Scholar Rock Holding Corporation (SRRK) Earnings Call Transcript & Summary

Good afternoon, everyone. My name is Jason Russell with the Morgan Stanley Healthcare Investment Banking team. Welcome. I'm joined today with -- by Tony Kingsley, President and CEO of Scholar Rock Therapeutics; as well as Yung Chyung, Scholar Rock's Chief Medical Officer; and Ted Myles, the company's CFO. Before we jump into the discussion this afternoon, I should cover a quick disclaimer. Please note that this webcast is for Morgan Stanley's clients and appropriate Morgan Stanley employees only. This webcast is not for members of the press. If you're a member of the press, please disconnect and reach out separately. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative.

So with that mouthful, maybe I can jump in. Tony, Yung, Ted, welcome. Thanks for joining us today. Maybe just to kick things off, Tony. You recently joined the Scholar Rock team as CEO in July. And so I thought it might be a good idea to start with you. Just providing some color and elaborating on really what most excited you about the Scholar Rock platform and what brought you here.

Yes. Thanks, Jason. Why don't we flip to the third page of the presentation as a good place to answer that question, is our pipeline summary chart. This is what attracted me to Scholar Rock and what I'm excited about. I think for the people on the phone, three things, 3 messages on this chart. The first is a great scientific platform that is beginning to show clinical utility. The company has a distinctive understanding of the TGFß superfamily of growth factors and an ability to engineer highly specific antibodies to hit targets where the biology is well-known and actually important, but the targets have been elusive. So that has manifested itself in multiple programs, which you'll see here that are moving fast. At the top of the page, you'll see 015, which is our myostatin program in spinal muscular atrophy, where we have an important interim readout at the end of this year, followed by 12-month data, 2021. Next is 181, which is our immuno-oncology program, which is moving very quickly. We're in humans. We'll have an update at least on dosing and dose escalation toward the end of this year. And then we start our Phase I -- Part B of our Phase I trial in humans and that, we think, a good test proof-of-concept pretty quickly. We have an important collaboration with Gilead in fibrosis, which goes through 2021, which we think has a promise as well. So as you -- that's an earlier stage program. So if you look across this chart, what was exciting to me, Jason, is because the [ ice ] cascade over the next 4 to 5 quarters of multiple data events, that tells me there's lots of opportunity for potential whole value inflection and also a lot of optionality. So exciting platform that is moving quickly and creating a lot of interesting potential for value inflection. So company-added inflection point was very exciting for me to come and join the team.

That's great, Tony. Thank you. And I think that's a great segue into really diving into -- to your point, you cover the catalyst-rich nature of the next period of time for Scholar Rock. It's really been the building over time, and we're really getting into a really important period for the company. So maybe we start with SRK-015 and SMA. I suspect and given our audience that the group here is quite familiar with SMA and the advancements that have happened in the field with Spinraza, Zolgensma and now risdiplam available as SMA-focused drugs. So why don't we start with what is the need in SMA? And why is the work that you're doing at Scholar Rock so important for these patients?

So exciting work. We're excited that there are now 3 SMN upregulators available to SMA patients. That's very exciting. When we look at the clinical data, and you can certainly look at the CHERISH trial for Spinraza, you look at the recent SUNFISH trial from risdiplam, our read is that for patients who start SMN upregulator therapy later, say, after the age of five, the primary benefit appears to be a stabilization of the disease. Our approach is complementary and orthogonal to that, which is a muscle-directed therapy based on blocking myostatin to promote muscle growth. And Yung can take you through some more of the details. But for patients, the natural history, if you will, has become a new natural history, which is the natural history of patients who are now treated with SMN upregulators. We don't see a lot of functional improvement on the Hammersmith scale for people who start late. The study that we're doing, we can talk about the individual pieces of it, test the hypothesis that with muscle-directed therapy, you can get absolute improvements in functionality, as measured by the Hammersmith scale on top of the SMN upregulators. So our hypothesis is that if that proves true, it's a therapy that could potentially be used across multiple SMN upregulators, but it adds clinical value, meaningful clinical value on top of them.

Got it. So your product 015, which I want to jump to next, will be used in combination with one of those SMN upregulators. And obviously, the thesis being played out in the clinic now. So maybe jumping to that. What is 015? What is specifically the construct and perhaps also an opportunity to just talk about the unique capabilities of Scholar Rock to be able to design such a candidate.

