Assembly Biosciences, Inc. (ASMB) Earnings Call Transcript & Summary

Welcome, everyone, and good day. I'm John McHutchison, CEO and President of Assembly Bio, and I'd like to welcome you all to our event today. I'm excited about these research webcast we've been hosting for 2 important reasons. First, I'm thrilled that we are showcasing the outstanding work that Bill Delaney and his talented team of sciences have been doing to capitalize novel programs to combat chronic hepatitis B infection and other viral diseases. And secondly, it's allowed us to invite scientific advisers and clinical experts and collaborators like Professor Ed Gane, who joins us today from New Zealand, to give his expert opinion and view on the tremendous unmet need in diseases like hepatitis B and delta infection and the opportunities for new approaches to make a marked difference for our patients. Before we turn to the content of today's event, I'd like to quickly touch on a few housekeeping items. I'd like to remind you that we'll be making forward-looking statements. So as always, please refer to our SEC filings for a full list of disclosures. Today's event will be available for replay on the Assembly Bio website shortly after the live webcast has concluded. The slide presentation will also be available there for download. Following the prepared remarks, we'll be hosting a Q&A session. You may submit your questions at any time during the event by entering the text into the Q&A box, which you will find below the video Play. If you experience any technical issues during the broadcast, please first refresh your browser. And then if the issue persists, please message the technical support team using the chat box at the bottom right corner of your screen. As you all know, a central tenant in our mission at Assembly Bio is to discover and develop finite and curative therapies for the nearly 300 million individuals globally, who are infected with hepatitis B virus. The depth of our scientific expertise in virology and the discovery of small molecules has made us a leader in that field. As I said during our last research event, Bill and I and many others on the Assembly Bio team were involved in the efforts to turn hepatitis C into a curable disease, where it was imperative that we think broadly and creatively about how to suppress and eradicate the virus. Professor Gane has also worked extensively in this area as well. We believe the strength of our science and skills positions us to bring long overdue innovation to hepatitis B therapeutics and to improve outcomes for individuals living with the chronic infection, including those co-infected with hepatitis delta virus. Interestingly, the program we are discussing today builds upon the strength of established science with insight and innovation unique to Assembly Bio's drug discovery capabilities. Interferon alpha has been used for over 30 years in the treatment of hepatitis B and also hepatitis C in the past. And a small subset of patients when given for a year, interferon alpha treatment, combined with the NUC, has achieved a functional cure of hepatitis B and loss of surface antigen. This is the highest rate of HBsAg loss observed in controlled trials to date, but the side effects of interferon therapy and its restricted use in only certain groups of patients have limited its availability, utility and uptake by both patients and by providers. As Professor Manns shared during our last event, historically, in treating patients with delta infection [indiscernible,], peginterferon also results in hepatitis delta RNA declines and improved clinical outcomes. Despite the potential to benefit some patients, interferons used as an HBV therapy is greatly limited today. And this is primarily because of treatment limitations with standard interferon having poor tolerability and many contraindications and requiring weekly injections for up to a year. The side effects can be substantial, including flu-like symptoms following administration, muscle aches and pains, joint aches and pains, lack of appetite, impact on blood cell counts that frequently fall and often potentially significant depression, mood changes, weight loss, dehydration, hair loss, a fogginess in thinking and thyroid abnormalities, just to name some that I can recall. Professor Gane will cover this more in a minute, but you can see why interferon today is not widely prescribed by liver specialists for hepatitis B. When Bill first joined me at Assembly, we strategized about what mechanisms we should be pursuing for hepatitis B that might complement our portfolio of open core inhibitors. At our last event, we talked to you about the entry inhibitor we are now advancing for hepatitis B and hepatitis delta, which represents a complementary antiviral approach. But what about immune modulation as another complementary approach, particularly with a validated mechanism like interferons. By leveraging our expertise in orally administered small molecules and designing a compound to have exposure focused to deliver, we have the opportunity to advance a promising therapeutic approach with greater convenience and tolerability. As you'll see on the agenda, Bill will present details on our oral small molecule liver-focused interferon alpha receptor agonist program a little later on in the webcast, and we'll include what we're trying to achieve, where we are with our research activities and what we have seen to date, why we're excited and confident about the program and what to look for from us as this body of work moves forward. But first, I'd like to introduce Professor Ed Gane who joins us from New Zealand, where he is Professor of Medicine at the University of Auckland, a liver specialist and hepatologist and Director of the New Zealand Liver Unit at the Auckland City Hospital. Professor Gane trained in hepatology at the King's College School of Medicine, London, where he completed his post-graduate training and degree on the pathogenesis of hepatitis C-related liver injury. In 1998, he was appointed as Chief Physician for the first New Zealand Liver Unit at Auckland City Hospital, which provides a national transplant and liver cancer program. He helped set up the community-based national Hepatitis B surveillance program, which is the largest in the world and also chairs the Ministry of Health Committee responsible for hepatitis C elimination. Professor Gane is a key leader in principal investigator for many international clinical trials with particular interest in early phase development, a new direct-acting antiviral therapies against chronic hepatitis C, hepatitis B, NASH and liver cancer. He has published extensively with over 400 high-impact papers and peer-reviewed journals, including The Lancet and The New England Journal of Medicine. In 2011, he was made a member of the Order of New Zealand for Services to Medicine, and he was the 2017 New Zealand Innovator of the Year for his work towards elimination of hepatitis C in New Zealand. And in 2018, he was elected to the Royal Society of Medicine in Australia. So Ed, thank you very much for being with us today, and I'll now turn the event over to you.

