Acelyrin, Inc. (SLRN) Earnings Call Transcript & Summary

Hello, everyone. Good afternoon. Day 2, Jefferies Healthcare Conference in New York. My name is Akash Tewari. I cover pharma and biotech companies here for the firm. I have the pleasure of hosting the Acelyrin management team, the new Acelyrin management team. I will hand it off to Mina to give, maybe some introductory remarks and introduce your colleagues and then we'll get started with Q&A.

All right. Thank you, guys. Hi, Mina Kim. I am the new CEO at Acelyrin. I am about 4 weeks into the new role, but I was actually employee #45 at the company. So long tenured. Started there as the company was building the portfolio, and in particular, came in to help get the ValenzaBio acquisition done, which is where we acquired lonigutamab, which is one of our lead programs. And then we rolled into the IPO. We did announce the management changes, but I would actually describe those as largely internal promotions. We as a team have been together for a while. And so we have continuity and knowledge across the operations and the portfolio. And so there has been a little bit of, I'd say, title changes, but very much the same team in place. I'll let Shep and Gil introduce themselves.

Hello. I'm Gil Labrucherie, the Chief Financial Officer. I've been with the company about a year, and glad to be here and share more about our company and our vision and thanks for the invitation to the conference.

Hi, Shep Mpofu. I'm the Chief Medical Officer, started in September last year. Great to be here. Thank you.

All right. So let's get started with questions, and it's funny. In this job, I feel like everyone wants takes in like 15 minutes. I remember I met with your company and I met with you, Mina. Right after the announcement was made, it was a 15-minute slot, and then I had to spend the rest of the day being like, "Oh, what did you think? I don't know, because it's a little too early to make an assessment on someone. But the things that stood out in that conversation, I think you probably use the word discipline 3 or 4 times, and you're like we're going to be very disciplined in terms of shareholder capital. Since we've talked and you said the data will help determine the plan. I don't know what your development plan is here. We've gotten data on psoriatic arthritis, which I haven't even really been able to look at this point. And we've also had data in TED with your IGFR1 asset. So from our last 15 minute conversation to now our 25-minute conversation, what do you think has changed? Do you think the data -- the signal you've seen with IZO and psoriatic arthritis and your TED asset is good enough to really move forward and be differentiated where -- versus other pipeline competitors in standard of care?

Yes. So let me maybe step back and frame it up a little bit, right, in the context of our original conversation and what we really talked about there was what are we going to do over the next quarter or two? Like what are the priorities? What is the strategy going forward? And maybe just to frame it up, we are in a really fortunate position where we have 2 lead programs, izokibep and lonigutamab that we think are both very promising. We think there are drugs that work. Izokibep, in particular, we think is approvable in multiple indications and will be a profitable franchise. That said, it's capital intensive. And this is where I think the discipline, the comments around discipline are especially important. We have also the fortune of having pulled in the guidance around our HS Phase III trial, which we originally were planning to read out at the end of the year, but which we are now planning to read out in the third quarter. And so we are going to use that data to really drive decision-making and disciplined decision-making around capital allocation and portfolio prioritization going forward. And part of what's driving that is we do have a second asset, lonigutamab, where we read out very early POC data, small numbers, right, at the -- earlier this spring, but that we thought was very promising and warrants further development. That POC trial is ongoing, and we did read out some incremental data from Cohort 1 at ENDO earlier this week, and we are planning to read out more data from the POC in the third quarter. So obviously, there's a lot in the third quarter that's going to inform, sort of, decision-making going forward, but we are very excited about lonigutamab as a program. So looking forward to that readout.

Okay. Understood. Now why don't we start off with TED actually. What's the interest -- I think -- look, there's a lot of companies doing subcus, including, by the way, Horizon and Amgen will have an on-body. So I think you're going to -- the most important thing with the subcus, okay, you got out of the infusion centers and it opens up opportunities to get reimbursed. I think your approach is interesting because what you're really exploring is, can we dose chronically. And can we avoid the hearing toxicity that we've seen with Tepezza in some of their trials and also in the real-world setting, where I think maybe 5% to 10% of patients actually have more durable hearing loss, which I think is more important than any transient ones. I think the pushback I would give you is when your initial data came out, tinnitus is a form of hearing toxicity, right? Like other companies have assessed that tinnitus is hearing toxicity, but that does not necessarily mean that leads to more durable, clinically meaningful forms of hearing loss. And I think that's really where all of the discussion needs to be focused on your program. Talk to me about why you feel confident that you can kind of decouple both of those AEs?

