Absci Corporation (ABSI) Earnings Call Transcript & Summary

Let's talk about AI. So maybe talk about how you're deploying AI on your platform. What you're seeing from a client interest, large pharma, biotech how they're deploying AI. Has it increased the inbounds to your platform? But let's first start about how you are deploying AI and how you have been deploying II and all the data sets that you've been accumulating as part of your platform?

Yes. Look, I mean, Scott, I think what is really exciting for us is we run an active learning cycle. So we have a lab-in-the-loop process, and we've been running from that for about 5 years. And that's really how we've been able to make gains in our model performance. And when I say model performance, I'm speaking about generalizability and accuracy. And I think one of the things you saw with our recent Origin-1 release. We released a preprint. We'll be looking to actually publish that in a journal. But one of the things that you'll see with that is we focused our platform on difficult to challenge targets and what we call 0 prior epitopes. So we're basically moving our platform in a direction where we can create differentiated assets. So we can target or address targets that aren't well addressed, or can't be addressed very well by traditional approaches or even at all. So things like ion channels, GPCRs, agonism. And then we're also making sure that our platform is not just delivering variable quality hits, which is I think where a lot of the focus of preprints have been. We're laser-focused on having the platform deliver lead quality candidates that we can take into preclinical development into in vivo studies and into development ultimately. And so when we map all of that together, Scott, I would say our focus is because our platform has matured enough is really using it to design assets that either we take forward like ABS-201 or that we can partner. And the partnering dollars and economics around an asset deal versus a platform deal are fundamentally different. We're looking to make 10x gains on the kinds of transactions we can do by leveraging the platform for asset creation.

And then maybe talk about your data and the moats around it and how you've built around your proprietary date sets, Zach?

Yes, look, it comes back to the lab-in-the-loop process, right? So it's this test, this design test cycle that we run. So when we make designs out of the model, we can rapidly test those in the wet lab. And we have a number of display technologies to look at binding and affinity to the specific epitope we're designing to. We have all sorts of other assays to look at developability and then -- and so when you put all that together in the sort of active learning cycle, that's why we're making these advances in the model where we can, a, design against challenging targets or epitopes with no known ligands. And b, we can design antibodies that are of high quality, meaning that they are lead quality candidate. They have high developability. We know they're stable, you can formulate them. They're soluble and that they actually bind to the epitope of interest. And so that's what's really -- that's where you see the step function changes. And just to give you an example, with the Origin-1 model, we're already deploying internally Origin-2, and we're seeing significant advances in the ability of these models to not only make the best designs but also to create diversity. And then to be able to select and prioritize those designs that are going to be the best in terms of those parameters I just mentioned, developability, affinity and selectivity to the target. And that's what goes into making a true asset, right, that you can take into development or to partner.

Yes. And that leads me to my next question. How you Zach, talk about how you decide whether to partner out with pharma or continue developing the drug in your own pipeline? What leads you to all the factors to decide that?

Yes, it's a great question, Scott. So we look at a number of factors, one of which is what is the cost of us developing it clinically, right? And so when you look at a program like ABS-201 and AGA, those costs, as I mentioned, are much lower than you would typically see in a large -- especially for a large indication. So that's very attractive. The other thing is how manageable is the clinical development. And again, I'll use AGA as an example. There, you have an objective endpoint. You're looking at terminal area hair count. Other indications can be a lot more squishy on the end points and so that's also one that ranks very high for us to look at for internal development. So can we execute the trials when you execute them relatively quickly? And is there a very large market opportunity on the other side and then the cost of development is relatively low. We look at those factors when making that decision. Now it doesn't mean we won't design antibodies to targets that could enable very large indications that are more expensive to develop in or more challenging. It just means when we design those, we're really designing those with the idea that we're going to partner those.

And speaking of costs, maybe, Zach, it's a helpful reminder for investors. Talk about your balance sheet, how much cash you have and how far that extends your clinical programs out?

Yes. So we'll have earnings next week. But in January, we did provide an update, an estimated end of year cash, which was around $140 million, $143 million. And that gives us a runway into the first half of 2028. And importantly, it gives us runway to achieve the execution of ABS-201 and AGA, both the interim and the final readout. And that allows us to begin execution of that Phase II endometriosis study with an expected interim readout within that time frame as well.

