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

Good day. Thank you for standing by. Welcome to the Anaptys conference call. [Operator Instructions] Please note that today's conference may be recorded. I will now hand the conference over to your speaker host, Dan Faga, President and CEO of Anaptys. Please go ahead, sir.

Good afternoon and thank you for joining us today. We are excited to discuss today the further evolution of Anaptys with our intention to separate our biopharma operations from our substantial royalty assets. This separation is designed to maximize value by creating 2 companies each with different business objectives and opportunities. After my prepared remarks, our CFO, Dennis Mulroy and I will be available to take your questions. This presentation contains forward-looking statements. Please refer to our SEC filings for further details. For the past 20 years, Anaptys has been known for generating best-in-class antibodies. Jemperli and imsidolimab are 2 previous successes discovered by Anaptys. Both are realizing value through our financial collaborations as well as have positively impacted patient lives. Jemperli's commercial uptake over the last 12 months, combined with its anticipated future growth is nothing but impressive. This results in an outsized tiered royalty stack payable from GSK that flows through to Anaptys. We are equally excited about Anaptys' proprietary development stage portfolio of immune cell modulating antibodies, including rosnilimab, ANB033 and ANB101. Anaptys is also well capitalized today with approximately $300 million in cash as of the end of Q2 2025 and cash runway through year-end 2027. Our intention is to separate Anaptys into 2 independent publicly traded companies. For simplicity, we are referencing generic names for these 2 companies, Royalty Management Co and Biopharma Co. Royalty Management Co, upon completion of the separation, will manage the future royalties and milestones from assets tied to our financial collaborations with GSK and Vanda. This company's focus will be to protect and return the value generated by these assets back to its shareholders. It's expected that minimal infrastructure and staff will be required to manage this company. We also anticipate Anaptys' NOL carryforwards and tax credits will remain tied to this business. Much like Anaptys does today, Biopharma Co will continue to develop and potentially commercialize its high potential programs focused on autoimmune and inflammatory diseases. We plan to launch Biopharma Co with a new name and with adequate capital to fund operations for at least 2 years through significant value-driving events. Stepping back, since March, we have repurchased approximately 10% of outstanding shares in Anaptys. This reflects our conviction that at current trading levels, Anaptys' stock is significantly undervalued relative to our royalty assets alone to say nothing of the value of our biopharma portfolio in cash. As we approach the point at which additional investment may be needed to advance rosnilimab into pivotal studies, we believe a number of alternatives to further finance our development stage portfolio exists, both prior to and after the separation into 2 companies. That said, we feel it's important to provide clarity now regarding our future intentions for the royalties. I want to repeat that we are committed to protecting and returning the value of the Jemperli royalties to our shareholders regardless of any potential capital needed in the future to advance the development of rosnilimab, ANB033 or ANB101. Overall, we believe each of the 2 companies' different business models will enable investors to align their investment philosophies and portfolio allocation with the strategic opportunities and financial objectives of each company. Jemperli has emerged as a blockbuster drug with the potential to impact hundreds of thousands of patients by treating multiple types of solid tumors, including women's cancers. Data suggests Jemperli is best-in-class when compared head-to-head versus KEYTRUDA as evidenced by its meaningfully greater response rates and overall survival data in the Phase II PERLA study in frontline non-small cell lung cancer. Jemperli plus chemo is also the only immuno-oncology regimen to show statistically significant and clinically meaningful overall survival data in all comers with first-line endometrial cancer. Jemperli was approved in this indication last summer in the U.S. and in January of this year in Europe. As a result, over the past year, total revenues have inflected. Jemperli sold $262 million in Q2 2025 alone, nearly doubling from the prior year Q2. Jemperli remains on the steep part of its growth trajectory. For the past 2 years and as recently as 2 weeks ago, GSK has reiterated the guidance of peak Jemperli sales from monotherapy indications alone of more than GBP 2 billion. This implies greater than $2.7 billion. And GSK's Wall Street analysts are playing catch-up. A year ago, Wall Street consensus peak sales were only $1.3 billion. Consensus now stands at $1.9 billion, which is still 30% below GSK's guidance. We anticipate consensus will continue to track upwards as GSK reports future growth from further market penetration in endometrial cancer as well as potential indication expansion. For an example of indication expansion opportunities, Jemperli demonstrated impressive data in the intent-to-cure setting in a proof-of-concept study showing 100% complete response in dMMR rectal cancer. GSK's pivotal trials in this indication is fully enrolled with top line data expected in the second half of 2026. Overall, Jemperli development is ongoing in 3 monotherapy registrational studies as well as in selected Phase II studies across different additional indications. GSK is also in or planning Phase I/II trials of Jemperli in combinations, including with EDCs from within their portfolio. So now let's transition