Yes. So I'll start and let Yung chime in. So it targets myostatin. Myostatin is a break on muscle growth, particularly on fast-twitch fiber muscle growth. So if you inhibit the break, if you will, then you allow muscle growth [ done ]. That's what -- and there have been other myostatin programs before, and some people who've had actually a lack of success at myostatin. You'll hear this also in the 181 program, Scholar Rock's secret sauce, if you will, is we're able to target the latent form of the growth factor, which we think provides a greater degree of specificity in controlling that. So that -- you'll hear that looking at the 181, which is on the TGFß immuno-oncology side, but that's where it's distinctive. So one thing is how we've engineered our antibody to myostatin. The second is the choice of SMA as a disease to test it out. And there are some particular things about SMA that may be different from other places, myostatin programs have looked that we think are important. Patients with SMA, once the deficiency -- the SMN deficiency is corrected, they have normal healthy muscle. They just don't have enough of it. In some other dystrophies, people may have muscle that's defective. So developing muscle doesn't help. That's one. Second, because myostatin has a disproportionate effect on fast-twitch fiber, that fast-twitch fiber, we just use for a lot of function, all things that are important to SMA patients. We think that's a benefit. And the third is there's an established clinical end point, which is the Hammersmith scale, which was used in the -- obviously, in the nusinersen trial and other trials that clinicians recognize. So we think there is a measurable way to demonstrate functional improvement from the drug.

Great. So maybe let's just fast forward right to where we are right now. You have the Phase I trial. You don't need to speak about that necessarily. You've demonstrated the target engagement with an early look on some of the Phase II data. But now we're in the midst of the Phase II TOPAZ trial. And so maybe this one's for Yung. If we could jump in and summarize the ongoing trial and the cohort, it's complex on the surface, but once you get into it, it's pretty straightforward. So would you take that one, Yung?

Yes, sure. So the TOPAZ Phase II trial consists of 3 parallel cohorts, each evaluating a distinct subpopulation of patients with Type 2 and Type 3 SMA. Each of these cohorts in themselves evaluates a different SMA subpopulation, which there are a sizable number of patients and there is high unmet medical need. So in a way, this is like 3 parallel mini Phase II trials in in one. Now more specifically, cohort 1 evaluates ambulatory Type 3 SMA between the ages of 5 and 21. The patients are treated with SRK-015 in conjunction with an approved SMN upregulator. Initially, as a more speculative and exploratory look, we're also looking at SRK-015 as a monotherapy in a subgroup pick. Cohort 2 evaluates Type 2 or non-ambulatory Type 3 SMA, also between the ages of 5 and 21, and all patients are treated with 015 in conjunction with approved upregulators [ and its contacts. ] Now Cohort 3 is looking at whether or not SRK-015 may offer benefit in the contact's early intervention with SMN upregulators and evaluate patients with type 2 SMA aged 2 [ and under ] and who had initiated treatment with that upregulator before the age of 5. Across all 3 cohorts, all patients receive IV SRK-015, dosed every 4 weeks [ for a total of ] 12 months. And in addition, as it's plausible that a lower dose may offer meaningful efficacy here, we're also conducting dose exploration in cohort 3 with the lower dose arm as well as the higher. The primary efficacy end point planned to be evaluated in the TOPAZ trial is the Hammersmith scale, which, as Tony has outlined, is a validated outcome measures which we designed for SMA and which served as primary efficacy end point [indiscernible].

That's great. And what are the time lines associated with the trial? So I believe there's an interim readout coming towards the end of this year. And then you communicated a more fulsome top line readout in 2021. So could you help give our audience some perspective on what they expect?

Go ahead, Yung.

