Operator: Greetings, and welcome to the INmune Bio Second Quarter 2023 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. A transcript will follow within 24 hours of this conference call. At this time, it is my pleasure to introduce to you Mr. David Moss, CFO of INmune Bio. David, thank you. The floor is yours.

David Moss: Thank you, John, and good afternoon, everybody. We thank you for joining us for the call for Immune Bio’s second quarter 2023 financial results. With me on the call, actually sitting right next to me is Dr. RJ Tesi, CEO of Immu Bio, who will provide an update on our two platforms, XPro and INKmune. Before we begin, I remind everyone that except for statements of historical facts, the statements made by management and responses to questions on this conference call are forward-looking statements under the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that can cause actual results to differ materially from those in such forward-looking statements.

Please see the forward-looking statements disclaimer on the company’s earnings press release, as well as risk factors in the company’s SEC filings, including our most recent quarterly filing with the SEC. There’s no assurance of any specific outcome. Undue reliance should not be placed on forward-looking statements, which speak only as of the date they are made as of the facts and circumstances underlying these forward-looking statements may change. Except as required by law, INmune Bio disclaims any obligation to update these forward-looking statements to reflect future information events or circumstances. With that behind us, now I’d like to turn the call over to Dr. RJ Tesi, CEO of Immuno Bio. RJ?

RJ Tesi: Thank you, David, and thank you, everyone for joining the call. As usual, I will arrange my remarks to highlight the key takeaways for the second quarter and subsequent period, and provide updates on our platform programs. I will start by reviewing our developments with XPro and INKmune before I pass it back to David to discuss financial results and provide an update on upcoming and new milestones. We will then move to Q&A. During the second quarter, our primary focus remained enrollment of patients into the Phase 2 blinded randomized trial in patients with early Alzheimer’s disease with inflammation and increasing the geographic footprint of that trial. We are going global. Expanding the geographic footprint has been slowed by staffing problems at regulatory authorities in some jurisdictions.

I believe this is a hangover from the COVID era. For instance, one country has — is a 120 days past the response time required by law. But there’s nothing you can do about the problem. We just deal with it and answer their requests as needed. Enrollment continues to accelerate, and we are encouraged to see patients finish the trial and opt to continue treatment under the Phase 2 open-label extension program. I remind you the OLE or the Open Label Extension provides two additional bites at the apple, if I may. One-third of the patients entering the Open Label Extension have been on placebo that is they’ve not received XPro. These patients now have an opportunity to respond to XPro therapy. We should be able to capture that data. Patients who received XPro the two-thirds who had been on active drug during the trial, we’ll continue on the drug and provides data for long-term efficacy and safety follow-up, important issues for the company, investors, clinical teams, potential partners and the regulatory authorities.

Finally, we remain on track with the FDA to meet the conditions necessary to lift the clinical manufacturing hold before the end of the year. This long and frustrating process is nearing its end, we hope. The just completed annual Alzheimer’s Association International Conference was filled with both promise and pragmatism. The promise was the release of data from Lilly’s Donanemab study in patients with early AD. With the release of that data, there are now three large Phase 3 studies performed with different anti-amyloid antibodies. The three studies showed consistent efficacy and safety. Put another way, wearing my commercial hat, although the marketing staffs of the respective companies will see differences in the three drug therapies in their clinical trial results.

Clinicians and patients will see similarities. There is a class effect. That is reflected by the pragmatisms seen by the clinical Alzheimer’s disease professionals. It was palpable that they want more. A multi-day survey confirmed there was no need in their opinion, for additional drugs targeting amyloid. But there was plenty room for improvement in the drugs treating Alzheimer’s disease. The clinical teams and the clinical experts want three things: first, additional drugs that improve outcomes and that do not target amyloid, drugs targeting tau and neuroinflammation are on top of that list. Second, there is a desire for better biomarkers to identify patients early in the disease process when they can be best treated and help select what drugs the patient should receive.

