Absci Corporation ($ABSI)

Good afternoon, everyone, and thank you for joining me in the fourth day of the Needham Healthcare Conference. My name is Gil Blum, and I'm a senior biotech analyst here at Needham & Company. It is my pleasure to have with me today Absci management, Sean McClain, the CEO; and Zach Jonasson, the CFO. Absci is a very interesting company that focus on AI and these days, sort of a snowflake.

So maybe you guys can start with a brief overview of the company, the main technology and kind of how you view your value proposition.

Yes, absolutely. So I found the company 15 years ago. Originally, we weren't focused on drug development. It was technology for scaling protein-protein interactions. We adopted AI very early on to be able to leverage AI to actually start designing the antibodies and the drugs with the attributes that we wanted. We all know that traditional drug discovery has been like searching for a needle in the haystack. And with AI, you can now start to actually create that needle, designing all the attributes that you want and start to actually go after some of these harder-to-drug targets. And we applied the technology in partnerships, and we quickly realized that we wanted to build value ourselves with exciting targets, one of those being actually the prolactin receptor and started to build out our own pipeline. We brought on an incredible drug hunter, Andreas Busch, that really helped build out the early portfolio and have been able to explore some really exciting biology with the prolactin receptor, which were, as you mentioned, targeting a derm indication, but I think it has much bigger implications than just derm. It's definitely, I would say, a very underappreciated target. And I think the reason for that is the name, prolactin -- prolactation. And -- but you see it all over the body. You don't see it in the skin and the hair. You see it in the endometrial tissue. You see it in your bones. You see it in the synovium on immune cells. It's really all over the place. And -- so what we're doing now is we have 2 programs that are in the clinic that are going after this is prolactin receptor biology. First is AGA, androgenetic alopecia as well as endometriosis and then using the AI platform, then to continue to build out a very robust platform around this biology and adjacent biology. And a lot of this is focused in on inflammation and so building out bispecifics. And one of the things that I'm really excited about in terms of just AI and where it's all headed is being able to take the de novo model that we've built with these Agentic AI models and really just being able to scale individuals kind of create a second brain and be able to not only scale yourself, scale your team. And I think you're going to start getting much better ROI. You're going to be able to get to new novel target biology, I think, faster than ever before. And so we're excited about what the future holds, not only for AI, but also for the prolactin receptor and the prolactin biology.

So maybe spending a second on the platform and the AI side of things. I mean there are a few names out in the space, a few recent IPOs, Generate comes to mind and ICON. What would you say is your special sauce as it relates to kind of how you approach biology?

Yes, absolutely. So you have to take a multimodal approach to this. So first off is the data. I think that the data that we've been generating has been really valuable to being able to get the results that we've had, not only for training them all, but just validating being able to rapidly test, do the AI solutions to actually give you the output that you're looking for. And we've been able to leverage that to be able to go after 0 prior epitopes where there was no previous known binder. And so I think that, that opens up exciting novel biology or at least biology that has been known but has been difficult to drug in our partnership with Almirall, we've been able to drug an ion channel, which have notoriously hard to drug with antibodies. And we got very high specificity with the antibody that we developed there. And so that's kind of the design aspect. But then we're really looking at integrating AI across the board. How can you use it in target discovery, how can you kind of string everything together with Agentic workflows and be able to kind of create these very rapid cycle times. But what we're seeing is that the -- outside of the Agentic AI, the data is really key to ensuring that you get the outputs that you're looking for, whether that's on the target side or the design side.

So maybe a broader question for both of you. It feels like we're at the best end of the boom-bust cycle as it relates to TechBio. What do you think -- what would be an aha moment for an investor here? And what kind of -- what are people looking for?

I think the upcoming readout we have is going to be, I think, a big validation of the platform. This will be one of the first Phase II readouts, proof-of-concept readout in humans of AI-designed antibody. And we're going to get the opportunity to see like not only did we get this antibody to the clinic faster and cheaper than traditional means? Were we actually able to show improved efficacy or any efficacy in androgenic alopecia. And we believe that, that's going to be a huge proof point. And that's what I think investors are looking for, like can these AI designed drugs, AI discovered targets really be -- are they able to provide value? And I think the answer is wholeheartedly, yes, it takes time, but we're going to have that readout this year.

