Thanks, everyone, for joining us. I'm Andrea Newkirk, biotech analyst at Goldman Sachs, and I'm really pleased to be joined by Andrew Booth, CFO of AbCellera. Andrew, thanks so much.
Thanks, Andrea, for having us.
Great. Maybe we can start big picture here. Over the last few weeks, two of your internally developed agents received authorization to enter the clinic. This has transitioned you from a platform company to now almost a clinical-stage biotech. What, in your view, does this transition mean for AbCellera's future?
Yeah, thanks for the question and the regular disclaimer about forward-looking statements for the talk. I think that this transition really symbolizes we've moved from spending 10-plus years building out our capabilities and now from building that company to now building a pipeline, now going from building the capabilities for best-in-world antibody discovery to now building a pipeline using those capabilities. We have miraculously arrived here with still about $800 million in liquidity. While we still have some ongoing partnerships with some of our typical strategic partners, we're really focusing our efforts on building that pipeline, starting with our first two molecules, ABCL635 and ABCL575, which this month have both received the no-objection letter and will be entering into clinical trials in the third quarter.
We have a big pipeline of development projects behind that, about 20-plus programs, over half of which are in this difficult target space, which we think we can uniquely address with our capabilities of the complex membrane protein targets, GPCR, and ion channels.
Awesome. Maybe based off of the structure of your company, how does that position you to stand out relative to your peers?
I think especially when we're building that pipeline, we've developed a framework in order to choose these targets. We make sure we've developed that framework that really plays to our strengths of best-in-world antibody discovery. This framework, first of all, we have to like the science. We're normally looking for targets where the science has been validated and the biological pathways have been validated. Also, that we're looking for this large commercial opportunity from an unmet medical need. Then looking for differentiation. This is where we think the antibody therapeutic can really help us stand out, that differentiation. We can talk about that with relation to 635 and 575 in the talk here. Importantly, places where these indications or these targets have a very clear development path.
Somewhere where, for not a lot of capital, we can get hopefully dispositive data that validates the pathway and validates the target in early-phase clinical trials. We'll talk about that a little bit more when we dive into 635.
Awesome. That's a perfect segue 635, you recently just disclosed the target, the indication for this. Maybe walk us through that decision and what makes this particular target and this particular indication so attractive.
Yeah, 635 is being targeted for VMS, so menopausal for patients suffering through menopause and specifically hot flashes related to VMS. This is a place where the science, going through our framework, where the science is well validated, the path is being led here for the target of NK3R, so a neurokinin-3 receptor. There are a couple of small molecules that have validated this pathway and that are recently either approved or pending approval, and where we believe that that pathway is well validated. NK3R is a GPCR target involved in the endocrine homeostasis and thermoregulation. That primary scientific risk has been identified. The primary risk that we have is just ensuring that we get the target engagement against that NK3R pathway. We'll talk about that in a second. Of course, the commercial opportunity here is very large.
Many women, it's a large and unmet medical need. About 30% of women experience moderate to severe VMS. We think that the opportunity there for the NK3R class is well over $2 billion in annual sales. The differentiation is there with an antibody against NK3R, specifically because of some of the issues, toxicity or safety issues related to the small molecules, and also an opportunity for monthly dosing versus a daily oral. We believe that that will have an advantage in treating VMS. The development path here is excellent. There are biomarkers that are available to assess the target engagement, which we will get a readout of in phase one. That will be an opportunity for us to get both safety and efficacy data in, we would anticipate, the first half of 2026.
The 635 molecule, just kind of assessing it in the light of our framework, explains why we chose that target and why we're excited about that opportunity.
Got it. Maybe if you could speak a little bit more about what you have seen preclinically from this asset that underlies your conviction in the potential.
Yeah, maybe I'll just talk about the scientific pathway here and, again, why we're excited about the science. NK3R is a protein expressed on KNDy neurons within the hypothalamus. These KNDy neurons play a role in regulating endocrine reproductive function that impacts thermoregulatory response via an independent neuronal pathway. That includes connections into the pre-optic nucleus in the brain. In postmenopausal women, the decrease of estrogen levels disrupts the balance of activity in these neurons. Specifically, it leads to the overexpression and overactive signaling of NK3R. This overactivation of the KNDy neurons then stimulates the thermoregulation neurons, ultimately resulting in hot flashes. Clinically, blocking NK3R with small molecules has shown to reduce both the frequency and the severity of VMS.