Thank you, John, for inviting me to participate in this event, and hello, everyone. My task is to discuss the role of interferon and the treatment of hepatitis B and how this agent could contribute to future functional cure. Next slide, thanks. So why do we need new therapies for hepatitis B? We already have safe, effective long-term nucleoside analogues or NUCs, which are recommended as first-line treatment by all the current guidelines, but there still remains an unmet need for hepatitis B therapy in many patient populations. Next. First, NUCs are currently only recommended for those patients with so-called active chronic hepatitis B and these make up less than 1/3 of all patients living with hepatitis B infection. NUCs do reduce, but they do not remove the lifelong risk of liver cancer. And lifelong treatment comes with a cost and also risks of noncompliance in particularly young people, but also there's a lifelong risk of cumulative toxicity, and this is especially in an aging population with risk factors for bone and kidney disease. Stopping NUCs either due to noncompliance or by design, maybe followed by rapid virologic relapse and in some patients, this can lead to severe clinical relapse, which may be life-threatening, leading to acute liver failure. And therefore, there is a need to develop a finite duration therapy to achieve functional cure. Next, thanks. Chronic hepatitis B virus infection is associated with very high levels of viral replication and impaired post immune responses. Therapeutic approaches to achieve cure include inhibition of viral replication, lowering the very high viral antigen burden and boosting the host's own innate and HBV-specific immune responses. Next, thanks. Advances and the understanding of the immunology and virology of hepatitis B over the last decade have identified many new targets for drug development. Next. And one therapy that is already approved, that actually has all these 3 mechanisms of action is, of course, interferon alpha. Next, thanks. Interferon alpha can boost immune responses, and it does that by enhancing antigen presentation, but also activates effector cells, which can therefore secrete a variety of cytokines, which inhibit viral replication. Interferon alpha also possesses direct antiviral properties [indiscernible] with JAK2, it activates multiple significant pathways within the [indiscernible], which goes on to activate ISGs and these trigger a variety of cytokines, again, which degrade viral RNA and inhibit HBV production. And finally, we now know that interferon alpha enhances the production of [indiscernible] and multiple other enzymes, which can [indiscernible] and also Pregenomic RNA and this itself blocks viral replication. Next slide, thanks. And you'll hear more about that from Bill later. So let's look, what is the efficacy of interferon in the clinic? This is an old very important measure analysis from David Wong in Toronto, and it shows that even the older standard interferon and this was dosed subcutaneously 3 times a week, even this very old interferon had significant antiviral efficacy in patients who are [indiscernible] post treatment, 24 weeks post-treatment viral suppression, [indiscernible] loss and even surface antigen loss in a small number of patients. Next, thanks. The development of pegylated interferon allows a more convenient once-weekly subcutaneous dosing, and this was associated with increased antiviral efficacy. And as shown in the international randomized study, pegylated interferon achieved higher rates of [indiscernible] loss, DNA suppression, ALT normalization and surface antigen loss when compared to the older standard interferon. Next. One particular benefit of interferon therapy in hepatitis B is that the efficacy continues to increase with longer follow-up post treatment. In this study from the Netherlands, more than half of those patients who lost [indiscernible] antigen on treatment went on to lose surface antigen during the 10 years of follow-up. Next, thanks. And again, in this large Korean study, which included almost 500 patients with [indiscernible] positive chronic hepatitis B, interferon treatment was associated with markedly reduced progression to cirrhosis and also the instance of liver cancer during 20 years of post-treatment follow-up. Next, thanks. We now have [indiscernible] different classes of novel therapies currently in clinical development, which can be combined in an effort to achieve finite duration of so-called functional cure. Given the multiple mechanisms of action, interferon would seem a very attractive therapy to include in these new combinations. And in fact, there's already considerable data available on the efficacy of combining our 2 approved therapies. That is pegylated interferon plus nucleotide analogues and these have been combined in the clinic, and this is a large meta-analysis of 49 different studies, where they looked at different designs of combining interferon to a NUC, either adding interferon on the patients on long-term NUC, switching from long-term NUCs to interferon or starting both the NUC and the pegylated interferon at the same time. And what this meta-analysis shows that the most effective strategy, what's combining both agents from the very beginning as this appear to be the most [indiscernible] of surface antigen loss. Next, thanks. At last month's [indiscernible] meeting, the preliminary results from combining pegylated interferon with a translation inhibitor, in this case, the siRNA [indiscernible] these were presented. And again, the strategy of combining both agents from the beginning was the most effective in terms of surface antigen reduction. Following on from this -- next, thanks. Every other siRNA and antisense oligonucleotide program is now also evaluating combining these translation inhibitors with pegylated interferon. So what about the safety profile of interferon alpha? John has already introduced this. This [indiscernible] summarizes the time course of the most common side effects seen with interferon. And these start off with flu-like symptoms early on, and these are replaced later on by fatigue and mood changes, which can lead to anxiety or depression. Next, thanks. This table depicts the frequency of common adverse events, serious adverse events, dose reductions and discontinuations from the 2 large registration studies of Pegasys [indiscernible] in patients with chronic hepatitis B. I should note that all of these were less frequent than the same safety parameters reported in the registration studies of Pegasys in chronic hepatitis C. And that has been seen in other analysis. Next, thanks. Nonetheless, the side-effect profile and also the systemic immunostimulatory effects of subcutaneous interferon means its use is contraindicated in many patient populations, including those with advanced liver disease or cardiac or lung disease, patients with autoimmune disease in particular and also patients with psychiatric diseases, organ transplant recipients, young children [indiscernible] do not tolerate this and is contraindicated in frequency [indiscernible]. And these contraindications significantly limit the usefulness of pegylated interferon in clinic. Okay. Let's now switch to delta co-infection. John has also introduced this in the earlier presentation. It affects around 12 million people across the world, that's 5% of all hepatitis B in effective patients, but if you look in particular countries and regions of the world, up to 60% of people living with hepatitis B have delta co-infection, and this is also the case in my backyard in the Western Pacific where [indiscernible] patients up to 40%, 50% of those with surface antigen also have delta co-infection. There's no proven benefit of long-term nucleotide analogue therapy in these patients. And we've already [indiscernible] delta co-infection accelerates the progression to cirrhosis and the complications of liver failure and liver cancer as shown here in this study from [indiscernible]. In my own experience in our transplant program, where we've transplanted a number of patients with delta co-infection, these patients are transplanted 5 to 10 years younger than patients we transplant for hepatitis B mono infection. Next slide, thanks. The only finite treatment, which has been shown to be effective in data is interferon alpha. And in this old but very important NIH study, you can see a clear dose response to [indiscernible] HBV RNA suppression in the table on the left. And this was associated with improved long-term outcomes. So there appear to be a dose response in terms of virologic suppression and long-term clinical benefits. Next slide, thank you. Now as I've already described in drug development HBV mono infection. The new therapies, which are being developed for delta co-infection are now also being combined with pegylated interferon. And these figures demonstrate that the antiviral activity of pegylated interferon is synergistic with both the entry inhibitor bulevirtide shown on the left and also the prenylation inhibitor [indiscernible] shown on the right. And I think this synergistic antiviral effect in part reflects the specific roles of interferon in blocking the intrahepatic spread of delta virus. Next slide, thanks. So in summary, interferon has multiple different effects on HBV and the host immune system. Interferon either alone or combined with NUCs has led to the highest rates of surface antigen loss and has improved clinical outcomes for patients with chronic hepatitis B. Interferon has synergistic antiviral activity when it's combined with novel therapies in development, either against HBV mono infection or HBV delta co-infection. However, we've seen that the inconvenience, the poor tolerability and the multiple contraindications have limited the use of subcutaneous interferon for the management of hepatitis B in our clinics. And therefore, an improved liver-targeting oral interferon with fewer systemic side effects could meaningfully contribute to functional cure in our patients with chronic hepatitis B. Thank you.