I would just add that there's an incredible amount of noise in the space, right? You've got preprints that fly out, a lot of marketing that's focused on in silico metrics or a lot of marketing that's focused on a hit rate with very limited wet lab validation. It just creates a lot of noise. And to Sean's point, I was on the investor side for 20 years. We really need to see where the value created. That's the asset, right? You need to see clinical validation around that. And that's where we are 100% focused, right? We're not focused on hit rate. We're not focused on in silico metrics. We're focused on creating assets that can be differential to patients. And I think with ABS-201, that's what we're going to see this year, clinical readouts, showing efficacy, showing that we created molecules that are stable, easy to formulate, showing that they're safe, but also showing that we could do it in very fast turnaround time at a low cost. And I think that will validate the entire AI pipeline for what we're doing at least. But it comes back to that focus, like you have to be focused on where the value is. AI is a tool and it's a tool to design assets that can create value for patients. And I think that gets lost in a lot of the noise.

Great. So very closely related question. Clearly, you guys are spending and focusing resources more on your lead program, which makes a lot of sense. Is there still capital being invested in the platform more broadly?

Yes, absolutely. And to Sean's point, I think what we're finding is we're seeing efficiency gains in the platform, and this is by leveraging data and those active learning cycles. But we're also seeing opportunities where we can reallocate some of that investment into building these Agentic pipelines. And that's something we're implementing across the company today, where we think not only will we see more efficiency gains on an FTE basis and other bases, but we'll also see better outcomes around like choosing the right targets, understanding the target biology. And Gil, you can imagine how focused we are on prolactin. So we're deploying those workflows on prolactin and have been doing so for the past 6 to 12 months. And I think that's -- I would confidently say to you today, we are a leader in understanding that biology. And to Sean's point, I think there are other indications in that space that are quite interesting for us.

Excellent. I do want to spend a significant portion of our time on alopecia. Lots of excitement on this asset. You mentioned the development history briefly. Maybe you can provide a bit more detail there where it came from and how you upgraded it.

Yes, absolutely. So it actually started a lot back in the early 2000s with the work from Professor Ralf Paus, really a world-renowned hair expert. And they were originally -- they had some interesting work that came out showing that prolactin may be involved in driving the miniaturization. It wasn't fully baked at that point in time, but there is definitely strong leading indicators. And then interestingly enough, Andreas Busch, our former Chief Innovation Officer, just retired, had looked at this for endometriosis and it was kind of serendipitous discovery where the mice that were on drug regrew the hair faster than those -- than the control arm. And so oh, wow, like prolactin seems to be involved in hair regrowth and it matched up to the work that Ralf Paus had done earlier. And so they went on and did a stump-tailed macaque study -- and in this stump-tailed macaque model, it's a naturally occurring AGA model. They naturally bald and lose their hair. And actually, early minoxidil studies actually used this to validate minoxidil could be used as a therapy for AGA. And lo and behold, these monkeys that were very bald completely regrew their hair. And they also repigmented their hair. They went from gray to jet black. And what was additionally remarkable was the regenerative nature of what you saw. So 4 years post treatment, so they treated for 6 months and then continue to follow them. They continue to -- they continue to grow their hair 4 years post treatment, which actually shows from a mechanistic standpoint that they were able to rebuild the stem cell niche and truly regenerate the follicle and kind of the machinery necessary to reverse the miniaturization of those hairs. And so Bayer at the time, they didn't want to pursue either of those indications. They ended up out-licensing that molecule to Hope Biomedicines, molecules HMI-115, though there were some, I would say, fundamental issues, both on molecule as well as how the Phase I was done. So first, with the Phase I they kind of shot themselves in the foot a little bit in terms of being conservative on the dose escalation. And so they didn't dose high enough. And the issue with that is in this particular mechanism, we know achieving 90% receptor occupancy is very crucial. And so if you're not able to dose high enough, you're just going to have to have more doses that are needed to achieve the 90% receptor occupancy. And then additionally, it's formulated at like 70 mg per ml. And with that, they couldn't achieve, I think, good subcu dosing. So -- what we're modeling is, I think, roughly 2 to 3 doses over 6 months, and that achieves 90% receptor occupancy with what we modeled from them to achieve that, I think they'd have to have like 20 to 25 doses. And so that's just not commercially viable. And so essentially, what we did was used our AI model to ensure that we could get the half-life that was needed, the high potency and be able to have the dosing frequency that's needed for a direct-to-consumer play. And then the more we kind of dove into the biology, the more we became super fascinated with what was going on. I mean the kind of the similar mechanism you saw in hair, kind of this -- this fibroblast macrophage-like crosstalk that drives inflammation and drives miniaturization, is a very similar mechanism to what you see in the endometrial tissue and the synovium. And so it does seem to sit on this stress-inflammatory axis that really wasn't well known or there's evidence of it in different places, but it hasn't really been well characterized and well talked about.