Very importantly, and we'll talk about this to answer your question about the preclinical data that we have, the infundibular nucleus, where the KNDy neurons reside, responds to soluble factors in the blood. It is therefore one of the few areas of the brain that is outside the blood-brain barrier. Because of this, we believe that ABCL635 should be able to engage NK3R on these KNDy neurons. Our preclinical studies have validated that hypothesis in vivo. That is the major scientific risk that we hope to get an answer on in our phase one studies. It really is this ability to engage the target. We should have that data, and the way our phase one study is designed, in the first half of 2026.
Maybe to that point, how translatable are NHP models in this indication? I guess maybe why is there so much risk there?
As I mentioned, where the KNDy neurons are located, it's not really well known or well appreciated that you can hit this part of the brain in the hypothalamus with an antibody. It's a GPCR target. That plays to our strengths of being able to find potent antibodies against GPCR targets. Really, while there is every indication that this biology will translate from NHP studies into human studies, that ability to hit that part of the brain with an antibody, really, anything can happen in drug development, as everybody knows. Really, while we have every expectation that that will work, you really don't know until you try it. We will get a good response or a good indication for both biomarkers, as well as being able to test menopausal women in the study, in the phase one study who will be participating.
That is both of those are reasons why the way we've designed that trial for phase 1 is very important. We should have a very good indication, again, in the first half of next year on how effective we are. Of course, we expect a very strong safety profile being an antibody. The big question is, what kind of efficacy can we get? How strong is that target engagement in terms of delivering the signal to ultimately reduce the frequency and severity of the menopausal hot flashes?
Maybe if there is such a risk or an outstanding question regarding the target engagement and being able to hit that with an antibody, why is this modality the correct one, especially if there are oral small molecules that are going after this indication?
Yeah, that is a great question. We see Veoza or fezolinetant. It's been approved, and it is a small molecule also targeting the NK3R pathway but has some safety concerns. It has liver toxicity issues and also has a boxed warning associated with it. The other small molecule drug that's expecting approval is by Bayer, elinzanetant. It targets both NK3R and NK1R and is known to have some additional effects regarding somnolence or sleepiness and drowsiness. The reason we believe an antibody will be quite effective here is that we are not expecting to have either of those safety or safety concerns. Of course, antibodies are known to be well tolerated and are not processed in the liver. We do not expect to have the toxicity issues.
Because it is specific to NK3R, we also are not expecting to have the additional feature of drowsiness or somnolence. That is one reason why we, those are the reasons why we are particularly excited about an antibody approach to this problem from the biology. From the administration point of view, we actually have reason to believe that people would prefer, women would prefer a once-monthly injectable subcutaneous injection versus a daily oral. We went out and surveyed a number of menopausal women and asked if safety and efficacy were equivalent to the daily oral, how many would prefer an injectable versus a daily oral. More than 50% of women preferred injectables. Actually, those that had injectable experience or experience with needles, over 75% of women with experience with injectables preferred the idea of a monthly injectable versus a daily oral.
That was assuming equivalence in both efficacy and safety. Of course, we're expecting to have superior performance on safety because of the reasons we discussed. Whether we have superior performance on efficacy is really going to the data will tell us if that is the case. Given all of that dynamic, we think that an antibody could actually be a very effective treatment and really accepted by the patient population.
What proportion of menopausal women have this, I guess, experience with injectables?
We do not know that for certain. Of course, with the success of GLP-1s and weight loss drugs, more and more people are getting some experience with injectables. Those people who have experience with injectables, I think either for weight loss or for diabetes, are over the age of 40. We would expect there to be some correlation between the two. Again, even without the people taking the population at large, more than 50% of the people who we had surveyed said that they would prefer just for convenience and also compliance reasons of taking a monthly injectable over the oral.
Got it. You mentioned here $2 billion potential sales opportunity. Maybe you can break that down for us.
Absolutely.
As you think about the agents that are currently available outside of just the approved small molecules that we just spoke about, there is menopausal hormone therapy. Maybe help us understand how prevalent that usage is. Is it effective for women? Maybe just help us understand that dynamic.
Yeah, so maybe taking a step back. First of all, there are about 40 million women in the United States who are of menopausal age. There's actually quite a big window. Onset of menopause can happen as early as 45 and can go well into the 60s. Only about 30% of those at any one point in time are experiencing moderate to severe VMS. That takes the population down to about 12 million. Now, about 50% of those women seek some kind of treatment. About 6 million at any point in time are seeking some sort of treatment. As you mentioned, MHT, so menopausal hormone therapy, used to be called hormone replacement therapy, is quite a good alternative for those women. However, 20% of women are contraindicated for MHT. In addition, some 50% plus of women have reservations about taking hormone replacement therapy.