to how this impacts Anaptys and Royalty Management Co. Our royalty tiers from GSK began at 8% for the first $1 billion of Jemperli revenues. These quickly ramped to a peak of 25% on all Jemperli revenues over $2.5 billion in the calendar year. To provide an example of the magnitude of these potential royalties to Anaptys, in a year that GSK sells $2.7 billion of Jemperli, which is GSK's guidance for monotherapy indications, the royalties payable for that year will be $390 million to Anaptys. Currently, Anaptys' receivables from Jemperli are payable to a group called Sagard as a result of prior capped royalty deals. This obligation will terminate once Sagard has received an aggregate payback of $600 million. Anaptys is estimating that Sagard will have accrued approximately $250 million in royalties and milestones through the end of this year, 2025. The current and conservative Wall Street analyst consensus implies Sagard will be paid down by Q2 of 2028. Alternatively, assuming Jemperli only achieves 10% quarter-over-quarter growth moving forward, the Sagard paydown will be accelerated to be as soon as mid-2027. This is realistic given Jemperli's current revenue growth last quarter was a strong 19% and the quarter prior was 16%. With composition of matter IP out through 2036, there is tremendous residual value post-Sagard paydown of the Jemperli royalties to Anaptys. Additionally, under our financial collaboration on imsidolimab with Vanda, we are eligible to receive up to $35 million for future regulatory and sales milestones in addition to a flat 10% royalty on global net sales. Vanda has guided to a BLA submission for the treatment of GPP later this calendar year. Now we'll move on to Biopharma Co. Operationally, this will look similar to Anaptys today. Our programs all target pathogenic cells that are significantly elevated in autoimmune diseases but are only present in lower trace amounts in healthy tissue. Each of our programs is designed to potently eliminate or modulate these specific disease-driving cells. I'll first highlight our Phase I development stage pipeline. ANB033 is a potentially best-in-class CD122 antagonist with optimized dual IL-15 and IL-2 signaling inhibition. We have initiated a Phase Ib trial for ANB033 in celiac disease, and we anticipate initiating a trial in a second indication in 2026. We are hosting an investor event focused on this specific program on Tuesday, October 14. We're also developing ANB101, a potentially best-in-class BDCA2 modulator that targets plasmacytoid dendritic cells. Since earlier this year, we are moving through a SAD/MAD dose escalation Phase Ia study in healthy volunteers. Combined with rosnilimab, we have several significant upcoming catalysts and believe our robust pipeline and antibody R&D capabilities will position Biopharma Co for long-term success. Regarding rosnilimab, it is a selective and potent depleter of pathogenic T cells. This year, we reported positive Phase IIb data in rheumatoid arthritis. Importantly, there is a favorable safety and tolerability profile with no treatment-related SAEs and no malignancies reported in the 318 rosnilimab-treated patients. Additionally, we observed JAK-like efficacy over 6 months and durable responses that last at least 12 to 14 weeks off drug for this 9-month study. In addition, we have fully enrolled a Phase II trial in ulcerative colitis. We are focused on developing a differentiated therapeutic for this disease that is tolerable and drives deep and stable remissions over the 1-year treatment period in the study. Initial data through the first 12 weeks is upcoming this November or December. We plan to follow up in 2026 with longer-term data, initially with at least all patients through 6 months of treatment. As the initially enrolled patients in the UC trial have just begun to reach the 1-year mark, I want to emphasize our blinded surveillance continues to suggest a favorable safety and tolerability profile that is consistent with prior rosnilimab trials. As we've previously disclosed, we are assessing multiple strategic paths forward for rosnilimab. One, we could execute a potential global partnership to help advance development in all indications, including RA and UC; or two, we could independently advance in one Phase III indication. We stated for a long time that we prioritize advancing ulcerative colitis, assuming we achieve our 6-month TPP. Options also exist to advance in RA independently. However, before we progress along that path, we are prudently awaiting the readout of these Phase II results in ulcerative colitis. Importantly, the outcome and timing of the strategic assessment for rosnilimab could impact how the economic value is allocated between Royalty Management Co and Biopharma Co. Here are a final few points before we go into Q&A. We anticipate completing the separation by year-end 2026. While it may be as early as the first half of '26, we are allowing flexibility, for example, to assess and make an optimal strategic decision for rosnilimab. Additionally, while the separation is anticipated to be a taxable event, we are very focused on minimizing the overall taxes for this transaction. Specific details and decisions regarding tax structure as well as the Board composition, leadership and financial operations of both companies will be disclosed at a later time in 2026. In conclusion, I want to emphasize the potential transformative nature of the journey we are embarking on. The separation of Anaptys into 2 independent entities is a bold step forward toward unlocking strong, sustainable growth and maximizing the value recognized across the 2 sets of assets, the royalties and the biopharma development portfolio. We are confident this will create significant value for our shareholders while continuing our long history of innovation. Now I'll hand it over to the operator for Dennis and I to take a few questions. Thank you.

