RAPT Therapeutics, Inc. (RAPT) Earnings Call Transcript & Summary

Good morning, and welcome to RAPT Therapeutics conference call. [Operator Instructions] As a reminder, today's call is being recorded. I would now like to turn the call over to Rodney Young, Chief Financial Officer of RAPT, you may begin.

Thank you, Kevin, and good morning. Thanks to all for joining us this morning to discuss our press releases issued this morning, which are available in the Investors section of our website at rapt.com. The slide deck for this call is also available in the Investors section of our website. On the call with me today is Dr. Brian Wong, Chief Executive Officer, with prepared remarks, and we'll have a question-and-answer period at the end. We remind you that during this call, we will be making forward-looking statements that are subject to risks and uncertainties. Our actual results may differ materially from those described. We encourage you to review our risk factors in our most recent quarterly report on Form 10-Q, which can be found on our website. While we may elect to update these forward-looking statements in the future, we specifically disclaim any obligation to do so even if our views change. I'll now turn the call over to Brian.

Thank you, Rodney. Good morning, and thank you all for joining the call today regarding RPT904, RAPT's newly in-licensed long-acting anti-IgE antibody, for food allergy and other allergic disorders. Slide 2 states our disclaimers. Slide 3 provides a summary of today's presentation. RAPT's mission is to develop transformative therapeutics for high-value inflammatory disorders. Today, we have announced the in-licensing of RPT904, also known as JYB1904, a half-life extended anti-IgE omalizumab bio-better antibody from Jemincare, a leading Chinese pharmaceutical company with over $6 billion in annual revenue. RAPT's territory will include all territories, excluding China, Taiwan, Macau and Hong Kong, where Jemincare will develop and commercialize JYB1904. Financial terms of the deal included a $35 million upfront payment, approximately $672 million in milestones, the majority of which are sales milestones and royalty payments to Jemincare in the mid-single digit to low double-digit percentage range. We are excited to partner with Jemincare to bring this exciting potential new therapy to patients. Omalizumab marketed at Xolair is a first-generation anti-IgE antibody approved for food allergy or FA, chronic spontaneous urticaria or CSU, asthma and chronic sinusitis. Jemincare's Phase I data in healthy volunteers were impressive and demonstrated a best-in-class profile with the potential for less frequent dosing and increased patient compliance. We are planning the Phase IIb study in food allergy with a steady start expected in the second half of 2025, the topline data available in the first half of 2027. In parallel, Jemincare is currently running Phase II studies in China for asthma and chronic spontaneous urticaria with topline data expected in the second half of 2025 and the first half of 2026, respectively. Based on the outcome of the Phase II CSU trial from Jemincare, RAPT will determine how to pursue development in this indication. It is possible we could leverage Jemincare's Phase II data to potentially initiate a Phase III trial, assuming regulatory agency agreement. We're also extremely pleased to announce a $150 million financing from top-tier investors, which, along with current cash on hand, will fund the company through our Phase IIb food allergy data readout. I'd now like to turn the call over to Rodney Young to speak about the commercial opportunity in FA and CSU.

