Absci Corporation (ABSI) Earnings Call Transcript & Summary

All right. Okay. Awesome. Good morning, everybody. Thanks for coming. Welcome to the first day of TD Cowen's 46th Annual Healthcare Conference. It's great to see everybody. We've got a packed line up the next 3 days, so I know we're just buckling in here. But it's my distinct pleasure to be joined on stage today by a couple of titans of the AI industry these days. So to my left is the CEO of Absci, Sean McClain McLean. And to his left is the CFO and CEO of Absci, Zach Jonasson. Thank you guys for joining.

Thank you.

Awesome. So there's no shortage of things to unpack here today. So we're just going to get dive right in, right? But we do want to try to keep it as interactive as possible. So if you guys have any questions or anything, feel free to go ahead and flag me or can send me an e-mail, Brendan.smith@tdsecurities.com. And then we'll I'll be checking my phone throughout. But maybe, Sean, let's just -- before we go into the individual programs and kind of the outlook for the year, let's just start high level with where Absci's platform is today. So maybe what do you kind of see March 2026 is really the primary points of differentiation for how you all are leveraging AI for what you do?

Yes. So first off, we are a clinical stage AI drug discovery company. So we've been at this for a little bit of time now, and it is exciting to start to go into this new era. I think we see new models being developed day in and day out. But what really matters at the end of the day is the assets that you have in the clinic and what those readouts are ultimately going to be. And I think one of the things that we're really excited about now, especially on the early drug discovery side is actually the agentic AI. I think what we've been able to see on the de novo side is being able to rapidly use our de novo model to design drugs to what we call zero prior epitopes or epitopes that haven't been drugged before. We can do this very rapidly going after hard-to-drug targets. But what really does matter is getting the target right. It doesn't matter how well you design a drug to a particular target. If you don't get that target right, it doesn't really matter. And so what we're seeing with a lot of the new agentic AI is being able to integrate that into the early-stage workflow. And I think within the next, call it, 1.5 years to 2 years, I think you're going to start to see these workflows where you're able to have AI actually pick really exciting new novel targets for you, pick the epitope and then have the model design the antibody towards that and then design the killer experiment to actually validate that particular pathway and target for you and just be able to, in a very autonomous manner, be able to rapidly validate new novel mechanisms and targets. And so it's a really exciting new frontier. So it's like developing frontier models within biology, but then being able to leverage the agentic AI. And I think that, that's going to allow you to rapidly scale. I mean the way we're seeing it, it's completely transformational, and it's a really, really exciting time that we're in right now.

Yes. So I think when we talk about value creation for -- just from the -- aside angle, right? Because I think a lot of these AI drug discovery players in the space are still, in some respects, figuring out what's the best way to drive long-term value creation, right, whether that's be an engine for the sector, build out their own internal pipeline, some mix of both, software licenses anywhere in between there, right? So when it comes to the pipeline, what is Absci's kind of North Star when it comes to long-term value creation strategy? Is it really -- do you see kind of a fully mature company largely coming from internally developed drugs that's driving pipeline? Is it a mix of platform itself with external partnerships? Where does it kind of stand for 2026?

Yes. So at the end of the day, the value is in the asset itself. That's where you're going to get the long-term sustainable value creation. But the platform is absolutely critical to being able to drive that value creation. And I think if you look at where everything is headed actually, to give an anecdote, there's a new AI scientist paper that came out. And actually, Zach and he can give you the details on it, use some of the agentic AI and was able to rebuild it in 20 minutes. And I mean that's truly incredible and just how rapidly you were able to reconstruct a model. And now if everyone has the capability of doing that and new models are constantly coming out, I think it's hard in this industry to have a SaaS business model or a business model that's solely focused on selling your platform as a service. And I think that's where really being able to make sure that you get the right target selected. And I think prolactin receptor is a perfect example of that. I think some of the earlier-stage autoimmune and I&I pipeline we're building out really is able to show that. And it's about how quickly can you get to those new exciting targets with AI and how can you use AI to unlock some of these differentiated biology that's out there.