Yes. And maybe just to push back a little bit on the framing of the question. We actually think that there is potential for differentiation, right, putting safety aside. So you started with subcu and what we have is the first real inpatient data in subcu. And so I know there was a lot of conversation about subcu, and we think that the qualities of loni are really what have enabled that and what we're excited about, -- right? So we -- and Shep can go into some of the details around the data. But we -- what we have seen even in these early cohorts is early onset of action, right, and the durability of that response. So the ENDO data, for example, shows that we dose patients at week 3, and we see that impact lasts through week 12, right? And so given that profile at very low doses, Cohort 1 was 40 mg, right? Cohort 2 is a 50 mg loading dose and then 25 mg weekly. We think that there is a real potential to differentiate in terms of efficacy at much lower doses and to really facilitate a true subcu. And again, we are the first to show POC data in patients in TED, right, in a subcu format. So I think there's a lot of differentiation there before you even get to the safety issue, right? And how we think about that is right now, the hypothesis is that we could win there, but it's hard to prove the negative, and we don't think we're going to do that in a POC trial, right? We can't declare victory there, and that's going to take some time to play out. And Shep can talk about what we've seen so far and how we're going to measure it going forward. But if the hypothesis holds and around loni's attributes, we do think that over time, we can differentiate and win on safety as well.

Yes. No, absolutely. Maybe just to add in terms of how our paradigm approach is different and unique. We are focusing on the potency of our molecule. And also, we have established an exposure, important in terms of epitope availability. How much do we suppress and we picked the data quite nicely from our single ascending doses in subcu, where we looked at a 20-milligram subcu, 40 mg, 125 mg, 250 mg. And the 40-milligram subcu, which we started in our Cohort 1 gave us the confidence that we have adequate suppression that could last 3 to 4 weeks, and the data that was presented matches that. So we are approaching from a minimum effective dose, whereas when we look at other programs, there was no dose ranging done in this study. And therefore, we will arrive at a goldilocks dose with a therapeutic window that has a very good benefit risk that might [indiscernible] any other issues in the hypothesis of a high Cmax, abrogating the blood library barrier resulting in perturbing the function of IGF-1 for cochlear physiology. The last thing I would say is in our cohorts, we do audiograms in patients at baseline and also at any time point where in the first cohort, there were 3 patients that had transient tinnitus. One of the patients had tinnitus on the first dose at week 0, that lasted 24 hours, and then on the second dose at week 3, that lasted 24 hours. All those patients had normal radiograms. And moving forward, we'll be having audiograms at baseline throughout the course of exposure in all of our studies. Up to date, all cohorts have had normal audiograms, and we have not seen any hearing impairment based on sensorineural hearing.

Okay. So that's really important. And I wanted to kind of hit on that. Because, again, I think the question becomes when are we going to know enough to go chronic dosing? And that, I think, is going to be really interesting because you look at [indiscernible]. They're looking at 16 dose trials. You have seen examples of where you just may need a dose longer and actually patients get into a proptosis response. That's really, I think, differentiated. Tell me this, when are we going to get enough long-term follow-up data when it comes to audiogram safety? Forget tinnitus. I think your point is well taken. It was transient. But are we going to get enough durability at your go-forward dose? Is that going to occur, maybe in the back half of this year? Is that going to occur next year? And what is the follow-up needed for you to really derisk yourself on audiogram hearing toxicity?

Yes, that's a very important question. And I think what we are doing currently in our cohorts, we are following patients up to 12 weeks. So we have audiograms at baseline and then definitely in the middle of this study and then at 12 weeks. So every -- what we propose moving forward when we move to pivotal studies, we'll do audiograms at baseline and every 2 months up to a year, our studies are a year long. Our primary efficacy endpoint is at an earlier time point. But we believe thyroid eye disease is a chronic autoimmune indication where there's disregulation of the IGF-1 access, not only in the eye, but systemically. So exposing patients to a therapy at a very good therapeutic window might have benefits, not only in the eye, but other areas systemically that might have disregulation.

Understood. Now I think there's a nuance, especially with your drug. Because I think when you look at the internalization and of course, internalization, I've seen different [ figures ], right, that Tepezza, I think initially, maybe 15% internalization, maybe the actual internalization rate is higher. But it actually does affect your PD decision as well. Because I think what's interesting is there are signs that may be dosing higher with a molecule like yours where you're having a very high rate of the internalization of the IGFR-1 receptor, is only conferring more toxicity. It is not actually conferring more efficacy, and it's really tricky to do that PK/PD modeling work from our public disclosures. Talk to me about the dose range that you're picking and why you think you are kind of balancing internalizing the receptor and getting the clinical efficacy that will stack up with other therapies in the space, while also maybe avoiding some of the toxicity.

