Zentalis Pharmaceuticals, Inc. (ZNTL) Earnings Call Transcript & Summary

All right. Good morning, everyone, and thanks for joining us at the Morgan Stanley Global Healthcare Conference. I'm Mike Ulz, one of the biotech analysts here, and it's my pleasure to introduce Julie Eastland, CEO, to my immediate right; and Ingmar Bruns, CMO to the far right from Zentalis. And before we get started, I just need to read a quick disclaimer. For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. And if you have any questions, please reach out to Morgan Stanley sales representative. And with that, Julie, maybe I'll turn it over to you just to make a couple of introductory comments, maybe for people who are less familiar with your story, and then we can hop into the Q&A.

Yes. Well, thank you. Thank you for having us. We always appreciate the opportunity to talk about Zentalis. And Zentalis, for those of you who may not be familiar with it, is a small molecule oncology company focused first and foremost with our lead asset, azenosertib in ovarian cancer. And we'll talk more about where that is positioned and why we think that, that's unique. But this is certainly a great opportunity for patients in this setting, which have few options to have a really novel approach, and we'll talk more about that. And so I'm grateful to be here with my CMO, Ingmar Bruns. And Zentalis is currently on a mission, and Ingmar can talk a little more about this, to develop azenosertib in registration trials. And so we're currently enrolling our DENALI trial. This is a registration-intent study focused in platinum-resistant ovarian cancer, as I mentioned, for patients who have Cyclin E1 positive protein expression. And this will be a trial that we are setting our sights on for accelerated approval, which will also be accompanied, of course, by a Phase III confirmatory randomized trial.

Great. Thanks for that introduction. And you've only been at Zentalis for less than a year now. I think you joined last November and sort of came in and provided sort of a clear path for the company and strategy. So maybe just talk about when you first joined sort of what was your focus on and how you ended up sort of getting to this clear path forward?

Yes. Well, thanks. I think the company has done an amazing job of looking at azenosertib in a number of settings, and that continues today. But the pipeline was full, and the company really needed to determine which lane they were going to go down to bring azenosertib to market. And I think it was relatively straightforward because there's just a large body of data that's been developed around azenosertib and in particular, in the platinum-resistant ovarian cancer. So we see this as an opportunity that's really broad beyond the initial setting, but we certainly saw a very clear path in terms of the clinical data that had been developed at the company over time. And that data was very supportive of moving forward into registration trials. So I think from a perspective of what do you focus on and how do you allocate capital, to me, it was very clear, this was an opportunity to really get a foothold here for azenosertib in ovarian cancer and then continue to expand and look for other indications as we finished up some ongoing trials. So that was, I think, straightforward to me and Ingmar joined with me along with a couple of other folks, our Chief Business Officer, Haibo Wang, as well as our HR person who -- folks we had worked with in the past. We think we all saw the same vision and the opportunity for azenosertib. And so it just needed focus and it needed trial management. I think Ingmar saw the same opportunity that I did.

And you mentioned sort of a breadth of a lot of data you sort of had to sort through. And earlier this year in January, you kind of gave a very comprehensive update across the program. So maybe just if you can walk us through some of the key highlights there, we can dig in a little more.

Yes, I'll just set the stage and let Ingmar talk about the data. So in January, the company did present in the webcast the data from three studies. These are all single-agent arms of the trial. So there was a 001 dose escalation trial that determined both dose and schedule in both two active doses of azenosertib in a schedule of 5 days on, 2 days off. There was the MAMMOTH trial, which was a trial that looked at combination in PARPs as well as single-agent Azeno post PARP -- and then the last trial was the DENALI trial, which is a multipart trial. In Part 1b of DENALI, we enrolled 102 patients at the 400-milligram dose, all patients with platinum-resistant ovarian cancer. And in all of these studies, we looked retrospectively at patients' tumor blocks and samples to look for their levels of cyclin E1 protein expression, which we believe and has turned out to be an important marker for these patients and correlates highly to currently meaningful clinical outcomes of azenosertib. Do you want to talk a little bit about the data, Ingmar?