So thanks, Ed. That was fantastic as always. So your review of the therapeutic approaches to finite and curative hep B therapies and the unmet needs are very relevant to the discussion today, of course. And your comments on the use of interferon for hepatitis B and some of the challenges that have limited its use provide a valuable context to why interferon hasn't played a greater role really to date at least in addressing these unmet needs, trying to cure hepatitis B. So with that as background, I'd like to hand it over to Bill Delaney now to provide an overview of Assembly Bio's small molecule liver-focused interferon alpha receptor agonist program that we've been talking about for a couple of years now, Bill, I think. So thank you, Ed, and I'll hand it over to Bill.

All right. Thanks a lot, John, and thank you, Ed. So I'll start my presentation just by reinforcing some of the key points that so clearly illustrated. Interferon alpha is an approved treatment for chronic hepatitis B and is used now in its pegylated forms and it gives the highest rate of surface antigen loss or functional cure of any agents. However, despite the efficacy that it has, it has relatively limited use currently, and that's partially due to the fact that it's weekly injectable, but mainly due to the significant side effects and tolerability issues that it has and therefore, an oral activator of interferon alpha pathway that was able to engage and take advantage of the efficacy that this pathway could give, but was focused on the liver and spare the rest of the body to improve tolerability would be a significant advance for patients. And that's the goal for our program. So I want to start by first talking about our overarching goal for hepatitis B cure, and I think this is shared by many of our colleagues in the field across academia and industry. And it's a 2-component strategy that focuses first on inhibiting the virus, which could be inhibiting viral replication but also antigen production, and most importantly, cccDNA, which is the reservoir for viral infection. So that's the first part of the strategy. And the second is to engage and augment the immune response, ideally ending up with an HBV-specific T cell response and B cell response, but this could also take advantage of many of the innate immune cells that are available and that could ultimately lead to better efficacy of the HBV-specific T and B cells. And something that's unique about interferon alpha's mechanism of action is that it can actually engage both parts of these -- both components of the cure strategy. So it has many ways that it can interfere with the HBV replication cycle, and we'll go through some of that in more detail. And then it's also the receptor is present in a broad complement of immune cells, including both [indiscernible] immune cells and the innate immune cells. So I want to talk a little bit more in detail about interferon's mechanism of action. First and really the 3 main activities that we see. So first, it can act within host cells and induce a cellular antiviral state. And it does this by engaging its receptor, activating the JAK-STAT pathway. And this leads to the expression of many interferon-stimulated genes, and I've listed some of those on the slide here on the left, things such as MX, OAS, PKR, et cetera. So it can protect cells that the virus will be replicating in. It also activates the innate immune system in many of cells, including some of those are shown here. So for instance, macrophages, which in the liver are present as Kupffer cells and constitute a significant portion of the total cells in the liver. It can activate macrophages and increase the regulatory functions. It can enhance the recruitment and activation of NK cells and also enhance the antigen presentation and migration of dendritic cells. And then finally, it can act directly on those adaptive immune cells and namely T and B cells resulting in the expansion of those cell types, enhancing the cytotoxic function of T cells and antibody production by B cells. So I want to focus next on the first part, which is the antiviral state of the cell and how [indiscernible] specifically to HBV. Replication cycle. We start in the upper left-hand part of the slide. The virus attaches and enters the cell through the NTCP receptor, it uncoats, it's able to deliver its DNA to the nucleus to form cccDNA, and that cccDNA is able to be transcribed, giving rise to viral mRNAs that enter the cytoplasm and could be translated into viral proteins. And then these proteins can be secreted, whether it's the antigens or they can form new viral particles undergo reverse transcription and be secreted to complete the viral life cycle. So due to the efficacy of interferon, it's been studied at a cellular level for many years. And -- if we go to the next slide, we can see a summary of some of this key literature. And within the last 10 years, it's been shown that one of the mechanisms of interferon and this comes from the lab of [indiscernible] show that interferon is able to inhibit the transcriptional ability of cccDNA through epigenetic mechanisms -- more recently was shown by [indiscernible] group that activation of the interferon alpha pathway can lead to degradation of cccDNA. And then several pieces of data coming from [indiscernible] over the years have shown that interferon can also act on HBV RNA, accelerating their turnover and can also destabilize viral [indiscernible]. So collectively, we see multiple complementary and distinct mechanisms of action that can result in inhibition of HBV replication within cells. Importantly, we have 2 mechanisms working directly on cccDNA. So to frame the project that we have here at Assembly, I'll use this slide to illustrate that. So starting on the left-hand panel, see interferon alpha is obviously a biologic. It's 165 amino acid large molecule and is used predominantly as a speculated form. That's dosed once a week, which leads to high circulating interferon levels. and this leads to tolerability issues, which have limited its clinical use and also caused discontinuations in eligible patients and limit its overall duration in eligible patients. And John and I have discussed many of the symptoms and side effects of interferon. They're also [indiscernible] the bottom of the slide there. Moving to the right-hand panel of the slide, goal for our program is to have a small molecule that's able to bind and activate the interferon alpha receptor. This small molecule will have liver-focused PK exposure. And what that will allow us to do is to activate the [indiscernible] pathways hepatocytes, as I just discussed, also to engage both innate and adaptive immune cells that are present in the liver. And furthermore, the goal of this program is to avoid high systemic exposure, which will spare the rest of the body from the effects of interferon alpha and the tolerability issues. Finally, this drug will be given orally, which also increases