AnaptysBio, Inc. (ANAB) Earnings Call Transcript & Summary

Well, thank you, everyone. Super excited to have AnaptysBio and looking forward to catching up with Dan after a while. So I'll let you kick things off.

Thanks. Appreciate you having me here, Umer. We have 2 very big catalysts coming up in the next plus or minus 2 months. Our 2 lead programs are going to read out Phase IIb data. The first is their BTLA program in atopic dermatitis and the second is our PD-1 agonist in rheumatoid arthritis. So I'll leave it there beyond the fact that we're well capitalized. We have more or less 4 programs going into the clinic, but 2 things right in front of us. It's been a long time coming since we reset the company a couple of years ago.

Got it. I guess maybe let's start with sort of extreme scenarios. If things work, I mean, things work and everything is on a path. Let's start with an extreme scenario where there's a rocky start on these 2 trials, but you guys are well capitalized. Could you -- could we start with that scenario first, Dan? And what does that look like in terms of cash situation, but also sort of beyond -- maybe you could speak to CD122, et cetera, as well and any external BD you're looking into?

Yes. We have very clear TPPs on these readouts. And what we're not going to do is kind of look through pages and try and figure out squeaky eyed, stretching what's not going to work. We have $450 million of cash coming out of Q3. We have 2 other programs. You mentioned our CD122 antagonist. That is in Phase Ia with healthy individuals right now and ramping through the SAD/MAD. And we will talk about where we're going in the Ib trial. Next year, we'll do an R&D Day. We also have our fourth program. We filed an IND recently. It's a BDCA2 modulator. There's one other in development at Biogen. They have a couple of Phase III readouts in lupus and CLE over the next year, 1.5 years. We have a more potent version of that. So that's about to start the Phase I. So a lot going on here. And then beyond arthritis for the PD-1 program, we're really excited. And it's actually the primary focus for the company in resetting the PD-1 was this colitis trial. Eli Lilly's proof of concept in RA reprioritized the order of operations for us, but colitis has strong literature on this mechanism in this disease, animal model data, that's enrolling. So that's another catalyst. Q1 2026 is the Phase II readout there. So there's a lot going on at the company. And lastly, we do have a royalty stream from GSK on JEMPERLI, which is a PD-1 antagonist. There's a $75 million milestone that will come in, in the next 1 or 2 years, on $1 billion revenue. Wall Street consensus for GSK is that's 2026 plus there's a value in the royalty tail as well.

And what's the royalty rate?

8% to 25%. Now we have monetized the near-term royalties in a nonrecourse transaction, but based on run rate, there's value there.

You have monetized?

We have monetized in a nonrecourse deal. So they will cap out at some point, and we'll get a return on the future milestones in the mid- to long run.

So when royalties go beyond 12%, which means sales beyond $1.5 billion, that's when you get it back?

No, it's $600 million of total royalties that need to be paid out on milestones and royalties to pay back.

And that happens in what time frame?

It depends on the estimates, but you can do some of the modeling on it, 2, 3, 4, 5 years. It just depends on the curve. There's actually a second-line non-small cell cancer readout that they've guided to in the first half of 2025, which is chemo plus chemo plus JEMPERLI versus chemo plus JEMPERLI plus TIM-3. That's another Anaptys milestone. That reads out soon. I mean the kink in the curve from that type of market if we see positive data there is huge, and that's not built into the consensus forecast.

Interesting, interesting.

So a lot happening here beyond 2 pretty big milestones coming up.

Because presumably, if that trial hits and let's say, your royalty rate is even 10 to 12% on a $2.5 billion product it is worth more than that.

It is worth more than the company is worth today.

Right, right. So the -- okay. So maybe can I just drill down that a little more because that completely changes Anaptys versus -- just for a second. So let's just go down that...

I love you, you don't want to ask these questions.

The current indication for JEMPERLI is let me just...

So what's driving growth is frontline endometrial cancer, where they were first to market there with a PD-1 antagonist. And that's what's driving the growth there...

It's endometrial.

Yes.

Because the JEMPERLI data that's high on my mind is when Summit Therapeutics showed their PD-1/VEGF, it had like this incredible PFS and OS. However, JEMPERLI had shown a trial. I think it was a PERLA study where OS hazard ratio was in the 0.7s.

It did head-to-head.

