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

Good afternoon, everyone. My name is Yatin Suneja. I'm one of the biotech analyst here at Guggenheim. Welcome to our SMID Cap Biotech Conference. Our next presenting company is AnaptysBio. From the company, we have President and Chief Executive Officer, Daniel Faga. Dan, why don't you make some opening comments, give us some highlights on the company and some of the near-term milestones, and then we'll go into the Q&A.

Thanks, Yatin, and I appreciate you having me here today. A lot going on in the company. We have a pretty big month in front of us here. What Anaptys is focused on is the discovery and development of antibodies that modulate overexpressed immune cells. So we're targeting autoimmune diseases that are systemic in nature, heterogeneous in nature. Our lead program is a PD-1 depleter antagonist which targets PD-1. We're in 2 clinical trials right now, one in RA, Phase IIb study, 420 patients approximately. We'll talk about this more later, but that top line week 12 data is reading out this month in February. And we have week 28 data as well as translational data sets available in Q2 of this year. We do have a second trial going on in the background. We're really excited about it in ulcerative colitis, 130-patient trial. We'll read out top line results, we're on tracking to Q1 of 2026, so within a year. We have 2 other programs in the development-stage portfolio, a CD122 antagonist, which is AMB-033. We're in the Phase Ia dose escalation right now in healthy volunteers. And the second program is AMB-101, a BDCA2 modulator, and that's just about to initiate Phase Ia. We have $420 million of cash coming into this calendar year. Our cash runway guidance is through year-end 2027. That encompasses taking the programs I just walked through, through disease-driven data sets as well as enabling the Phase III programs for rosnilimab. What it excludes is any further inbound capital, which would be $75 million coming in from GSK when they achieve $1 billion of commercial sales of Jemperli, which is a PD-1 antagonist, developed by Anaptys, as well as any other future royalty potential from that program. So we're well capitalized. We have the runway to produce a number of different results, and we have the ability to further capitalize the company off the royalties if it's warranted.

Got it. Very good. Thank you for that brief intro. So I want to come back to the royalty later because that seems to be a hidden value that you have, which I don't think investors are focused on. But let's focus on the asset first. So rosnilimab, how this asset is different from Lilly? And just walk me through the Phase II study that you're running in RA, how you constructed it? What are some of the expectations?

Yes. So I can speak for 20 minutes on this question. I promise I won't. Lilly had a Phase IIa study that showed proof of concept in arthritis. This is long ago at this point. Lilly's program was a moderate depleter and a weak agonist of PD-1 expressing T cells. In contrast, we have a very strong depleter of PD-1 high T cells and a strong agonist. So given the proof of concept that exists already in this disease, we do believe that the differentiation and what we have shown immunologically, and that's in vitro and head-to-head comparisons through a number of different types of assays as well as translationally with both of our Phase I and Phase II data sets and Lilly's Phase II data sets, there's a consistency here. Immunologically, we know we're different. We need to see that now translate to clinical differentiation.

Okay. And then by being more potent depleter of PD-1 high T cell, what does that give you, if you could articulate?

Yes. So there's 3 mechanisms of action with PD-1 depleter antagonist. One is the depletion of PD-1 high Tph cells. And these are precursors in terms of they interact with B cells and induce differentiation into plasma cells and autoantibody production. We will deplete those out both in the periphery and in the tissue. The second is PD-1 high T effector cells. And in aggregate, when it comes down to the depletion, we use this terminology high versus intermediary PD-1 expression. What we mean by high is there's a lot more clustering in terms of the PD-1 expression and does facilitate ADCC, and that's why we're seeing depletion with an IgG1 backbone. The third mechanism of action is the agonism of the PD-1 intermediary T effector cells. And what the result there is it reduces proliferation of additional T cells, reduces cytokine secretion out of the T cells. So they're complementary mechanisms that when you look at the state of disease that's a multiplier of what you'd see in healthy controls of PD-1 expressing T cells in the periphery in the synovium of an RA patient, 80% of your T cells are PD-1 expressing. Half of those are PD-1 high. So if you're only doing the depletion aspect, you're leaving a lot on the table, in case this is what happened with Lilly, where we do believe that you're not clearing out the inflammatory-driven T cells, which should result in additional efficacy. So it's 3 mechanisms of action, and we hit all 3 pretty hard.