Thank you, Brian. Okay. We're on Slide 5. As Brian mentioned, omalizumab is approved for food allergy as it demonstrated robust efficacy in the Phase III OUtMATCH study summarized here on Slide 5. Far more patients were able to achieve the prespecified food challenge threshold level when treated with omalizumab as compared to placebo. This was observed across a number of common food allergies, including peanut, egg, milk, walnut, hazelnut and wheat. These data supported the broad label for oma to cover multiple food allergies. Omalizumab is dosed either once every 2 weeks or every 4 weeks depending on the food allergy dosing table, which takes into account the patient's weight and baseline IgE levels. Turning now to Slide 6. Omalizumab is off to a highly successful launch and is on a blockbuster trajectory. First off, there are a lot of food allergy patients. According to Roche, there are some 17 million patients in the U.S. with a food allergy, of which approximately 50% have had a severe reaction resulting in approximately 30,000 ER room visits per year. Omalizumab is the first and only FDA-approved therapy to reduce allergic reactions to multiple foods and many patients are allergic to more than 1 food. So the market uptake has been rapid. In the first 2 quarters after approval, Roche has reported they already had 30,000 patients on treatment, which if you simplistically annualize, that suggests 60,000 patients on omalizumab in the first year on the market. Moving now to Slide 7. So we see a high unmet need and a very large commercial opportunity in food allergy. There are millions of patients and until the approval of omalizumab, there has not been a convenient, effective treatment for multiple food allergens. The treatment environment has been dominated by inconvenient treatments, including food avoidance, which is the most common treatment approach, which can limit the patient's risk of exposure to the allergen but can be quite burdensome on the patient and the caregiver. Another common approach are allergen desensitization approaches, such as oral immunotherapy or OIT, which can be effective, but again are inconvenient and can take a while to work and are generally limited to a single allergy. So to us, the rapid uptake of omalizumab in food allergy underscores that there is a need for a convenient therapeutic option that can address multiple allergens. However, even with oma's early success, payers and prescribers would welcome a longer-acting treatment to increase compliance with therapy and also expand the pool of patients that would consider taking an injectable therapy. When we tested a target product profile of equivalent efficacy and safety to omalizumab but with Q 8-week dosing as opposed to almost Q 2- or Q 4-week dosing, there was an enthusiastic response on both prescribers and payers. Prescribers would expect to use RPT904 in about 16% of their moderate-to-severe food allergy patients compared to the single digits for omalizumab, and payers would support around a 30% premium over an omalizumab biosimilar. Based on the millions of FA patients and assuming oma biosimilars will be on the market, we estimate peak sales for RPT904 of approximately $4.5 billion in U.S. alone. Moving to Slide 8. We believe CSU is also an exciting commercial opportunity. CSU expects over 1 million patients in the U.S., of which approximately 400,000 are not well controlled by antihistamines. Omalizumab is the only approved biologic for CSU after an inadequate response to high-dose antihistamines. We believe RPT904 could be positioned as the preferred choice in the frontline setting due to the improved convenience and compliance compared to oma. Based on our market research, our revenue model suggests approximately $1 billion peak revenue in the U.S. for this indication. I'll turn the call back to Brian now.

