Camilla Zuckero - Marketing Communications Manager, Opexa Therapeutics Neil Warma - President, Chief Executive Officer, Director Karthik Radhakrishnan - Chief Financial Officer Don Healey - Chief Scientific Officer

Jason McCarthy - Maxim

Greetings, and welcome to the Opexa Therapeutics First Quarter 2015 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host I would like to turn the call over to your host Camilla Zuckero, Marketing Communications Manager for Opexa Therapeutics. Thank you, Ms. Zuckero. You may begin.

Thank you, Devin. Good afternoon, everyone, and welcome to the Opexa Therapeutics quarterly conference call. During today's call, members of our Senior Management team will review Opexa's financial performance and business highlights for the first quarter ended March 31, 2015. Before turning the call over to senior management, I would like to remind everyone that this call includes forward-looking statements including financial projections and expectations of progress in our clinical development programs, that are subject to risks and uncertainties that could cause actual results to differ materially from those projected including the risks set forth in Opexa's Annual Report on Form 10-K and quarterly reports on Form 10-Q filed with the Securities and Exchange Commission, as well as specific risks and uncertainties noted in our first quarter 2015 financial results news release. With us today, are Neil Warma, President and CEO, Karthik Radhakrishnan, CFO, and additional members of Opexa's senior management team. I would like now to turn the call over to Neil.