So one comment we get from investors when we discuss specifically this mechanism of action is that if it's so good, why haven't you never heard of it before. But I know it's a very circular question, but just bringing that up.

Yes, 100%. I mean I think the #1 reason why it has not been brought up is because it's been looked at as a women's health reproductive hormone. It's in the name, prolactin, prolactation. Everyone thinks of it from a lactation standpoint. And so when you see it in immune cells or you see it in the synovium, immunologist may just say, "Oh, well, that's interesting, but that's a women's health hormone for lactation and kind of push it to the side." And I would say like it's not highly expressed either. It's almost like an ion channel or GPCR, like even in single cell sequencing, it's very low abundancy. Maybe you have it on 1% to 2% of cells. And so it definitely kind of goes, I think, under the radar in single cell sequencing, but I think, again, the #1 reason is the name has completely thrown it off. And I think we're seeing that these "women's health hormones or reproductive hormones " actually have a much bigger role, not only in women, but in men as well. I mean even like progesterone, like, I think a lot of people think of that as a women's health hormone, but it's in men as well. And I think that there's bigger roles that these hormones are playing than I think we previously understood.

I think if anything, the prominence of hormones should be increasing all the time just given what's going on with GLPs. That is a hormone.

Yes. Exactly.

One of the other aha moments for us and look, the literature started on this in the '90s, but there's a different promoter in the periphery. So there's -- the promoter everybody thinks about is the pituitary promoter. That's -- people think about it as the classic endocrine hormone, it's systemic. But in tissue, in the periphery, it's regulated through a different promoter that's completely dopamine independent. And so you've got the systemic prolactin, but then you have prolactin signaling that's regulated, expressed in local tissue, including the skin and including in the hair follicle.

So maybe talk a bit about the HAA market. This is something that I think on the sell side, we have trouble with. It's too big, and we have to handicap that somehow. So if there's any way to like realistically view this...