Yes, that's a very important question. But obviously, we still have small data sets. But I think where you're going is important. And I would start by saying, number one, by being very clear in establishing a minimum effective dose, and we are very fortunate that we have a potent molecule, which at 40 milligrams, demonstrates at 3 weeks, a rapid onset and improvement across all endpoints that are seen with Tepezza at 6 weeks. With doses, if I was to give an example, a 70-kg patient requires 1,400 milligrams of Tepezza; in our study, it's only 40 milligrams. So we believe that ability to have rapid efficacy with a depth of response. And what we have just shown now is durability after the third week. At 12-week follow-up, patients have still maintained their response, allows us to be prudent to choose a dose that is not too far from where we are starting. And knowing that, when you look at the blood brain barrier, the blood labyrinthine barrier, sometimes the abrogation of that is due to too much drug that's able to penetrate. So therefore, if the hypothesis is true, we might have limitations on having that impact in patients. But obviously, we will need to run the audiograms in our pivotal studies to show that this is what we are seeing is the potential safety benefit.

Yes. And just to be clear, right, that POC trial is ongoing. We're in the third cohort. So that dose ranging work and exploration that we're doing, we do think is very important to address this question and does enable both the subcu format, but that longer treatment regimen. So I think that is -- like those are all of the issues that we're thinking about, but that is where this POC trial and doing real dosing work in advance, we think is a real advantage for us.

And should we think it's going to be Q3? Or could you actually go maybe monthly, is maybe the right approach here? I know there were some questions even when the initial data came out, but actually we've got a dose we're not showing data on, which was always fun. But what happened there? And what do you think the doses are going to be that you ultimately select?

We are going to explore monthly. And like I said, we do plan to read out more data from the POC in the third quarter.

Third quarter. Okay. Now, the funny thing in biotech is sometimes the worst thing is the drug works, but it's just not good enough, right? And then it's really hard for some management teams to be like, okay, I've got something that's going to be viable, but not differentiated. And I think that's the question I think everyone has on izokibep and psoriatic arthritis start with there. Because I think the pitch initially was, okay, we're going to show as competitive on some of these traditional endpoints, but it's enthesitis where we're really going to differentiate because we have higher tissue penetration. Initial data came out, maybe high placebo response, but I don't think we necessarily saw that signal, right, where there's a clear differentiation on the enthesitis part. What if -- the data came out today. Talk to me about the hypothesis of IZO in psoriatic arthritis. Do you feel like it is differentiated enough to move in an area where Cosentyx is going to be going off patent very soon?

Yes. No, thanks for that question. Number one, based on the characteristic unique properties of the molecule, being a small protein therapeutic, 10x smaller, as you say, than monoclonals, like in IL-17s that are currently approved, we believe we have the ability -- based on the potency, which is also higher, the ability to penetrate, permeate and be present in tissues that are difficult to treat in this multifaceted disease. Our data has already shown that in terms of what we will be presenting at ULA, ACR50 responses that happen already separating quite nicely by week 4 and being very significant by week 16, plus the 1,900 responses that are in the range of where you have an A and F blockade. So we also achieved, to your point, pertaining to enthesitis, in the Phase IIb study, we saw enthesitis resolution in patients with enthesitis of [ LE1 and 2 ] only. So low bed-in enthesitis around 83% improvement. In our current study, despite a high placebo response, when we look at the prespecified strata for the enthesitis, we see in the low burden, we see 3/4 of patients have resolution and in the high burden patients, 50% of resolution. But our placebo-adjusted responses show very nicely that this is the data where you separate placebo in high-burden enthesitis from active drug. We have not seen other people present that data in that way, and we still think there's still an opportunity by improving training in assessing enthesitis in the next Phase III studies to showcase this differentiation.

Understood. So bottom line, the psoriatic arthritis, you have kind of passed that initial threshold, you're going to be moving forward. Understood. HS, same question. What are you going to see that's going to make you excited enough to push this forward and getting it onto the market?

Yes. And maybe let me step back and put the PSA data into context as well, right? Like I said at the beginning, we are going to look at this HS data readout and make some decisions around portfolio prioritization and sort of go-forward capital allocation, and we are going to be disciplined about that. When we look at IZO, we don't look at it so much indication by indication. This is a classic kind of pipeline in a program type of profile where we, again, think it's approvable in multiple indications, and it deserves a place in the market. And it's how do you get there, right, balancing the capital requirements that are required for a program of this size. And so I think about PSA and HS, we're also reading out uveitis data by the end of the year. And as we think about a potential franchise around IZO, what is the best avenue, right, to bring that asset to a market in a capital-efficient and disciplined way. And so I think the context and looking at them together programmatically is pretty important and this HS data readout is going to be key for that future investment. So even with respect to PSA, we have not made a decision about the future of that program, and we're not going to do that in isolation.

Understood. So it's going to be really do I see enough proof of concept in both of these indications? Okay. Now I know there's -- these are always going to be a little more difficult, but I think it's extremely important for your company in particular. You have a lot of cash. And you think about ROI. Talk to me about in a scenario where I see a signal in HS and I see a signal in psoriatic arthritis. We are moving forward in terms of getting that on the market, running studies. What is the cost associated with that decision?

