S1, E5: Arialys and a neuropsychiatry drug revival with CEO Jay Lichter and experts Marty Jefson (Pinteon) and Dr Leon Henderson-MacLennan (InThought)

[00:00:00] Welcome to the Raising Biotech podcast, I'm your host, Surani Fernando and thanks for tuning in. This podcast has a mission of exploring biotechs raising impressive funds to develop ambitious medical breakthroughs. I speak with CEOs and founders to get origin stories, missions, and future visions for the company,

[00:00:20] and I also talk with relevant medical and industry experts to get more context on the company's potential to really make a difference in healthcare. Today, I'm talking to Arialys for a biotech rendition of one man's trash is another man's treasure.

[00:00:38] Arialys is a company founded by a group of venture capitalists backing the potential of one neuropsychiatry drug that Japanese pharmaceutical company as Steles no longer wanted. The drug treats a rare type of autoimmune and cephalitis, and in September 2023,

[00:00:56] the company announced a $58 million seed financing to bring the drug back to life. The drug has shown dramatic signals in pre-clinical marmyset models, and while the primary indication is a small group of encephalitis patients, the company's also eyeing a much broader population suffering from autoimmune psychosis.

[00:01:17] In this episode, I'm speaking with CEO and co-founder Jay Lickter. He'll talk about how it all began, the company's plans to get into clinical trials and future business plans for the company.

[00:01:28] Also joining us to give us some context on the drug's potential is Marty Jefferson, CEO of Pinti on Therapeutics, and he's also chair of Arialys' Clinical Advisory Board. And finally, returning to the podcast for a completely external perspective on the drug is Dr Leon Henderson, McLean.

[00:01:46] Medical advisor and co-founder of Consulting Firm, Inthold. I hope you enjoyed this episode. So Jay, thanks for coming on to the podcast. Really good to have you here. Just to kick us off, are you able to explain how Arialys started and how the technology came about?

[00:02:05] I guess it's a pretty interesting story coming out of a stellist. Sure, sure. So as you know, I'm a little bit of a capitalist and I start companies and have been doing it for almost 40 years, 35 years.

[00:02:18] Stichler, Brandon and Besting is we call white space, novel technology, novel targets, novel platforms. We think those were areas where you can have the biggest leap of treatment approval for patients.

[00:02:30] Jay's track record is actually very impressive, which is also one of the reasons why I wanted to begin to this company.

[00:02:37] He has a biochemistry PhD from the University of Illinois, Chicago, and in the early 90s was one of the first people to begin working on the human genome project.

[00:02:47] He started avalanche by ventures in 2006 and has invested in a number of successful biotech that have either been acquired, all gone public for hundreds of millions of dollars. Their biggest victory was the 2019 sale of synthetic biology companies in Thorax to snuffy for $2.5 billion.

[00:03:06] So I've done some sea vestials, I've been involved with sea vestials, and hadn't for a while, and I was keeping an eye out for something in the sea in a space that was known as a human genome project.

[00:03:14] And there hasn't been a lot in the last 30 years, it's really novel and different in new. I would just keep an eye out. And of course, I networked like we all do, and I had met the team at the Stone's Ventures several times over the years.

[00:03:32] And when they decided to close down their CNS group, they wanted to sell off an asset, but all the assets and discovering CNS. And with me, I felt was particularly interesting. That asset is what's now known as ART-5803.

[00:03:45] It's a one arm antibody treatment for anti-NMDA receptor and cephalitis or ANR-RE for short. A life-sortening neurological disease that causes severe psychosis. Our condition continues to regress, manic behavior and our annoyance.

[00:04:02] That was a clip from the trailer of Hollywood film Brain on Fire based on the true story of Susan Kahelin, a reporter from the New York Post who presented with the disease in 2007. The only problem being that nobody knew what it was.

[00:04:24] Anti-NMDA receptor and cephalitis is a disease occurring when antibodies produced by the body's own immune system attack NMDA receptors in the brain. And these NMDA receptors are proteins that control electrical impulses in the brain.