[Operator Instructions] Our first question coming from the line of Anupam Rama with JPMorgan.

Just wondering if you could provide a little more color on why this is the right time to announce this strategy, given you'll have the 3-month UC data here in the next several weeks. And by the time you get to the separation in 2026, you'll have a much better understanding of the totality of the TTP (sic) [ TPP ] for rosnilimab in UC. I think you made a comment that some of the UC data could impact how the funds flow between Royalty Co and then Biopharma Co.

Yes. Thanks for the question, Anupam, and a really good one. We're always proactively and objectively assessing our strategic options in the business overall. And as I just walked through, it's been clear over the last year that the value of the royalties for Jemperli have substantially increased. And we've also put the second relationship in with Vanda. And these are very tangible assets today. They're commercial, near commercial stage royalties. And at this point, I think it's clear. We're also stating very directly that we intend to protect the value of these royalties, and we're looking to maximize the value overall the 2 sets of assets. So once you've made this decision, there's no point -- there's no reason to delay announcing our intention. But to your question, this decision is independent of any clinical data moving forward. It's independent of development milestones or any advancement across the portfolio overall. So I think that's a key point here. No matter what happens with rosnilimab in colitis moving forward, moving forward in RA, a partnership, the rosnilimab strategic outcomes are going to pass one way or another. But the value of the royalties and the value of the rest of the portfolio are specifically going to be different entities moving forward, and we think that's going to set both entities up for maximizing value overall. And as we play through rosnilimab, I think there will be a choice here on how to allocate the economic value. One of the reasons we are announcing this will happen by year-end of 2026 is to allow us the time to work through how we're advancing rosnilimab.

Our next question is coming from the line of Yatin Suneja with Guggenheim.

Can you hear me?

Yes.

Thank you so much for the details. I appreciate that. And I actually like the split, as you know, done the analysis on the royalties. So that's pretty good. So two questions for me. One would be, what would be the size of capital that would be required for this Royalty Co? And then the one question that we generally received when we did the analysis on the royalties and then how the split would work is the impact of biosimilar on the PD-1. I would love to hear from you how are you looking at that and how are you addressing those questions?

Thanks for the questions. So first, you're asking about the capital required for the Royalty Management Co. It's too early to begin to get into the specifics, but the overall needs of the Royalty Management Co would be pretty minimal. It doesn't require a huge team to run a public company. And the idea here is it would be a slim profile. It would be separate, obviously, from Anaptys. But also, I think what's important is the cash that would ultimately come into Royalty Management Co tangibly from Jemperli, is not far away either once you get out through some period of time in 2026, plus or minus within a year, even the company will be generating direct cash. So we think you need a very de minimis amount of capital to operationalize this business, particularly when you're just thinking about a time frame that you need to cover between day 1 and the direct proceeds of capital coming into the company once Sagard is paid down. You asked the second question around biosimilars with, I think, KEYTRUDA. I think overall, I don't want to speak for Merck. How they're thinking about KEYTRUDA over time is pretty important in the business. They recently had an approval of a subcutaneous form of KEYTRUDA, where they've announced publicly that pricing will be at parity. I think that's kind of a smaller point. We are realizing here that Jemperli is focused in areas where KEYTRUDA isn't or doesn't have the same quality of data. So endometrial cancer, Jemperli is the only drug that has overall survival in endometrial cancer, which is obviously one of the bigger value drivers moving forward. I think overall, when you look at the combination of the superiority of Jemperli as an asset and the continuity of the business overall at Merck that we feel we're in a pretty good position here with Jemperli moving forward through the life cycle of its IP. And then finally, we are in the early part of a sales curve that is a combination, as you know, between volume and price. And I think there's going to be a lot of volume growth here moving forward. Lastly, and this is even as recently as KEYTRUDA subcutaneous was approved a few weeks ago, GSK is also out there very focused talking about the ability to exceed their guidance of the USD 2.7 billion at peak sales and knowing all this information overall. And we do have some confidence in how they're leaning into that. So I think the totality here is we feel pretty good about the next 10 years of Jemperli growth.