The preference is for easily obtained blood tests. Finally, combination therapy has become a serious topic of discussion. No one is satisfied with the results of the monotherapy anti-amyloid trials and Alzheimer’s disease is a complex disease and modern medicine complex diseases often require treatment with combination therapy. We should expect no difference with Alzheimer’s disease. An interesting problem did rare head at the meeting. There was much head scratching about what to do with patients after the amyloid is gone. In fact, the Lilly trial with donanemab, they stopped the drug once the amyloid is gone, but the patients continue to show progressive cognitive decline. Clearly, there is a need for something to solve this problem. Like with combination therapy, we believe XPro is well positioned to fulfill this new cognitive decline without amyloid problem.

Some may be scratching our heads trying to understand the data the company presented at the meeting in Amsterdam. The posters on the effects of XPro on gray microstructure elements were complicated and a little bit data dense and I’ll attempt to integrate these highly technical data into our overall program for you. We have presented extensively on the benefits of XPro treatment on — in white matter on white hematopathology in patients with Alzheimer’s. Because the brain has both white and green matter, some have asked, well, what about gray matter. And these data we presented show that XPro does affect positively the micro structural elements of gray matter in the brain, in the areas where Alzheimer’s pathology is most severe. That is XPro helps normalize the micro structural elements of both white and gray matter, that is the whole brain.

So we have already shown that XPro changes the biology of neuroinflammation, neurodegeneration synaptic and myelin. These data suggest that remodeling and repair of the aging of brain occurs when you control destructive neuro information with XPro. What remains to be shown is the impact of these changes on cognitive function. In the open-label Phase 1 trial, eight of nine patients treated with shall we say, four dose XPro had stable or improved cognition on XPro therapy. We have been vocal in our belief that XPro will flatline cognition in patients with Alzheimer’s disease and neuroinflammation. But we won’t really be able to answer this question until we’ve completed the ongoing Phase 2 trial. We have signaled our interest in using the DN-TNF for the dominant negative TNF platform for the treatment of Duchene Muscular Dystrophy or DMD.

As highlighted in January, we established DN02, a separate wholly owned subsidiary that will hold the intellectual property to facilitate partnering and business development activities for treating DMD with our dominant negative TNF. This business structure allows us to focus on our core mission that is the treatment of Alzheimer’s disease without leaving a valuable asset on the shelf, so to speak. Our confidence in DMD is based on the preclinical data. The ticket for entry into DMD is clear. A therapy must decrease inflammation and decrease muscle fiber destruction. DN-TNF does that and more. The most interesting and novel attribute is that DN-TNF treatment improves muscle fiber regeneration. To our knowledge, muscle fiber regeneration has not been seen in any small molecule biologic or gene therapies.

A therapy that promotes muscle fiber regeneration may change the course of the disease in these boys. As part of the preclinical effort, we are performing molecular studies to understand the advantage of DN-TNF therapy compared to standard of care corticosteroid therapy. We are working hard to find a potential partner for this promising asset. Moving from DN-TNF to the INKmune platform. You recall in May that the FDA or we received from the FDA is safe to proceed letter. Actually, it’s an e-mail these days for the Phase 1/2 clinical trial using INKmune treatment with metastatic Castration-Resistant Prostate Cancer, or mCRPC, is the more common phrase that is used. This simple e-mail formalized our decision to pivot from using INKmune to treat hematologic diseases to treating solid tumors.

The decision for this pivot was based on the unique biology of INKmune primed NK cell. INKmune primed NK cells undergo changes that allow the NK cells to function in the immunologically hostile and hypoxic TME. To our knowledge, cytokine primed NK cells or genetically modified NK cells, do not undergo these changes that are critical for successful treatment in solid tumors. The choice of metastatic castrate-resistant prostate cancer as our first tumor target was carefully considered. Prostate cancer specimens have a robust NK cell infiltrates, but the cells are resting NK cells that do not kill cancer. Prostate cancer is well-established biomarkers that allow us to determine if INKmune is decreasing tumor burden in the cancer patient. And finally, metastatic castrate-resistant prostate cancer is one of the few tumors that have not benefited from the immunotherapy revolution over the last five or six years.