That is probably because of the Women's Health Initiative, which explained that there are some potential increased risks of coronary heart disease or stroke, breast cancer associated with taking menopausal hormone therapy. That has caused at least a perceived risk of taking that and undergoing that type of treatment. As a result, as I mentioned, there are over 50% of women who have some hesitation. That is why we see that being an opportunity. Even if you just look at those, as I mentioned, 12 million women experiencing moderate to severe, 6 million looking for treatment, even if I just take the 20% that are contraindicated for MHT, that is still 1.2 million prospective patients that would be looking for some alternative to MHT as a potential therapy.
That's where the NK3R class of drugs, either the small molecule or the antibody, could be a great alternative for them to have a choice to take some kind of treatment. That can result in a very significant commercial market for these therapeutics. That's kind of how we would break that opportunity down.
Got it. Does that $2 billion assume use in the 20% that's contraindicated, so the 1.2 million women?
Yeah, so if you look at that 1.2 million women, if we look at the small molecules, both offered by Bayer and AbCellera, they themselves, even acknowledging the presence of the others, are expecting at least a $2 billion opportunity. Just for rough numbers, if there's about a million women, the net price that's being charged is about $5,000 or $6,000 a year. That's a $5 billion-$6 billion opportunity. Both the Bayer CEO has indicated they see at least a $2 billion opportunity for their drug. When questioned in a conference, he admitted that that was a very conservative estimate given the size of the market and the unmet medical need and the fact that women are looking for alternatives here.
Important to note that there have been trials also started for VMS associated with cancer treatment for women, both for breast cancer and ovarian cancer, where a similar mechanism also can experience hot flashes. There is an additional indication as well. Just in the VMS associated with menopause, I think that the $2 billion opportunity, if anything, is quite conservative.
Got it. Assuming 635 comes to market alongside these small molecules, how does the market segment from a biologic versus these orals? I mean, clearly, there could be a safety differentiation, the once-monthly dosing convenience. Does 635 take that entire market share? Is there some room?
No, I think there's definitely room. Some people will prefer an oral. As we mentioned, just even looking at equivalence in both safety and efficacy, some people would prefer, a majority of people that we surveyed would prefer, an injectable. If safety is superior with an injectable, I'm sure that would be even more. I think there's room for alternatives. Ultimately, the patients can take a choice. I think that presenting a subcutaneous injection for targeting the NK3R class will do quite well in the market, even with some extra alternatives.
Great. Maybe we can switch to 575, where we have known your target and your indication for a little bit longer here. Just remind us the mechanistic rationale for targeting the ligand, so the OX40 ligand versus some of your peers are looking at OX40.
Yeah, that's right. The OX40, OX40 ligand pathway mediates T- cell expansion and survival. This is applicable to TH1, TH2, and memory T- cell pathways. Blocking the OX40 ligand rather than the OX40 receptor is believed to have potential safety advantages. Really, OX40 ligand expression is limited to sites of inflammation. Its blockade is expected to preserve the effector T- cell and memory T- cells and regular T- cells, potentially avoiding some of the adverse events related with cytokine release syndrome, so fever and chills. That's what was experienced from the rocatinlimab trial, where it was a depleting OX40. We believe that there's this opportunity for differentiation in targeting the OX40 ligand. Certainly, the OX40 ligand, the leading molecule here, is offered by Sanofi and AbCellera Biologics. It did not experience the same.
We have reason to believe that our OX40 ligand will have a similar effect.
Got it. You're exploring 575 in atopic derm. To your point, Sanofi is also looking at a number of these different indications here. Remind us the process behind choosing atopic dermatitis as your first indication. Do you have plans or interest in looking? Essentially, anywhere Sanofi goes, would you follow?
Yeah, I'd say that there's actually you'll remember, but for the benefit of others, you'll remember the history of how we got into this molecule. It was originally a partnership and a co-development partnership we had with a company called EQRx. EQRx eventually sold to Revolution Medicines. This molecule reverted to us to advance. Around that time, Sanofi had some great data from their OX40 ligand molecule in atopic dermatitis. Atopic dermatitis is a giant unmet medical need. Of course, there's some great drugs. Probably the most notable is Dupixent, which targets IL-4 to treat atopic dermatitis. It's still an $8 billion drug, so a very successful drug. Many people discontinue Dupixent. We see the atopic dermatitis very similar to psoriasis, actually, how the psoriasis market was large enough for many entrants to come in and have blockbuster drugs.
