Quince Therapeutics, Inc. ($QNCX)

Good morning, and welcome to the acquisition of OrphAI Therapeutics by Quince Therapeutics Webcast and Conference Call. [Operator Instructions] Please be advised that this audio presentation is being recorded. I would now like to turn the call over to Corey Davis of LifeSci Advisors. Please proceed.

Good morning, everyone, and thank you for joining us. Two press releases went out this morning, which are also available on our website. A replay of this webcast, along with the presentation materials will also be available on the company's website following today's call. Before we begin, I'd like to remind everyone that statements made during this conference call and the accompanying presentation may include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, statements regarding the anticipated benefits of the transaction and financing, the expected closing of the private placement and the anticipated use of proceeds there from, company's strategic plans, anticipated clinical development activities, ongoing clinical trials, planned regulatory interactions, expected milestones and data readouts, expected IP protections, projected cash runway and the potential therapeutic and commercial opportunity of the company's pipeline. These statements are based on current expectations and assumptions and are subject to risks and uncertainties that could cause actual results to differ materially from those described in the forward-looking statements. Additional information concerning these risks and uncertainties are contained in the company's filings with the Securities and Exchange Commission, including our press releases issued this morning and our Form 8-K filed with the SEC announcing the transaction and our most recent quarterly report on Form 10-Q which are available at sec.gov or on our website. The company undertakes no obligation to update any forward-looking statements, except as required by law. This communication is for informational purposes only and does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval. In connection with the matters subject to stockholder vote in connection with the transaction, the company will file a proxy statement with the SEC. Investors and security holders are urged to read the proxy statement and other relevant materials filed with the SEC carefully and in their entirety when they become available because they will contain important information about the transactions and the related stockholder vote matters. Investors and security holders may obtain free copies of these documents when available and other documents filed with the SEC by the company through sec.gov or on our website. Free copies of these documents, when available, may be obtained from the company directly if requested. During today's call, we will review the rationale for the transaction, provide an overview of our pipeline and development strategy, discuss the concurrent financing and outline expected upcoming milestones and operational priorities. Joining me on the call today are Dirk Thye, who will discuss the details of the transaction; Brigette Roberts, the company's Chief Corporate Affairs Officer and the former CEO of OrphAI, who will explain the strategic rationale and vision for the company and provide an overview of the pipeline, clinical development plans and anticipated milestones; and Dr. Paul Yu, Director of the Cardiovascular Research Center at Massachusetts General Hospital and Associate Professor of Medicine at Harvard Medical School, where he holds the Charles and Elizabeth Sanders Endowed Chair, who will review the recent Phase IIa data with LAM-001 presented at the ATS meeting. And with that, I'll turn the call over to Dirk, CEO of Quince Therapeutics.

Greetings, Quince stockholders, and thank you for joining the call to announce the acquisition of OrphAI. After an exhaustive search of the competitive landscape for acquisitions to maximize stockholder value and with the help of LifeSci Capital as our financial adviser, we selected OrphAI. We believe the acquisition of OrphAI represents the best possible outcome for our stockholders, and you're about to hear about the scientific programs and pipeline we acquired and our strategic plan for the future. This acquisition was structured as a stock-for-stock merger, whereby all of OrphAI's outstanding equity interests were exchanged for a combination of shares of Quince's common stock and shares of a newly created Series C nonvoting convertible preferred stock. The acquisition closed on May 18, 2026. With the acquisition of OrphAI, Quince entered into a definitive agreement for the sale of Series C nonvoting convertible preferred stock and warrants in a private placement to a group of accredited investors from leading health care-focused institutional investors. The private placement is expected to result in upfront gross proceeds to Quince of approximately $115 million before deducting placement agent and other offering expenses and up to an additional approximately $72 million in gross proceeds upon exercise of accompanying warrants. The private placement is expected to close on May 21, 2026. Subject to approval of Quince's pre-acquisition stockholders, each share of Series C nonvoting convertible preferred stock will automatically convert into 1,000 shares of common stock, subject to certain beneficial ownership limitations set by each holder. No stockholder approval was or will be required for the closing of the transactions under applicable law or NASDAQ listing standards. However, stockholder approval for, among other things, the conversion of the Series C nonvoting convertible preferred stock into common stock will be sought during a meeting of stockholders expected to be held later this year. As a result of the acquisition, Quince's pre-acquisition equity holders will own in the aggregate approximately 17.8% and OrphAI's pre-acquisition equity holders will own in the aggregate approximately 82.2% of the post-acquisition company before the private placement transaction. And approximately 6.9% and 31.9%, respectively, after the private placement transaction. And the private placement investors will own in the aggregate approximately 61.2% of the post-acquisition company. And in each case, calculated on a fully diluted as converted to common basis and without giving effect to any beneficial ownership limitations using the treasury stock method and based on the implied equity values of Quince and OrphAI. Quince expects to use the proceeds from the private placement primarily to advance LAM-001, including initiation of a Phase IIb trial in pulmonary hypertension associated with interstitial lung disease with data anticipated in 2028, and delivery of Phase II data in bronchiolitis obliterans syndrome post lung transplant in the first quarter of 2027. And Phase II data in sarcoidosis associated with pulmonary hypertension in late 2028. We note that this description of the transaction is not complete. We refer our stockholders to our filings with the SEC, which incorporate by reference the material agreements in connection with the acquisition and the private placement. With that, I will turn the call over to Brigette to provide the strategic rationale and vision for the company, an overview of the pipeline, clinical development plans and anticipated milestones.