convenience for patients. So to expand a little bit about the liver-focused strategy for this program. This slide illustrates the goals of the program and the approach that we're taking. So the compound, again, will be given orally and it will be rapidly absorbed through the intestine into the portal vein. And as soon as it enters the portal vein, high concentrations of compound will hit the liver, resulting in high liver exposure, they'll engage the interferon alpha receptor. And an important part of this strategy is that the compound does not need to be circulating at high levels, like a conventional antiviral that inhibits the virus. But -- it just needs to trigger the receptor and start a signal transduction cascade and we'll talk more about that in a moment. But the driver here is that we'll have a long pharmacodynamic effect after engaging the receptor. And then the liver will do what it naturally does, which is eliminate drugs. So this compound will be designed to have a high first pass effect of very little that will survive the liver, and will have a short half-life and ultimately, having low systemic exposure. I also wanted to note that the liver is a complex organ and contains many different cell types. Of course, we think first of hepatocytes in the liver and those constitute about 70% of the cells in the liver. But there's also many other important cell types that could be relevant for the resolution of HBV infection. So those include liver sinusoidal epithelial cells, which constitute about 10% to 15% of cells in the liver. And then Kupffer cells, which I already mentioned, which can be present in about 10% of the cells in the liver and then various other immune cell types, including T cells, B cells and NK cells. And importantly, all of these cell types express the interferon alpha receptor and they can all be engaged to collectively work against HBV, whether it's the direct antiviral state and the hepatocytes or the activities on the innate or adaptive immune cells. So I'm going to switch now and share some of the data that we've generated from our internal small molecule program here. There are expectations that we would have for a compound that acts by this mechanism and those are summarized here, and I'll walk through some data for each of these expectations. First, we would expect a compound that activates the interferon alpha pathway to have broad antiviral activity and be active against a number of DNA and RNA viruses. We would expect it to have activity against HBV, as I've outlined on previous slides against both replication and antigen production. And we would also expect that this activity would be dependent on signaling through the receptor through the JAK-STAT pathway and through the production and transcription of interferon stimulated genes. So starting with the broad antiviral activity, we used 3 RNA virus assays to first profile some of the compounds from this program. This includes hepatitis C virus, Zika virus and EMCV or encephalomyocarditis virus. In the case of the HCV and the Zika assays, these are replicon cells that are -- have a construct that replicates continuously within the cells. So this is a very simple assay where we really add the drug for 2 days to these cells and then use a luciferase reporter to look for the amount of virus present at the end of the assay. In the case of EMCV, this is a whole virus assay, where we infect lung cells with EMCV. We then add the compound and incubate cells for 2.5 days. And since this is a cytopathic virus, we look for cell viability as the marker for protection against the virus. So on the next slide, we can summarize the results of these antiviral assays. I am showing the results here for 5 different [indiscernible] starting over on the left panel, you can see for hepatitis C. It's quite sensitive to these molecules, and we see EC50 is ranging from about 100 nanomolar down to about 10 nanomolar for the various series of compounds, very consistent activity. Moving to the central panel, similar results for Zika virus, where you can see all 5 of the series are active with EC50s around 100 nanomolar or less. And then finally, in the whole virus assay for EMCV, again, similar results where we see compounds having activity somewhere around 100 nanomolar for all of the series of compounds. So moving on to talk about HBV. We used 2 assays to look at the antiviral activity against hepatitis B and early in a late treatment assay. So I want to walk through the differences in these assays because it's critical to understanding the activity of interferon. So first, in the early treatment assay, we take primary human hepatocytes. We infect them with virus. And then a couple of hours later, we add the compound. So this added compound before the formation of cccDNA, we then incubate the compound or the cells and the compounds for 7 days. And then we're using surface antigen as a marker for formation and transcriptional activity of cccDNA as the endpoint. So again, we're treating the cells before cccDNA formation in the early assay. Then in the late assay, we've played the cells, infect them. We give the cells 2 days after infection to form cccDNA, and then we add the compounds and incubate for a further 5 days. So importantly, here, we're adding the compound after cccDNA formation. We're using the same surface antigen endpoint to look for the activity and transcription from cccDNA. 3 different classes of molecules in both those early and late assays, nucleoside analogues, core inhibitors and then the small molecule interferon agonist receptor, interferon alpha agonist receptor molecules. So starting on the left-hand panel, we're using entecavir, as an example, NUC. You can see that whether we give entecavir early or after 2 days, we see very little activity against cccDNA. So basically, it doesn't affect significantly the production of surface antigen. And this degree is with the known mechanism of action of nucleoside analogues, it has no effect on preformed cccDNA. It's also not effective in being able to stop the formation of new cccDNA. Moving to the central panel with the core inhibitors. Here we're using our Phase Ib compound 3733. And we can see in the early treatment assay with 3733, we see potent activity against the formation of cccDNA. So you can see surface antigen is inhibited with an EC50 around 100 nanomolar. However, when we treat late, 2 days after infection when cccDNA is already formed, we don't see a significant effect against surface antigen as expected for this class of inhibitors. And finally, moving to the right-hand panel with the small molecule agonist. We can see that whether we give the molecule early before the formation of cccDNA or late after the formation of cccDNA, in both cases, we see a significant inhibition of surface antigen, and I think this slide very nicely illustrates the differences between the different mechanisms and the different classes of inhibitors and also the uniqueness