Yes. And look, that's a problem we want to have, right? So we're happy to have that problem. The way we've looked at the market, first off, we started with interviewing derms, KOLs and then moved to interviewing patients. So we had a better understanding of what drives patients. And that led us to commission a consumer research study. We surveyed 600 patients. I know you guys have run an interesting survey, too. And we asked those patients a lot of questions in the survey, including what were the psychological social impacts of AGA. And those are very pronounced. And they're also very similar to what you see with weight loss. So just again, the analogy to the GLP-1s. But when we look at that market, we dug into at least for this survey, standard of care, what motivates patients, how patients think about standard of care and what their response would be to new categories of medicine that could treat the condition. And I think what we found at a high level, and you can go into some of the data, if you want, is that, by and large, patients are not satisfied with standard of care. You really have 2 categories of treatment. And really, when you boil it down, you have one category, which is you either use a topical or oral every day or twice a day. So even if you get a transplant, you have to use some maintenance therapy. And that's -- every option today looks like that, and it's almost like a gun to your head, right? If you start taking minoxidil oral or topical, you can see some -- a lot of patients, not all, there's a lot of variability. But if you see hair growth, you have to stay on that for the rest of your life. As soon as you go off, you shed your hair and you go back to the baseline you would have been at, so not the baseline where you started, but the baseline you would have been at. And a lot of patients don't like that profile, and they don't like being locked in like that. And so when we've tested the TPP for ABS-201, we presented a fairly modest efficacy to patients. So high end of oral minoxidil, I think 35, 40 terminal area hair count addition. But with the dosing frequency that's about 3 doses over 6 months with another 2.5 years of durability. So set it, forget it and see that efficacy over that durability, it really tests through the roof for us. We see huge number of percentage of patients, male and female, who say they would go out and seek to take this product if they were available today. And in fact, when we zero in on those patients who are currently using oral minoxidil, those percentages go up even higher. And then the other thing that we thought was very instructive and exciting is we ask patients, what would you use as first line? You've got shampoos, conditioners that are cheap supplements, none of them work very well, but they're cheap. And then you've got minoxidil oral also cheap, and you've got premium product like this that would be priced much higher. Over 1/3 of patients said they would want to use ABS-201 if we hit the TPP as first line. So we think there's a huge market opportunity here. And even factoring in the durability and the pricing, we've come to a place where we think if we're successful here, we could be treating 5 million to 9 million patients a year in the U.S. and with a TAM that's north of $25 billion.

Those are some big numbers.

So now you see why we're focused on executing this program, priority 1.

So let's talk a little bit about the clinical development because this is a key focus for most investors. Starting with the single ascending dose, pretty soon, we're going to see some level of data from there. Maybe give some guidance on that and then talk about the efficacy data readouts.

Do you want me -- you got it.

Yes. I'm happy to give a high-level overview of kind of where we sit. So first half of this year, we are going to be coming out with the top line safety data along with what the PK looks like to ensure that we can fit in that 2 to 3 doses over a 6-month period. And then in the second half of this year, we'll have the 13-week interim. The full study is 26-week. 13-week, we will be showing likely responder data with the total area hair count. We do, however, want to be clear that we see this as directional. We do see the 26-week readout being in that 30 to 40 hairs per square centimeter that we continue to guide to. We just want to be clear that we do not know at 13 weeks exactly what hair count is going to be there. And so we see this as an important directional readout, but are not setting any guidance to that 13 week.

What would be a win in your view for 13 weeks?

I believe being able to show that you have hair growth at 13 weeks, I think, is going to be a win.

So lots of excitement on the investor side around Veradermics, recent IPO. This is a reformulation for minoxidil, just extending its effectiveness. And I mean, how does this help or hurt you as you're looking forward into your readout?

Look, the more wins that we can get in this space, the better. I think it really shows investors that this is an exciting space. It is as big as the GLP market. There's huge demand out there. And I think having even something like a reformulated minoxidil that could show similar or potentially better efficacy than oral minoxidil, I think goes to show like the need is there and even like small incremental change could be a home run. I think just really hits home how the standard of care is so poor and people are really wanting to figure out how can I get something that's more efficacious, that could actually be regenerative. And I think that that's something that we give with our product is not only potentially oral minoxidil level efficacy or better, but the fact that you could do 2 to 3 injections over 6 months and have durability for the next couple of years, I think that's really exciting for patients. And I think that we all can play. And in terms of like synergies, I think the one thing that's nice about minoxidil is that it's super cheap. We're obviously going to have a premium product here. And so if you have a premium product, with something that's cheap like oral minoxidil, I think you are going to see people combining these and seeing what effects that they could get through combo. And I think there's reason to believe actually from just a mechanistic standpoint, how you could have oral minoxidil synergized with the prolactin receptor. I mean, the biology, you're able to essentially get the stem cell niche built back up. And then if you have oral minoxidil that's ensuring more blood flow, in theory, it could be additive. And so all in all, I think it's great for the space.