Great. Let's play a blue sky scenario, say you get the most exceptional readouts on 201 both for hair loss and endometriosis. And what would be the logical next steps? Or how would you think about the optionality on that going forward? Would it, I guess my question is, does it make it more attractive to double down and maybe, again, use more of your capital to really accelerate those programs? I'm just trying to walk through all the steps if we get these exceptional readouts on 201, how does it -- what are the optionalities here in your mind?

I think we'll certainly have inbound partnering interest. We already do. But our plan of record, and again, we come back to the points we're just talking about how do we decide on something we need to develop internally. If we look at the AGA indication just because it's the lead indication, you look at ability to exceed on those trials, the fact that there's objective endpoints, the fact that the trial costs are relatively low for registrational trials. Our plan of record is going to be to develop that asset. We think the ROI is phenomenal. And like I said, at the onset, I've been in the industry for a long time. I haven't seen a potential ROI. You look -- there's risk with everything, but I haven't seen a potential ROI that's significant in any program I've ever worked on. And so I think our plan of record is to make sure we execute clinical development and prepare for commercialization. And I think a good signal to the market along those lines is us bringing on Ransi as the CMO last week and the depth of experience he brings on clinical trial strategy and execution.

Yes. No, that's an important point. When we think about Absci beyond 201 and maybe the next 5 years, how should we think about the platform broadly? Is it more about going after these big market opportunities where you think there's relatively lower cost in the clinic and faster performance? Yes, how do you think about outside 5 years from now?

Yes. I mean, so putting aside the lead programs, which we intend to develop, I think there's every indication if we're successful, that we could take those to market. And in fact, I talked about the speed of the AGA design. We could, if we execute on the plan, and we're having some FDA feedback on this now, we could be in line for a potential approval 2030 for AGA. So then we would be engaged in commercializing that program. But looking backwards into the pipeline, we'd be building, which I think is kind of where you were going. What we're focused on today is really, look, Origin-1 publication gave you a little bit of a preview to it, right? We want to focus on designing differentiated assets. We don't want to design an asset to an easy target that you could reach with a traditional platform. You're inviting 10 companies in China to compete with you. What we want to do is focus on these opportunities where either we have a competitive advantage in the target biology such as prolactin and we think there are other indications where prolactin is going to be important, or we want to focus on targets where they are difficult to address with traditional technologies, and we can do something fundamentally differentiated with the platform, and that fit into indications where there's a large unmet medical need where that differentiation is really going to make a big difference to patients. That's the mapping we do. So I think what you'll see over the next several years is we're developing this pipeline of those types of differentiated assets because that's where the platform is today and the platform is going to improve over that time as well. And we're going to be selectively developing some of those into the clinic, and we're going to be selectively partnering some of those to large pharma. And I should point out, the partnering strategy on the assets, as I mentioned, the economics there much more favorable than platform deals is why we're focused there. But the reason why we would partner assets is to basically recycle that capital into development of other programs that we're doing internally.

And maybe that's a good point, Zach. And maybe talk about how the unit economics have changed over the course of these years on these partnered programs. And to me, it's a testament to your platform, but maybe talk about like how the economics have changed when you sign these deals, if they have. I mean my sense is that royalties and milestone negotiations have accelerated for the space in general. And I think it's validating to all these platforms.

Yes. We don't really see much movement in the platform deal structure in terms of the -- if you look at a per target basis, if anything, probably going down and I think that's in large part because there's now a lot of SaaS offerings that are trying to come in. And really, those platforms are more about, can we be a hit generator and that's where I'm pointing out our differentiation is we're not focused on generating hits. We want to focus on delivering lead candidates because that's where the value is. But the other thing that's quite interesting, and we've done our own analysis internally on this. The 2 points. One is the upfront payments for programs. So whether you're looking at DC, Phase I validated, Phase II validated have gone up over the last 5 years. There's a much more premium from pharma on assets that they've won that are in indications that they're interested in. So that's a good barometer. I think the second point is, if you can deliver differentiated assets, the potential economics upfront and back-end on asset deals get to be very high because there's a distribution there. And so our focus is, can we develop assets, design and develop assets that are going to be on that right or part of the tail of that distribution, and you do that by creating differentiated programs that can be first-in-class and that's where we're focused.

Great. Well, Zach, Alex, thank you so much for doing this fireside chat. Investors, if you have any other questions or want to follow up with them, please don't hesitate to reach out to me directly. But thank you both.