So maybe that's kind of a perfect segue into 201, right? So let's kind of unpack this a little bit. So maybe let's start with where you guys see what's the primary value case for -- this is ABS-201, this is prolactin receptor antibody within androgenic alopecia. Maybe how big is this market? And where do you really see the unmet need that this particular asset could address?

I'm very excited about prolactin receptor in many indications, but squarely in hair regrowth or androgenic alopecia. I think you're seeing this exciting trend shift towards out-of-pocket. You see it with the GLP-1s, shifting towards preventative care. And this falls squarely in that category. I think last year, more than half of Lilly's new customers that were brought on were from Lilly direct out-of-pocket. And what we're seeing is the consumer wants this total vitality. They want their weight. They want their hair, they want their wrinkles removed. And the demand is very high for being able to regrow your hair. And there currently aren't mechanisms that fully allow you to get that hair back. And what we show prolactin receptor, it's this master regulatory switch for hair regrowth. And as you age, the more stress you have, the faster your hair grades and falls out or I should say, miniaturizes. And what we've been able to show in ex vivo samples with a world-round hair expert, Professor Ralph Paws was that you're able to regrow the stem cells within that niche, which enables you to regrow the hair or reminiaturize or reverse the miniaturization. And so we think that this is a really new kind of exciting frontier. And it truly is actually regenerative. Post therapy, what we saw in stem cell macks was the ability to regrow hair up to 4 years post treatment. So we think that this could be a durable treatment that's able to give potentially superior efficacy. And so yes, it's a really exciting opportunity.

I add something to that, too. If you zoom out a little bit, the ROI on this program is phenomenal, right? We just went through an LRP with our Board. And it's really 3 things that make this exceptional versus, I think, any other type of indication you might look at. One is the market opportunity is huge. So Sean mentioned this would be a brand-new category of therapy. In our market research, it suggests this is something patients are going to love. They're going to seek to adopt and they're going to be willing to pay a premium for. So we think the TAM in the U.S. alone could be north of $25 billion. So the market is there, it's massive. But if you look into the cost of development, point number two, it's really de minimis compared to typical therapeutic indications. We believe we can do the registrational studies for under $100 million. That would be unheard of for IBD or oncology. So very inexpensive development for a large market. And then the third part of this is speed. These trials, we're recruiting a trial now. We're going to recruit over about 230 patients in this trial. But when we get to the registrational studies, those are going to go extremely quickly, we believe, as well. The KOLs tell us there'll be waitlist to get in the trials, and we think we could be in line for an approval of circa 2030. So a very rapid, efficient development path for a massive indication.

So you're talking about $25 billion TAM or so. So I think I've seen the numbers throw out maybe 80 million, 90 million patients or something like that addressable in the U.S. alone. I guess, can you give us what -- like what proportion of patients are seeking treatment today? And I guess, are you envisioning that 201 would capture a lot of the folks who are already coming in for this kind of treatment, expand the proportion or pool of folks who would consider something like that or both?

Both. And we saw that and we've done KOL studies. We've done interviews with patients and then we commissioned a consumer research survey, 610 patients. And what we saw is there are a lot of patients who just stay on the sidelines. They don't want to use standard of care or they've tried it and they don't like it. They don't want to be on Minoxidil for the rest of their life, taking it every day. And then we also saw patients that are currently on therapy, whether it's Minoxidil or they're going in office, their interest level was even higher than the average patient. So we think this is going to be used. It's going to expand the market. It's also going to bring in a lot of patients that are currently using standard of care. And we actually don't think this is competitive with a lot of standard of care therapies like Minoxidil. We think patients are probably going to use them in combination.

Okay. So when you look at -- when you're talking about the patients who are on Minoxidil who have tried it somewhere around there who, for whatever reason, want something else or are no longer testing it out. I guess, what is it about the data you've seen with 201 so far that gives you confidence that it's at least as good efficacy. And if it's a safety or tolerability issue for a lot of those patients, what is it about either the mechanism here or the drug itself that's giving you confidence that you can kind of overcome that?