Thanks, Camilla. Thanks everyone as well for joining this afternoon for our first quarter conference call. As Camilla mentioned, I am here with the senior management team for Opexa and we are happy to be presenting to you some of the activities over past several months of 2015. It has certainly been a productive few months with us during 2015 with us having raised over $15 million and having advanced on the MS clinical program and the NMO pre-clinical program. Opexa's primary objective is the completion of our double-blind placebo-controlled Phase 2b clinical trial that we call the Abili-T trial in secondary progressive multiple sclerosis. In total 190, subjects patients have been enrolled and each subject in the trial has been treated with two annual courses of the therapy consisting of 5 subcutaneous injections of Tcelna at regular interval each year throughout the two-year follow-up period, so everyone gets two course of the therapy over two years of treatment 190 subjects. Just to review, Tcelna is the name of our personalized T-cell immunotherapy currently in Phase 2 development that is specifically tailored to each patients' immune response profile to myelin. We manufacture Tcelna in our GMP facility here in the Woodlands in Texas. The primary endpoint of the Phase 2b clinical trial is brain atrophy or the percentage change of brain volume, which is measured after 24 months on study drug. Data Safety and Monitoring Board or the DSMB, which is an independent group of multiple sclerosis experts responsible for periodically reviewing the safety data of Opexa's Abili-T trial recently met as scheduled, I believe it was towards the end of April, when they had their most recent meeting. Following its review, the DSMB recommend unanimously to continue the Abili-T trial with no modifications. The trial continued on track and we expect to announce top-line data during the second half of 2016. An important objective as many of you know for us going into the first quarter was to obtain the capital and that would enable us to complete the Phase 2b Abili-T MS clinical trial and report data. It was also equally important to us to conduct the financing in a manner that would be friendly to our existing shareholders. Rights' offering in our opinion was the most appropriate vehicle, we believe, to accomplish these goals. As we noted a number of months ago in the release of our fourth quarter 2014 financial results, additional capital would be needed so that we could complete the Abili-T study and analyze results in the second half of 2016, so the primary focus for the company during this quarter has been on securing that necessary capital and we obtained the necessary funding in two ways. First, a very strong sign of support from Merck Serono, our potential partner for Phase 3 studies, provided us with a $3 million payment as part of an amendment to the existing Option and License Agreement between the two companies. The purpose was to provide support for further development of Tcelna and the Abili-T trial, so this $3 million payment, which we secured in March of this year, was in addition to the $5 million upfront fee we received in February 2013, when we consummated the deal with Merck Serono. Then secondly, we secured the other funding as I mentioned was through the successful completion of our rights offering in early April. We saw us raise approximately $13.8 million in gross proceeds before expenses and this was through subscriptions for approximately 25 million units, including the exercise of over-subscription privileges. Each unit was comprised of one share of common stock and a warrant to purchase an additional share of common stock. Net proceeds, after deduction of fees and expenses, including dealer-manager fees are expected to be approximately $12 million, so we were certainly pleased with the outcome of the rights offering allowing us to secure the necessary capital to completely fund the trial, so we really initiated the rights offering for two main reasons as we mentioned that it provided us the opportunity to raise additional to continue our clinical trial and pre-clinical development programs and it also allowed us to raise equity in a more shareholder-friendly way since shareholders of record were [ph] proportionate stake in the company. Again, in total in the first four months of 2015, we raised approximately $15 million, which we believe should provide us with the necessary capital to complete the Abili-T trial and report on top-line results, so really a key milestone for the company. Regarding the ongoing Phase 2b Abili-T study, we are continuing to treat adult patients with most of them now in their second year of treatments, so as we mentioned earlier, the trial was fully enrolled with 190 patients. To give you a sense of timing and proximity of the trial, over 75% of all patient visits have now been completed, and I would really like to take this opportunity now to thank the clinical trial investigators, the study coordinators, the patients and their families for helping us achieve this important milestone. We know that Merck Serono has an option to license the therapy for MS indications worldwide, excluding Japan. This was the option and license when we secured with them back in 2013, so once the data readout next year and if Merck Serono does exercise its option, they will then pick up all the cost for the Phase 3 study and future development cost as well. In addition, they would pay Opexa a $25 million auction fee, if we went straight into a Phase 3 clinical trial. Once they or should they exercise that option, the next milestone payment from Merck Serono would be $25 million option fee to Opexa, provided we went straight to a Phase 3 clinical trial. Future milestone payments to Opexa beyond that could reach almost an additional $200 million and on top of that Opexa could receive royalty payments ranging from 8% to 15% of sales. Again, in the future, revenue generation potential through this deal could be interesting for Opexa. We all know that secondary progressive MS is a serious disease with significant unmet medical needs for which there are very limited treatment options. It is estimated that between 30% and 45% of all MS patients have secondary progressive MS, so we are aiming to be the treatment of choice for these patients. We are also excited about the potential of our platform technology to treat multiple autoimmune diseases. We believe that there is that capacity for the T-cell technology to be leveraged to treat other autoimmune diseases. Second disease program that we launched in 2014, that being neuromyelitis Optica NMO is moving forward as we continue with our pre-clinical and IND-enabling studies with OPX-212 and that is the name we have given our developmental therapy for NMO. NMO is another example of a disease with a high unmet medical need that Opexa is targeting. There are no FDA-approved therapies for NMO, essentially no therapies approved worldwide for these patients, so we believe we are taking a unique approach to this disease by targeting the activated or pathogenic T-cell, which drives disease progression. We generated some very interesting data in-house last quarter and we were invited to present these data during the American Academy of Neurology Annual Meeting, the AAN, and our results from those studies show that despite patients receiving B-cell depleting therapy, there remained an underlying and persistent inflammation due to the presence of activated T-cells. Even with B-cell depleting therapy, there was this persistent level of information brought on by the presence of these activated T-cells, so our belief is that treatment using Opexa's novel immunotherapy, our development candidate OPX-212, could dampen both, the T-cell and the B-cell inflammatory process, thereby really attacking the root cause of the disease and this is where we feel we bring a very novel approach to the treatment of this rare orphan disease NMO and potentially we have applications to other autoimmune disease as well. With that overview of the clinical programs, I would now like to turn the call over to Karthik Radhakrishnan, our Chief Financial Officer to review the first quarter 2015 financial results. Karthik?

In the earnings release under From 10-Q that has been filed with the Securities and Exchange Commission today, we have detailed the movement in various financial line items. For the purpose of this call, I will consign my comments to the cash balance and liquidity. As of March 31, 2015, our cash and cash equivalent totaled approximately $9.6 million. Included in this amount is the $3 million payment that protects our receipts from Merck Serono in consideration for the amendment to the option and license agreement that Neil mentioned. Excluded from this $9.6 million amount is the approximately $12 million in net proceeds that Opexa received upon completion of the rights offering in early April. Our monthly burn rate in the first quarter of 2015 was about $1.1 million per month. The balance sheet is clean and we have no debt. Based on our current activities and projected burn, we believe that we have sufficient liquidity to support the remaining clinical activities of the Phase 2b Abili-T program, the pre-clinical activities for Opexa's OPX-212, in NMO and for general operations of the company into the fourth quarter of 2016. With this, I will turn the call back to Neil.