Got it. Very good. So we have already seen positive data, as you mentioned, from Lilly in RA. So what benchmark would you set for your drug in the upcoming Phase II RA readout? And also talk about the size, also about the arms and the dosing that you're using there.

Yes. Okay. So I'll start with the Phase II trial design. So it's a 420-patient study, 3 active arms versus placebo. We are looking at every other week and monthly dosing within the active arms. The primary endpoint, the primary statistical analysis will be at week 12. It's DAS28 CRP, the change from baseline through week 12. That's a well-controlled historically endpoint. What's going to matter commercially are the high-order responses at week 12. Now I'm going to come back to the specific targets. But in the real world, the way physicians treat this disease is they look for the beginnings of response to treat the target through week 12, so things like ACR20. And that's traditionally the regulatory endpoint in the Phase III trials. If there's a sign of response, you continue on treating out through week 24. And across all classes of drugs that are approved, whether the biologics, the JAKs, you do see increasing efficacy, deeper response rates between week 12 and week 24. Now our trial, and this is driven by the regulators, after week 12, the primary analysis at week 14, you assess for low disease activity based on the [ CDI ] score of less than, equal to 10, so pretty common assessment of disease used by the rheumatologists. If you hit that response rate, you can stay on drug through month 6. What we'll be looking for out to week 28 is sustained responses from those patients. What that also means is that if you did not hit response, you could have hit ACR20, but you aren't low disease activity, you're out of the trial. So it's not a real-world study in that sense. Placebo patients are also out of the trial. So what I'm also implying is you're not going to have higher response rates out to week 28 because the patients aren't there to respond deeper than they got to at week 12. I'm making this point because if you look at the comparisons in the marketplace, week 12 data sets [ can ] be compared to week 12 data sets, week 24 to week 12 -- 24 data sets. Our trial enrolled bioexperienced, i.e., [ posttumor ] in most cases; as well as bio-naive patients, 60% were bio-naive. And what we're going to do is break down the results by those two different populations we stratified, so we should have balance across arms those populations at week 12. What we're guiding everyone are not Lilly data, that's behind us. They're not moving forward, so their data is not even relevant. What matters here is what's the commercial bar when you look at all the other biologics, and we clearly need to be better than the biologics and approaching JAK-like efficacy. What that translates to on some of these high-order numbers, which are high bars at week 12, ACR50s of 30%, ACR70s of 10%. When you look at that [ CDI ] low disease activity benchmarking, 30% in the bioexperience population. And those are clearly differentiated than any other biologic class. Bionaive, slight bump up from there across each of those three outcomes. So again, the DAS28 is a great control. We feel very confident that we're going to be statistically significant here in this disease, particularly given Lilly did this with a weaker drug in a very small study. But we are setting a very high bar that we do think you can credibly launch into second and third line and get pricing power if you look -- have that type of profile and you're tolerable.

Very good. Very clear articulation of what you expect. What about the doses, doses and the regimen that you're using?

Yes. So I mentioned there's 3 active doses, and it's a 12-fold delta between the low dose and the high dose. The low dose does hit IC90 on administration. However, it does dip below that at trough. So we're reasonably confident we should see efficacy across these doses. It's rational to think there'll be dose response, but we're just going to have to get the data to see it. We're looking at every other week or monthly dosing, depending on the arm that you're in.

Got it. Got it. Safety, how -- what is your expectation on the safety? I mean you have studied this drug in many patients now so far. Anything particularly stands out? How is the safety and tolerability looking?