[00:04:39] Their functions are critical for judgment, perception of reality, human interaction, the formation and retrieval of memory and the control of unconscious activities like breathing and swallowing. Also known as autonomic functions.

[00:04:55] It primarily affects young people about a third of the patients are under 18 and it's a lot more common in young women. Susan's case was the index case for the disease, and 15 years later there's a lot more awareness of its existence and diagnosis.

[00:05:09] But it's still a horrendous disease with subpar treatment options. Taking all of that into account when Jay saw that Estella's had a drug candidate for this disease with an interesting mechanism of action and already had generated some pretty impressive preclinical data.

[00:05:26] He saw a compelling opportunity to get back into the CNS space. They basically just wanted to sell it that they wanted to garden and they didn't really want any residual rights or anything. It was not even like a spin out or something else.

[00:05:40] It was telling us, it's just up here as it's hell. So as doing my dog, it started getting toward the acid I was explaining that to them and they wanted to know if we wanted to meet a couple of VCs that were working on the project.

[00:05:54] What's interesting was that Estella's handle the site in San Diego, about two blocks away from our facility and their head and their CNS crew making lots of motor was running on site. And when they divested their CNS program, they were going to get rid of that site.

[00:06:14] I was able to convince him when we closed this deal to leave Estella's and join us as our chief scientific officer. I went back to Estella's as a DM and talked to the VCs and turned up.

[00:06:24] So in a small health care investor world, those venture capitalists turned out to be Ed Hurwitz from MPM Capital, who Jay knew and had worked with on two other successful deals in the past.

[00:06:35] And the other group was catalysts specific led by BT Slingspi, who Jay had met three mutual friends over the years, and they always thought they might eventually do a deal together.

[00:06:47] So fast forward, the three investor forces formed the company in December 2021 and finalized the purchase of the drug from Estella's in April 2022. They brought in Estella's Miki Matsumoto as their chief scientific officer and scientific founder,

[00:07:02] and they financed the company with the top priority of repeating Estella's impressive pre-clinical study in non-human primate marmisez. So there were two marmisez studies done, Estella stated first, before they sold the assets of maybe four years ago, three or four years ago.

[00:07:21] And what they did, so it's been cloned are the human pathogenic antibodies from them. Estella's had the sequence of a human pathogenic antibody that also had to be heard from that new molecule.

[00:07:33] To through an ICV intrusor re-driven tricula infusion which is a constant infusion direct into the brain, Estella's put that molecule into the marmisez. And these marmisez got very sick, very quickly showing behavioral and neurological disorders within two weeks.

[00:07:51] Then Estella's took their drug ART-5803 and infused it back into the brain via the same direct brain infusion, and in two weeks all the marmisez were pretty much back to normal function.

[00:08:05] So you had a see in our treatment that was exceptionally rapid, an exceptionally robust, and now it's got me excited. So what's we closed the deal? We wanted to repeat that because we didn't think the ICV would be a viable product.

[00:08:20] So the team at ART-Area was went back to the marmisez, used the same methods to make them sick with the pathogenic antibody, but then instead of that direct brain infusion, they did an intrapartinile injection, which is an injection into the abdomen.

[00:08:35] And we got great exposure and after one week the animals were better and after two weeks they were still better. So those are two different experiments done with different colonies of monkeys, a different protocol, different route of administration, different handlers to assess behavior,

[00:08:54] and done four years apart, and the cycling experiment probably worked a little better than the first one. So that's for us in super exciting times. So after that successful results, ART-Area was came out of stealth mode and announcing the company and it's $58 million seed financing in September 2023.

[00:09:14] To talk a little bit more about the drug candidate and its potential, I spoke to Marty Jefferson, who is CEO of another neurology company, Pintion Therapeutics,

[00:09:26] and he's also ART-Area's clinical advisory board chair. Marty was at Pfizer for 27 years, and at one point was the head of neuroscience fair. Now he virtually operates venture back to new companies that have a neurology or psychiatry focus.