We believe we can change that. Finally, the health of men with metastatic castrate-resistant prostate cancer ranges from very active, let’s say, normal to sedentary. INKmune, is given as an outpatient without the need for pre-medication, cytotoxic condition or difficult-to-use cytokine therapy. This therapeutic profile aligns well with the expectations of men with metastatic castrate-resistant prostate cancer who often live a long time with their disease and value a high quality of life. The trial is a novel Bayesian design that is expected to enroll 30 men. The trial will take place at a minimum of six sites in the US, and we plan to enroll the first patient by the end of the year. Patients will receive one of three doses of INKmune outpatient during the six month trial.

Immunologic and therapeutic efficacy will be measured. Immunologic efficacy will be measured by the increase in memory-like NK cells in the blood and how long these cells are present in the patient circulation. We expect this to correlate with therapeutic effects. Therapeutic efficacy or tumor response to INKmune will be using traditional biomarkers of prostate cancer tumor burden including Blood PSA, CT scan and bone scans as well as novel biomarkers of tumor burden, which include the PMSA-PET scan and circulating tumor DNA. We continue to treat patients in the Laurel trial. That’s the ongoing Phase I trial in high risk MDS AML patients, four patients have received the complete three dose regimen, the results show that it so far is well tolerated.

Three of the four patients showed evidence of NK cell activation. Of the four patients, one remains alive 20 months post-treatment with having received no other therapy and has enjoyed an improved quality of life. Two patients were bridged to transplant, and one great patient actually died while waiting for a transplant. We’ve opened a third clinical site in Athens. The first Greek patient has been identified and treatment is planned for the end of August. There have been two major barriers to recruitment of patients in the Laurel clinical trial. The first was COVID-19. The original sites are all in the UK and the UK’s National Health Service really suffered under COVID and those dislocations and service persist. The second problem is related to the enrollment conservative, enrollment criteria we use for the first cohort.

With experience that enrollment criteria can be made more liberal, we believe this will solve some of the enrollment problems. The company remains committed to execute on its vision of moving XPro and INKmune, towards commercialization. Both platforms offer unique therapeutic options to treat more than one disease in their effective therapeutic silos. We are excited about the prospects of both platforms and are working hard to make a difference at the bedside, while building shareholder value. I return this to David Moss, to review certain financial items

David Moss: Thank you, RJ. I’ll provide a brief overview of our financial results and upcoming milestones before we head to our Q&A session. Net loss attributable to common stockholders for the quarter ended June 30th, 2023, was approximately $6.5 million compared with approximately $6.8 million for the comparable period in 2022. Research and development expenses totaled approximately $4.1 million for the quarter ended June 30th, 2023, compared with approximately $4.2 million for the comparable period in 2022. General and administrative expense was approximately $2.3 million for the quarter ended June 30th, 2023, compared with approximately $2.2 million for the comparable period in 2022. At the end of June 30th, 2023, the company had cash and cash equivalents of approximately $47.8 million.

Based on our current operating plan, we believe our cash is sufficient to fund our operations into late-2024. As of August 7th, 2023, the company had approximately 18 million shares of common stock outstanding. As highlighted in the prior quarter’s investor call, we continue to focus on achieving our primary clinical trial objectives, while remaining cost prudent with the potential to recover a portion of R&D expenses in Australia and, to a lesser extent, the UK. Now I’d like to move on and list our upcoming important milestones. Top line results for our Phase 2 early ADi trial in patients with inflammation in Alzheimer’s disease is expected in late-2024. We will initiate a Phase 2 trial of XPro in patients with Treatment Resistant Depression upon resolution of the FDA’s manufacturing review.

