Absci Corporation (ABSI) Earnings Call Transcript & Summary

Thank you. Okay, good morning, everyone. I'm Sean Laaman, Head of U.S. Mid-Cap Biotech Equity Research here at Morgan Stanley, and welcome to Morgan Stanley's Global Healthcare Conference. Before we commence, to make you aware of some important disclosures, please see those disclosures at the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. For this session, we have the pleasure of hosting AbCellera with [ founder and CEO Sean McClain ] and [ CFO and CBO Jack Johnson ]. Welcome and thank you both for your time today.

Yeah, thanks for having us. Again. Yeah. Maybe I just to do me a favor and answer some questions before we delve into the guts of it. Yes, obviously there has been a lot of activity in China, and I think it's about how you utilize China. We obviously have an AI platform, and we look at China and just how we scale our infrastructure, and so not necessarily going in and, you know, assets there, but working with China to be able to rapidly test these hypotheses, get to yes-no answers on new targets, and even looking at how we could potentially utilize them on the clinical development side. It's been very interesting to see all the activity going on, but we, we definitely see it as a net positive for the overall space.

Sure, thank you. Next question is redundant for you guys because it's asking, implementing AI in your business, so we'll skip that one. The third one, you know, so which policy variable are you most focused on? I'm guessing it's FDA, but think about FDA and Medicare negotiation, MFN tariffs, etc. But I'd suggest it's FDA.

Which policy variable are you most focused on? Yeah, I think we're most focused on FDA. I mean, we're in the middle of our Phase 1/2 trial for pattern hair loss. We're about to initiate a Phase 2 trial on endometriosis. So we're following all of that policy activity. And I think as [ Sean McClain ] mentioned, we have a strategy to leverage execution in China, not just preclinical execution, but to do proof of concept work in China and Phase 2 development going forward. So we're following all the developments in Congress and policy-wise from the administration, but we do think there's a significant opportunity there to reduce costs, increase speed, and really leverage Chinese execution.

Wonderful. Thank you, Zach. Now to get into it, so I've got a series of questions here, obviously on ABS-201, in patent hair loss to start with. So the interim Phase 1 across 4 single ascending dose cohorts in 32 volunteers showed no serious adverse events and an estimated half-life, I think of at least 65 days. That is a single dose estimate. How much could it move with multiple dosing and complete follow-up?

Yes, so far the trial is going very well. We're very happy with the progress. And we're going to be announcing the Phase 2 efficacy data in December of this year. The recruitment has been going extremely well, and safety profile really good as well. And, yeah, we're really excited to be announcing this project.

Of this data in December. Okay, so that's the 13-week data coming out in December? That is correct. Got you, thank you. Um, I guess the commercial thesis rests on 2 or 3 injections over 6 months, you know. What is the minimum durability that still supports that profile and. What happens to the pitch if it lands closer to monthly?

Well, first off, I'd say we're very pleased with what we're seeing on the half-life. So it looks to us like it's going to be either 2 or 3 injections over 6 months, so once every 2 months or once every 3 months. And that, at least from our consumer research, is a game-changer for the market because the convenience paired with the durability of the effect based on the mechanism, I think would be a completely new premium category of therapy for pattern hair loss and resonates extremely well with customers and we talked to consumers, we've commissioned the large survey as you know. They're very dissatisfied with standard of care. So a profile that allows for a very simple injection that infrequently with durable effect is very exciting for that population.

Awesome, thank you. And we just mentioned that we're looking at the 13-week data in December, so you look at like with darkness and hair count if I remember that correctly and you know I guess some what sort of the the benchmark you think you need to achieve?

So we've talked about all along. This is a directional readout. This is a brand new mechanism that is being explored. And when we first started this study, it was really to be able to show, yes, indeed, we are getting the hair regrowth. And, you know, we're hoping to, you know, actually see some interesting signals. You know, you look at, you know, the ketogen follicle, these dormant follicles that haven't been regrowing hair for a while. If you can actually start to show that you can regrow hair there. I think that that's very exciting. There's no other mechanism out there that's able to show that. So we are going to be reporting on various different parameters, obviously the most important is the terminal hair growth and we'll also be looking at total, so including vellus and then obviously the darkening as well. So I think it's going to create a really nice as to what the potential 26-week reach is.

Could look like and again everything is going quite well and we're excited to be able to share that in December. Sure thank you. When we get to the 26-week data what sort of hair count are we hoping for? I think it's kind of 30 to 35 would be, you know, in class. So maybe talk a little bit about that. And then what if you sit in that 20 to 30 range? Is it still benefit in providing a drug that delivers that? Maybe just talk through that a little bit, [ Sean McClain ].

Yeah, I'll let Zach dive into that a bit more. But if you look at how we came to that, you know, 30 to 35. That was actually based off a consumer quant study, and that's, you know, where we saw a very large TAM, and there was high demand at 30 to 35. I think that there is the opportunity to, from a biology standpoint, to even be higher than that, and I think with even in recent, you know, minoxidil studies, even being at, you know, 30 to 35 could even be not only only best in class, but first in class as well. So we're really excited about the overall opportunity, but I'll let Zach kind of talk more about that.

Yes, I mean, I'll just add that, you know, when we did the survey of 610 consumers that have pattern hair loss, had to present them with a target product profile so we presented them with a profile that was an efficacy similar to high dose oral minoxidil so call it 30 hairs per square centimeter growth in terminal hair count and then the durability of a couple years based on 3 injections over 6 months and the response to that was enormous. I mean, we saw, like, broad-based response from both men and women saying they would seek out that product, they would choose it as first line. And when we tested some pricing... The feedback we got is we could price this at a significant premium. And so taking that all together, we estimate, at least at that TPP, with that effect size, that's north of a $25 billion TAM in the U.S. alone. Now, if the effect size is higher, I think that TAM goes up. We can price even higher.