[00:09:41] My affiliation with ART-Area is that I was involved with one of the investors in the opportunity analysis prior to the formation of the company, and I very much liked the approach recommended the investment,

[00:09:56] and I thought when I got the opportunity to consult more on a sort of an operational and strategic basis that I would take it. And I've done that now for about 18 months.

[00:10:06] Marty said the bigger met need for this disease combined with a differentiated and advanced therapeutic approach was what really peaked his interest to work more closely with ART-Area-Las. We talked a little bit more about the disease itself and what makes it so burdensome.

[00:10:23] The disease can sort of start with an almost viral presentation, like a flu, but then pretty rapidly move into what have usually at the outset some psychiatric symptoms, and they can look very much like schizophrenia, but also include, you know, sleep disturbances, anxiety, things of that nature.

[00:10:43] And soon the disease generally transitions into more profound cognitive deficits, movement disorders, disorder and all-mea, so autonomic nervous system difficulties which present cardiovascular, seizures, and even coma.

[00:10:59] And the diagnosis is based generally on a combination of these clinical signs, so oftentimes patients will present initially they have symptoms which could be, you know, found in other disorders could be standalone symptoms and anxiety disorder. Let's say, or asleep disorder.

[00:11:16] But with the progression to other systems and other symptoms being involved, it starts to present to clue that it's more than a simple psychiatric or isolated neurologic condition that's manifesting.

[00:11:28] Mardi said the industry is getting better at diagnosing the condition, but it can take some time to go through that diagnostic tree and current options to treat patients are monoclonal antibodies developed for other autoimmune neurological disorders.

[00:11:42] And while many patients do respond to these recovery can be slow sometimes months or even years and oftentimes patients relapse. Current options are also immunosuppressive, so there's an increased risk of developing other infections. Suffice to say, there's room for a more targeted approach.

[00:12:01] This is a treatment that's not based on broad immunosuppressive properties and I think that's a big advantage to it. I also spoke with Dr. Leon Henderson McClennan, medical internist and co-founder of Consulting Firm in Thought Research.

[00:12:14] He was on the very first episode and when I told him I was looking at Ariales, he was immediately curious, particularly because he's come face to face with this disease with patients. Back when nobody knew what it was.

[00:12:28] There's no question that autoimmune and cephalitis, misinere of great on met me including anti-NMDA receptor and cephalitis or ANRE. So basically when one thinks of these immune mediated conditions in general I think it's always important to understand how far down the road from high dose cortical steroids

[00:12:51] and you know, suppressants drug discovery process has taken us in the management of the condition under consideration. So for ANRE, we've not really come that far at all, right?

[00:13:03] You know, sure if you're refractory to steroids or IVIG or Plasma Exchange, you may get, you know, retoximab, but even that it has to be said, you know, is wolffully non-specific, right?

[00:13:18] What we're talking about with this asset, ART-50803 is a more specific approach blocking the NMDA receptor and auto antibody action underlying pathology that drives the symptoms morbidity and in certain cases mortality is much more attractive than these non-specific approaches.

[00:13:39] So looking at the preclinical data so far granted it's still pretty early, both Marty and Leon appear to be pretty impressed with early results both in the lab and then in two separate preclinical studies in the marmysets. Marty pointed out the drugs notably rapid therapeutic benefit.

[00:13:57] Very rapid, it's very noticeable. It was noted by one KOL that we work with who viewed the videos of the study to be an effect you could essentially view from outer space was the way she put it, which is hyperbally but a very dramatic compliment on the results of the studies.

[00:14:15] So taking together very strong evidence to suggest that the mechanism of action will intervene the effects of the auto antibodies and then demonstration of that.

[00:14:26] Same effect on the behaviors that model that of itself, a lightest in marmysets gives me a lot of belief that these studies and the effects seen in them will translate nicely to the clinical setting.

