] (ph) on for Corinne. So I wanted to build on a point that you just highlighted, specifically that about finding a partner to develop pemvidutide. And I guess what I’m wondering is, can you describe what your ideal partner would look like? And specifically, are you looking for someone to contribute to the development of NASH and obesity or just individual indications?

Vipin Garg: Absolutely. Good morning, and thank you for the question. So I mean, the best thing — the best way I can describe it that we’re talking to fairly large universe of companies, all of the companies that you would expect us to be talking to and then some. In terms of looking at the indications, we don’t believe that a partner would want to split indications given that it’s the same molecule, it’s the same drug for both NASH and obesity. So yes, our ideal partner would be somebody who is interested in both of these indications. And the good news is that they’re both metabolic diseases. So we are finding that people are interested in both indications and even additional indications for incretin-based compounds. So overall, we’ll — we have flexibility.

We can structure the deal in various ways, but I think both of these indications or perhaps all indications would be included in that partnership. The key for us is to really get the full value for the asset. So we are very encouraged with conversations and we’ll keep moving forward.

Unidentified Analyst: Got it. Thank you very much.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Mayank Mamtani from B. Riley Securities.

Mayank Mamtani: Good morning, team. Thanks for taking our questions. A few from us. So staying on this theme of glucagon-based therapeutics being complimentary to a number of programs out there, just, I was curious if there’s any work underway regarding combinability with sema. I assume your NASH Phase 2b is assuming some sort of background rate of either diabetes or obesity level doses. Not sure if you can comment on what those rates are. Sorry, I haven’t been able to dig out your clinical trial design yet on ct.gov. I’m not sure if that’s posted there. And then I have a couple of follow ups.

Scott Harris: Yeah. Mayank, we believe that pemvidutide would be safe on topic of existing GLP-1 therapy. It’s something that we’ve certainly looked at as potentially studying at some point in the future, but our current feeling is that there would be no problem if a physician wanted to combine those therapies using them concomitantly.

Vipin Garg: And more importantly, we should see additional benefit of putting pemvidutide above — over and above any of the baseline diabetes treatments again because of the glucagon component and having a direct effect — a direct hepatic effect on hepatic fat.

Mayank Mamtani: Like, boosting GLP-1 activity should only be helpful, like, [GLP] (ph) does. And then on MOMENTUM quickly, the baseline characteristics there for the full patient cohort, relative to the interim analysis population cohort that you recorded on in March, any insight you have there on differences? And I was also curious about, there were certain sites that may have contributed to a higher discontinuation rate. So was there like a ratio that you can share, what the full population versus the interim analysis population looks like in those sites?

Scott Harris: Yeah, Mayank. We announced when we completed enrollment in MOMENTUM, and I believe that was in the September of 2022, we announced that we had done a comparison of the full population versus the interim analysis population. And that the, we had made public statements that the demographics were comparable in terms of age, BMI, body weight, gender ratio, and the like. So there’s been no additional information. That was really a snapshot we took when the trial completed enrollment. Regarding the discontinuation rates of trials, yes, there has been some sites that had out of place rates of discontinuation that clearly were higher than other sites. For example, Dr. Arrone sites had no discontinuations at all. And it showed that the careful management of patients really controlled or mitigated the discontinuation rate.

So yeah, that is something. And we’ve taken a look at those sites and whether they would really be sites that we would consider for future trials.

Mayank Mamtani: Okay. Got it. And I have to ask a quick SELECT CVOT trial question. Obviously, we have to see the full results there. But since, this was a non-Type 2 diabetes patient population and everyone’s trying to understand the HbA1c independent mechanisms at works here, I was just curious about the CRP biomarker, as we know, the inflammatory underlying state that can help with outcomes. Is that a marker you’re looking at in your NASH study that is starting out or even in the obesity study if you’d report on that?

Scott Harris: Yeah. We hope to have that information in the future. We don’t have information to share at this point.