Thank you, Dirk. So turning to Slide 5. We believe this acquisition offers a unique opportunity to build a leading clinical stage biotechnology company centered around LAM-001, a novel [ once-off ], once-daily inhaled formulation of rapamycin with potential applicability across multiple pulmonary indications. The first indication is pulmonary hypertension associated with interstitial lung disease or PH-ILD, which affects approximately 200,000 patients across the U.S. and Europe. Approved therapies in PH-ILD are largely focused on vasodilation rather than addressing the underlying disease biology. LAM-001 is designed to target and help reverse the pulmonary arterial smooth muscle cell hyperproliferation, inflammation and fibrotic vascular remodeling underlying the disease state. Just yesterday, at the American Thoracic Society, OrphAI presented encouraging Phase IIa data of LAM-001 in pulmonary hypertension, demonstrating clinically meaningful improvements when added to standard of care, thus supporting our plans to initiate a Phase IIb trial in the middle of 2026. The second indication is bronchiolitis obliterans syndrome or BOS, which is a severe complication of and the leading cause of death post lung transplantation, which is estimated to affect approximately 28,000 patients across the U.S. and Europe. Median survival is only 2.5 years, and there are no approved medications for this condition today. A placebo-controlled investigator-sponsored Phase II study in BOS is ongoing with top line data anticipated in the first quarter of 2027. And finally, we intend to advance the program into sarcoidosis associated pulmonary hypertension or SAPH, which affects an estimated 60,000 patients across the U.S. and Europe and which similar to BOS, currently has no approved therapies. The planned Phase II study is expected to initiate late in 2026 and is supported by prior proof-of-concept clinical efficacy data generated in pulmonary hypertension patients. Importantly, we believe the LAM-001 program benefits from our ability to leverage the highly efficient 505(b)(2) regulatory pathway. Additionally, LAM-001 offers a strong intellectual property estate with expected protection extending into the mid-2040s. The program has received orphan drug designation in both the U.S. and Europe across multiple indications, and we have received supportive regulatory feedback through prior pre-IND and end of Phase II interactions with the FDA. Overall, we believe this portfolio offers a compelling combination of validated biology, significant unmet medical need, regulatory advantages and multiple near- and midterm clinical catalysts. So turning to the development time line, beginning with PH-ILD. As mentioned, following the encouraging Phase II data just presented at ATS, we plan to initiate a Phase IIb study in the middle of this year with top line data expected in the first quarter of 2028. In bronchiolitis obliterans syndrome post lung transplant, the ongoing Phase II investigator-initiated trial is expected to generate top line data in the first quarter of 2027. And finally, in SAPH, we expect to initiate a Phase II study in late 2026 with top line data anticipated in the fourth quarter of 2028. Turning now to Slide 7. Why not oral rapamycin? First, when delivered by mouth, like any medication, oral rapamycin distributes throughout the body systemically. And unfortunately, with rapamycin, this systemic exposure is associated with a number of side effects highlighted on this slide that have precluded its broad adoption in pulmonary diseases. Additionally, the systemic toxicity can limit achievable dosing, thus preventing sufficient drug exposure directly within lung tissue, which can be particularly important in pulmonary diseases where localized target engagement may be critical for efficacy. And finally, oral rapamycin has demonstrated low and highly variable bioavailability, which often necessitates therapeutic drug monitoring and dose adjustments, creating additional burden for both physicians and patients. Collectively, we believe these limitations have constrained the use of oral rapamycin in pulmonary diseases despite evidence supporting the importance of the mTOR pathway in disease biology. So turning to Slide 8. We believe LAM-001 has the potential to address many of these key limitations. First, our inhaled delivery is designed to maximize exposure locally at the site of disease in the lungs while minimizing systemic exposure and concomitant toxicity. And second, our proprietary rapamycin formulation possesses physical chemical properties that we believe are ideal for pulmonary delivery, supporting the potential for improved tissue penetration in the lungs and thus therapeutic activity across multiple pulmonary indications. These properties combined have allowed us to dose LAM-001 at just 100 micrograms daily directly to the lungs. This is 20-fold lower than the standard 2-milligram daily oral