We’ve been working relatively hard on that. Additional, open-label Phase 1 trial of INKmune in high-risk MDS/AML in 2023 and early 2024. Initiation of a Phase 1/2 program in metastatic castration-resistant prostate cancer, will begin in the second half of this year. Finally, we continue to pursue business development partnership opportunities, and there can be no assurances that the company will complete any transactions as they are complex and very difficult. We have two great platforms and as a small company. We will try to expand the applications of these platforms in areas we do not have the resources or expertise to pursue ourselves, in order to benefit shareholders. Naturally, we’ll update investors should material business development events curve.

At this point, I’d like to thank you for your time and attention. And I’d like to turn it back to John, our operator to poll for questions. John?

Operator: Thank you, sir. At this time, we’ll be conducting a question-and-answer session. [Operator Instructions] And the first question comes from the line of Joel Beatty with Baird. Please proceed with your question.

Joel Beatty: Great. Thanks for the update and for taking my questions. The first one is on the ongoing FDA manufacturing review. Could you provide a little bit more detail there on what is needed to get that resolved?

RJ Tesi: Yes. So thanks, Joel. So it’s now 15 months since we received — maybe 14 months since we received the clinical hold. And really, I divide this into two halves. It took us a long time to understand exactly what the FDA was asking for. As you know, both Canada and Australia were — are fine with the new Xpro that we’ve made is being used to treat patients and both of those are regulatory jurisdictions. And we with the way the communication happens with the FDA, which is not very efficient, it took seven months for us to reach an agreement with the FDA, what the problem was and what the solution was. So I can promise you that was extremely frustrating for us and as it was for investors. Since then, we have been executing against their request, once again, scratching our heads, little confused why they are preventing us from treating patients in the US despite the fact the drug has been used in the US before for COVID trials and is being used in both in the — in Canada and Australia.

But that is the nature of working under the regulatory authority of the FDA. We expect to give them everything they need to get us off clinical hold and time for us to receive that hoped for safe to proceed e-mail before the end of the year. If I sound a little bit less than hyper confident is just because it’s the FDA. And you never know the score until the end of the whistle is blown. So it’s been frustrating for you. It’s frustrating for us, but the drug gets fine. We’re using it in two venues and new patients are going on frequently.

Operator: And the next question comes from the line of Thomas Shrader with BTIG. Please proceed with your question.

Unidentified Analyst: Hey. Good afternoon. This is Sung [ph] calling in for Tom and thanks for taking our questions. So I have two questions. First is regarding Alzheimer and more of a big picture question. Thinking about a pricing for a new drug, if a new drug does not require ARIA monitoring, do you believe that, that will allow for premium pricing pruning cost savings from the MRIs? And then the second question is following the recent FDA decision on the competitor’s drug in MDD over the weekend, how does that help you think about enrichment strategy for TRD trial? And can the level TNF can be used here? Thank you.

RJ Tesi: Yes. So thank you. Very two good questions. So the current estimate for the cost of care — the cost of receiving an anti-amyloid drug for the first year is $82,000, A little more than US$82,000. That’s — only a one-third of that is the cost of the drug. So two-thirds of that is really all of the safety monitoring and what’s needed for diagnosis of the disease. We believe that XPro will not have that burden. In other words, right now, our enrollment criteria include basically a set of blood tests, which are all relatively cheap, nothing fancy, can be done virtually in any lab in the country. and an MRI scan that requires some set of reading, but that is not expensive. There’s no PET scans and there’s no need for — at least as we envision it today, there’s no need for additional follow-up MRI scans.

So yes, you know how pharmaceutical pricing works. The first drug company sets the price, which has been done. And then you can adjust the pricing based on whether you’re better. We think if we do meet our clinical goal of stabilizing cognitive decline that allows us for premium pricing. And I would expect that premium pricing would come well within that $82,000 bracket, although don’t hold me to that, we’re a little ways off from that decision. But the bottom line is the current drugs are difficult to use. They’re complicated. I think their uptake is going to be somewhat — will be slow because of that sophistication needed for managing those patients and the resources, such as MRI scans, which are going to be needed for those managing those patients.