Yes. So I think we're particularly intrigued by the fact that Julie mentioned the integrated analysis across those studies that they were somewhat independent in terms of site participation and also time -- but the results, the response rates and also durability of response that we saw were very consistent, which in many ways, is reassuring. But then coming to DENALI Part 1, Julie already mentioned the 102 patients that were biomarker analyzed retrospectively. The latest data cut presented was at the SGO meeting earlier this year. And there, the response rate was close to 35% and with impressive durability of 6.3 months. And it's still subject to change based on that data cut because there are active patients on the trial, but those are the DENALI data in particular with a very manageable safety and tolerability profile.

And I think, just to add one point there, important data in the setting of standard of care, which is single-agent chemotherapy. Patients have had chemotherapy and other agents coming into the setting. And right now, the current offering for standard of care is single-agent chemo, which offers patients pretty low response rates from 4% to 13% and short duration. So the data that Ingmar describes a significant improvement for patients.

Definitely a meaningful improvement there for sure. Maybe just talk about dosing a little bit. I know in the past, there's sort of been continuous dosing and then intermittent dosing. So maybe talk about how you got to your sort of selected dose.

Sure. Ingmar?

Yes. So the dose selection happened in the original dose escalation trial, the 001 trial that Julie briefly mentioned and including different schedules and 5 on to off intermittent schedule just turned out to be the best combination of exposure efficacy and then tolerability here. And so going forward for Part 1b of DENALI 400-milligram, the intermittent 5 on to off schedule was chosen as the go-forward dose. We consider this also the primary dose of interest, right, because there's a correlation between exposure and response. But what wasn't done in Part 1b is the direct comparison with the lower doses. We all know that necessary these days with FDA's Project Optimus and the data that we have gathered on the intermittent schedule 5 on to off the 300 were from other trials, those that Julie already mentioned, including MAMMOTH, the trial in PARP inhibitor resistant patients as well as the original dose escalation trial. So it's a cross-trial comparison and a relatively small number and the 300-milligram patients are more heavily pretreated as well. So it's not really an apples-to-apples comparison. So for that reason, we're grateful to do the comparison as well and staying focused on the 400-milligram 5 on to off. But here now, we will certainly investigate in a prospective and randomized fashion.

You're selecting the patients, Cyclin E positive patients with the biomarker. So maybe just talk a little bit about the advantages of using that approach and what you've seen in the data.

Yes. So we've seen clearly, as Julie already mentioned, that this is predictive of response, right? So if we look at the overall population, there's a more than 10% difference in the response rate, if we do the biomarker enrichment. And so we now in Part 2 of the DENALI trial, do it prospectively, right? The Part 1, as mentioned, was retrospective enrichment and with the proprietary cutoff of Zentalis.

Got you. And just on DENALI Part 1, maybe just talk about the patient population you enrolled there and just sort of what impact it had on the study in your view?

Yes. So Part 1 was a PROC population [ with ] 1 to 5 prior lines of treatment. And it was a biomarker unselected population, which is the requirement of submitting tissue for retrospective analysis, as already said. The difference to Part 2 is that the patients only have 1 to 3 prior lines of treatment. So a lot less pretreatment in case of folate receptor alpha positivity, then they are required to reserve mirvetuximab where available and reimbursed. But overall, this is, of course, a less heavily pretreated population.

Got you. And maybe you can expand a little bit on the safety profile you observed in Part 1, maybe the discontinuation rate was a little bit higher than what we saw previously and what -- maybe talk a little bit about that and how you maybe can mitigate that moving forward.

Happy to. Yes. So you already said it, right? So that was a bit of an outlier compared to the other studies we saw where there were -- the discontinuation rate was kind of where we would expect it for this drug class and for oncology drug in general. There's a couple of reasons for this, right? Part of it is how the database was built and that every patient that basically discontinued and also had an AE of any grade was considered a discontinuation due to AE. If you really look at the protocol algorithm for discontinuations, right? So you have a repeated Grade 4 event or a Grade 4 event or repeated Grade 3 event after dose reduction, then the rate is much lower and in line with prior studies like MAMMOTH 001 trial. So that's one thing. So we're confident that this is really a technicality as well, but we also put several measures in place to ensure that this is not as high and Julie already alluded to it. There's more guidance in the protocol on how to deal with the key classes of side effects, and those are cytopenias, but they're really even the high-grade ones were Grade 3. And this is, of course, something that we will pay attention to, but this doesn't initially limit the patients. I think the most dominant class is GI toxicities, right? And there's extensive guidance now and the protocol for the investigators on how to deal with these adverse events and also the use of supportive care. We're also coming back to the cytopenias, introduced the use of G-CSF early. And then last but not least, is a really different approach to trial management and site management with really kind of high-touch interactions. And you may wonder, okay, why is that necessary if this is a manageable safety profile. But with many of drugs that have a relatively narrow therapeutic index, the prescribers and the providers, they learn over time, of course, as you go along in your development chain and then go towards launch. And once the drug really is broadly available, then there is, of course, also an education process that has happened and people will learn to manage the drug then.