Our next question coming from the line of Joseph Thome with TD Cowen.

Maybe the first one, just a little bit of a clarification because I know at the beginning of the call, you indicated funding to year-end '27, but that the biopharma company would have 2 years of runway kind of post the spin there. So are you anticipating any additional funds coming into the company? Or kind of how do we reconcile that? And I guess does the spin kind of -- obviously, both sides of the business, I think you would agree, are undervalued, and that's why you're doing this. But I guess does this action kind of reflect any recent change in the conviction of any of your specific biopharma programs, in particular, kind of -- any comments on that would be helpful.

Yes. I'll just start with the last question. I want to completely take this off the table. This announcement has nothing to do with our confidence in the portfolio, nothing to do with likely success in the UC trial. But we acknowledge that at some point in the future, particularly for rosnilimab, there will require additional investments to advance the program. There's many ways to think about how to capitalize that drug that are independent of this announcement of the separation. But what we're very clearly stating is that we're protecting the value of the royalties from future dilution. And so I think that's an important point to emphasize. But how we move forward rosnilimab, we're going to have choice. And like we've mentioned, if you partner a drug, it will bring in capital. There's various ways to work with investors, other strategic parties or other types of alternative investors to further capitalize programs moving forward. And I actually think that this announcement, whether it's before or after a separation event, gives us more flexibility to capitalize rosnilimab as an independent asset. We've said for a long time the guidance through year-end 2027 in cash does not include executing the Phase III trials for rosnilimab. That still remains to be the point. And we have plenty of capital to finish off the colitis trial to enable Phase III development for rosnilimab as well as fully invest in ANB033 in the initial indication of celiac and potentially additional indications over time. So we feel like we're in a very good capital position out of the gate. We're committed to 2 years of capital for that business, and we have alternatives for rosnilimab. Same we do today, but I just think this actually gives us more flexibility not less moving forward.

Our next question coming from the line of Andy Chen with Wolfe Research.

So I imagine if you're looking for a deal with another partner and that deal probably has to come to fruition before your intended separation and you have your intended separation by year-end 2026, does that mean you're confident that an attractive deal will be available by that time? And if you don't have a deal by then and then you separate, how would that affect the negotiation leverage for Biopharma Co at that time?

Yes. Thanks, Andy. So again, a clarification here. We're announcing that this will happen by year-end 2026. Now it's not practical just from a legal basis, what we have to do with the SEC, for example, to do this in 2025. So you're really talking about that 12-month window. And this could be as early as the first half of 2026. But we are allowing for flexibility to assess and make an optimal strategic decision on the path forward for rosnilimab. So I don't think we should be hedging do we do a transaction on rosnilimab with a partner before after a separation or even that's the best path forward, particularly given the separation where I think we're going to have a lot more flexibility on how to think about rosnilimab. So rosnilimab is an option value. And like we said in the prepared remarks, if we do put a relationship in place in front of the actual separation, there could be an opportunity to work through how to allocate the economic value of the drug. But we could also, and this could be the optimal decision, get the separation behind us and then transact or move forward rosnilimab independently after the separation. I think we have -- all these options are on the table, and we'll be working through that. So that kind of sits in the middle right now to work through. But what we're being very intentional about here is Jemperli and are going into one company, ANB033 and ANB101 are going to another. Rosnilimab, there's a bias to operate, obviously, into the Biopharma Co, but that could look different depending on the timing of how the advancement works and when we get the separation completed.

Our next question coming from the line of Alex Thompson with Stifel.

I guess on the relationship between Royalty Co and Biopharma Co, do you expect Biopharma Co to have any economic interest in Royalty Co? Or will this be a complete separation?

Thanks, Alex. So as it relates to Jemperli and imsidolimab, we think it will be a clean break and then all the nuance and flexibility around rosnilimab as stated.

And our next question coming from the line of Martin Fan with Wedbush Securities. Okay. Please queue up again if you have a question. Our next question in queue coming from the line of Yasmeen Rahimi with Piper Sandler.