of the interferon alpha mechanism of action and compared to the antivirals. So next, we also wanted to confirm that these molecules were acting as we expect by engaging the receptor activating signal transduction and resulting in the transcription of interferon stimulated genes. So the first set of experiments we did to look at this is we did a [indiscernible] to look for the evidence of [indiscernible]. So after the receptor is bound by interferon or the small molecule agonist, you should get [indiscernible] activation of JAK-STAT pathway, phosphorylation of STAT and then STAT1-STAT2 heterodimers is what stimulates and then the transcription of the response of genes. So the endpoint we're looking for is that phosphorylated STAT1 as evidence that we're signaling through the receptor and causing dimerization and activation of the pathway. So we looked at 3 conditions: DMSO control, using interferon the biologic itself and then also using the small molecule agonists and we're using a Series 1 molecule as the example here. So let me walk you through the Western blot on the right-hand panel. The first 2 columns show the DMSO treated. And whether we add a JAK inhibitor or not, we see no basal level of STAT1 phosphorylation, so there's no detectable signal there. Moving to the center 2 panels using interferon alpha itself, we see that in the absence of the JAK inhibitor, we see a strong signal for phosphorylated STAT1. However, this can be completely blocked by the addition of the JAK inhibitor, and we see the disappearance of that green band there in the middle indicating phospho STAT1. And then moving on to the far right. Last 2 columns, we see with the small molecule agonist. Just like interferon, when we add the agonist, we see the appearance of phosphorylated STAT1 and that's able to be blocked just like interferon by the addition of the JAK inhibitor. And you can see the loading control [indiscernible]. So overall, these indicate that its molecules are acting like interferon alpha through the JAK-STAT signaling. So we next wanted to look at some of the genes that would be produced after activation of this receptor pathway. And to do this, we took primary human hepatocytes and we treated them with interferon or we treated them with a small molecule agonist and compared them to untreated cells and look for the induction and changes in genes based on those treatments. This is done by a NanoString analysis of RNA and we're looking at a panel of approximately 800 genes here. And what I have plotted out is the fold induction of genes on the Y-axis, fold induced by interferon alpha. And on the X-axis, the fold induced by a Series 1 small molecule agonist. And what you'll see is a very nice diagonal line within our Square 0.9, indicating there's a very tight correlation between the genes introduced by the biologic interferon and by the small molecule agonist. So you can see the genes that are highly induced by interferon are also highly induced by the small molecule and conversely. -- those that are -- have little induction or no induction by interferon show a similar pattern for the small molecule. And I've highlighted a couple of the common household name interferon-stimulated genes on this panel, including OAS, [indiscernible], et cetera. Moving on to our target profile for this interferon agonist program. In terms of activity, the compound needs to be active against both hepatitis B and hepatitis delta with levels comparative to interferon alpha or better. It has to induce ISGs comparable to interferon alpha. So induce the same type of immune gene response. And then finally, we want to see that when we treat animals and preclinically that in vivo, we get strong induction of interferon stimulated genes in the liver versus the periphery. And the PK profile that would support that type of activity would be, as I said before, an orally administered compound with rapid absorption, high liver exposure, but limited systemic exposure, and therefore, having a short terminal half-life. And finally, critically, the safety profile for the molecule, it needs to be well tolerated, it could be a significant advance compared to the side effects we discussed from pegylated interferon. In terms of our progress on the project and our goals, the projects currently in lead optimization. We've got multiple chemically differentiated lead series, as I've discussed. And I've shown that these have brought into oral activity as well as activity specifically against HBV. We've confirmed that it's active through the canonical signal transduction pathway, and we're currently in the process of optimizing the PK. We know that we can modify the half-life based on chemical structure, and we're actively profiling compounds in preclinical PK/PD studies. Our goal is to advance compounds into preclinical safety profiling in 2023 to enable selecting a development candidate as quickly as possible. And before I wrap up my portion of the presentation, I just wanted to highlight thinking forward to the clinical testing of a molecule from a program like this. The fact that we can detect the activity of interferon relatively shortly after it's administered. There are many, many studies that have been published that showed this. I pulled out 1 example that looks at the early kinetics of pegylated interferon. So this is a study from [indiscernible] in 20 patients, where you can see that, they give 4 doses of interferon over 28 days, immediately after the first dose, there's a marked decline in HBV DNA. You can actually see due to the pharmacokinetics of pegylated interferon that, that starts to wane and rebound a little bit before the next shot is administered. But progressively, as you continue to give shots over the 28-day period, there's a decline in HBV DNA [indiscernible] half a log -- we've also seen in other published studies that you can see movement in viral antigens, including [indiscernible] as well. So it's very important that we would be able to get an early read and proof of concept for the compound, and we would be able to do that in a 28-day study. As Ed and John have discussed, the side effects and tolerability of interferon is apparent very early in clinical dosing, and we would also have viral biomarkers for the activity and proof of concept. So I'll wrap up at this point and just summarize that interferon alpha is an approved drug for hepatitis B that has a demonstrated ability to achieve functional cure. Despite that, it's not used very often due to its poor tolerability and contraindications. Therefore, a small molecule that's able to engage the benefits of the interferon alpha pathway, so the efficacy while reducing the systemic exposure and improving the tolerability profile would overcome this major limitation. And we've discovered novel potent agonist IFNAR alpha receptor and are aiming to advance compounds in the preclinical safety assessments next year. And I'll wrap up at that point. Back over to you, John.