Yes, do you want to take that one?

Yes, that's -- thanks for the question. I think that that's something that we're thinking very, very carefully about. As Mina said, we're committed to being very disciplined around the target product profile and what does it take for the next step to get approval in each of these indications. And from a commercial perspective, what needs to be done to lay the framework for a successful launch. So we're fortunate to have lonigutamab that we're going to put into late-stage development. We're going to get more information from the HS study. And that's going to help us sort of make the capital allocation decisions. So we're going to stay very disciplined about that, very conscious of our cost of capital as we make that decision as we go into the third quarter.

Understood. Okay. So maybe too early just to give that definitive data point, I think that's very fair. Mina, if you were to say an investor, they meet you for the first time and you say, they ask you, where should we be spending most of my time on. Should I spend my time understanding izokibep, should I be spending my time to understand the TED asset? What would you say to them right now? Where is the best use of an investor's time to figure out the Acelyrin story?

Yes. Look, I think, again, 2 very different profiles. We obviously have put out a lot more information, right, on izokibep. So I think that's all out there, and again, we think that there is value in that program, right? It deserves a place in the market. It's a question of how do we get there. I think lonigutamab is a place to spend time, right? We obviously have put out less data, but again, more to come. But we think that, that is a very promising program. So rightsized for our smaller trials, more capital efficient, and it's an indication that this team knows super well. So I think that is an area that we are excited about and looking forward to talking to folks about that more in the future.

Understood. Okay. So let's say that you have HS data, it's good, it's not great. It doesn't meet your threshold. And then I think you say, looking at IZO as a program, you know what, there are better places for us to spend our money. Great. What would that look like for Acelyrin, right? Would that look like partnering with that asset out with other companies trying to monetize that? Would it look like maybe "starting all over again?" Or would it look like external M&A? How -- in a scenario where izokibep does not move forward, does not meet your ROI thresholds, what are the options available both to you and the board?

So I think all the things, right? What I would say is we're open-minded. Like I said, we're going to be disciplined and look at everything. I don't think there are any foregone conclusions we will do what we think is best for the programs for patients or investors, right, to drive value. Gil, anything to add on that?

No. I think that's well said. So we just want to -- we want to find the most efficient path forward, and we're open to every different option. And we -- and both Mina and I and Shep have been on number of -- a number of different paths to get there. So I think we'll have to see the data and let that drive our decision making.

Yes. And we are in a really privileged place, right, because we did -- this company is so well funded and has programs that work. It provides a lot of optionality, right, and time to figure out the right path for all of these assets. And so I think we are in a really privileged position in that way. And so we'll look at the data, stare at it and make disciplined decisions on the back of that.

Understood. Maybe a quick question. You saw -- I think lebrikizumab, Lilly started the trial. I think it was systemic sclerosis. It was one of these new indications. It's not hitting me right now. Talk to me -- that's where this kind of gets interesting, right? What are some targets with IL-17 that maybe the big guys haven't gone after? What is the next "HS" that is a big market and we're not seeing? Any ideas about where IZO could maybe head what people aren't really talking to you about right now?

Well, just to throw out. I know we've been talking about HS and PSA. We are reading out a trial on uveitis and that's an indication that we really like, high unmet need, right, way less competitive in some ways, and so that's a nice profile, and we also have the AxSpA, which has been part of the development time line. And so that's also one that we don't talk about. So those would be obviously the next two. And then I'm going to defer to Shep on some of the more creative thinking.

Yes. I mean there are quite a number of life cycle management indications. One could go on in IL-17 having worked on izokibep before giant cell arteritis, polymyalgia rheumatica and with the potent we have to penetrate tissue disease like lupus nephritis, rotator cuff tendinitis, and even chronic spontaneous urticaria, there is good evidence that IL-17 is a role in there.

Interesting. Maybe lastly, we got a minute left. Everyone says there's a lot of mast cell mediated diseases. Everyone basically stops at urticaria, and that's pretty much it. You have a KIT. I don't know how maybe differentiated is versus the Celldex or Jasper compound. I think that's TBD. But I was always curious what [indiscernible] would have taken that indication too. I'll hand the same question to you, Shep. Do you see an indication with your KIT inhibitor that you can take this in where maybe other people have not explored and you would be first-in-class?

That's a very good question. I think at the end of the day, what's important is to focus on an indication where there is great evidence in terms of probability of success given the well-recognized PD markers in that disease. So that's what we'll be focusing on. And then to your point, then expanding very quickly to any other indications where we see the biologics making an impact.

Understood. We are out of time. What a great conversation. Thank you so much for this, and really excited to keep the dialogue going.

Yes. Thank you so much.