dose. As seen in the graph on the right side of the slide from our Phase I/II study in LAM patients, this 100-microgram dose has been observed to translate into steady-state systemic exposure below 1 nanogram per ml, which is 1/5 to 1/15 the 5 to 15 nanogram per ml systemic levels typically observed with the standard 2-milligram oral rapamycin dose. Importantly, as well, animals treated with the equivalent of that single 100-microgram human dose achieved lung concentrations resulting in greater than 90% inhibition of the mTOR target out to 24 hours. Collectively, we believe these data support the potential for reduced systemic toxicity along with clinically relevant lung exposure. So with that, I'll ask Dr. Yu to present the latest data from our Phase II study evaluating LAM-001 in pulmonary hypertension. By way of introduction, Dr. Yu is Director of the Cardiovascular Research Center at Massachusetts General Hospital and Associate Professor of Medicine at Harvard Medical School, where he holds the Charles and Elizabeth Sanders Endowed Chair. A physician scientist trained in immunology and cardiovascular medicine, his research focuses on BMP and TGF-beta signaling in cardiovascular homeostasis, repair and disease. His work spans pulmonary vascular disease, cardiovascular rheumatology and rare disorders such as fibrodysplasia ossificans progressiva. Dr. Yu has translated several scientific discoveries into therapeutics, including contributions to sotatercept for pulmonary arterial hypertension and the clinical repositioning of sarcatinib for FOP. He has published over 120 peer-reviewed studies and has been elected to the American Society for Clinical Investigation.

Thank you, Dr. Roberts. To preface the Phase IIa trial results, I'd first like to highlight the unmet need in pulmonary hypertension associated with interstitial lung disease or PH-ILD. This is a major cause of Group III pulmonary hypertension associated with lung disease, and the pathophysiology is similar to other types of pulmonary hypertension in that pulmonary arterial smooth muscle cell proliferation, fibrosis and endothelial dysfunction lead to progressive narrowing and loss of vessels. The prognosis for this condition is worse than for pulmonary arterial hypertension or interstitial lung disease alone with just 1/4 of patients surviving 5 years after diagnosis. There are currently 2 approved drugs for this condition that are inhaled forms of treprostinil, and there are an estimated 86,000 and 120,000 patients in the U.S. and the EU, respectively. LAM-001 or rapamycin DPI is uniquely suited to targeting PH-ILD pathology as it inhibits mTOR signaling, which is a master regulator of signaling pathways governing smooth muscle cell proliferation, fibrosis and inflammation and is a key integrator of hypoxic stress. Inhibiting mTOR with LAM-001 has the potential to improve disease by arresting or reversing the obstructive vasculopathy. There is evidence of markedly upregulated signaling both upstream and downstream of mTOR in the distal arteries and distal arterial smooth muscle cells of patients with idiopathic PAH, shown in the left 2 panels, which correspond with smooth muscle cell proliferation, survival and metabolic stress. On the right panels, we see that rapamycin is shown to prevent or treat experimental pulmonary hypertension and vascular remodeling shown here in the monocrotaline model in rats. For the treatment of PH-ILD, in addition to the 2 approved treprostinil inhaled formulations, there are several other programs at various stages of development, spanning preclinical to Phase III. Several of these programs target the prostanoid pathway by inhaled delivery, others target the ROCK1 and 2 and the soluble guanylate cyclase pathways. Among these, LAM-001 is relatively unique in its antiproliferative and antifibrotic mechanisms of action. The Phase IIa trial of LAM-001 was designed to capture changes in cardiopulmonary function in Group 1 PAH and Group III PH disease via invasive cardiopulmonary exercise testing, or CPET. This was an open-label study of adults with functional Class III disease on background therapy. The primary endpoint was peak oxygen uptake or VO2 max as well as safety and tolerability. Secondary endpoints included PVR or pulmonary vascular resistance, the 6-minute walk distance and WHO functional class with an exploratory endpoint of NT-proBNP. The enrolled patients in this trial were comparable in age and demographics to recent trials in PAH and pulmonary hypertension, including the STELLAR trial and the INCREASE trial. Of note, all PAH patients were on stable and maximal therapies, in most cases, triple vasodilator therapy. And all of PH-ILD patients were on maximal therapies, including background treprostinil therapy. 