Thank you, Rodney. On Slide 10, I'd like to cover the characteristics of RPT904 and the data supporting this drug candidate as a best-in-class omalizumab bio-better antibody. RPT904 is a half-life extended anti-IgE monoclonal antibody with improved potency in IgE binding and neutralization. They achieved this half-life improvement by incorporation of the clinically well-validated YTE mutation. Based on the improved half-life and potency, we project the ability to address patients with food allergy and other allergic disorders with Q 8-week or Q 12-week dosing, which would be highly favorable relative to omalizumab Q 2- or Q 4-week dosing. Importantly, RPT904 uses the same clinically validated epitope to omalizumab and therefore, uses a proven mechanism of action, which we believe carries a higher probability of success. Furthermore, RPT904 also has the potential to treat patients that are currently excluded from omalizumab treatment due to high weight and/or high IgE levels. Finally, there is a strong patent position with a loss of exclusivity date of 2041 without additional patent term extensions or formulation patents. Slide 11 shows the design of this novel anti-IgE antibody. Jemincare design's principles were to make minimal changes to the omalizumab sequence to retain the same epitope binding as omalizumab while extending half-life and improving drug by properties. Half-life extension was achieved by incorporating the well-established YTE mutations into the FC domain. There were no other changes in the FC region. In the variable domain, affinity maturation was performed by [indiscernible] to improve affinity to IgE by roughly fourfold. In addition, post-translational modification residues were removed to improve manufacturability and stability, and additional humanization was performed in the framework to further reduce potential for immunogenicity. Moving to Slide 13. To demonstrate the effects of these improvements, Jemincare performed a Phase I healthy volunteer study using omalizumab as a comparator. This was a randomized and double-blinded single ascending dose study of 5 dose strengths of RPT904 from 75 milligrams to 600 milligrams. RPT904 was dosed subcutaneously and each cohort also contained placebo patients. And omalizumab comparator was also included in the study and dosed at 150 milligrams subcutaneously. So it could be compared head-to-head with the 150-milligram dose of RPT904. The primary endpoint was safety and tolerability with secondary endpoints, including PK/PD and immunogenicity. Slide 14 shows key results from the Phase I trial, which demonstrates improved PK and pharmacodynamics of 904 over omalizumab. The left graph shows that in a head-to-head comparison at 150-milligram subcu, the PK profile of 904 was superior to oma. The half-life of RPT904 was 63 days, while that of omalizumab was 27 days, representing a better than twofold improvement in the half-life. This is consistent with the YTE modification seen in other therapeutic antibodies. In addition, the graph on the right shows that RPT904 shows deeper and more sustained reduction of free IgE compared to oma at the equivalent 150-milligram dose. Pre-IgE reduction by oma is strongly correlated with its efficacy. With respect to other endpoints, RPT904 was safe and well tolerated, all AEs were mild or moderate with no evidence of clinically significant immunogenicity. Slide 15 shows that simulations of RPT904 on free IgE suppression support Q 12-week dosing in most food allergy patients. Using PK parameters from the Phase I trial and a well-established PK/PD model published by Roche and Novartis, we simulated the dose strength and frequency that would be required for RPT904 to reach therapeutic levels, which for omalizumab is a mean free IgE of 25-nanogram per ml or lower. We also simulated this in subjects with varying weight and IgE levels to project dosing across the food allergy dosing table, which is illustrated on the right. The left graph shows simulated free IgE or a 20-kilogram patient, which equates roughly to a 6-year-old child and a baseline IgE of 700 IU per ml, which is the median IgE and age in the Phase III OUtMATCH study. We first simulated the approved dose of omalizumab, which in this case, is 225-milligram dose Q4 weekly shown with the gray line. Here, you can see the free IgE levels fall just below the 25-nanogram per ml threshold. In comparison, modeling dosing of RPT904 to 12 weeks shown in the gold line, readily reduced free IgE into the therapeutic range. When we attempted to simulate lengthening omalizumab dosing to Q 8-week shown as the black line, it was no longer able to achieve therapeutic target levels. Therefore, based on these projections, RPT904 may significantly reduce the dosing frequency