Well, if you look at the [ somumelack ], I think that, that's case in point. You're able to -- in 6 months, you were able to get full hair regrowth. They were able to go from their gray colored hair to their jet black hair, and they were able to have durability for 4-plus years after treatment. And then what really got us excited was the work that we did with Professor Paus. And this for us was very much a derisking experiment. We were able to take ex vivo samples of the scalp biopsies and we're able to run an experiment to see how ABS-201 performed on those scalp biopsies. And it was incredible. Within 6 days, we're able to actually see stem cell growth. We saw upregulation of the key growth factors, TGF-beta decrease, which is a known catogen driver. And we were able to actually see hair regrowth as well in those. And we saw that prolactin when you added it was a catogen driver and took hair growth in the opposite direction. And so within 6 days, we saw really remarkable results from human ex-vivo samples. And so that for us, like really bridged that gap of like will this work in humans? We believe, absolutely. I think the question is, can you hit the receptor hard enough? On the stem tail the [indiscernible] it was greater than 90% receptor occupancy. We believe based on the data we've seen now, if we can achieve greater than 90%, we should be able to achieve at or above that 30% to 40% or 30 to 40 hairs per square centimeter that oral Minoxidil achieves, but potentially even much higher than that because the stem cell meacks were at like 80 to 90 or 80 to 100 hairs per square centimeter. So we feel very, very confident going into this. And I think we're going to have some very differentiated TPP coming out of this Phase IIa study.

Maybe before we get into expectations for the data itself, I want to ask just so we can level set how the study is being run, the idea about IV subcu, different kind of treatment regimens that you're testing, what's kind of the time line for testing a couple of those dosing regimens?

Yes, I can comment. So right now, the SAD is ongoing. There'll be 4 cohorts tested in the SAD. That's all ID for maximum exposure. That gives us some really good data for PK modeling. And then we'll roll into a MAD study, and we're going to test 3 doses there. Everything is randomized, placebo-controlled. And in the MAD study, patients will see 4 doses, 1 dose every 8 weeks. And so we'll be able to have a 13-week interim readout in the second half. And then early next year, we'll have the 26-week final readout. And those readouts were really looking at targeted hair growth as well as some secondaries around the thickness of the hair and the pigmentation. And we'll also, of course, do global photography.

And I also mentioned too, we have dosed the third cohort. Everything is looking good so far and on track to dose that fourth cohort here very shortly.

And just sorry, the fourth cohort is...

In the SAD...

Yes. Okay. So all right. So ideally coming out of this combined kind of Phase I/II, you have a proposed dosing. I guess what is kind of the target dose interval you think? Obviously, it's early days, so we'll have to kind of see how the early data looks. But is this like a monthly, bimonthly subcu injection once it hits the market? Is that kind of the plan at this point?

So we'll be able to answer that more fully once we get the PK data. But as you know, we've introduced half-life extension mutations into the molecule. So we're expecting potentially a dose every 2 months and that would give you -- when you do that 3 doses over 6 months, that would give you that 6 months of exposure, really targeting greater than 90% receptor occupancy like what we've seen in that NHP study. And we think that can deliver durable hair growth. And that would be the new category of therapy that I think patients are very interested in.

Yes. And so again, it would be 3 doses and potentially then durability for 2 to 3 years. And so we think that, that's extremely convenient for patients.

Okay. So when we -- fully can see we're getting a little ahead of ourselves. But when we think about a pivotal study then, would you expect to need to follow them for that long? Or is there -- would you have like a primary endpoint 6 months or so out and then follow them as a secondary tertiary beyond there and then add that into the label once you have?

Yes. So we are going to be following these patients a year afterwards. And there is an important note on this. We likely won't be seeking the durability on the label itself, but this would be something that would come post approval, but we are looking at atleast durability a year afterwards and even in this ongoing study right now.