[00:14:39] Yeah, I thought the you know convergence of the promise of a specific monoclonal antibody designed to address an area of unequivocal on metneid, the assets having been through two companies preclinical programs and indeed, arealess is impressive, confirmatory data in marmysets is basically a foundation for a compelling story.

[00:15:03] Thinking about going into the clinic, Leo says that won't come without its challenges as the CNS is always a tricky beast to demonstrate convincing efficacy.

[00:15:15] There are some specific challenges and it's not the least of which is achieving reassuring CNS distribution kinetics, transitioning from non-human primate models to humans is often the biggest initial challenge, especially for larger molecules.

[00:15:32] So if you have the appropriate distribution kinetics, then you want to look at at least the reproduction of the non-ehuman primate, pharmacodynamics and eventually one would hope to begin to see at least a measure of influence on parameters of clinical and self-alitis.

[00:15:49] Leo answered that once the studies conducted in affected individuals, the company will need to convincingly modulate elements of psychosis in the trials. Like having an effect on anxiety, hallucinations, motor function, autonomic dysfunction or even the production in seizure frequency.

[00:16:06] You know, some aspect of the human condition that would have a measurable response, I think, would stand them in good stead, you know, transitioning from first and man into phase one, be or phase one too.

[00:16:23] While CNS trials are often seen as very time-consuming, risky and expensive, Leon and Marty both agreed that the potential trials for autoimmune and cephalitis are likely to be much smaller and shorter.

[00:16:36] Just because of the fact that the drugs should be able to achieve an effect quite quickly. In the Marmissets it was two weeks, and while the time of response is often what differs from the preclinic to the clinic, human trials most likely weren't last several years or have to enroll hundreds of thousands of patients liking other CNS trials think Alzheimer's Parkinson's or ALS.

[00:16:59] Because the course of disease is often, you know, subacute then the question becomes also patient selection and I think in this situation that's all together possible and recruiting patients with with characteristics that suggest that early intervention will yield that also early response will be very important.

[00:17:23] Speaking to Jay, the company is planning to enter human testing in healthy volunteers in the second half of 2024 and then will enter an exploratory trial in around 30 to 40-incephalitis patients in the first half of 2025.

[00:17:37] The FDA has agreed that autoimmune and cephalitis is an orphan disease giving the company certain benefits with things like FDA communication and feedback. And Jay said that because there's such an unmet need for a severe disease like this, after their exploratory trial in and cephalitis patients,

[00:17:54] our analysis hoping to only need one combined phase two three trial for an approval. So I asked Jay what he thought a registration or trial might look like.

[00:18:04] So we don't, obviously we haven't talked to FDA about what it's going to take to get approval, you know, we're just sort of guessing it to explain. So I would imagine that registration trial would be 50 to 100 patients.

[00:18:17] Which if patients respond like more of a set, which is they're going to call them and then a week after you get the drug they're kind of right around back in normal. I mean I think the news will get a rally community and we'll get patients.

[00:18:30] The trial design for an autoimmune and cephalitis study will have a small number of patients. And you will see an effect I believe very rapidly with the mechanism that ART 50803 exerts. Although the patient population is relatively rare, they almost universally seek treatment eventually, not always immediately, but eventually.

[00:18:55] And as a result, they're highly motivated, participated in clinical studies. So while an impressive early efficacy profile might lend itself to smaller and more manageable clinical trials, I was curious about the drugs current safety profile.

[00:19:10] So I think the key is an MGA receptor is not expressed outside of the brain. So you take in antibody fragment or an antibody it won't bind target systemically and you know, antibodies are exquisitely selective.

[00:19:25] So you're not going to have any off target near neighbor effects. So so the peripheral dosing should be relatively safe. As always, show that the molecule isn't the magnetist or an antagonist for the animal the ever separate.

[00:19:39] So it just is a silent binder and our expectation is that when it does get into the brain, it'll just be a silent binder and won't have an effect. So you know, if this were a small molecule, I would be more concerned.