We see with atopic dermatitis something similar. Also, because of where OX40 ligand is in this inflammatory pathway, the opportunity to address some of these other indications. Others have also seen this. There are others that are coming out with OX40 ligand, also some combination therapies, recognizing a large unmet medical need here in inflammation. I think that there are opportunities for ourselves. However, it's very easy to do the phase I in looking at the indication in atopic dermatitis. We're really in our phase I. We're looking for safety, tolerability, and the PK. That's the primary data that we're going to get out of our phase I. Absolutely, there are opportunities either alone as a monotherapy or in combination as a bispecific, for example, as some others have taken, to treat a number of these different indications.
Sanofi, as you well know, is looking at asthma as well as a number of others and are pursuing their and continuing to pursue their asthma trial because of this giant unmet medical need and where OX40 ligand, the OX40 interaction plays in this pathway. It's quite upstream. And it's expected to have potentially very useful biology for many of these indications.
You mentioned Dupi here. I guess, how are you thinking about 575 fitting into the treatment paradigm? Would this be a post-Dupi type setting? Could this potentially compete with where Dupi is being used?
Yeah, absolutely. As I mentioned, Dupixent is a great drug. It generates about $8 billion in sales. It shows good efficacy and a very reasonable safety profile. Despite the success, there's still a high unmet medical need. Only a little over half the patients achieve this kind of response rate. A minority of patients achieve clear skin and a complete resolution of their symptoms. There are others, IL-13 blockers as well, as well as IL-4. What we would expect is for those patients that didn't respond to either the IL-4 or IL-13 blockers, that they'd be looking for a different mechanism of action even in second line. That's where I think the OX40 ligand class could really play a major role. That in itself could be a multi-billion dollar market.
Certainly, I think even just as second line, you'd be looking for something that had a different mechanism of action rather than going to another IL-4 or IL-13 blocker.
Just on that point, remind us how 575 is differentiated from Sanofi's OX40 ligand.
Yeah, I think, we recently published some preclinical data, which I know many were waiting for at the Society for Investigational Dermatology. There is a great data package there about the preclinical experiments that we've run for 575. I think the most notable point of differentiation would be in half-life. The half-life of 575 is over 60 days, whereas the half-life for Sanofi's asset is under 25 days, so between 20-25 days. That offers an opportunity for less frequent dosing. Even as it stands, AbCellera Biologics could get monthly or maybe even quarterly dosing. I think the data would show that they'll get at least monthly dosing. Of course, that would also be superior to Dupixent's dosing scheme.
That would open up an opportunity that we think if AbCellera Biologics is successful in getting a 30-day dosing or monthly dosing, that we should get quarterly, given the difference in half-life, maybe even semi-annually. It just really depends on we're waiting to see that data just like everybody. I think that's the opportunity we would have for differentiation.
If they're able to show quarterly dosing, does that decrease the value proposition in any way for 575?
It depends on if they are showing quarterly dosing. Does that mean there's an opportunity for semi-annual or even annual dosing if the data would show that there's a significantly larger half-life? That could be an opportunity. How important is that? That remains to be seen. Once you have quarterly dosing, is that going to be good enough? I think there's the opportunity with our 575 molecule, which we believe is a very good molecule. Maybe it has also opportunity in combination therapy bispecifics with some of these other inflammatory targets. That would be an opportunity.
What is gating to initiating these phase I trials right now?
Yeah, as I mentioned earlier in our discussion, we received the no objection letter from Health Canada. We are running these trials in Canada. We have a CTA filing that's been accepted. You may remember we received some funding from the government of Canada to run these trials in Canada. We actually have a low cost of capital position on executing on these phase ones. With these no objection letters in hand, we are activating sites and would expect to start dosing in the third quarter, so imminently, really. We would expect on our next earnings call to give you an update on how is that going. Yeah, we are really excited. That is kind of the next major milestone in AbCellera's trajectory, to start dosing our first patients.
What can we expect from that first data disclosure for 635 as well as 575?
Yeah, as I mentioned, we'd expect both of the first data to come out in the first half of 2026. For 635, we're expecting safety, tolerability, as well as the biomarker data that we mentioned that confirms the target engagement, as well as having some VMS patients in the trial. Maybe some early signs also of efficacy. In 575, it's really the dosing and PK, so safety, tolerability, and PK that we're expecting. Again, well-established clinical trial design from AbCellera Biologics, so that we're able to just be able to compare that data head to head.
Got it. And then just quickly on 635, you are also including male healthy volunteers. Maybe help us understand the rationale behind that. What can you expect to learn from?
Yeah, the male volunteers are there because a very similar pathway where the biomarker is reduction in testosterone levels. With dosing males and measuring testosterone, we're able to see the effect of target engagement. That's probably the clearest biomarker data that we'll have for confirming target engagement and the degree of target engagement in the healthy males.