Thank you. Maybe a reminder of the TAM in the U.S., but the percentage that you view as women, and then I understand that finasteride is essentially unavailable to women of reproductive age, leaving topical minoxidil as the only option. So do you think that the bar is different?

Or lower for an outcome in women versus men? I mean, I do fundamentally do. You saw Veridermics' readout recently. Sort of in the low 20s for women. And then a pretty significant portion of those women in their study experienced hypertrichosis, and that's common for minoxidil, right? You get unwanted hair growth. So the side effect profile and efficacy of minoxidil for women is far less than ideal, and we see that in our surveys, too. Women are very dissatisfied with standard of care, and we think that's a very underappreciated market in pattern hair loss, and I think that the TPP that we're bringing, this new category of therapy, I think is going to resonate with that market.

Of course. Sure. And when you talk to the dermatologists, too, they're seeing actually more women coming in with hair loss problems than men. And I think it just goes to show that standard of care is just really, really poor. And so there is a massive opportunity in the female market in addition to males.

Sure, just got paced a little bit, but are you aware of studies that show hair loss associated with GLP-1 uptake and is that another sort of complementary angle you could you could sell?

Yeah, 100%. I mean, there's published literature that's coming out, and then again, you just talked to the anecdotal evidence with these germs, and they're saying like 10%, 20%, even more. GLP-1s are experiencing hair loss and I think it's due to the stress of the body when you're losing that amount of weight so rapidly and so I think being able to pair ABS-201 with the GLP-1s I think is a real opportunity and a big overall synergy.

Sure. 13 weeks might seem a little early to get a decent response in hair growth. I think, you know, minoxidil and finasteride take, you know, 24 to 48 weeks to see a decent outcome. What's the risk if you get to the 26-week data and you get a false negative, and how would you frame, you know, potentially, you know, ambiguity?

Data. Yeah, so as we've said all along. So I guess first off, you hit the nail on the head like you know, we do think that 13 weeks is probably the earliest time point that you could actually start to see hair regrowth given the growth of hair, and I think you're going to just continue to see a linear, you know, increase from there. And... Again, we think that the 13 weeks is correctional. I think that there's a real opportunity to see some new mechanisms of merge that other standard of care aren't able to address. And we're quite excited about what that looks like. And again, we're not putting any sort of firm numbers on there, but we are going to get very quantitative with the overall readouts at the 13-week.

Cool. Thank you. Maybe a little bit on the science so prolactin receptor antagonism is the first new mechanism in androgenetic alopecia for 3 decades or so and I guess beyond the ex vivo scalp work, what human evidence supports prolactin as a driver of pattern hair loss?

Yes, so we actually just released some genetic data in the last early which actually showed from the UK Biobank, men that had increased levels of, or SNPs that drove increased levels of prolactin receptor had more severe patterned hair loss. And so we are seeing that uh increase in receptor uh within the actual um follicle is driving pattern hair loss from a population genetics level, which is actually really, really quite interesting to see and our team was able to publish that work just recently. So I think that that's pretty strong genetic evidence, in addition to the mouse study, the the primate study we did and as well as the human ex vivo data.

Okay. Thank you. Scalp data point to follicle regeneration and stem cell restoration, is durability off treatment part of the claim and would you expect to see it at 26 weeks?

So we're really excited about the regenerative effect that this drug could have. If you looked at the stumptail macaques, one of the things that got us most excited was not only did you get full hair regrowth at 6 months, you also got repigmentation. And then 4 years post-treatment, they continued to regrow their hair. And one of the phenotypes that you see in individuals that are losing their hair as it miniaturizes, they're actually losing the stem cells within the follicle niche and you get a decrease as well in collagen 17A which attaches the stem cell to the niche and what we've seen is blocking the prolactin receptor actually replenishes that stem cell needs, increases collagen 17A. And once you have that, you have the ability to kind of rebuild all that machinery. And once it's rebuilt, and you're off drug, it's obviously going to slowly decrease over time with, you know, bald intakes, quite a bit of time to actually see the full effects. And so that's why we believe we're going to get this regenerative effect, because we're affecting the stem cell niche. And again, there's no other drug out there, minoxidil, finasteride, that touches the stem cell niche is able to replenish it.

I'll just add to that too, in the clinical trial, in the headline trial, we're going to follow each of these patients a full year after their final dose and we'll be taking hair measurements. So we're actually going to be able to track this durability post-treatment.

Got you. Thank you, Zach.

Is a systemic antibody in injection where I guess the other options are pretty inexpensive generics. What's the bar for safety here and what do you think you need on the label to be commercially viable?

I mean, I think we're in a great position with respect to safety. I mean, you saw we released the interim data from the SAD portion looking at safety back in June. It looked clean. More to the point, too, human genetics supports the safety. There are case reports in the literature of individuals who have loss of function mutations in either the ligand or the receptor, the prolactin ligand or the prolactin receptor. Those individuals are perfectly healthy. They only present to clinicians because the females can't lactate. Otherwise completely healthy, no sexual dysfunction, including they've done family tree analysis, males also fully healthy. So this looks to be a very uh attractive mechanism. We don't see any mechanistic reason to think there's a safety issue. And then the molecule we have based on this animal data looks to be safe as well. So we think we're in a good position.

Wonderful and this pattern hair loss is largely a cash pay market so how do you think about potential reimbursement and what sort of pricing assumptions do you think about?