We're happy with what's happening here in the class. When you look at all the publicly available data sets and the number of drugs that have been developed so far, including ours, they've been benign safety profiles in the Phase I. A former Phase II study that we ran with rosnilimab, which was 6 months in duration at 400 milligrams monthly dosing, there's nothing there. On a blinded basis in our study, we're not seeing any signs of a signal. We have an independent DMC. It's the unblinded data. They've raised no flags. And we're clearly well through this study at this point. And that also goes for the colitis trial that's happening in parallel. Backing up from here, though, things also have to be put in perspective for RA patients. They -- the comorbidities are multipliers of what you would normally expect in a healthy population, whether that's malignancy risk, DVT, MACE, infection risk. And one of the reasons for that is not just the disease. All these patients are on background methotrexate. Many of them have some level of steroid use in parallel. That's constant in our trials. And this is consistent across all trials. So you're going to see low-grade infection. You're just going to with these patients. And then a second, really a reminder for Wall Street is the biologics, pretty much all of them that are being used to treat RA have black boxes that came from their RA trials that are exacerbating those comorbidities. So the bar is unfortunately, really low here and what we're talking about for a tolerable drug. And you have to put that in context. And so then when we look at what's going on with Lilly, right, they did run a 60-week trial. So 60 weeks, that's over a year in 500 patients. All of those patients were eligible through 6 months, and responders stayed on from month 6 through week 60. It's almost guaranteed you're going to see events. There's no control. You're going to see events. It doesn't mean it's a class signal, and it doesn't mean that's why their drug is not moving forward. But as it relates to our program, things look good so far in our trial on a blinded basis, and we'll see soon enough.

Okay. Got it. I want to go back to CRP. What impact does PD-1 mechanism have on CRP? And could you be at a sort of disadvantage just if you look at the DAS28 CRP?

You have to hit DAS28 CRP regardless. And other biologics like [ ORHENCIO ], which is an immune cell modulator, it antagonizes dendritic cells, but still upstream. So there's other mechanism of action that are -- do not target a macrophage directly or the specific cytokines that are related to CRP slightly upstream that have had effect. An IL-6 antagonist, you see -- obviously, you see an immediate reduction in CRP. That's unique. Over 3 months, we should see that reduction downstream from targeting T cells, depleting or agonizing and reducing the proliferation, and we should see ultimately signaling on reduction of CRP on how they're activating the different monocytes or macrophages, which are releasing IL-6, releasing TNF and are upstream from CRP. It might take more time to get there, but it's happened with other classes of drugs in this time frame. So it's not something we're concerned about. Lilly actually put out some translational data from their Phase IIa study that was good to see where they showed IL-6 reductions that were separating from placebo somewhere around week 8, right? So even with a weaker drug that's upstream from where you'd be targeting CRP, they're seeing the reductions in IL-6. So we should anticipate seeing that as well. Our baseline characteristics, the baseline scoring are all within a normal range. Lilly's Phase IIa trial is a quirky thing with their trial. They were pretty low on CRP, but that was probably because it was just a smaller trial. So we're starting off with a baseline characteristic, where we need to be with moderate to severe disease, and there's nothing weird on an aggregate basis with CRP numbers.

Anything particular you've done to minimize the placebo response? I mean it generally tends to be within a particular range. But just curious, any particular steps you've taken? And how should we think about it?

This disease has been studied for over decades, and these are composite endpoints, right? DAS28 CRP is just the nature of looking at a biomarker on top of the decrease in tender and [ swollen ] joints. It helps control for placebo. It's a pretty tight spread historically over these decades of what placebo looks like, whether that is the primary or these higher-order responses with the things like ACR70, which have very low placebo rates. And particularly at week 12, you're not getting placebo ACR70 responders at week 12 in any meaningful way, right? And there's decades of experience on this. So that's just the background here. We have a big study. It's distributed across the U.S. and Europe. It's all seropositive patients that are enrolled here. We know they have inflammation. So it's the right patients that were enrolled. It's broad, robust study. So we feel pretty good about where we should be coming into this. It's not like atopic dermatitis, which is a visual assessment with a lot of variability and flaring.

Got it. Very good. Then moving to the UC study. I think last year is when you narrowed the guidance, right, for the readout. Like how is the enrollment so far? Because I have experience with other companies there, there have been some delays, but it seems like you are tracking. So number one, how is the enrollment? And how is the -- how strong is the mechanism of PD-1 agonism as it relates to UC?