10 patients were enrolled and 6 patients completed the trial. All of the discontinuations were unrelated to the study drug. For the primary and secondary endpoints, we saw very promising signals of efficacy in both the overall evaluable population that completed the protocol as well as the subset of PH-ILD patients. A mean improvement of 81.3 meters in the overall cohort or 67.4 meters in the PH-ILD subset was seen in the 6-minute walk distance. The VO2 max was also seen to improve. The pulmonary vascular resistance decreased by 25% to 35% under exercise conditions and 28% to 33% under static conditions. NT-proBNP decreased by nearly 30%. When we examined forced vital capacity as a percentage of predicted, we saw a 4.8% increase among the overall cohort and a 1.8% increase among the PH-ILD subgroup. All of the evaluable patients in the study improved to functional Class II by week 24, starting from Class III at enrollment. Many improved as early as 12 weeks and 2 patients improved to functional Class I. For comparison, in the sotatercept Phase III study, 29% of patients improved functional class at 24 weeks. In this study, there were drug-related adverse events, including Grade 1 productive cough, cough and gingivitis. Overall, LAM-001 was well tolerated, and there were no dose interruptions due to AEs. There were no discontinuations due to drug, and there were no SAEs related to drug. To summarize, in our Phase II study, we saw compelling evidence of clinical activity, notably with a 67-meter improvement in 6-minute walk distance among PH-ILD patients comparing favorably with existing therapies in recent trials. This benefit was seen on top of standard of care in heavily pretreated populations and there were consistent signals of patient benefit seen across multiple measures. The tolerability was favorable, again, with no dose interruptions, discontinuations or SAEs related to drug.

Thank you, Dr. Yu. So turning to Slide 21. We are outlining the design of the Phase IIb study of LAM-001 in pulmonary hypertension associated with interstitial lung disease or PH-ILD. The study is expected to enroll approximately 75 patients across an estimated 40 clinical sites and is designed as a randomized, double-blind, placebo-controlled multicenter trial evaluating LAM-001 as an add-on therapy on top of stable background therapy. Patients will be randomized 1:1:1 to receive either 100 micrograms once daily of LAM-001, 200 micrograms once daily of LAM-001 or placebo over a 24-week blinded treatment period, followed by a 12-month open-label extension phase. The trial is expected to enroll adult PH-ILD patients with WHO functional Class II or III disease who remain symptomatic despite stable background therapy, which may include background treprostinil similar to our Phase IIa study. Importantly, these are patients with significant unmet medical need and limited treatment options beyond vasodilatory approaches available today. The primary endpoint of the study is change in pulmonary vascular resistance, or PVR, which we believe represents an important hemodynamic measure of disease activity in this population and is an accepted endpoint for Phase II studies in pulmonary hypertension. Secondary endpoints include change in 6-minute walk distance, time to clinical worsening, incidence of clinical worsening events as well as safety and tolerability assessments. The study will also evaluate a number of exploratory endpoints, including change in WHO functional class, NT-proBNP, forced vital capacity and patient-reported outcomes using the K-BILD questionnaire. Overall, we believe this study is designed to comprehensively evaluate both the hemodynamic and functional impact of LAM-001 in a patient population with substantial unmet need. So let's turn now to bronchiolitis obliterans syndrome or BOS. BOS is the leading cause of death post lung transplantation. Unlike pulmonary hypertension, this disease is centered around the airways, not the pulmonary arteries. As seen in the picture on the right, it is characterized by a progressive infiltration of inflammatory and fibrotic cells that occlude the small airways, resulting in substantial airway obstruction and irreversible decline in lung function and ultimately graft failure. The number of lung transplants continues to grow, approaching nearly 4,000 lung transplants annually in the United States today, translating into an estimated addressable BOS patient population of approximately 17,000 patients in the United States and 11,000 patients in Europe. There are currently no FDA-approved therapies for this disease, and the program has received orphan drug designation in both the United States and Europe. Turning now to Slide 24. The median survival post lung transplantation is 6.2 years. And unfortunately, over the course of 10 years, 94% of lung transplant patients will develop BOS. BOS is the #1 leading cause of death post lung transplant. And once BOS has taken hold in the setting of a lung transplant, the median survival is just 2.5 years. Turning to Slide 25. The key measure for BOS diagnosis, progression and prognosis is FEV1. BOS