Thanks, Bill. I love that [indiscernible] correlation. So it's the same, the small molecule is the same as a large molecule as well. So look, our oral liver-focused interferon alpha receptor agonist program has the potential to unlock the value that interferon has shown and can bring to the treatment setting while mitigating the considerable toxicity of systemic exposure and improving ease of use and potentially duration of use as well. It also introduces an immune mechanism into our strategy to combat hepatitis B and delta hepatitis alongside the antiviral approach of our hepatitis B delta entry inhibitor and our next-generation more potent core inhibitors. And from a company perspective, we have successfully assembled an incredibly strong research organization over the past 2 years that's enabled us to create significantly more potent core inhibitors targeting that second mechanism of the class to combat the formation of new cccDNA and to expand our discovery and development efforts as you've heard today, beyond core inhibition as they are focused towards hepatitis B [indiscernible] and other viral diseases, which we plan to talk about in an upcoming additional webcast as well. So along with our strong research pipeline we are building, we're enthusiastic about advancing our next-generation core inhibitors, 3733 and 4334 into the clinic. And we're excited to have the talent and ability to be able to do all those things. So thank you, Bill, and your team as well. But it's a good time now to transition to a few Q&A.

[Operator Instructions] As a reminder to our participants, if you'd like to ask a question today, I know some of you have already, please enter it into the chat box below the video player and we'll get started. So perhaps Ed Gane, I should say, for me, but perhaps we can start there with you because you've got an enormous clinic there. So hepatitis B Clinic [indiscernible] how many people or patients attend that hepatitis B clinic?

Thanks, John. So we -- New Zealand is part of Asia-Pacific or Polynesia. So we have about 2.5% of our population with hepatitis B [indiscernible]. So my clinic, we see people who need treatment. So traditionally, we have been referred from our large surveillance program. We've talked about people who have higher ALTs, high HBV DNA. We currently have around 2,500 people on oral new therapy [indiscernible] on long-term therapy.

2,500 people. That's an extraordinary number of patients. I was incredibly surprised to hear that in some of those populations, 40% to 45% of people have delta co-infection as well. I think you said that during your talk today.

Yes. Certainly, this is the case in the Western Pacific [indiscernible], yes. And we really have a lot of these people living in our major cities now.

As all those patients, anyone on interferon or not?

Well, the patients are very involved in development such as [indiscernible] studies. And we used a bit of [indiscernible] and that's 20 years ago. I guess our long-term results went great. We are largely [indiscernible] here in the South Pacific. Nowadays to answer your question, we use very little interferon. I think the only patients are treated in the clinic with interferon over the last few years have been patients with delta co-infection because there's a lack of any other treatment for this population. I am using interferon in a number of the development programs in the combinations. And as you pointed out, most of the development programs of novel agents are adding in cohort combining pegylated interferon. So these are really my use of interferon limited to that.

So and I'm just trying to take it out a little bit further. So is it -- from the patient perspective and the doctor or the provider perspective, do the patients not want the side effects as well? Is that part of it? Or is it because NUCs were so much easier to use with a much more tolerable safety profile, what led to the sort of -- people just not using it over time?

I guess we were very [indiscernible] in particular, treating the younger patients, the [indiscernible] positive patients with the high ALT, the patients whom we felt were the best responders in terms of to a finite course of interferon. But -- the -- our results -- long-term results have been very poor, and I think that reflects the HBV genotype in this part of the world and all of Asia, to be honest. But also, you're right, the patients -- really giving them 24 or 48 weeks of pegylated interferon, it has a significant impact on their quality of life, on their ability to work, on their relationships. And it's there to -- and the hepatitis B population. This is just not -- I showed you some data that it's not just in hepatitis C patients, hepatitis B patients do struggle with the systemic side effects of interferon. And to go through 24, 48 weeks, and there not to achieve a durable response is disappointing for the patient and the physician.

For both alike, probably the patient more than the physician really, right?

So we really -- and you're right, the NUCs available here unrestricted -- they are very well tolerated. And the only issue I have with some of the younger patients is adherence, but we do try and reinforce that. But NUCs are very well tolerated.