required for efficacy. When we apply these projections across the food allergy table as on the right, we demonstrated that most patients can be addressed with Q 12-week dosing. Q 12-week dosing also included patients in the black shaded region in the lower right part of the dosing table, which are excluded from omalizumab therapy in the label. A small proportion that may not be addressed with Q 12-week dosing may be treated with Q 8-week dosing. Additional modeling and PK/PD data are expected to help further refine the RPT904 dosing table. Now let's move to ours and Jemincare's Phase II trial design on Slide 17. This slide shows our proposed Phase IIb study for RPT904 as monotherapy in patients with food allergy. This is a randomized, double-blinded, placebo-controlled food challenge study initially starting in adolescents and adults and extending to younger children during the course of the study as safety data is collected. All patients are expected to have at least 1 documented food allergy by laboratory testing and oral food challenge. Assuming successful screening, patients are then randomized and allocated 2 to 2 to 1 on either a Q 8-week or a Q 12-week regimen or the placebo group. We are anticipating a total of 75 patients in this study. After 20 weeks of treatment, patients will be rechallenged with allergen and their threshold of food measure. We plan to use identical thresholds as those used in the OUtMATCH study for inclusion and for the primary efficacy end point. We estimate that this trial could take 18 months from first patient in to topline data. Slide 18 shows our proposed dosing strategy for the Phase IIb trial. The OUtMATCH Phase III trial successfully used the omalizumab dosing table where patients were assigned to 1 of 13 different dosing regimens based on their weight and baseline IgE levels. We plan to use a significantly more simplified dosing table. Patients randomized either the Q 8-week or Q 12-week cohorts will be further assigned to either a 150-, 300- or 600-milligram dose based on their IgE and weight. We also plan to include patients currently excluded from the omalizumab label. In addition to data from this Phase IIb trial, we are also planning additional PK/PD studies in healthy volunteers and in patients with high IgE levels using the Novartis Roche free IgE assay to help refine the dosing table for Phase III. Slide 19 shows the 2 ongoing Jemincare Phase II and planned Phase III studies in asthma and CSU. In asthma, Jemincare's Phase II trial is exploring 3 dose strengths of RPT904 at 150, 300 and 450 milligrams versus omalizumab dosed using the approved dosing table in patients with moderate-to-severe disease. There are 60 patients in total, and the primary objective is to establish the optimal Phase III dosing regimen using the PK/PD data generated from this study. Lung function, including FEV1 and exacerbation rates will also be measured as secondary endpoints. And if successful, Jemincare is planning a single large Phase III study designed to assess noninferiority versus omalizumab. The Phase II trial in CSU is geared towards exploring efficacy comparing the flat dose of 300 milligrams, 904 a Q 8-week or Q 12-week versus Xolair's approved dose of 300 milligrams Q 4-week. A total of 135 patients are expected to enroll in this study. If successful, Jemincare is planning a Phase III trial in 200 to 400 patients assessing noninferiority versus Xolair as the basis for approval. BLA submissions for CSU and asthma are anticipated in 2028 and 2029, respectively. Slide 20 highlights the anticipated milestones for the RPT904 program. We anticipate IND filing for the food allergy study followed by the start of the Phase IIb trial in the second half of 2025 with topline data expected in the first half of 2027. In parallel to the food allergy Phase IIb study, we are planning to conduct additional PK/PD studies in healthy volunteers and in patients with high IgE levels to help refine the dosing table for Phase III clinical trials. Jemincare's asthma study is expected to read out in the second half of 2025 and the CSU trial data is expected in the first half of 2026. Assuming success in the Phase II CSU trial, RAPT is concerning initiating a Phase III trial in CSU pending regulatory agreements in the second half of 2026. In summary, we are very excited by RPT904's potential to address high unmet needs in food allergy and other allergic disorders. The announced financing should provide sufficient capital to achieve key data milestones, including the Phase IIb trial in FA. We are looking forward to working with Jemincare and the current and new investors as we pave a bright new path for the company. Thank you for your time and attention. I'd now like to open up the call for questions.