Mayank Mamtani: Okay. And last one for Rich quickly. On the R&D spend coming down quarter-over-quarter, obviously, as you ramp up with this NASH study scaling up, we should have that sort of trend back up. I was just curious if any manufacturing capacity related investments that also kind of feed into that because, obviously, you are probably making sure that you are making, investments for Phase 3 ready supply of the drug?

Rich Eisenstadt: Yeah. All that is true, Mike. The spend did come down as some of the other trials, the NAFLD trials we ran last year and the diabetes, the drug-drug interaction trial rolled off. So Q2 was pretty much just MOMENTUM trial expense, a little bit of investment into the IMPACT trial. Looking at the second half of this year, the IMPACT trial expenditures should increase. And as you point out, we also will have some manufacturing expenses to get the Phase 3 materials ready. All that will probably lead to some increase or rebound back to the old R&D expenditure rates, but that should be just temporary or temporal as MOMENTUM completes and patients are rolling off that trial now. So as we complete that, there’s always a big expenditure towards the end of the trial as we do the data analysis and such forth, but that will end up rolling back out in 2025 — or 2024, I’m sorry.

Mayank Mamtani: Understood. Thanks for taking our questions.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Jon Wolleben from JMP.

Jon Wolleben: Hey, good morning, and thanks for the update and taking the questions. Two for me. You mentioned expectations for weight loss after 48 weeks, but I was hoping you could talk about what you think you’ll see in terms of tolerability, GI adverse events, especially within the context of the trial design. And then also, Scott, you mentioned heart rate a couple of times. Wondering what you view as that threshold between acceptable and unacceptable heart rate increases for the class? Thanks.

Scott Harris: Yeah. Thanks, Jonathan. Regarding the first, we’re still blinded to the data. We certainly are not seeing any — a thing that would indicate that we would have any worsening of any adverse events. We think there’s only this prospect of this continuing to get better, but we’ll have the data at 48 weeks. One thing to point out as we go into Phase 3 that, there’s learnings in Phase 2. We’ve seen that with all of the companies. We saw 20% adverse event discontinuation rates with the oral GLP-1 program, the Lilly program. We saw it with the tirzepatide, excuse me, we saw it with the retatrutide program and it was also, as we’ve mentioned in prior calls, seen in other Phase 2 programs. So we think that these companies have clearly addressed this and we think that our dose reduction strategy is something that will really bring this down over the course of time, especially in Phase 3.

Regarding the heart rate increases, it’s not really known what the actual threshold is. But one of the things I would point out is, the concern that in the retatrutide trial, that heart rate increase is also associated with arrhythmias and the two could be linked. In the retatrutide Phase 1 studies, they were seeing heart rate increases that were quite high as much as 30 beats per minute early on, the data that they’re reporting out is really at the end of the trial. So there’s a lot more to learn as that data comes out, but I would flip to the positive and say that we’re not seeing that with our data. We’re not seeing any heart rate increases. We’re not seeing any imbalances of arrhythmia. And we really think that that distinguishes us from retatrutide and other compounds in the field.

Jon Wolleben: And mechanistically, you’d expect that to happen early on in treatment. So if we didn’t see it in 24 weeks, unlikely to see it at 48?

Scott Harris: That’s a difficult question, but there does appear to be higher heart rate increases early on. There appears to be adaptation over the course of time. So what’s important to understand with regards to say those arrhythmias is not that they occurred, but when they occurred during the course the trial. Now the trials that are being conducted in Phase 2 are — clinical development standard is relatively small. They’re supposed to be in Phase 2, but these are the kind of events that come out in outcomes trials when you’re studying 15,000 subjects. We feel very comfortable with our cardiovascular safety profile. But you know, as you start taking any drug with any kind of signal and expanding the population, you may be seeing something in a large outcomes trial, especially one that’s a risk — enriched with patients at risk.