Thanks, Ed. Thanks, Ed. So Bill, you looked at this, we were looking at all the [indiscernible] and the studies and is noted today that people are starting to use interferon in their new regimens for their new trials of [indiscernible] for hepatitis B. So -- what's your take on that all, Bill? And what's going on there in terms of clinical trials and people using interferon for hep B cocktails?

Yes. I think what we're seeing is hepatitis B is tough to cure. -- the field is looking for a way forward and probably instincts coming out of the HCV days, where people work very hard to get [indiscernible] regimens with small molecules were able to do the job. We are not to go to the side effects that we've discussed with interferon despite the fact that it was effective. But as we've moved forward as a field for HBV, there's been, I think, a reawakening of what interferon brings to the table. And actually, looking at [indiscernible] clinical studies ongoing right now where people are looking at novel mechanisms of action in combination with interferon. So I think people are really trying to work with and leverage what interferon alpha brings to the table in their cure regimens.

So maybe to just add, John, I think everyone is looking at the combination of various replication inhibitors with immunomodulators. And because the only immunomodulator currently available and approved is interferon, I think people initially looked at interferon [indiscernible] develop other effective immunomodulators. But now the preliminary results are coming through. It looks as though interferon may certainly be a part of many development programs going forward.

Yes, it's true, isn't it? Because many of the other immunomodulatory approaches, and you had a long list of them all on your slide. And Bill and I worked on a lot of those, but they haven't panned out, so I think there is a significant opportunity if we could dial back the side effects of interferon, maintain its efficacy and its mechanisms of action and potentially even dose it for a longer period of time, we might be able to do something different. So I think that's the goal of what we're trying to talked to you about, and that's what we'd like to be able to hopefully achieve and to get there and to try and improve at least in some early clinical trials. Bill, I just wanted to ask you another question as well because I think one thing on everybody's minds and the questions coming in here today is, as I said before, you and I have been talking about this program now for a couple of years, working here together. And we're trying to start to show something that we believe is differentiated and on target here. But why hasn't anybody done this before? Why are we doing it now? And why hasn't anybody done it before? I think it's an obvious question, really.

Yes. Thanks, John. So I personally have been interested in interferon most of my career, dating back to my [indiscernible]. It was very obvious to me when the first nucleosides were approved, and we had experience with conventional interferon and later with a pegylated that the 2 mechanisms of action have -- were very different. We had the tolerability of NUCs and the profound viral suppression, but interferon could do something that nucleosides didn't? And what was that? Was it its antiviral properties, was it the immunomodulatory properties or was it the combination? But -- so this has been something that's been dear to my heart and scientifically incredibly interesting to me, my whole career and definitely something I wanted to try to harness and leverage with our program here. So the question of why aren't others doing this? Or why is it taking us or the field longer to get here? I think, again, might be partially a hangover from hepatitis C, where as I said, we worked really hard to remove interferon from the regimens. And as an RNA virus with a limited lifespan, that can be accomplished with [indiscernible] and other compounds, but hepatitis B is proving a tougher nut to crack, being a DNA virus, the reservoir, cccDNA in the nucleus. So I think it's really just an appreciation of what interferon can do. And the question is, can you get the efficacy without all the tolerability issues, which is what we're trying to accomplish here.

Okay. Very good. Ed, do they test everybody there in New Zealand for delta. That was just a brief prevalence of delta [indiscernible] population?

Yes, we certainly test everyone who are from -- have immigrated from countries of high prevalence of which there are large numbers, living in New Zealand now from the Western Pacific. It's not found in our Asian population. We do test it though in patients who are from other ethnicities, other countries, if they have persistent active disease with low HBV DNA. But certainly [indiscernible] countries of known high prevalence.

Okay. Thanks, Ed. And Bill, we wouldn't limit the development. If you are successful doing this, and we wouldn't limit the development of this to hepatitis B. Ed had slides on delta and interferon today. Would that be part of the plan?

Absolutely. So I mean, interferon is actually used quite a bit against delta virus even though it's not an approved agent and the reasons are just as Ed illustrated that it does impact the viral load and translate into improved outcomes for the patients. And I think furthermore, the 2 delta studies that Ed showed, 1 with bulevirtide and another with an experimental compound where there was a clear enhanced effect by adding interferon on top. So absolutely, this would be something we would be interested in, looking at for delta and potentially combining with our entry molecule for delta.

Okay. That's good. Of course, if we're successful, there's a couple of questions here. Would we use this in cocktails with next-generation compounds, core inhibitors, et cetera? The answer to that would be yes. But there is a path to approval to [indiscernible] as a freestanding agent for hepatitis B and/or delta and/or in combination with NUCs for hepatitis B. And that could be in the setting of a switch, an add-on or a combination upfront as well. So we have lots of potential options there. But as Bill said today, it's important to realize that PD-wise, in 28 days, and we should be able -- if we're doing what interferon does, we should be able to see an effect on hepatitis B DNA within the first month of dosing. There's a number of questions here about various different aspects of the development program. And I just want to touch on is the data isn't very good with functional cure -- and is it really just a matter of it being side effect related, et cetera, et cetera. And I touched on this. The response rate and the cure rates [indiscernible] loss rates are low [indiscernible] interferon in 5% to 7% to 9%, but right now, we're at 0%. So that would be a start and an incremental improvement. And there are a couple of better analysis where we were just talking about before mainly from Asia, but they show if you extend the duration of interferon beyond a year, you can increase [indiscernible] loss rates by about 10%. And we can send that paper around to some of you who would like to see it as well. So I think there is an opportunity that, again, gets back to what we were saying before about ability to take the drug for a prolonged period of time with its side-effect profile. When would you -- sorry, Ed, you're going to say something.