Thanks very much, Karthik. I do want to emphasize that our recent financings will enable us to focus our activities on completing the Abili-T trial and analyzing the data and reporting results, which we anticipate will occur during the second half of 2016. We view Merck Serono's recent $3 million payment in connection with the amendment as a vote of confidence in our ability to execute successively. We are also beginning to work towards and IND submission for OPX-212 in NMO following the completion of a requisite pre-clinical activities. We anticipate the submissions to occur of the IND by the end of 2015, so we remain excited about the future potential of the company and remain committed to our goal of building shareholder value. With that overview, I would like to thank you for your attention and we are happy to answer any questions that might be posed from the audience. Devin, maybe we can turn back to the audience.

Thank you. [Operator Instructions] Jason McCarthy with Maxim. Please proceed with your questions.

Hi, Neil. Hi, Karthik. It sounds like everything is going really well over there. Just a couple of questions. Given the use of Rituxan off-label in NMO, the depleting of B-cell arm of the NMO cycle, if you want to call it that, exacerbate the inflammatory side and the other side of the cycle with Neutrophils, and macrophages maybe if eosinophils had targeting the T-cell with OPX-212 mitigate disease from both sides and would you see using Rituxan or some other anti-inflammatory like an anti-IgE, in combination.

Yes. Great. Thanks for the questions, Jason. Appreciate your input today. I am going to hand it over to Don Healey, our Chief Scientific Officer. I just want to reference before Don provides some scientific feedback. Number one, there are no approved treatments for Neuromyelitis Optica, NMO, and Rituxan is used as an off-label therapy, but really there are no approved treatment, so we are trying to approach this from a T-cell component, which we believe is novel. No one else is really looking at wiping out the pathogenic T-cell as a way to control disease progression and kind of bring the patient back to normalcy. Maybe specifically, Don, you can speak to Jason's comments about the - the other side of equation.

Certainly. Thanks Jason for the comment. There is no doubt that [ph] reacts within NMO-IgG, art of the pathogenic mechanism in the [indiscernible] molecule generated by B-cells, so one can understand the argument that by B-cell, you may expect a positive benefit in terms of influence in the B-cell from [ph] potential susceptibility of the disease. As you mentioned that there are more elements in play in the pathogenesis of the treatment, just the anti-body response, per se, looking at the target lesions, you see inflammation associated with monocytes, the neutrophils and eosinophils and it is inevitable that that recruitment of [ph] is also dependent on T-cell help, so T-cells support chronic information and also the induction anti-body from the B-cell component. As such with regard to T-cell or potentially if you orchestrate the inflammatory response and the pathological mechanism, so by the placing or controlling that T-cell compartment, you have positive benefit in not only shutting down the B-cell as the source of antibody, but also impeding that inflammatory event that exacerbates the sensibility to the pathologic [ph] symptoms.

Great. I know you guys are looking to file the IND towards the end of the year, so assuming that that goes well, how quickly could you get data from an early trial? We could see this as we are waiting for MS data potentially the Rituxan therapy is relatively quick, could you have some catalyst coming in front of the MS trial data with the NMO trial assuming that you do get the IND approved.