But it missed it on the p-value a little bit. So it wasn't on the label, which reminds me now, and I don't know there's a chemo combo trial going on. So presumably, they should be able to hit. And is that versus KEYTRUDA, that trial?

It's chemo versus JEMPERLI plus chemo versus the triplet with TIM-3 and chemo.

Chemo versus...

Standard of care is chemo.

Versus JEMPERLI plus chemo plus triplet.

Yes.

But your basic point is right now, the estimates are off of endometrial. And if they can get lung on label, it changes. What's the peak sales expectation right now on this?

$2 billion to $3 billion depending on the analyst.

In the consensus numbers. So let's just call it $2 billion. Let's just go with the $2 billion. So presumably, lung adds something, which could be $1 billion to $2 billion, something along those lines. Got it.

Look, POS in this is low, right? Set the right expectations, but they are guiding the data in the first half. They're guiding a BLA filing on the...

Data in first half '25?

Yes. And they're guiding on BLA for second half of '25.

I see. So if I just think about it out loud, let's say the royalty rate hangs out in the lower side of that 8% to 25% range, let's just call it around 10%. And the sales run rate currently is about $600 million. So yes, in the next 3 to 4 years, the royalty caps out.

And the $75 million payment is excluded. So that one comes to us in the next couple of months.

Right. So what that means then is, realistically speaking, you have a path to having an annual royalties of $200 million plus starting 2028 time frame.

Step back from this for a second because -- for the last 2 years, we have 2 huge co-inhibitory receptor programs. I know you're driving to the royalty. We are not going to advance both of them ourselves into Phase III in derm, rheum and GI. It's 3 huge areas. It's an operational lift that's too heavy beyond a financial overhang. If I have 2 winners here the flip side, we will partner one. They're novel mechanisms. We're the only SMID Cap in development with checkpoint agonists, and we have 2 distinct agonists in different markets. And we can advance all these on their own and execute Phase III. It doesn't mean we're going to commercialize globally, right? I'm not saying that. But we will find a partner for one of these drugs over the next 12, 18 months and on capitalized through year-end 2026, if we never advance to Phase III. And we are capitalized to enable Phase III. So I raised a little bit of money in August to invest in the drug supply ramp-up plus other operational things we're doing to get ready for the Phase IIIs. So there's a lot that's going to happen in 2025. There's a number of different ways I could pull through capital across 4 programs, and we're going to have a lot of strategic optionality here. Whether one drug works, 2 drugs work, no drugs work, we're in a good position from a capital and other catalyst cycles with noncorrelated assets to the agonists.

Got it. So in terms of data readouts, you have BTLA with atopic derm by year-end, you have PD-1 in RA in February and then UC is further out. So RA with the PD-1 and atopic derm with the BTLA.

Correct. With 2 best-in-class checkpoint agonists.

Correct. So let's start with maybe the PD-1 agonist, and I want to focus on BTLA next because that's the main focus with something coming up. On the PD-1 agonist in RA, remind me, Lilly also ran it in RA ahead of their business reasons related. Any other color on that? Was that efficacy related or tolerability or...

They ran a 60-week trial, 500 patients in Phase IIb. I think everyone is aware in Phase IIa, they show compelling efficacy proof of concept with a self-described moderate depleter and Anaptys described weak agonist, right? So they have partial efficacy, a moderate efficacy profile, and they showed proof of concept in RA. In the Phase IIb 60-week trial, they've had 6-week data there for 8 or 9 months. They've known that they've had, you don't run a trial for 60 weeks if there's a safety issue. What we've heard is that they showed efficacy. It looks like other biologics. That's a TPP that does not work in a mature market.

So it's efficacy like a TNF and then they're just worried about biosimilar. Hence, the business reasons.

Right.

Which then means presumably, if your molecule is better, you could come in presumably better.

We have a materially more potent molecule and are very excited about what we hopefully will see in the next couple of...

Can you speak to that materially more potent?

Yes. Lilly is a moderate depleter and a weak agonist. We are a strong depleter of PD-1 high T cells and an agonist to the remaining PD-1 expressing T cells. A lot of data in vitro head-to-head with the Lilly molecule and other molecules in the space for PD-1 that are showing this. We have clinical data sets in Phase I healthy individuals. The company in a prior life ran an alopecia trial. So we have translational data that suggests this potency relative to the translational data Lilly has shown in Phase IIa.