Okay. Yes. So this is a 12-month study, as you point out, and we anticipate top line efficacy and safety readouts first half of next year. Now because it's quite plausible that if our therapeutic hypothesis is correct, that such effects may be observed earlier in the treatment course, we are conducting the 6-month interim analysis, which will occur next quarter. This analysis will look at efficacy and safety for all 3 cohorts. Now to dive in deeper in terms of how we're going to interpret the efficacy results and what we're hoping to see. For cohorts 1 and 2, the study population here involves patients who are aged 5 and older. And as Tony outlined earlier, given that SMN upregulator treatment, patients started at age 5 and older appears to [indiscernible] for a disease stabilization rather than motor and functional improvement. What we're going to be looking for is to see if SRK-015 treatment can lead to actual absolute improvement in the mean change in Hammersmith scores over baseline rather than just a 0-point change representing disease stabilization. And to complement this analysis, we'll also be looking at the proportion of individual patients who attain at least a 3-point improvement for over baseline. Now as it is rare, less than 15%, in fact, individual nusinersen-treated patients started with the age of 5 to attain 3-point improvements, at least based on the CHERISH trial. We would consider it quite exciting, in our view, if a proportion of 015 patients, slightly north of that 15%, are indeed able to achieve a 3-point improvement. And we'll also be looking at various other motor function measures in addition to Hammersmith. Now for cohort 3, as this population encompasses patients who are starting nusinersen at a very young age and as such, patients can actually experience some improvements in motor function, although certainly not curative. But we'll be looking to see if 015 treatment leads to increases in Hammersmith scores beyond what one would otherwise expect and look at other end points as well. Now here's an important point to emphasize on the TOPAZ trial and the 3 cohorts. While we are enthusiastic about SRK-015's potential in all 3 cohorts, it's important to note again that each of the 3 cohorts evaluates a distinct subpopulation and with a high number of patients for [indiscernible] and for those with high unmet needs. So as a result, if we were to observe proof-of-concept for any of these 3 cohorts, we'd be excited because we believe we could build around it and potentially be on a path towards actually offering important benefit for patients with SMA.

Yes. And that's a really important point, I think, and that a win can take many different forms here for patients at the end of -- in this interim readout and in the top line data. So thank you for pointing that out, Yung. I guess, Tony, Yung, anything further to cover briefly on SMA? I wanted to make sure to spend an equal amount of time on oncology today.

No. I think that's the key stuff again, 6-month readout. It is a 12-month study. So we will complete the 12-month study and with the additional rich data set coming in 2021. We had 58 patients enrolled, 57 continued. 1 dropped out a long time ago for nondrug reasons. Of the 57, 54 will be in the interim analysis at the end of the year. There were 3 patients we've excluded because they missed up doses due to COVID, but by and large, the data set is very robust.

Great. Great. That's wonderful. And encouraging to hear you had such little attrition from COVID impacts as well. So that's great, Tony. Let's move to IO. So obviously, a different conceptual problem here. So SRK-181 is your IO candidate now in the clinic. Maybe just to start, I mean, we all -- the audience here, everyone is very familiar with the huge benefits of checkpoint inhibitors. And obviously, we've had a large wave of first attempts of different combination trials to try and either prolonged responses or deepen responses or broaden the addressable population that benefit from checkpoints. You're looking at a similar hypothesis, but obviously with a different target. So before we get into 181 specifically, what is it that you think about TGFß inhibition makes your ability to really potentially make a difference and show better responses here with checkpoints?

Yes. We're excited. So the science is hot. It's moving fast here. There's been some good work done by others and some done by us that what 80% of patients don't respond to checkpoint inhibitors. So it's a massive opportunity. The expression of TGFß and specifically TGFß1 is implicated as a culprit in a large portion of those patients, what we call an immune-excluded phenomenon. We -- the approach that we have, it's a little bit like the myostatin approach I talked about before. We have a way of targeting the latent form or the precursor form of TGFß so that you hit -- you only attack TGFß1 as opposed to 2 and 3. Type 2 and 3 are involved in some other biologies and have some meaningful toxicity effects potentially associated with them. So we think it's the specificity of targeting TGFß1, where the science seems to be pointing to that as the main culprit. With specificity, you should have a safety margin that allows you to dose much higher and hit the target much longer. So we're -- in simple terms, that's why we're excited about our approach. We're excited that others are addressing this also because any work that people do to prove out the TGFß1 hypothesis is helpful. There are some other programs doing this. But we think we have potentially advantaged approach because the ability to dose higher.

Got it. And are there -- just to clarify, are there other groups, and I'm not asking you to name them, but are there other groups that have a TGF1 selective -- TGFß1 selective approach?

I don't think, Yung can correct me, they were aware of any other programs that are as specific as our program. There are some bispecific programs that hit both 1 and 3. But we don't know of another program at this point that also hits -- that hits TGFß1 in quite the way we do.

Okay. Great. So you've kicked off a Phase I proof-of-concept trial, the DRAGON trial. Various cohorts and that seems to be progressing along quite nicely. Yung, maybe I'll hand it back to you to help summarize the trial design. It is, again, on the surface, complex, but -- for a Phase I trial. But once you dive in, it's pretty straightforward. So if you could just give us some perspective on the trial design. And maybe as a follow-up, to give us -- help us understand where we are in the progression of the trial.