Right. So we're not aggressive with our guidance here, in general. When we narrowed -- you're referring to historical guidance of first half of '26 to Q1 of '26, we wouldn't have done that if we weren't confident we were going to hit the timelines. It's a 132-patient study. It's been ongoing for over a year, approximately. And we are tracking towards that readout. We have a lot of sites in the study across the U.S. and Europe. And so we're also not conservatively running the trial. And I think that's also important. We have a lot of sites we're going to have dispersion across sites and not over consolidation in one site or one country, particularly in Eastern Europe. When you look at what you're actually doing these trials, you need an endoscopy to get in with a certain severity. That will be done again at the end of the study. That helps control out of the gates. These are e-diaries, and there's a certain level of severity. So between the way the inclusion criteria, which you have to go through a procedure that assesses the inflammation at the time of randomization, it's an important way to help manage. But I also want to highlight one other thing as it relates to placebo here. You look at the TL1A classes, the lowest placebo was PROMETHEUS on clinical remission in induction phases, low single digits. Most of these trials are 5% to 10% on clinical remission. Sanofi, Teva was the highest placebo, something like 20%. You know which one had the best placebo-adjusted response? Sanofi, Teva, was 2 points higher than PROMETHEUS. So had the highest placebo, but also had the highest placebo -- because the drugs work, right, and you see separation. So I think we have to keep this in mind that there's a range here on placebo. If your drug works, you're going to see it separate.

Yes. In UC, what do you think you would need to show?

We haven't guided yet here, and we will post the RA data. The market has been more in flux. What's unique about RA, when we initiated this trial over 2 years ago and now multiple times through, what you need to hit is no different because there's been no success in the last 2 years. And you see, it's evolving. So from a conservative basis, we'll give some guidance later this year, more specifically. But just like observationally, clinical remissions is going to be the commercial bar that you need to hit at 12 months. You need to see a substantial number of patients there. The TL1As are all the same. They're all plus or minus 25%. The IL-23, p19s are high teens, low 20s. So you get this range that is not too differentiated and not too different from where RA would have been a long time ago. The difference with the UC market is you're, in the future, going to have more biologic choice it and you should see more class switching. In RA, that's exactly what happens now. So for the reasons that we need to be bio-better JAK-like in RA, it's the opposite in UC, where if you're more bio-like, you're going to have a substantial market share still because patients are going to cycle through these drugs. 1/3 to 1/2 of patients on biologics in UC lose response at 1 year. There's going to be class switching. So it's a different growth market there. And so we're optimistic that it's a lower bar, which is important because when -- if we hit the TPP and RA, there should be a read-through to UC. If we miss the TPP in RA, but we still work, there should still be a positive read-through to UC. I think it's an important point to keep in mind here, it's a different bar.

Very good. What is the strength of mechanism in UC, PD-1?

So similar to RA, PD-1 positive high T cells are amplified in the periphery. There's literature that exists in UC that by just eliminating those cells from the periphery in the blood, it correlates highly with clinical remissions. ENTYVIO works just by blocking T cell trafficking from the blood to the tissue that's inflamed the lamina propria. Those T cells are PD-1 positive, they're activated. That's all they do. The S1P is blocked efflux from the lymph nodes through the periphery into the tissue. That's all they do, is block that. So if we're depleting out these Tph cells, which are PD-1 high by definition, they're all PD-1 high expressing; we should see effect. Translationally in the RA study, we'll be able to show you that in Q2 that in an amplified state of inflammation versus healthy controls, we showed 90% depletion. In these amplified states, we'll see that in the blood in the translational data sets in RA. That's pretty similar. In the lamina propria, which is the inflamed tissue and the colon of UC, there's 40% approximately positive PD-1 cells. We'll see what we're doing in the synovium of the RA patients. We'll see the cytokine reductions. We'll see if we're impacting downstream things like IL-23. Cytokines, we know that are highly upregulated in UC. That should be an important read-through as well in Q2 translationally. So we're excited about the opportunity in UC. And we think that positive results, just stat sig results in February here in RA as well as the translational data sets in Q2 will continuously derisk what's already a very strong preclinical data set. We have animal model data in mice, there's literature, all the in vitro work that supports why we should work in UC. So we do see a consistent derisking into our data in Q1 2026.

Could there be some patients that have RA and UC might have gotten enrolled in the RA study? Is that a possibility? Any thoughts on look into it...