is diagnosed when a patient's FEV1 has declined to 80% or less of baseline levels with baseline being defined as FEV1 levels post lung transplant. And progression of disease or BOS grade is then measured by further sequential declines in FEV1, as shown in the box on the far left of this slide. And importantly, studies have shown that each 1% decline in FEV1 is associated with a 3.4% increase in mortality. And in a recent survey that we conducted across 48 clinicians treating BOS patients, FEV1 decline was highlighted as the single most important criteria for escalating BOS therapy. Turning to the next slide. Before embarking on our BOS program, as we did with our PH program, we searched for off-label proof-of-concept data with the oral form of the medication. And we found a small study that had been conducted in the early 2000s in 11 patients with progressive BOS. In this study, as seen in the graph on the right side of the slide, prior to rapamycin dosing as is typical in this disease process, FEV1 declined over the course of 12 months. However, over 12 months of subsequent rapamycin treatment, FEV1 demonstrated stability or even improvement in 8 of 11 patients. Given this supportive proof-of-concept data with oral rapamycin, combined with the mechanistic rationale, a randomized double-blind, placebo-controlled investigator-sponsored study was initiated at UCSF under Dr. Steven Hays, evaluating LAM-001 in 19 double lung transplant patients with newly diagnosed BOS. In this study, patients were randomized 1:1 to receive either LAM-001 100 micrograms QD or placebo over a 48-week blinded treatment period, followed by an open-label extension phase. The primary endpoint is the percent change from baseline in FEV1 at that 48-week time point. Overall, this is a small study and has been designed as a safety and signal-seeking study to evaluate the potential for LAM-001 in this underserved patient population. Enrollment for the study was completed in January 2026 and an interim safety review conducted in February 2026 showed that 5 of 19 patients enrolled demonstrated a 10% or greater decline in FEV1 versus study baseline. Dosing continued as planned following that interim safety review and top line data are currently anticipated in the first quarter of 2027. Turning now to Slide 29. We believe we have established a broad and multifaceted intellectual property strategy designed to support long-term exclusivity across the inhaled rapamycin platform. The portfolio includes claims protection across drug substance, drug product and method of treatment, including composition claims related to particle size, formulation, delivery and dosing as well as treatment claims in pulmonary hypertension and chronic lung diseases. The company currently has 9 issued U.S. patents with expected exclusivity extending into 2035, alongside pending patent applications that, if granted, are expected to extend protection into 2047. Importantly, the portfolio is further strengthened by orphan drug exclusivity in both the U.S. and Europe across multiple indications. And finally, we have secured exclusivity with the device manufacturer for the use of rapamycin in the RSO1 dry powder inhaler device we have been using in our clinical trials and plan to use for our commercial launch, if approved. Overall, we believe this layered IP strategy provides meaningful protection for the platform. Turning now to Slide 30. We believe we are well capitalized, having raised $115 million in upfront gross proceeds in an oversubscribed private placement that is expected to close on May 21, 2026. Based on the current operating plan, we expect our cash runway to extend through the end of the fourth quarter of 2028, which should allow us to deliver on the multiple anticipated clinical readouts highlighted on the following slide. Turning to that slide. As noted, OrphAI just yesterday presented Phase IIa pulmonary hypertension data in an oral presentation at the American Thoracic Society Conference. Looking ahead, anticipated milestones include top line Phase II data from our BOS program in the first quarter of 2027, followed by Phase II PH-ILD data expected in the first quarter of 2028. We also expect top line Phase II data from the SAPH program in the fourth quarter of 2028. Overall, we believe these milestones should provide multiple opportunities for clinical and operational value inflection across the platform. In summary, the company's mission is to transform the lives of patients facing serious underserved diseases. The clinical data we shared today represents an important step in advancing this mission. And our acquisition of OrphAI, along with the concurrent pipe financing provide us with the resources to further advance our goals. We hope you share our excitement as we move forward to the next set of milestones. Thank you for your time today.

Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time, and enjoy the rest of your day.