Palisade Bio, Inc. Common Stock Morgan Stanley 24th Annual Global Healthcare Conference

Good morning, everyone. My name is Frank Tang, and I'm with the investment 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 prodrug?

Sure. Thanks, Frank. 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. 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.

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. 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?

It is 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 have ramped up for that. We also have switched from focusing on FSCD, fibrostenotic Crohn's disease, to broader Crohn's disease. The reason for that is because of feedback we have 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 are better served by pursuing a smaller, broad Crohn's indication and then circling back and doing fibrostenotic Crohn's once that regulatory landscape has been cleared up.

Clearly, we think pursuing both Crohn's and UC is in the best interest of building shareholder value.

Great. I would love to dig in more around PALI-2108. This quarter marks your transition into phase II. The clearance of the IND. Could you walk us through the design of the trial?

Yeah, I think I can take that. It is 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 one to one to one. A target of about 50 milligrams for the target dosing group. The high-dose group is 30 milligrams, 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 are on 15 and responding, you stay on 15. Then same thing for 30, same thing for placebo. If you are not responding, then you get randomized or placed actually into a high-dose group in the maintenance phase. Then, of course, responders keep going, and non-responders are terminated.

Yeah, 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 SES-CD and 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. Historically, obviously, apremilast was evaluated in a UC study, let's say, combined around 20% clinical remission at 12 weeks over placebo. As well, mifamelast with a 90-patient double-blinded RCT, China-only study, demonstrated best in indication, 44% remission over placebo in the high-dose group in a dose response. I think 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. 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 calprotectin improvements, CRP, et cetera, as well as in both the CD and the UC study, we saw endoscopic improvements. On the UC study, we saw 100% response, 40% remission, and in the CD study, we saw a 40% response of remission. Really, smaller studies, open label, non-controlled studies, but really the biomarkers all went in the right direction. It gave us the ability to collect information that we could use in our population PK models that were predictive.