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Evelo Biosciences, Inc. (EVLO)·Q4 2022 Earnings Summary

Executive Summary

  • Q4 2022 narrowed losses: net loss of $23.5M and EPS $(0.21), with R&D ($16.1M) and G&A ($5.0M) down year over year; cash was $47.9M at 12/31/22 after debt refinancing to three years of interest-only, improving near‑term flexibility .
  • Clinical progress: first oral extracellular vesicle (EV) product candidate EDP2939 entered the clinic; Phase 2 dosing in moderate psoriasis began in February 2023; EDP1815 atopic dermatitis cohorts 1-3 missed the primary endpoint due to unusually high placebo response; cohort 4 (faster-release capsule) readout expected in 2Q 2023 .
  • Regulatory path: EMA/MHRA acknowledged Evelo’s proposed Phase 3 psoriasis design (PGA 0/1 with 2‑point improvement; placebo acceptable for mild‑to‑moderate); FDA feedback received; Phase 3 advancement is funding dependent .
  • Sequential improvement: Q4 net loss improved $7.1M vs Q3 ($30.6M to $23.5M) as expenses fell; however cash declined from $69.1M (9/30/22) to $47.9M (12/31/22) .
  • Estimates unavailable: Wall Street (S&P Global) consensus for Q4 2022 EPS and revenue could not be retrieved; no beat/miss analysis is possible due to data unavailability (SPGI mapping error) [SpgiEstimatesError].

What Went Well and What Went Wrong

What Went Well

  • EDP2939 EV program advanced: clear Phase 1 safety/tolerability in healthy volunteers and initiation of Phase 2 dosing in moderate psoriasis, positioning a potential “step change in opportunity” versus EDP1815; management expects 2H 2023 efficacy readout .
  • Regulatory traction: EMA/MHRA alignment on Phase 3 psoriasis endpoints and placebo control acceptability; Chemistry, Manufacturing and Controls plans aligned, de‑risking eventual registrational design .
  • Capital structure action: December 2022 refinancing of $45M debt into three years of interest‑only followed by two‑year amortization improved near‑term cash burn profile and flexibility .

What Went Wrong

  • Atopic dermatitis: cohorts 1-3 failed to meet the primary EASI‑50 endpoint due to unusually high placebo response; management cited potential off‑protocol topical steroid use as one possible driver and intensified site engagement to ensure protocol adherence .
  • Cash drawdown: cash fell from $69.1M at 9/30/22 to $47.9M at 12/31/22; while losses improved sequentially, the absolute cash level tightened, heightening dependency on financing/partnership progress .
  • Continued pre‑revenue biotech profile: no revenue recognized; loss from operations equaled total operating expenses, underscoring reliance on external funding and partnership processes amid small‑cap biotech market headwinds .

Financial Results

MetricQ4 2021Q2 2022Q3 2022Q4 2022
Revenue ($USD Millions)$0.0 (no revenue; loss from operations = total opex) $0.0 (loss from operations = total opex) $0.0 (loss from operations = total opex) $0.0 (loss from operations = total opex)
EPS ($USD)$(0.54) $(0.40) $(0.28) $(0.21)
R&D Expense ($USD Millions)$18.9 $21.2 $21.9 $16.1
G&A Expense ($USD Millions)$8.7 $8.4 $7.1 $5.0
Total Operating Expenses ($USD Millions)$27.6 $29.6 $29.1 $21.1
Loss from Operations ($USD Millions)$(27.6) $(29.6) $(29.1) $(21.1)
Net Loss ($USD Millions)$(28.7) $(30.6) $(30.6) $(23.5)
Interest Expense, net ($USD Millions)$(1.0) $(1.0) $(0.8) $(1.8)
Cash & Cash Equivalents ($USD Millions)$68.4 $92.0 $69.1 $47.9
Weighted Avg Shares (Basic/Diluted)53,515,636 75,719,092 108,051,851 109,839,320

Notes: Revenue is $0 across periods as evidenced by Loss from Operations equaling Total Operating Expenses (no revenue line item presented) .

No segment reporting; KPIs are focused on clinical milestones rather than commercial metrics .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
EDP1815 AD Phase 2 cohorts 1-3 readoutEarly 1Q 2023Expected early 1Q 2023 Reported: cohorts 1-3 did not meet primary endpoint due to high placebo response Update (results disclosed)
EDP1815 AD Phase 2 cohort 4 (faster release) readout2Q 2023Expected 2Q 2023 Anticipated 2Q 2023; human release profile favorable; no further changes needed for Phase 3 use if positive Maintained
EDP2939 Psoriasis dosing1Q 2023Dosing expected to commence 1Q 2023 (after CTA questions) Dosing began in February 2023 Achieved
EDP2939 Psoriasis Phase 2 data2H 2023Anticipated 2H 2023 Expected 2H 2023 Maintained
EDP1815 Psoriasis Phase 3 pathTBD (post-feedback)EMA/MHRA supportive; FDA feedback pending meeting EMA/MHRA alignment; FDA initial feedback received; advancement funding‑dependent Maintained with funding caveat