Okay. So looking forward, let's assume everything goes well as it relates to the proof of concept -- any thoughts on what a pivotal study potentially looks like, especially on -- there are some requirements from the FDA for you to have enough patients dosed basically?

Yes. And we're having our dialogue with the FDA right now, both around the endometriosis study design, which we intend to initiate a Phase II study there in Q4 as well as what registrational trials will look like for AGA. We do assume we'll need about 1,500 patients exposed over all of the clinical trials. So that would include the numbers in this trial right now. But the nice thing about this is these registrational studies, in particular, are going to recruit very quickly. And the cost per patient is significantly lower than other indications. And so the all-in cost and the faster speed with this very large market at the other end, creates a very attractive ROI. And that's again why we prioritized this program.

Right. I know we're getting way ahead of ourselves, but do you think there's a similar path for ABS-201 to what we've seen with GLPs? Think about direct-to-consumer strategies, partnering with Hims & Hers. We've seen some interesting things in this space.

I think that that's one of the most exciting pieces here is being able to have a relationship with the consumer, with the patient and being able to go direct to consumer. And one of the things that you saw with BOTOX was BOTOX was able to build a really robust brand due to the patient interaction. And post-patent cliff LOE, they retained 80-plus percent of the market share. And I think that you can see a similar thing happening here is if you build a robust brand that patients trust and you continue to provide assets and drugs that give them that total vitality that they're looking for, I think they're going to continue to come back and you're going to be able to maintain that market share past LOE and past patent cliffs. And I think that, that's actually quite exciting. And additionally, we do have follow-on programs, follow-on kind of best-in-class to continue to be able to provide further benefits to what ABS-201 already has. And so we're kind of looking at those strategies as well. But I think it's a really exciting opportunity that we have here.

And again, getting ahead of ourselves about -- if everything works out, what do you think your go-to-market strategy is going to look like?

I think very different than traditional pharma commercialization. I think first off, I think partnering with the derms is going to be incredibly important. And I think we're building really great relationships with the derms I think launching with them is going to be great. And then additionally, having the direct-to-consumer play alongside that or after that, I think, is going to be a key part to this overall commercialization strategy. Zach, if you want to add anything else to that?

No. I mean I think you nailed it. I mean there's very good incentive alignment with derms and other practitioners. But to Sean's point, I think it's a very different marketing exercise where you develop that brand and that relationship with the patient. And I think what we find, again, stating in the GLP-1 space as an example for weight loss, doctors don't need to go find patients who prescribe GLPs for weight loss. The patients are finding the doctors. And I think we're going to see the same kind of phenomenon here. We're several years away. We think we're -- we think we're likely to be in a position to go out and get approval by 2030. So it's not that far out, but our belief is we'll be able to do something really creative here that's very customer focused.

And it's going to be so much driven by the social media, the influencers. I mean you already see that with the peptides and these looksmaxers, so much of this is all being driven by social media for good or for bad, but we really do think like being able to drive it through those channels is ultimately going to get, I think, the fastest uptake here.

I would venture to say that's very accurate, specifically for GLPs because that's an old, old drug. It was on the market for many, many years.

Yes.

All right. I do want to spend a minute or 2 at least on endometriosis. Again, interesting that there's a commonality here. What do you guys think the MOA is? And maybe for those who aren't familiar in the space, just to give people an idea of the unmet need in this particular indication.