And this is a small molecule orally available opportunity for patients, a non-chemo option. And so in the space, that's really sort of a new novel approach. And I think physicians will understand and learn how to manage that when they're typically seeing patients either from a surgery perspective or seeing patients from an infusion center perspective. So there is an opportunity like there is with all therapeutics to really help educate, manage and support physicians and patients in this development period so that there really is a successful commercial launch in a broader space.

How much overlap is there between sort of the Part 1 and Part 2 sort of centers that are enrolling?

Yes, there's a complete overlap. It's just that Part 2 is going to expand the number of sites. Right.

Yes. Got you. Then maybe in the past, you were on clinical hold sort of for a brief period of time. Maybe just remind us what triggered that and what the conclusion was there.

Yes. So we looked at these cases, of course, when we came in. And I think a couple of things that are important. Number one is that there weren't a lot of agency contacts in the past and -- but a very large body of data with close to 800 patients across doses and combinations. And then there were these 2 deaths where the company rightfully so erred on the side of caution -- and considered them related to azenosertib. But at the same time, if you look at these cases, you could also see alternative explanations for that. But of course, we want to be careful because we talked about patients here, and that's what the company did, and it's the right decision to make. The FDA, and that's important to us, was important to us when we did our initial diligence, which seems really in my experience, a rare event that they looked at the entirety of the data and then they asked no changes in protocol for -- in terms of dose and schedule. So there's really, after review, a lot of confidence in the drug and the program and in particular, the safety profile. It was really a bit of an unfortunate situation. Of course, unfortunate for those patients and sad that this happened. But unfortunate in the sense of that the communication was really lacking and the interactions were lacking. So despite accumulating so many data, there was little visibility there for the agency. I think it was one of the reasons that triggered it.

And I think also for the market in general, so understanding the rationale behind it and that the agency was to the hold without change in dose or schedule, these are communications that I think were important to be made, and those are messages that we're happy to share today and bring forward. But the agent's profile still remains a novel profile and a manageable side effect profile as well. And in fact, compared to other Wee1 inhibitors, for example, Adavo, looking at the IGNITE trial, you see a very favorable tolerability profile with Azeno, which was really the sort of the basis and the thesis of the design of the molecule having fewer off-target kinase hits.

Makes sense. And maybe we can just switch now to sort of DENALI Phase II. There's 2 parts there. So maybe just walk us through the design a little bit and...

Yes. So there's the -- as already discussed, the original Part 1b that was the 400-milligram with retrospective biomarker analysis for Cyclin E1. And we talked a little bit about the patient profile, 1 to 5 prior lines in the platinum-resistant setting. And then there's Part 2a or Part 2 in general, which is -- consist of 2 parts, IIa and IIb. So IIa is basically the prospective dose confirmation. That's between 300 milligram and 400 milligram, both 5 on to off, and they're randomized. And each arm is 30 patients. There is an opportunity for an earlier look as an interim, and then we'll confirm the dose with the FDA. And it's also a seamless design. So we'll continue to enroll into both arms while we confirm the dose and have that meeting with the agency. And then we'll continue additional patients into IIb to get to a registrational trial size of about 100 a little over 100. It won't be more patients than 100 because we are kind of continuously enrolling to not stall the trial.

Can you talk about what parts of the design so far that you have sort of feedback and agreement with the FDA?

So the entirety of the trial, right? And that's something that we're very happy about that early on, they confirmed the design, right? So there is alignment with the design. And that's not a small thing these days, right, as you know, because -- there's project frontrunner, right? Generally, the FDA's guidance is towards doing this in randomized controlled trials. We've seen in the first half of 2025 alone, a lot of single-arm approvals in the Phase II -- based on Phase II accelerated approvals. But they agreed to this design as just outlined. And then there's a confirmatory trial that needs to be largely enrolled at the time of the filing, right, which we will plan in the same patient population.