Jon Wolleben: That’s helpful, Scott. Thanks again for taking the questions.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Patrick Trucchio from H. C. Wainwright.

Louis Susser: Hi, good morning. Louis here on for Patrick. Thanks for taking our questions. One question regarding the NASH program and, are 24 weeks enough to see benefits on NASH resolution and fibrosis improvements? And, do you think you can already have some data –clinical data that could predict that? And then I have another question on the HepTcell program.

Scott Harris: Right. Thanks for the question, Louis. So we do have preclinical data in animal models of NASH showing fibrosis improvement, and that’s been accompanied also by gene expression study showing reduction in those drivers of stellate cell activity in fibrosis. Regarding the 24-week endpoint, several companies have shown the ability to achieve NASH resolution and fibrosis improvement at 24 weeks. And we believe that with our class-leading liver fat reduction effects and with the link between liver fat reduction and the factors that you just mentioned, we think we have a very high likelihood of achieving success in those endpoints at 24 weeks.

Vipin Garg: Yeah, it’s important to point out that it’s not just the magnitude of the effect, it’s also how fast you get there. So it’s also not only it’s class leading in terms of overall reduction in liver fat, but the speed of it, very fast reduction in liver fat, we believe gives plenty of time for the liver to heal in 24 weeks.

Louis Susser: Thank you. That’s helpful. Can you discuss the antiviral mechanisms that you believe will be most complimentary to the HepTcell and what do you need to see in the HepTcell data to have more confidence to move the program forward to a larger trial?

Vipin Garg: Scot Roberts, do you want to take that?

Louis Susser: Combination trial potentially.

Vipin Garg: Scot Roberts, do you want to take that?

Scot Roberts: Absolutely. Yes. The cell — the mechanism of HepTcell itself, which is immunotherapeutic, is to stimulate T-cells that are able to recognize the HBV virus and in that way help clear the virus from the infected cells. As you know, the recent antivirals, sRNAs, monoclonal antibodies against surface antigen have been very effective at dropping the surface antigen level, but removal of those agents causes a rebound in the level of that surface antigen and immune tolerance state that results from that. And so that’s why it’s generally believed that the combination of a direct antiviral to lower the surface antigen levels and take the pressure of the immune suppression off the immune system together with an immunotherapy to rev up the now released immune system could be an effective way to treat this disease.

And so, we believe that HepTcell with its ability to stimulate responsive against very conserved portions of the HBV polymerase and core antigen will be an effective immunotherapy that when combined with an effective anti — direct acting antiviral, could yield a very interesting, effective therapy. As far as what we’re expecting in the Phase 2 HepTcell study, the efficacy endpoint is set at the 1-log reduction in the surface antigen. We believe that that’s readily achievable. Really any sort of convincing effect of monotherapy with a HepTcell would then align us and prepare us for a follow-on study with the direct acting antiviral.

Louis Susser: Great. Just a quick follow-up on that. Would you have any other types of analysis on the antigen presenting side on the potential effect to have a — not just a stronger response, but a broader response with the type of CDA T-cells that are required to clear those infected cells?

Scot Roberts: Well, especially with respect to breadth, that’s really one of the differentiating aspects of HepTcell. It’s the epitopes that we’ve selected to include in the peptides that constitute HepTcell. And so with respect to breadth, because these epitopes are in largely in hydrophobic regions, and are highly conserved between the different genotypes, we feel that the immune response, which we’ve demonstrated pre-clinically to be broad against genotypes A through D would extend through all of the known genotypes right now. That’s what the bioinformatics would suggest. And we do have the preclinical data showing a very broad response.

Louis Susser: Great. Thank you.

Operator: Thank you. At this time, I would now like to turn the conference back over to Vipin Garg for closing remarks.

Vipin Garg: Thank you. Thank you everyone for participating today. We appreciate the opportunity to share our results and outlook with you and thank you for your continued interest. Have a nice day.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.