I'm aware of tracking.

Okay. Very good. So I want to spend a little bit of time on the pipeline and the royalty stream. So ANB033, CD122, how is this asset differentiated? What are you doing right now? When would you disclose new indication?

So CD122 receptor is what ANB033 targets and blocks, is a dimeric receptor that's found on NK cells, CD8-positive cytotoxic T cells, CD8-positive [ tumor ] cells, resident memory T cells, so these T cell subsets that are linked to very specific disease sets. It's a dimeric receptor. It blocks IL-15 and IL-2 on those cells. And these cells are very sensitive, in particular, NK cells, are very, very sensitive to IL-15 reduction. Any CD122 blocking program is going to knock down any NK cell that expresses CD122. And that's not all of them, about 3/4 of the NK cells express the CD122 receptor. So you should see a pretty potent reduction of that specific type of NK cells across all of us. But there are differences in potency that can be driven by affinity and epitope that are going to matter here. We will put out data later this year that shows differentiation relative to the 2 other CD122 programs that are currently in clinical development. And we will do a teach-in on why we think blocking CD122 is much more powerful in terms of treating these specific inflammatory diseases than just blocking IL-15 on its own. So that's coming. We've committed to an R&D event later this year. We're building up data now. We're in the Phase Ia, like I mentioned earlier, moving through the SAD/MAD dose escalation. We're looking at IV and subcutaneous dosing in parallel, and we are on track to initiate the Phase Ib this year, and we will disclose that indication at the time of that R&D event.

So more to come. I think lot of competitive data coming also in this space.

Yes. And I'll just highlight a couple of things. Incyte talked about vitiligo data coming this summer. They have a CD122 they acquired from a company called Valaris, and there's a company called Forte that's talked about celiac data coming up here in Q2, both Ib trials. small, small...

Yes. Okay. Very good. Yes. So going back to the GSK royalty agreement, could you just talk about how the dynamic -- because you've monetized sub-$1 billion, but now the sales is going to reach above $1 billion. So how is that set up? What sort of is the potential?

GSK is starting now to sell a lot of Jemperli, and it's off the back of a frontline endometrial approval for about 80% or so of the patients that have endometrial cancer just based on subpopulations. They just announced their quarter this morning. If you take Q4 run rate, so just times 4, it's about -- it's between $750 million and $800 million of revenue. So they're tracking with any modest growth to hit $1 billion this year. That's my guidance, not theirs, right? So it's just very simple math. When they hit $1 billion, we get a $75 million payment direct to us. That's not been monetized. I think it's reasonable it happens this year. If not, it will happen in 2026.

[ $7 billion ] in one calendar year?

One calendar year. So it has to happen this year. Yes. But if it doesn't happen this year based on the growth rates -- and they just received frontline approval in endometrial a couple of weeks ago in Europe. So that's not in any of the numbers so far and will be in 2025. And they have a number of additional catalysts upcoming, but they've guided to $2.5 billion, which they reiterated today of peak Jemperli sales, which is based on monotherapy indications. Wall Street consensus as of November, which is what they published on their website, was $1.2 billion. There's a lot of upside there. And this is by 2031, so the next 7 years, a lot of upside there. If you take a DCF of the Wall Street consensus from November, which is dated, it is worth more than my market cap right now after we pay down what we've already monetized. So the simple way to think about the monetization is it's -- we have to pay back $600 million. We've paid back $90 million coming into the year. It sounds like it's a lot, but these royalties are very big. We've disclosed all the royalty tiers. It's 8% up to $1 billion, escalates to 25% at $2.5 billion. So it's a substantial royalty. Wall Street consensus, again, dated and very conservative; suggests we'll pay that down into 2028 sometime. And I think it's -- again, I think it's upside risk from there. The reason this is important is we will ultimately need more money in this company, and this will help subsidize us moving forward something like you see into Phase III on our own. It's not the total money we will ever need in life, but it's a lot of capital coming in with risk to the upside. So we're excited about it. A year ago today, it wasn't this substantive as it is coming into this year.

Well, very good, Dan. Thank you so much. That's all I have for you. So we will wait for data in the next few weeks.

Excellent. Thank you for your time.

Thank you.