As far as the more recent events with major depressive disorder, we found that very interesting and actually quite validating about how we do our CNS drug development. Clearly, although I’ve not seen the data, I’m not going to comment on it, we are very sensitive to the fact that particularly in depression, but in all central nervous system diseases, placebo effects always are what captured you by surprise. And the way to eliminate surprises on the placebo side is to better control your patient enrollment criteria using enrichment factors. The oncologist learned this, 20 years ago. The CNS drug developers have not yet learned it. We take this seriously. And in our Alzheimer’s trials, these patients all have neuroinflammation and actually in the trial that we planned in treatment-resistant depression, they will all have neuroinflammation.

We believe by using that kind of, shall we say, discipline and enrollment, it will prevent surprises on the placebo end or the placebo response and allow you to really accurately assess the drug’s effect on the disease.

Unidentified Analyst: Great. Thank you.

Operator: At this time, there are no further questions. And now I would like to turn the floor back over to RJ for any closing comments.

RJ Tesi: Yes. Thank you. So just in summary, XPro is a unique asset in the Alzheimer’s therapeutics space. And this became particularly clear when at AAIC this year, where there are a lot of companies have jumped on the anti-inflammatory bandwagon for Alzheimer’s. But as many of you know, CJ, as CJ likes to say, CJ is our VP of CNS Drug Development. For those of you who don’t know CJ. It’s not treating neuroinflammation that’s important. It’s how you treat neuroinflammation. Many of the anti-inflammatory strategies are what we call glial suppressive. Another is they turn off glial cells, both astroglia or microglia cells. And while that may prevent production of destructive inflammatory cytokines, it doesn’t fix the problem because glial cells play a very, very important and active role in the remodeling and repair needed to control and reverse CNS diseases, including Alzheimer’s disease.

So turning off a dysfunctional glial cell is not a winning strategy. Converting a dysfunctional, destructive glial cell into functioning — normally functioning glial cells, the Phagocytize Mylan debris promotes synaptic plasticity and improved neurons function is needed for success. So far, we have evidence that XPro plays this role well. And as far as we know, we’re the only drug that plays this role. And finally, why is the NK cell base so confusing. We believe it’s a pretty simple reason. Everybody has assumed NK cells are like T cells. When in fact, the how and why of NK cells in oncology is a separate and distinct scientific discipline. INKmune is a therapy that solves the three major problems facing today’s NK therapies. INKmune therapy leverages the patient’s own NK cells to treat their disease.

Why make new NK cells when the patient has plenty. INKmune converts the own — the patient’s own NK cells into cancer killing memory-like NK cells, that are present for months after in INKmune therapy. And it does this in the patient’s circulation without the need for complex, manufacturing or concomitant cytokines supplementation. Finally, INKmune primed NK cells survive and thrive and kill cancer, in the hostile tumor microenvironment of solid tumors. You can’t control cancer, if the cells can’t play on cancer’s turf. INKmune primed NK cells thrive in that environment. So these are the reasons why INKmune should succeed in solid tumors and why others are stuck treating hematologic malignancies. I remind you that 90% of cancers are solid tumors.

When we have the data to support this bold talk, well, because the CARE-PC trial, which is the open-label Phase 1, Phase 2 trial, if it is open-label, we should be able to see snippets of patient responses during 2024 and you will care about them. Our corporate focus is in delivering Phase 2 data with XPro in Alzheimer’s disease and INKmune and prostate cancer. We are positioning other valuable assets in our pipeline such as MBO3 and DN-TNF for DMD for partnering. Our goal is to partner seeing these promising assets to allow them to be to benefit patients while providing non-dilutive capital for the development of our core assets. On behalf of Mark and David, CJ, Terra, the entire INmune team, we thank you for your support, your continued support.

And we look forward to speaking to you in the near future and providing further updates. Thank you. With that, we will conclude the call.

Operator: Ladies and gentlemen, that does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation. And have a great day.

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