Yes. I mean, obviously, a lot of this is subject to FDA input, what we have done is we have had a discussion with the FDA during the pre-IND meeting which is why we understood what were the necessary steps were on the pre-clinical side before we got to IND, so that first conversation with FDA has been conducted and was productive, so we certainly their feedback on clinical trial design what we have already done as well, Jason, is to engage in discussions with some of the world leading experts in NMO to understand from them what are the challenges and what are the requirements from a patient perspective in clinical trial design, so we have engaged with a couple of folks one out of John Hopkins one of the new T-cell's lesson after leaving Dr. Greenberg understand clinical trial design. Again, for us, we have done a lot of the backend work to understand what should be required, but again this is subject to approval from FDA and for their input from the opinion leaders. Again, we would like to think - and another component actually in that equation if the patient advocacy group when we have strong interactions and ties with the Jackson [ph] Foundation was really the patient advocate group four NMO and understanding from them how they would see clinical trial design from the patients perspective, so a lot of the groundwork, while some work has been done, we are looking at we publicly stated a potential clinical trial design is kind of dose ranging study Phase 1/2 study looking at three different doses potentially an open label design, so an answer to your question as I said the timing is unknown, but it is certainly possible that subject to FDA, subject to capital requirements that with an open label design, we could start seeing data from a clinical design and we can see that - pretty quickly once we got into the trial, so it is tough to predict exactly when the timing would occur, but I think we have done a lot of the background work and a lot of the upfront preparation identified a lot of the issues and the stakeholders with whom we need to discuss to at least answer a lot of those questions upfront. Right now, the team is working hard on the pre-clinical, the IND-enabling study if you want to get those completed this year reflecting process improvements we are looking to implement getting those done in a next number of months getting the IND and getting in front of the FDA with the IND in the clinical trial protocol to move that forward as quickly as we can invest in just other patients.

Great. Just one more quick one. It is related to the entire platform, so just briefly like when other autoimmune disease would you might be thinking about that do you have the size immune profile, do you have a potentially easy antigen like myelin to target that you could use this the entire platform to take another indication as your pipeline expands? Thanks.

Yes. Thanks for that. It is certainly the potential of the platform is something that has been very intriguing, very interesting for us over the past couple of years. We did a fairly extensive analysis prior to advancing with our second - the program that being NMO, and in that evaluation there were a number of other disease which look really exciting to us. Certainly as you mentioned, understanding the antigen profile of this specific disease is critical to us. I know Don smiled when you said a simple one like myelin, but MS is probably one of the more complicated ones. There are three different antigens and a number of different peptides, so multiple sclerosis is not an easy disease to go after. In a way it is nice to be able to pick and choose an easier one so to speak, but there are some there and it is interesting a lot of these are orphan or rear disease, NMO is a rear disease, some of the other ones we have in that potential shortlist are orphan diseases which were attractive for a number of reasons. I am hesitating providing actual disease names, Jason, we have not been public with that, but as I said our evaluation of NMO kind of brought forward some, we believe, some pretty exciting other disease applications that we can potentially move into, so we are going to said, it is kind of one step at a time, MS fully funded moving forward, partnered. Data is expected next year, NMO is moving forward. We are doing pre-clinical get that into the clinic when we can. Behind the scenes trying to demonstrate to pharma company, that we do believe we have a platform technology. We have applied the technology to MS in five clinical trials now. We have shown proof-of-concept and we can roll into our next disease with NMO. We are getting a lot of positive responses, if you will, from the industry from our peers in pharma company saying it does look this might be an engine of growth in the area of autoimmune disease. Again, we believe, a lot of respect and attention is coming to effects and now that we are advancing with not only MS, but NMO so due course is we kind of advanced our programs, move NMO a little bit closer, you may see us kind of move forward with another potential disease, but I think it is fair to say at this stage there are some with relatively streamlined approach, if you will, kind of antigen profiles that look intriguing for us some of the discussions we have with opinion leaders are ready to kind of test the market with some of our theories hypothesis and mechanism of action. The potential is certainly there, it is kind of unlocking the potential, unlocking that potential in a responsible manner that - for us to achieve and hopefully we can do that over the next kind of number of months, years kind of thing and demonstrating that potential.

Great. Thanks, guys. Sounds like everything is going well.

Yes. Thanks so much, Jason. I really appreciate the questions.

[Operator Instructions] There appear to be no further questions at this time. I would like to turn the floor back over to Mr. Warma for closing comments.

Thanks, Devin. Thanks again, everyone, for listening. If I could kind of reiterate that not only immunotherapies, the but personalized precision immunotherapies, we believe, will a force in the coming decades in the treatment of major diseases. We also like to believe that Opexa has been ahead of the field in this, having devoted over a decade to the science of optimizing personalized medicine for autoimmune diseases. With our Abili-T trial funded through data with NMO moving forward, we remain optimistic about potential improvements in the quality of life for these patients. Thanks again for entertaining us this afternoon for your questions. We appreciate it. Thanks, Devin.

This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.