Got it. Got it. Excellent. Anything unique about your trial design versus how Lilly ran it? I don't think you're running 60 weeks.

For the first 3 months, it's similar. It will be similar -- most likely a similar data set. The inclusion/exclusion criteria is more or less in parallel. About 60% of the trial in naive, 40% in biologic experience, U.S., European-driven study. After 3 months, at week 14, if you're in low disease activity, you're eligible to stay on trial if you're on active through month 6. The Lilly trial was a step beyond that going out a year. Our colitis trial will generate efficacy data out through a year and safety data out through a year. So there's differences in the colitis trial in terms of longer term.

If there's an issue, let's say this trial disappoints you, the upcoming trial in RA, UC trial still stands regardless.

We're very excited about the UC trial. There's different corollaries to proof points that have driven efficacy that we are spot on with our mechanism of action in UC that exists in commercialized programs today.

Got it. Makes a lot of sense.

Enrollment has been underway for the better part of this year, and we're rocking and rolling in there.

Got it. Any differences in background methotrexate usage or steroid usage...

Methotrexate is on background for all these studies. And it's a good plug here. These are meaningfully comorbid patients in RA. These are not atopic derm patients, and they're all methotrexate. Your immunosuppressed infections are going to be there. It's 35%, 50% all grade infection in any of these trials on placebo. And then look, here's the benchmark, RINVOQ, 4%, 5%, 6% MACE black box. That's what's getting used. That's the growth asset for these patients who are on third, fourth line. Salvage therapy is rituximab that drives infections beyond what you would normally see. The AE profile here is horrendous in terms of on drug, off drug because of how these patients are treated. So it's a different bar to be better than on efficacy. What we're seeing on a blinded surveillance basis is nothing that would look uncharacteristic to what you would see on placebo. I've said since August, and this is the same for both of these drugs, we believe we have active molecules. And for the PD-1 program, we do have an unblinded DSMB that has looked at this data routinely, and there's no signal to date, nothing of caution.

Got it. Primary endpoint, I think you guys are using DAS28, the activity score. I remember historically just looking at trials, ACR50, ACR70...

That's what we're guiding to. We're guiding ACR50 and 70 is that look towards where the JAKs are. And this gets back to the TPP. If you see something that's biologic like, that's where there's not enough benefit and then there's now risk in developing new mechanism of action. That's the Lilly commentary and what they saw. You need something that looks towards biologics. For ACR50, that's in the low mid-30s on an absolute basis. On ACR70, that's in the mid-teens. That's the bars we're looking at to be commercially incredibly exciting here and then an AE profile that's better than the JAKs.

Got it. Excellent. Excellent. Maybe transitioning to the BTLA. Could you remind us the trial design for atopic derm?

Yes. So we'll have data within the next couple of weeks here. It's a 200-patient trial. The majority of that is in naive, over 160 patients will be in naive to biologics. We are powered for that naive population. The residual are DUPI experienced. So it's 3 active arms versus placebo, and we've stratified by those 2 populations. So it will be about 8 or 9 patients per arm in the DUPI-experienced population, signal finding. We will report out through week 12 dosing, week 14 is the primary endpoint. We report out the primary endpoint is EASI-75. We'll hit on the other key secondaries, EASI-90, IGA 0/1, change in EASI score. Importantly here, not just skin clearance is reduction in itch. So change in PNRS and greater than 4-point change on that scale. We'll report all that for naive. So that's going to be your apples-to-apples comparison for monotherapy, not including steroid in a placebo-controlled trial for patients who in our trial, baseline EASI score is in the mid- to high 20s for the patients enrolled in this population. Severe cutoff is 21. So we have a meaningfully severe population, which is a good comparable to drugs like DUPI, lebri, amlitelimab, Sanofi's OX40-Ligand in terms of their backgrounds in their Phase IIs and IIIs.

Got it. Remind me, was there a Gilead molecule here that's relevant as well?

Gilead acquired a company 18 months ago out of the U.K. that also has a BTLA and PD-1 agonist. They are in Phase Ib in RA, rheumatoid arthritis for both of their drugs. So somewhere in Phase Ib...

Okay. Got it. Okay. Got it. So there's no randomized evidence on the Gilead side yet.