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2022)Previous Mentions (Q3 2022)Current Period (Q4 2022)Trend
EV platform (EDP2939)Phase 1/2 initiation planned; dosing expected Q4 2022 MHRA requested additional info; dosing anticipated 1Q 2023 Phase 1 safety clear; Phase 2 psoriasis dosing started; potency may exceed EDP1815; 2H 2023 readout Advancing to efficacy
Regulatory (EDP1815 psoriasis)Health authority feedback expected by year‑end EMA/MHRA supportive; FDA initial feedback; Phase 3 design outlined EMA/MHRA alignment confirmed; Phase 3 advancement funding‑dependent Steady progress; financing gating
Atopic dermatitis (EDP1815)Cohorts 1-3 on‑schedule; cohort 4 faster release added Cohorts 1-3 complete; cohort 4 ahead of schedule Cohorts 1-3 missed primary endpoint due to high placebo; cohort 4 results expected 2Q 2023; protocol adherence steps taken Mixed; risk management ongoing
Financing/cash$79.2M raise in May; CFO appointment Cash $69.1M at 9/30; ongoing spend Debt refinanced to interest‑only; active partnership discussions; cash preservation prioritized Preserving runway; partnership focus
Mechanism of actionSINTAX & regulatory T cell induction narrative Biomarker evidence presented (IL-6, IL-8, TNF reductions) CEO reiterates regulatory T cells and durable effects; faster release capsule targets proximal small intestine Consistent thesis

Management Commentary

  • “We continued to progress on our SINTAX platform… action in the small intestine generates systemically circulating regulatory T cells… We also developed a faster release capsule… first clinical testing… in a placebo controlled fourth cohort of our ongoing atopic dermatitis Phase 2 trial… anticipate reporting results in the second quarter of this year.” – CEO Simba Gill .
  • “We announced in February 2023 that our product candidate, EDP2939… is now in the clinic… started dosing in a Phase 2 study in moderate plaque psoriasis… readout expected in the second half of 2023.” – CEO Simba Gill .
  • “As far as we know, this is the first Phase 2 for an orally delivered microbial extracellular vesicle… We expect data… this year… EDP2939 strongly suggest[s] the potential to drive greater efficacy than EDP1815 while maintaining safety and tolerability.” – CEO Simba Gill .
  • “Cohorts one, two and three did not meet the primary endpoint [in AD] due to an unusually high placebo response… No conclusions… have been identified.” – Press release .
  • “We are in a significant number of discussions… Our fundamental goal is to get a partnership over the course of this year.” – CEO Simba Gill (Q&A) .

Q&A Highlights

  • Placebo response management (AD): Management engaged sites to ensure protocol adherence; speculated possible off‑protocol topical steroid use as a contributor; cohort 4 was already underway with faster‑release capsule .
  • Efficacy bars: For AD cohort 4, seeking ~40% EASI‑50 on active and ~15% placebo separation; for EDP2939 psoriasis, aiming for Otezla‑like efficacy or better with placebo‑like safety and tolerability .
  • Dose selection and biomarkers (EDP2939): Chosen dose aims well above minimum effective; no biomarker evaluation in healthy volunteers given mechanism requires inflammation context .
  • Phase 3 timing vs financing: Advancement of EDP1815 Phase 3 in psoriasis contingent on securing appropriate financing or partnership; multiple partnering discussions ongoing across EDP1815, EDP2939, and EV platform .

Estimates Context

  • S&P Global consensus estimates for Q4 2022 EPS and revenue for EVLO were unavailable due to ticker mapping constraints; therefore, no beat/miss determination versus Street estimates can be made at this time [SpgiEstimatesError].
  • Given pre‑revenue status and development‑stage profile, investors should focus on cash trajectory and clinical milestone timing rather than traditional revenue/EPS comparisons .

Key Takeaways for Investors

  • Cash runway is tighter post‑Q4 ($47.9M at year‑end vs $69.1M at 9/30); debt refinancing to interest‑only helps near‑term liquidity, but partnership or additional financing remains a critical gating factor for Phase 3 initiation in psoriasis .
  • Near‑term catalysts: AD cohort 4 (faster‑release capsule) data in 2Q 2023 and EDP2939 psoriasis Phase 2 data in 2H 2023; positive outcomes could be stock‑moving events and partnership enablers .
  • Clinical narrative: EV modality (EDP2939) offers potential efficacy uplift versus EDP1815 with placebo‑like safety; management’s dose‑response rationale and mechanistic clarity (regulatory T cells via SINTAX) support the thesis .
  • AD risk: High placebo rates in cohorts 1-3 raise execution risk; cohort 4 design and site engagement steps are key to restoring confidence in dermatology indications .
  • Expense discipline: Sequential and YoY declines in R&D and G&A drove improved EPS and net loss; continued prioritization of investments in key programs is expected .
  • Regulatory positioning: EMA/MHRA alignment on Phase 3 psoriasis endpoints and CMC is a meaningful de‑risking step; FDA feedback received, but Phase 3 is funding‑dependent .
  • Trading setup: With estimates unavailable, focus on event‑driven catalysts (AD 2Q, psoriasis EV 2H) and partnership headlines; downside risk relates to weak readouts or delayed financing, upside from efficacy signals and strategic deals .