Got it. You have committed to running these phase I trials. There will be a divergence as you look to potential further clinical development. Maybe just what is the latest as you think about 575 versus 635? Which program would you be willing to move forward on your own? Which one would you look to partner?
Yeah, I think, certainly the easy answer there is with 635, we absolutely are looking forward to a phase two. We are getting the plans ready, assuming success. We'll follow the data. If the data indicates that we have strong target engagement and even that early efficacy data, which we'd be excited to see, that'll help us with our conviction and confidence in moving forward with a phase two. With 575, as you know, it's been known for some time what that molecule is. We've had many active BD discussions. I think it's our current belief that that molecule might be better in the hands of a partner or a sponsor that can really look broadly across different indications for a phase two. We've had a number of partnering discussions already looking at that.
However, we've always had the conviction to be able to do the phase one, partly because of this government funding and because of how straightforward this trial is. I think any partner will also love to see that safety and PK data from 575 through the phase one. That's one where probably the likely path would be to hand that off to another partner in order to advance it through a phase two.
Got it. I guess, is phase two the right time to find a pre-phase two? Is that the right time to find a partner? Or is there?
For 575.
For 575? Or is there value in potentially running a small phase two, get that validation, and then.
Like every program answer, it depends. It depends on who the partner is that we might be able to find. If we can find the right partner, I think what's most important with 575, because as we've discussed, there are multiple entrants here, is really a streamlined clinical trial design and speed. For that reason, it's good to try and find out who is going to be bringing the phase two forward early, whether that's ourselves in doing a phase 2A or something in order to keep that program moving because of the competitive environment. Yeah, especially given the dosing profile, it could be very attractive. We don't want to be slowing that down by having protracted partnership discussions.
Either we will have the conviction to keep moving and advancing that molecule through trials, or we've found a partner who has that conviction and we're happy with the transaction that we could do in order to keep that molecule moving forward.
We have talked about this in the past as you think about potential partners and maybe what they can bring to the table, their capabilities. How are you thinking about the characteristics of that partner for 575? Because this could really be a pipeline and a product. Who is the ideal partner for you for 575?
That is a great question. Because of that feature that you just mentioned there, this could potentially be a pipeline and a product and the broad implications of the OX40 ligand pathway and all these different cases of inflammation. It would be a well-funded partner that could advance ideally multiple indications and maybe including maybe some of these multispecifics. If there's other targets that would be a great option in combination with a best-in-class OX40 ligand, a partner who had the conviction and had the capital to pursue that kind of broad-based phase two trial would be a great partner for this asset. I think we also are encouraged by the amount of attention that this pathway is getting from a variety of players. We do believe we have a best-in-class molecule with our 575 molecule against OX40 ligand.
The preclinical data that we presented at the Society of Investigational Dermatology, I think, would back that up and has renewed the interest in this molecule for partnering, as well as the fact that we are moving it forward into phase one kind of at quite a good pace. I think the partner that we're looking for is a sponsor who could really invest the resources to do the appropriate phase two and ultimately ultimate clinical trials for this potential pipeline and molecule product.
Maybe in the last couple of minutes we have here, any updates that you have on your partner-initiated programs, the sort of your legacy business, that component?
Yeah, in the first half of this year, we announced a good partnership with AbbVie around the T- cell engager platform. We did not talk about T- cell engagers today, maybe for another time. That is progressing well. We still have our other partnerships that are progressing well. Just more fulsome response around the rest of the business in addition, because we spent a lot of time on 635 and 575. Of course, that is kind of new for us since we spoke last. We continue our investment in our GMP facility. Actually, that is going to be up and running at the end of this year. It is just in time to start receiving the next molecules that we are going to get to our IND enabling studies.
As I mentioned, we have some 20-plus programs we've started, approximately half of which are in the difficult target space that have gone through our framework of where we believe that there are good opportunities for us to pursue. We'd expect the next candidates to be on this pace for roughly two INDs per year. We would expect the next candidates moving into IND enabling studies to happen during the rest of this fiscal year. We'll announce those as they come, probably with similar level of disclosure of 635. It might be a little frustrating because it was quite cryptic until we entered into the clinic. That is what we can expect.
In addition, the partnership business, I think, will continue with these strategic partners that we've established, including some interest in taking the early discovery through to the CMC GMP for those partnerships and certainly for our own programs that are advancing to that facility for later this year and the beginning of next year, where we'll be able to manufacture the materials in our pilot plant for all of the preclinical studies, as well as the GMP runs supporting our clinical trials.
Great. With that, Andrew, thank you so much. Thanks, everyone, for joining us.