Can you just maybe talk a little bit about just the status of IIa and just how that's going versus your expectations in terms of enrollment?

Yes. So it's very active. And I think we're on track with regard to the guidance here. And updates.

Yes, we'll have guidance. We still expect top line data at the end of 2026 and DENALI, generally speaking, in Part 2a is on track.

And just in terms of disclosure, Part IIa versus Part IIb, any -- what should we expect when IIa is completed or any kind of communication around that?

Yes. I think and you can fill in, but the Part IIa and Part IIb is really all part of one data set. So at the selected dose, as Ingmar mentioned, the totality of those patients will be part of the registration package. So once we've confirmed the dose and had alignment with the agency, we'll continue to enroll. And so we will not be planning to share data regarding the dose comparison. However, we will be able to share that we've selected a dose and that were -- that will be ongoing should the data support that. So I think we will have a discussion around the dose selection, but it won't be at a clinical data level. We'll save that for the top line data at the end of 2026.

So that's a meaningful update, right, in addition to, of course, the Zentalis gene, there's also an [ IDMC ] involved, right? So basically, if you hear that dose has been selected, the trial goes forward, then it, of course, means there was futility, which we don't expect. But there's also a positive news in terms of the tolerability and efficacy of the trial.

Makes sense. Maybe just talk a little bit about what you think the bar is for accelerated approval for Part [ 1b ].

Yes. So we think it is around maybe a little bit below the data that we just shared that I mentioned earlier for Part 1b in a more heavily pretreated population in that case. So I think the bar is around if it comes to response rate, 30%. Of course, statistically we look at confidence intervals of excluding single-agent chemotherapy activity, which is not a particularly high bar. I think supportive data will be duration of response. And of course, you need to get somewhere in the 5, 5.5 to 6 months, which we exceeded in the past. And there's certainly some expectation to see higher activity, higher efficacy due to the fewer lines of pretreatment. And we've shared past small post-hoc analysis with all the caveats of small numbers. But if you have fewer lines of treatment, certainly, it doesn't work with the [indiscernible] yet because of the small sample sizes, but the response rate goes up, right, with fewer lines of treatment. So we're positive in that regard.

Got you. You mentioned also just a confirmatory study. I think you're planning to start that at some point next year. Maybe talk a little bit about your current thinking in terms of the design and the -- any other data you're sort of waiting for to sort of help inform that?

No. It will be important to start the study. So it is largely enrolled at the time of the filing for the accelerated approval, and we will actually see this as a combined data set, right? What you normally do is filing blinded data from the Phase III even with your accelerated approval. So we don't see these as completely separate entities, but it's actually combined. I think as it makes a lot of sense is the -- to use the same patient population, because that's the ultimate derisking. Of course, your Phase II data then translate into the Phase III. So we're choosing the same patient population with 1 to 3 prior lines and 1 to 4 in case of folate receptor alpha positivity -- and the design is going to be a randomized controlled design, of course, with still standard of care single-agent chemotherapy, which we believe still holds largely, right, as investigator's choice chemotherapy.

And we don't really see a gating event other than, of course, alignment with the FDA, which we plan on seeking this year and so that we can be prepared to start that enrollment in 2026.

Maybe you can talk a little bit about the market opportunity in sort of the Cyclin E PROC setting and sort of where you can fit in?

Right? And I think this was a great opportunity to also help people understand that the biomarker selective population is around the protein expression levels. There is many drivers of Cyclin E1 protein expression beyond CCNE1 gene amplification. That's part of the story that even patients with non-amplified status have -- can have high protein expression and have shown to have meaningful responses to azenosertib, and we presented that data at the SGO conference where we looked at responses for Cyclin E1 protein expression with CCNE1 AMP was either up or down. And we see responses sort of across the board. So other drivers of Cyclin E1 then are other transcription factors, potential protein that doesn't degrade. And so what's important is really to look at those protein expression levels. And in that setting, we see about 50% of the PROC population having an opportunity to be subject to and benefit from azenosertib. So that's about 50% of that market. It's about 21,500 patients. And that's pretty significant when you think about correlates in the setting of other biomarker-directed therapies like mirvetuximab for folate receptor alpha high, which has about an opportunity of 35% of the PROC setting and has seen really sort of market and successful uptake, which really describes the excitement for physicians and patients to have these biomarker selected opportunities. So quite a large opportunity in this first setting for azenosertib. And then, of course, we think opportunities beyond this market for the agent in earlier lines of ovarian or potentially in other tumor types.