[Operator Instructions] Our first question comes from Anupam Rama with JPMorgan.

Congrats on the deal. A quick question -- a couple of clarification questions actually. So how confident are you that FDA is going to be comfortable with sort of a healthy vol study that's been conducted in China versus having to conduct one here? And then also, just wondering why maybe not pursue CSU more aggressively given you're considering that if you get positive topline data from your -- versus the food allergy?

Yes, I'll take your questions here. So with respect to the -- using the healthy volunteer data, this is something we're very comfortable with. The FDA guidance for the use of trials outside of an IND are very clear what's accepted and what's not. Our regulatory consultants and our regulatory group are comfortable that we should be able to move directly to Phase IIb. The worst-case scenarios that we would -- might need to perform a run-in as part of the Phase IIb protocol. But we're fairly comfortable that we can move forward directly into that study. With respect to moving more aggressively to CSU, as you'll recall, Jemincare is performing studies right on -- Phase II study right now in 135 patients with CSU. And we think we could potentially leverage that data to go directly to a Phase III trial, pending, of course, discussions with regulatory agencies, which would indeed accelerate the program and would provide information, which would allow us to further refine dosing for that Phase III trial. So that's how we're thinking about it.

Our next question comes from Thomas Smith with Leerink Partners.

Congrats on the in-licensing deal here. Two questions on our end. First, can you walk us through the outstanding steps and the gating factors to starting the Phase IIb study in the second half of next year? Is there any ongoing tox work or CMC manufacturing work that needs to happen before you can start that study? And then secondly, can you just elaborate on your expectations for biosimilar omalizumab competition? I know in your market research, you assumed sort of equal safety and efficacy versus oma with a less frequent dosing. But I'm wondering if you see any potential to differentiate on efficacy or safety. And then if you could just expand on your assumptions here in terms of the number of biosimilar competitors and your pricing assumptions, how should we think about that 30% premium to biosimilar oma.

Tom, I'm going to answer your second question first of biosimilars. So we understand even Roche has said they expect biosimilar competition being in 2026. So we do expect that there will be a handful of biosimilars on the market, say, 3 to 4 at least. We don't -- I mean I think -- I'll let Brian speak to the potential for increased efficacy. But when we tested our target product profile in our primary market research, we assumed equivalent efficacy, but less frequent dosing. And we actually only tested Q 8-week or test Q 8 and 12, but even at Q 8-week dosing, it was very enthusiastic response from payers and providers. So we do kind of see that differentiating versus the biosimilars, and that was pretty much what the payers were looking to support why they would be willing to pay a premium versus biosimilar oma.

And I'll just add, like when you look at the OUtMATCH data, clearly, there's robust efficacy with the highest effect size over placebo, not only over peanut allergy but also across a range of allergens that were studied in that Phase III trial. And so from our perspective, maintaining that efficacy and providing more convenience for patients, but also greater adherence to the drug and also potentially opening up the pool of patients that would be willing to take an injectable because now you're at 12 weeks or 8 weeks. This is the base case value proposition. It is possible because of the improved potency and the enhanced recycling due to the YTE mutation that we might be able to drive deeper pre-IgE reductions. And certainly, that's true in patients that are currently excluded from Xolair therapy based on the label. But that would certainly be an upside case. And again, Xolair is already highly efficacious based on that food challenge study.

Got it. That's helpful. And then I was wondering if you could just kind of walk us through the gating factors here to getting the Phase IIb food allergy study off the ground.

Yes. I mean I think there are no limitations, all the requisite toxicology is completed. Obviously, we need to start working with Jemincare to have material ready for the Phase II trial. And in parallel, we'll be in the process of doing tech transfer as well as we have multiple redundant pathways for manufacturer. But there really is nothing standing in our way at this point starting that Phase IIb trial.

Our next question comes from Prakhar Agrawal with Cantor Fitzgerald.

Congrats on the deal. So maybe first question, Brian. The epitope is similar, but the IgE reduction is turning out to be a little bit better for Jemincare's assets. So maybe just talk us through the rationale on why you believe that's happening? And secondly, more on the commercial side because the clinical risk should be low here, but commercial, given Xolair biosimilars, the commercial risk should be there. So maybe just talk about what came up during your payer discussions on the pricing, where the biosimilars will land up and what exactly our payers saying that will let them cover more convenient Xolair?

Yes, Prakhar, thanks for the question. As you recall from the Phase I data on Slide 14, when you compared 150-milligram of 904 versus the 150-milligram omalizumab in the head-to-head comparison, 904 showed both deeper and more sustained reduction in free IgE compared to omalizumab. And so we think this will greatly translate into the need for less frequent dosing across most of that food allergy dosing table. One caveat, of course, that, as I mentioned, Jemincare used a nonstandard free IgE assay. This is an assay format that has not been used by Novartis and Roche. And therefore, feeding comparisons of absolute free IgE levels to other trials is not possible with these data. But the relative difference are clear and can be interpreted as such. This was significantly better pharmacodynamic effect with 904 versus oma.