[00:19:52] This were a molecule that targeted something that was both peripheral and central. I would be concerned. But the fact that we're central only it's antibody and it has no activity except binding and is blocking the pathogenic.

[00:20:05] It got a way to body from binding. We think we're going to save to standpoint. That's going to not be that big as challenge. He said there likely be patients with infusion reactions, which is pretty standard with these intravenous injections.

[00:20:16] And those can be treated quite easily with things like benadrol or Tylenol and usually they get better with subsequent doses. So while safety isn't the primary concern for the company right now, you don't really know until you know.

[00:20:29] So that's what their recess in their upcoming healthy volunteer studies before it goes into the exploratory trial. So so far, things seem pretty flowery for this drug candidate. But we can't forget that the CNS is like the black box of the human body.

[00:20:46] We don't completely understand all that's going on in there, sometimes it's a lot of guesswork. And that can also be a scary place to invest.

[00:20:55] A lot of these unknowns have deterred many farmer companies from investing in CNS drugs and that's probably well illustrated by a stellar selling off its CNS assets.

[00:21:06] So I asked Jay, whether there was any apprehension going into this therapeutic area, even though he'd been looking for some time and finally settled on pursuing this one. When I was thinking about a CNS program, it had me really, really different.

[00:21:21] And it couldn't just be you know, modulating receptor and hoping three months or six months the patient is better. And so that's why these animal models where you see this really profound result in a short period of time makes this really interesting.

[00:21:36] But I think, you know, that's the way the critical thing is that it doesn't scare me because of the profound result in the in the marvaset. The speed and the depth of efficacy.

[00:21:49] And so we're going to do a short trial and if it doesn't work, we will roll. Now it's still pretty early to be talking about market opportunity and how this drug might be used in the clinic.

[00:22:01] But the company does have its eye on pursuing subgroups of patients suffering from other psychosis related diseases, and that is actually quite a compelling market opportunity for the company. So autoimmune and cephalitis oftentimes manifests itself with primarily psychiatric symptoms. And sleep out normalities symptoms very much like that.

[00:22:24] See, this gets a friday with hallucinations paranoia, etc. Positive symptoms of schizophrenia. And so this has led many to believe that that schizophrenia as disease may in part be driven by the presence of patient derived older receptor antibodies to NMDAR.

[00:22:44] And other possibilities include certain forms of dementia as well. Other psychotic disorders like schizophrenia, some more rare conditions where psychosis is a hallmark symptom of the disease. Now this I think is going to take a little bit more development than it will in a cephalitis.

[00:23:04] So so to characterize against cephalitis field, virtually everyone who works in the field believes that the disease is downstream. Of the presence and the effect of patient derived auto antibodies to the NMDAR receptor. And a reasonable number of schizophrenia patients also evidence these antibodies.

[00:23:25] But there's less consensus among experts as to how positive they are to the disease. So Ariales will have to figure out how to identify schizophrenia patients that might also have auto antibodies to the NMDA receptor.

[00:23:43] And hopefully they may benefit from a drug like ART 5803, especially if they've been resistant or refractory to more typical treatments like dopamine and serotonin targeting drugs.

[00:23:54] The thing that will be I think very, very dramatic about 5803 if it does work is it be a very large medical advance because there has been really very little substantial evolution of treatment in the schizophrenia.

[00:24:11] And there's been a lot of people in the population for about 30 or 40 years, and the typical anti-Secotics that were around 30 or 40 years ago are less selective and less safe. But fundamentally work in the same way as the more modern agents do.

[00:24:27] I think this would be a dramatic step forward in the field might be complementary to the performance of those agents and I think it certainly will be useful in patients that do have quantities and the presence of auto antibodies that affect the functions of their brain and induced disease.

[00:24:45] So there are many, many opportunities the challenge will be to instill a treatment paradigm where those patients can be identified efficiently and then demonstrate that ART 5803 alleviates those symptoms. Leon agreed that it's worth our relis exploring the drug in other neuropsychiatric conditions like schizophrenia.