I wanted to ask what other sort of tumor types are you potentially considering or...

Well, we won as a master regulator. So you could think about really combining azenosertib in a broad way outside of ovarian, wherever you might see other agents that are combinable with a small molecule. So we think there is interesting opportunities broadly, but a little more close to home, of course, earlier lines of ovarian cancer is probably the closest in terms of the concentric circles to what we're doing first off. And in our 002 study, we're looking at a combination of azeno plus bevacizumab in terms of the dose escalation combination there, and we'll look to explore other ways to expand in ovarian. In addition to that, there is currently a couple of investigator-sponsored studies that are ongoing that have really just started early. Some of those are in HER2-positive mediated tumors. So we'll see sort of a broad combination with standard of care in that setting. And then also in triple-negative breast. And then, of course, we currently have completed enrollment in our TETON trial, which is in USC. That is an indication that is obviously important, but a smaller indication and one in which we'll share data in the first half of next year. That's been our projection to have that data available. And if we see interesting signals, we may look to see if there's a way to move forward in that setting. I think importantly, I want to be crystal clear, stay true to our focus. We came in, in November and said dollar #1 is going to take azeno into PROC patients to get to the market. Dollar #2 is going to complete these other studies. And so we really want to remain focused on what our initial drive is. And if there's additional capital resources and opportunity to explore in combination in other settings, like we'd love to think about doing combinations with ADCs, because we presented preclinical data with TOPO1 and MK2 inhibitors from preclinical data that really showed a synergy there. So we'd love to find a way to continue to explore those opportunities for Azeno beyond PROC.

You mentioned the TETON data first half of next year. Just what -- how do you think about the bar there in terms of what you need to do to sort of move forward or not?

Yes. I mean the landscape there has changed. And so I think we'll have to see how the data develops and where it compares in today's current environment and see what makes sense. So I'm not going to -- I don't have something to sort of predispose it. We'll see what the data looks like.

Yes. No, it makes complete sense. And maybe you talked about capital resources. So maybe just touch on your current cash position and runway and sort of what that covers in your plans.

Sure. And it was a very intentional reorganization restructuring at the beginning of the year to ensure that we had the capital to get to accelerated approval with a runway into late 2027. So a significant runway beyond the pivotal data point. At the end of Q2, reported that we had cash, cash equivalents and marketable securities of $303 million, again, to extend our runway into late 2027.

Okay. Great. And maybe last couple of minutes here, I could ask a couple of just macro questions. It's something we've been asking all our companies at the conference. So maybe 2 questions. The first one, just with China's rise in biotech innovation, how are you thinking about your competitive positioning here? And will this influence your R&D or BD strategies?

I think for a lot of companies that probably will. I think for us right now with our focus on registration trials, and it's already going to be a Phase III that will likely be a global study that will probably not tackle China on our own, right now. I think that the innovation coming out of China is a future opportunity for the company. I think it's a future opportunity for a lot of companies, but it doesn't really impact us in the short term. Ingmar, do you have any thoughts you want to add?

Yes. No, I do agree, right? So this -- given the very focused effort here and late-stage development, I think it's less relevant. But I can, of course, see this if you're a platform company, you're in earlier stages similar to what Julie just said.

Yes. Okay. And then maybe second macro question. Just what has been most impactful for you from the regulatory side? Would it be changes at the FDA MFN or tariffs in any way?

So definitely for us right now in a registration setting, it's going to be any changes that may impact the FDA. That's my opinion. Mark can have his own. But I will say we're really happy with the interactions with the FDA that we've seen. They're paying attention. They're very interested in patient populations with unmet need. They've been responsive. So from our perspective, the changes that have been made have had a little impact. And of course, we have some time to go before we get to really the big interactions around filing and approval. So we'll see how things develop. But so far, I think that's the area that we're looking at. I think MFN is not top of our list right now, but it's always something to keep an eye on.

Makes sense. Great. We're just about out of time. So why don't we end it there. Thanks so much, Julie and Ingmar. Really appreciate your time.

Thanks so much. Appreciate it.