Obviously, this does make quite sense because if you look at your market cap, you've not been getting full value for the royalitization nor have you gotten full credit for your pipeline, right? So obviously, splitting them up could bring 2 different shareholder bases and drive value. I guess the question for you is, given that you are in discussion with partners, do you think the separation is just making it simpler for a transaction to occur with a potential partner? I'm just trying to figure out that if you didn't change anything, what the outcome would have been and whether this just makes those dialogue with strategics simpler in some way or some sort of form? Appreciate any color.

Yes. Thanks, Yas. So a couple of points. One, I'm not sure this announcement plays into when and how to transact on rosnilimab with parties any differently one way or the other. It's -- what we're saying here is the royalties are in one area, the majority of Biopharma Co is going in the other, and we can transact on rosnilimab at any time before or after. I think we have that flexibility. I do not think this is going to impact excitement around rosnilimab and the ability to partner. A separate point is we are explicitly not announcing any sort of strategic alternative process of putting the asset up in a more formal way. I do think that we have a very viable path forward independently on rosnilimab. We have a huge event coming up with ulcerative colitis, not just the initial 12-month data, but the 6-month TPP and the follow-up 1-year data that we want to play through and really assess our options. So while I appreciate the question on partnering, it could be a lot more advantageous to at least, out of the gates, move forward here with one indication on rosnilimab without a partner. And I do think this gives that option a lot more flexibility.

Our next question coming from the line of Dave Risinger with Leerink Partners.

So I'm curious just to have you talk a little bit more, please, about I guess, two things. First, with respect to this type of transaction, are there any certain benchmark or representative types of publicly traded entities or exits of royalty companies that you would point us to, Dan? And then second, I think you've addressed it, but is there any more color you can provide on the scenarios for how the economic value of rosnilimab may be allocated between the royalty company and the biopharma company?

Sure. Yes. What's unique here is the absolute size of Jemperli being embedded in a company that looks like Anaptys today. So while there have been other high-value royalty programs within companies, I think on a relative basis to where we are as in any of Anaptys, this is quite unique. And there aren't a lot of comps that exist for this type of a transaction over time. So I think what we're doing is pretty unique, not just because of the overall value for Jemperli, which I think one of the other one of the other analysts mentioned earlier that is just dramatically undervalued as it sits in the company today, but also the strength and breadth of what we have in the R&D operations and how well capitalized we are. So I'm not going to point, I think, everyone to some alternative. I think there's plenty of companies that exist that focus on royalties in one way or another. I think our initial vision out of the gate here is this entity for the Royalty Management Co is focused on protecting and returning the value of these assets and returning that back to shareholders. There's ultimately going to be choices of how to return that value over time. That will be decided and communicated as we get closer. As it relates to the second question, Dave, I'm not sure I have much more to add. If there was a transaction done ahead of the separation, you'd have an economic relationship in place with another partner. And I think we'd have to assess what that looks like at the time. I think there's too many scenarios to try to walk through them all right now of what that could look like. But we would have some sort of an option to put some of the value in rosnilimab into the Royalty Management Co, but that's far from certain. And like I said, whether we partner or not is kind of choice 1, whether we do it before or after the separation is part 2, and that will all come into play on how we think rosnilimab could ultimately be valued and put into different companies. But I think the baseline plan right now is, like I said, there's different choices, and we've got to work through the timing post the ulcerative colitis data.

Our next question coming from the line of Derek Archila with Wells Fargo.

Maybe just two. Can you highlight the potential tax impacts of the split and any of the minimization strategies you're taking? And then also what milestones can you reach for 033 and 101 within your expected cash runway for Biopharma Co?

I'll let Dennis answer the first part of the question. I'll come back and finish.

Yes. Thanks, Derek. We're very focused on minimizing the overall strategies of this transaction at both the corporate and shareholder level. Taxes are complex, and we're exploring timing and method of separation to minimize the potential tax effect, if any. We'll provide more details when we get closer to the transaction being effective. But I think it's important, although we're focused on minimizing taxes, the bigger picture is the overall value creation from this transaction itself relative to where we are today or if we were to remain in the company's current structure.

Yes. And I'll just kind of echo the point on the net overall value creation. Like I mentioned on the prepared remarks, we've repurchased approximately 10% of the company today. We are still dramatically undervalued on either piece separately. When you separate these businesses, we do think this is going to create a lot of value for shareholders. There's various discount rates that are different for different types of companies and assets. The net value is the most important factor. And to Dennis' point, we'll update more in the future on how to best minimize tax, and there's going to be various strategies we can take.

Thank you. And that's all the time we have for our question-and-answer session. Ladies and gentlemen, that does conclude our conference for today. We thank you for your participation, and you may now disconnect.