[00:25:03] I mean, the potential there is great because we're seeing that you know, maybe on the order of three to five some people even say 10% of these more common conditions, more common neuropsychiatric conditions have at its root at least a modicum of an MDA receptor disarray.

[00:25:25] That could be addressed to effectively reduce disease burden. So I think that is appropriate for the future and when you can get a subset of a common chronic disease, that can be addressed. You're also still going to preserve your ability to make it into an orphan condition.

[00:25:49] And we call it orphanizing common chronic conditions, you know, and you see that sometimes in cardiology and whatnot. So this could preserve orphan pricing all of the benefits that are crude for developing orphan medicines and also address a tremendous unmet need.

[00:26:09] Moving forward, J and I discussed how far the 58 million will take are yallas. And he said that would get them clinical data. But the company will assess its financing needs along the road. My biggest worry is unseen costs for the clinical trial.

[00:26:25] I mean, we have our plans at our budget but you know, your kind of a hostage to a clinical trial as a sponsor because you know, what's you've dose, you know, 10 patients.

[00:26:34] Now you understand the cost basis for the trial and some of your associates may not have been correct. You know, so it's at a 58 million costs 70 million. And so you have to assume it's going to be more expensive than, you know, your most aggressive budget.

[00:26:46] And you know, we're fortunate, you know, the investors around the table have depockets so we can, you know, we can fund overage. But that's quite, well, my biggest concern is that was stay on the timeline, you know, efficacy. And he's going to work.

[00:26:58] So further down the line, perhaps they'll need to reach into those deep pockets to keep the development engine running. But J and I spoke about how he sees the company's strategy moving forward and commercializing a drug like this.

[00:27:11] I think as long as we're in these borrison disorders, we would probably go to just to build a company around it because you don't need, you know, massive infrastructure on the commercial side.

[00:27:21] If we're in psychosis and we also have some preliminary data that it could be more than just gets a free need. It could be severe depression by polar, some epilepsy patients, maybe some dementia patients.

[00:27:33] If it grows into something like that, then obviously we have to partner those are really, really big indications that are somewhat complicated. So as the company focuses on the small and very targeted indication of ANR-RE, if it pursues other psychiatry indications, it would need to partner.

[00:27:49] So I did ask J where he saw the company 10 years down the line in terms of remaining as a standard loan company with partnerships could a public listing beyond the cards since he has experienced there or is there a preference for a straight up company sale?

[00:28:05] And the mission is pretty clear. Well, that we're out of somebody bought us some wrong business. That's the life from this business, right? The only real exits by a tech or when big farmer pays cash and you know, IPO is not an exit, especially in this market.

[00:28:21] First of all, they're out of IPO, so this market, but in general.

[00:28:25] So with that in mind, I did ask J what he would see as a meaningful and valuable inflection point for the company to generate the best value if it say did pursue a future acquisition down the road.

[00:28:38] Yeah, it's going to be efficacy of a psychosis patient. That'll be the number one greatest value. If we get caught in the psychosis patients that don't have neurological symptoms that I wouldn't imagine there'll be a great deal of interest from big farmer.

[00:28:53] You know, it's a very simple focused mission in plant, which is to give this molecule into patients as soon as possible and see what works.

[00:29:03] So that's it for another episode of Raising Biotech, a different type of biotech origin story and it will be interesting to see how this slick VZ team is able to take the baton from big farmer to finish the race of one promising drug.

[00:29:17] How they're able to navigate clinical trials will be interesting to watch and we'll be keeping an eye out as they head into human testing. Thanks to my guests, Jay Lickter, Marty Jeffson and Leon Henderson McClennan for their time and valuable insight

[00:29:32] and thanks to you for listening in. Once again, if you liked the episode, please share it around with those who you think might be interested

[00:29:40] and give us a rating and review on Apple or Spotify. But for now, I'm Serani Fernando and I'll see you next time on Raising Biotech.