Correct.

Okay. Excellent. So the trial finished when, the BTLA, the last patient in...

Over the summer, what was the last patient in.

So that long to clean up the data?

It's a 14-week trial.

That was the last patient in. That's not when the last patient finished the trial.

We were within 2 weeks of having data.

I see. I see. Okay. Got it. Got it. Excellent. Yes. So it's exciting.

We're coming right on to it. Now other components of this that are going to be exciting for folks, selective translational data over time. So what's the cytokine activity, a big thesis here. This is why OX40-Ligand has been exciting as a comparable to the IL-13s and Th2. This is a heterogeneous disease. There's more going on here than just Th2. IL-13 reduction is important, but so is interferon gamma reduction, IL-17 reduction, IL-22 reduction. We'll have translational insights over time later. We also have a 6-month off-drug portion of the trial that we're tracking patients. We're looking for durability response. So only dosing through 12 weeks, we will then be looking for how sustained are the responders out over 6 months or up to 6 months. The reason this is compelling, and this is where the OX40-Ligand have really potentially started to change the game. By modulating the immune cells, they're modifying disease. You're seeing disease modification and 6-month off-drug results. I think Sanofi reported after 6 months, another 6 months off drug, about 80% of patients sustained response. That's because of disease modification. We're going to be looking for that after dosing only through 12 weeks. That will all come in 2025.

Got it.

So a big part of this and where these markets are moving, Umer, is there's a lot of benchmarks out there. What's EASI-75? Is it 40%? Is it 50%? We're looking at a second-line market DUPI generics in the early 2030s. Giving patients a different alternative a Th2-driven molecule isn't enough with all the onesie, twosies differences there to give a broader treatment regimen that you could have a broader impact on patients, potentially deeper responses over time and modifying the disease. That's the profile where this market is going to move. And the second-line market here is going -- it's going to -- it doesn't exist today, and it's going to be huge.

Got it. Maybe in the last minute or so, could we just touch up on the CD122 and also the Calypso program and maybe some of those comparisons?

Sure. So CD122 is a dimeric receptor that blocks IL-15, IL-2. It's found dominantly on CD8-positive cytotoxic T cells, subsets of T cells like TRMs, resident memory T cells, you find in various tissue and NK cells. IL-15, there's a number of them out there. Amgen has one on prevention. It's a first-generation molecule. Novartis bought Calypso. Teva is developing one. They're looking at EoE and celiac disease. In the CD122 landscape, there's -- Incyte acquired a private company 1.5 years ago. They've advanced that drug into vitiligo. And there's another company that recently initiated a celiac Phase Ib trial, the CD122. We have a more potent version than the other CD122s on the market or in development. We will do an R&D Day next year to walk through differentiation relative to their CD122s as well as the IL-15 class and really walk through the story of where we're going in the Phase Ib and why.

I guess what's the -- I know Teva is going to put out some celiac data on a single dose in early 2025. Could some of those initial data sets form the basis of something much more rapid for Phase II planning for you guys? I know you're going through Phase I right now.

Yes. I mean you're hypothesizing that we're moving to celiac. But what's interesting about big companies moving into celiac disease, mapping out what the endpoints are going to be in Phase II is going to be really important with these mechanisms of actions and differentiation moving forward. It doesn't really exist well today in a robust setting. These Phase Is are in gluten challenge studies where you're looking for prevention of villus to crypt death ratio getting worse, right, looking for prevention. We need to see this in disease in Phase IIs. That will happen over the next couple of years. But the Calypso data was incrementally pretty exciting in terms of what they were able to do...

And the Calypso data was on the celiac side as well.

It was in celiac. Well, they were in both, but the abstract that's being -- that was pulled, they didn't end up presenting it, but the data is out there from the abstract, exists in terms of the prevention of the gluten challenge.

Got it. Excellent.

So noncorrelated to the agonist, we're really excited. There's a lot happening in the space. There's more places you can go, but there will be a number of read-throughs between celiac disease and vitiligo in 2025, while we're moving through and entering into Phase Ib with a best-in-class program.

Outstanding. Listen, best of luck into the data. I know the data is the data, so it will be -- but I have to admit, I did not appreciate the scope of the royalties properly until just now...

There is a lot happening in this company. I appreciate you asking.

Thank you again.

Thanks for having me.