Yes. This has been an indication that I think has been overlooked and definitely underfunded for quite some time. And it's a huge, huge unmet medical need with a large patient population. Right now, it's estimated 1 in 10 women have endometriosis. And since we don't have great ways to diagnose these patients, we do believe that this is an underrepresentation of the amount of women that have this. And right now, standard of care is really poor. You have GnRHs that are out there. This is a hormonal drug that does lead to some serious adverse events and women can only stay on these for 6 months, and it's not a long-term solution at all. And essentially, what happens is you get these lesion formations in the endometrial tissue and that drives overall pain during administration. And again, nothing out there right now is disease-modifying or even being able to address the pain that effectively. And if you look at the mechanism of prolactin and its role, it does look like from the animal studies that were done as well as actually the HMI -115 Phase II study, what you see is that prolactin drives the lesion formation and it also looks to drive the pain sensitization as well. And so by blocking it, you're essentially reducing or eliminating lesion formation as well as eliminating the overall pain that's associated with it. And I think that the piece that we're excited about as well as the recent clinical validation from HOPE, HMI-115, they were able to show overall pain reduction in dysmenorrhea, pain during administration. And we feel like that, that is actual really strong evidence that this will work. And we also -- it's not published, but we do have very strong genetic evidence of this as well. So all in all, we do think that this could be disease-modifying, and we are going to be going after the pain piece of this, the pain during administration. And I think one of the things we're really excited about is having Ransi on the team as our Chief Medical Officer. He worked on the NaV1.8 that recently got approved at Vertex, who is the SVP of Clinical Development there. So he knows pain really well. And I think we're set up well to I think, have potentially a successful readout on this. And I think it's a space that has huge unmet medical need and standard of care is just really poor.

Great. So maybe a last couple of general questions. So you guys had a TL1A asset, you still do. Should there be any expectation for investors on likely monetization of this, just given its older generation tech?

Yes. I'd say, look, we're completing that Phase I trial by the end of this quarter. And what we have said publicly is we are not going to invest in developing that asset. And I think those reasons should be clear. I mean, IBD is a very challenging space for development. Patient recruitment is extremely slow and it's very competitive. Whereas you look at us allocating resources in the right way, we're allocating towards ABS-201, where we have really no competition on the mechanism for AGA. And we think based on what we've seen HOPE doing, they're basically recruited to only develop their molecule in China for endometriosis. So we think we could be first to market in endo as well. And those are significant opportunities with less competition. And certainly with AGA, very rapid recruitment and low cost for trial. So we have discussed that publicly for ABS-101, the anti-TL1A program. We are looking to potentially partner that and looking at other new indications with partners, but not ones where we would invest capital in. But we are also derivatizing that into some bispecifics that could be synergistic with some of our other targets in our pipeline. And that would not be aimed towards IBD, be aimed towards other indications.

And cash position, cash runway?

Yes. You probably saw we recently released an update on cash. We had $144 million, just above that end of Q1, and that gives us runway into the first half of 2028. So essentially allows us to get our full readout here on the ABS-201 AGA trial as well as we believe an interim readout on the endometriosis study that we're going to start in Q4.

That's very helpful. So kind of a last summary from you guys. I mean, lots to unpack overall, but what do you think investors are missing about your story? .

I think first, it's the -- the prolactin, I think people are still, I think, understanding how is this mechanism going to work, like why hasn't anybody looked at prolactin. So I think that there's like this -- it's new biology that's been out there, and I think people are just kind of wrapping their heads around the actual mechanism of action. And I think when you dive into the science, I think you see that there's very, very strong evidence of this working in not only AGA and endometriosis, but actually other indications as well. And to me, I think that, that's probably like the biggest hurdle. And it's kind of like similar to [indiscernible], like that was kind of a target off the beaten path that I think folks didn't know if it was going to work and they got a great readout. I think it's a very similar type of story here. Again, it's just an underappreciated target that I think has a lot of very strong data backing it.

And Gil, I would add to that, like I think there's a lot of investors, at least still recently categorized this as an AI platform and didn't really look at the assets. And I think what we're seeing now on the IR front is a lot of investor engagement and a lot of focus around ABS-201 for both indications, but predominantly in AGA right now since that trial is running. And so we're seeing some recent initiation from investors and a lot of diligence going on. So I think that dynamic of sort of somehow being kind of miscategorized and not understood in terms of the true assets we're creating using the platform is starting to change.

Great. All right. We're out of time. I want to thank you both again for attending today.

Yes. Thank you, Gil.

Thanks, Gil.