John, just to add to that, really, I think a couple of questions about what about increasing the dose of pegylated interferon [indiscernible] increase efficacy? Well, I think that was really well studied [indiscernible] randomized study where we went up from 90, 180, 270. The higher you push the dose, the worse tolerability. So there is a balance, I think, between efficacy and tolerability [indiscernible].

Yes. Thank you, Ed. I appreciate that. I missed that. So that was good. Bill, another question here about, is there a scenario where we can design the drug to enhance the selectivity potency, widen therapeutic window, dose higher, et cetera, along those lines again, but what would you think about that sort of approach from a drug development discovery perspective?

Yes, I think that's really the crux of the program that we have a compound that's well absorbed, rapidly absorbed [indiscernible] high concentrations and activates the liver and then is rapidly degraded and disappears that the goal is to harness the efficacy without having the circulating interferon levels that [indiscernible] activating cells throughout the body. So I do expect that we -- that's really the crux of the program that we will enhance the selectivity. Now whether we can push much higher and get more out of the mechanism, I mean, I think that's something we'll be able to test when we get there with the program. And then like you were saying, John, I'm really encouraged by both the results in hepatitis C with interferon and hepatitis B, where the prospect of dosing longer could push the cure rates higher. And obviously, if we had a molecule that was much better tolerated, we could -- there was no reason to limit the dosing to 24 or 48 weeks as long as we continue to increase the cure rates.

Well, as I always said [indiscernible], right? I do say that -- there's a question about whether you discover, how you discovered the molecules through screening and where the molecules are binding, et cetera. So it might be [indiscernible].

It's well known that there are various receptors that can be engaged with small molecules. We worked on a couple of [indiscernible] together with TLR 7 and TLR 8. It's not every receptor is suitable, but this is 1 that is. And it's -- and then it becomes a medicinal chemistry campaign to build in the profile that you want in terms of potency, activity and the PK profile.

Very good, very good. When would we have 28-day proof-of-concept data? As soon as possible, really, but no. I mean there's a lot of work to do here, right, Bill, but we'll go from lead to IND-enabling tox studies as quickly as we can, and we're pretty prompt and efficient at that and probably healthy volunteers and then a short duration hepatitis B study, probably with Ed helping us, I would hope in New Zealand to be able to do that to see if we could show some antiviral effect very early on. I think that's what we want to do. We want to be able to say, look, if you give a dose of subcutaneous interferon or you give an oral drug for a 4-week period of time, you're seeing equivalent reductions in HBV DNA, you're not seeing fevers, you're not seeing low neutrophil counts, et cetera, et cetera. If we could do something like that, and this is a very forward-looking in 28 days, you know you had proof of concept and you were very much on the right track, right, Bill.

Yes, absolutely. I think we have -- we'll have a great understanding of the molecules and their potential after a 28-day study.

Right. I may not have answered the question exactly about timing, but I think we'll do everything we possibly can to accelerate the program as quickly as we can. But we have a number of series now that have the characteristics of what you've seen today as well. So we have some diversity around the scaffold. One of the other questions, Bill, probably -- I think we're running out of time now. But 1 of the other questions really is when you target something that's not a large molecule, but a small molecule, you sort of potentially increase the number of side effects that you can have, right? Because you've got a lot more compounds [indiscernible], et cetera, in various different parts of the body. So what's the trade-off here? And how can you do that?

Yes. I think, again, it all comes back to what exposure we're going to have around the body, and this is the rationale for having something that's liver-targeted that has a very short half-life in vivo. Normally, we're working towards the opposite for typical antiviral because we want to maintain very high levels. But in this program since we're going by a pharmacodynamic effect driven by engaging the receptor, the high first pass of the liver should remove the compound from circulation effectively, very quickly and spare the rest of the body. So there are always differences that are possible when you're going from a 1 treatment modality to another treatment modality, but that's something we can study carefully during the preclinical discovery phase and as we move compound towards development. And again, with the strategy of the liver-focused exposure to the compound that should allow us to manage those effects.

Thank you, both. So with that, I think we'll wrap things up today. Ed, as always, we're incredibly grateful that you've been so generous with your time and your insights and your vast experience and for helping all of us and for those listening to the event and what's most important for patients and also for the field. So thank you again.

Thank you, John, and I think this is an incredibly exciting program given the multiple mechanisms of action of interferon if we had an oral liver-targeting form without systemic side effects, this will be a huge boost in our journey towards hepatitis B cure.

Thank you for saying that. Unscripted everybody, that is, of course. So as I've said before, we're thrilled to be advancing our research pipeline to complement our next-generation more potent core inhibitors. Bill and I are excited about incorporating additional mechanisms into the portfolio and to expanding beyond hepatitis B and delta with some early programs targeting other viruses, so we plan to introduce to you later this quarter also. We also hope to share more from our research programs at upcoming scientific meetings later in this year and going forward. To recap our anticipated progress during the remainder of '22, you can see that we have a Phase Ib study, which is underway for 3733, next-generation core inhibitor with great potency against the formation of cccDNA and new virus production, and we expect to have interim data to report during the second half of the year for that program. We also plan to advance 4334 into the clinic during the second half of this year. This is our most potent core inhibitor designed with a profile that's potentially the best-in-class. And additionally, during 2023, we anticipate moving several research programs we have told you about into preclinical safety profile and to enable development candidate nomination and then IND-enabling studies as quickly as we possibly can. So here at Assembly, we're embracing the science, our data-driven strategy and our approach while leveraging our team's strength and track record in biologic drug development as we advance and expand the portfolio. I look forward to updating you all further during the second half of the year, including at the final research event we plan to announce soon. This concludes today's webcast. Thank you all for joining us. And once again, thank you all for supporting Assembly Bio.