And Prakhar, just with respect to the commercial side, we did -- so we -- obviously, we do expect biosimilar omalizumab competition by the time we are on the market. So one of the key questions we explored was where we see that pricing going. And when we talk to the payers, we ask them basically how much price erosion would they be expecting for the biosimilar versus the brand. And you get back in a range anywhere from 35% to 40% price erosion. So in our modeling, we had assumed 40% price erosion already. Where the willingness to pay a premium comes from, we think, and again, based on the primary market research we did with the prescribers and the payers is first of all, oma is a good product for this segment, right? There's no really convenient treatment that can treat multiple food allergies. And a lot of patients have more than one food allergy. So that's already good compared to the alternatives. What the payers really were enthusiastic about was less frequent dosing because that's going to enhance compliance, which shouldn't have the efficacy. So for them, better compliance, better efficacy will -- is likely to lead to less ER business because less accidental exposures to the allergens. And that's very valuable to the payers or meaningful to the payers. That's really what's driving, we think, a lot of the willingness of the payers to pay a premium for an extended half-life oma.

Yes. And given the size of the market potential for premium pricing, even in the backdrop of oma biosimilars and assume gross-to-net discounts, et cetera, this is still quite a large product, as Rodney said earlier, $4.5 billion in estimated sales with those assumptions.

And just one quick question. Rodney, what with the pro forma cash, where does this take you in terms of the runway?

Yes. So with the $150 million pipe and our cash -- our Q3 cash balance was about $98 million. So when we modeled out the runway, including accounting for the upfront, et cetera, we get well into mid-2027, well past the time we expect to have the Phase IIb food allergy readout.

Our next question comes from Andy Chen with Wolfe Research.

Congrats on the deal. And I'm looking at your Slide 7, your market research again. So the 16% of prescribers that want to use your product, can you talk about what is the other 84% is a large fraction of that driven by untreated patients or patients that are untreated by biologics? Or is it mostly driven by Xolair or maybe other off-label biologics? And also a quick follow-up on the payer question. So obviously, the pricing of oma biosimilar hasn't stabilized yet, has even really happened yet. But can you talk about how you asked that question that led to your answer of 30% premium?

Yes. Great questions, Andy. So I'll the address the first one, the 16%. So you generally ask the prescribers, how are you treating your patients now and you kind of offer them the current menu of options and then you put -- quote product X into the mix and you asked the question again. In the current mix, probably 2/3 or so of the answer is going to be, we tell them to avoid the foods they're allergic to. So that leaves you kind of with 30-ish percent left. And a lot of that, oma is about 10-ish percent and then there's all the desensitization approaches, OIT, oral immunotherapies and the like, and then combinations of OIT and omalizumab. So then when you ask -- that's the current menu, then you ask them the future menu, which includes product X, which is 904, the prescribers jumped to 16%, they would treat their food allergy patients. And that compares to in the -- when you give them the full menu, including product X, that 16% compares to omalizumab dropping to kind of high single digits. So already on a head-to-head basis, at least theoretically, when you ask them or give them the choice, 904 is preferred versus omalizumab or an oma biosimilar. We similarly -- again, when you query payers about pricing and things like that, you tell them, and they will tell you, they know a biosimilar oma is coming. So the question is, where do you see that price erosion going. So you first get that and they kind of use that as their reference price and then think about how much of a premium over that they would be willing to pay for a target product profile, that is in omalizumab equivalent efficacy, but Q 8-week dosing or better. And again, it's that dosing less frequently, that differentiation they believe will lead to the increased compliance that I think is what they consider as valuable and willing to pay a premium for.

And I'm not showing any further questions at this time. I'd like to turn the call back over to Brian for any closing remarks.

I'd like to thank the entire route team, the BD teams and the diligence teams at routes, and thank you for your attention. Look forward to interacting with you in the future.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect.