Welcome, everyone, to the last morning session on Tuesday of Goldman Sachs Global Healthcare Conference. We're thrilled to have with us today the team from Aclaris. Maybe first, we could have you guys all introduce yourselves and provide a bit of an overview of the company m aybe Neal will turn it to you for that one.
Kevin Balthaser, CFO.
Joe Monahan, CSO.
I'm Neal Walker. I'm the CEO. Just a little bit about the company. We're a biotech company focused on immunoinflammatory disorders. And we have a pipeline that spans across a few phase two assets, ATI-1777, which is a topical soft JAK where we reported out positive phase II data at the onset of this year. We have ATI-2138, which is an oral small molecule ITK/JAK3 inhibitor a nd we recently announced that we will be studying atopic dermatitis in a small POC study that will start imminently. And then, of course, we have a preclinical pipeline and an early discovery pipeline in addition to a platform.
Okay. I know you recently restructured the company and priority set m aybe talk to us about some of the key decisions that you had to make there. What do you view as the core competencies of Aclaris, and how did that then inform these decisions?
Yeah, sure. So, I think mainly we were focused on cost control when you have your lead asset not turn out the way you expect, you just have to reduce the headcount, control costs, and then take a look at the rest of the portfolio, which we have a pretty expansive portfolio, and decide where you want to allocate your capital over the short term and kind of rebuild the catalyst calendar that's where the main focus was. And, I mentioned the pipeline already t hat's kind of what we're moving forward with, with an emphasis on the ITK JAK3 oral small molecule.
In terms of kind of core competencies of the business or that underlie that pipeline?
Yeah. I think it's the people and the platform those things still exist. We all know that drug development can be a binary event but at the end of the day, we have a world-class team, which is multidisciplinary across biology, chemistry, translational into the clinic a nd these folks have decades of experience out of companies like Pfizer, etc.
And so, that combined with our proprietary drug discovery platform means that we still have the ability to do what we've done in the last 3-4 years, which is be very productive in terms of pumping out different assets. I think people often forget that we drove three assets into the clinic within the span of 2-3 years, which is quite productive. Right.
The program that kind of came into focus with your most recent quarterly update was the ITK JAK3 inhibitor. Maybe? you can provide first some just background on the mechanism of action there.
Sure. Yeah. T he compound is ATI-2138. It's a dual covalent inhibitor of ITK and JAK3. ITK is a kinase that's downstream of the T cell receptor and regulates T cell differentiation and activation and function. ITK particularly is involved uniquely in the regulation of TH2 activation and so could be utilized in atopic diseases. JAK3 is the only JAK isoform that has a cysteine residue that allows this covalency to occur.
So, inhibiting JAK3 gives you potency on that target while giving you several thousand-fold selectivity for all the other JAK isoforms. JAK3 regulates cytokines that signal through the gamma common chain. That includes the TH2-driven IL-4 as well as the T cell cytokines or T cell function around IL-7, IL-2, and IL-15. By inhibiting both JAK3 and ITK, you have some complementary, and you have some overlapping function that should have a major impact on T cell-driven diseases and in particular TH2-driven diseases.
Okay. How? did you think about the target product profile for a product inhibiting these two molecules, and how did that inform some of the key design decisions around creating this drug?
Yeah. I think when we were involved in the discovery of this a number of years ago, we were trying to think about a way to get more specific within the JAK inhibition realm. A lot of the molecules that are out there currently, even Rinvoq, baricitinib, etc., they hit multiple isoforms. We wanted to target JAK3 so we could get the benefit of JAK inhibition but be a little bit more targeted, a little bit more specific.
And we understood from Joe and his team's previous work that ITK was a very interesting target. The problem with ITK was that it was very difficult to drug o ver 20 years, numerous pharmaceutical companies tried to drug it t hey just couldn't do it.
What the guys came up with was a way to covalently bind ITK a nd so, by having, as Joe mentioned, something that's exquisitely potent on the TH2 side of the house married up with a known mechanism but more specific in JAK3 a nd remember, there's only one product out there that's approved hitting JAK3, and that's ritlecitinib for alopecia areata.
This is a very different drug that works through a very novel mechanism by hitting these two targets specifically. And so we think that that opens up an array of potential indications for us as we move forward that's kind of how we were thinking about it in the early days.
You mentioned there's been a history on ITK drug development i t hasn't really panned out. I guess what were some of the key technical hurdles that pharma companies started to face as they were targeting that molecule? And then how far along did the most advanced get?
Yeah. D rug companies have been interested in ITK for the past 20 or so years. And the first focus in ITK drug development was on reversible ATP competitive compounds. Because of the poor biochemical efficiency, it was difficult to generate a drug-like compound that had enough potency to be able to translate from biochemistry into cell and into in vivo. So a lot of those compounds fell out preclinically.
More recently, with the advent of the cystinome and identification of a cysteine residue in the active site of ITK, it allows one to then target that cysteine with compounds that have both reversible affinity as well as reactivity with that cysteine. Having a covalent compound overcomes the problems with biochemical efficiency and allows one to move further. And so, I think we're on the leading edge of ITK inhibitors. But, Corvus has a compound, CPI-818, which is in phase II i t's an ITK inhibitor. And as Neal mentioned, ritlecitinib, which is mainly a JAK3 covalent inhibitor, but also sort of tweaks ITK as well.
Okay. And then maybe you could kind of expand upon it y ou talked at a high level about this, but expand upon the profile of ATI-2138 around selectivity and potency, the half-life of the drug, and any other data that you think is important as you look to the clinical effect of this agent.
Yeah, sure. 2138 inhibits in biochemical systems ITK and JAK3 at potencies in the 100-500 picomolar range. It's over 2,000-fold selective over other JAK isoforms. It's about 25-fold selective against BTK. It does hit another TEC kinase that's the T cell kinase called TXK. And the combined inhibition of TXK and ITK would have an impact on TH1 cells.
In cellular systems, in PBMCs, in whole blood, driven by activation of JAK3 and activation of ITK, you see low nanomolar potency against both. And when you get into in vivo systems, we have good potency and good efficacy in mouse collagen-induced arthritis and rat adjuvant-induced arthritis in mouse T cell colitis models. So we have good efficacy in the rodent. The PK of this compound in various species gives a half-life of about 2-3 hours a nd that includes, based on our phase I studies in humans.
Overall, the important concept is that we have very similar potency in ITK inhibition and JAK3 inhibition. I think it's the first molecule that's going to be able to test the concept that dual inhibition of these two pharmacologies will have efficacy in these various diseases.
You mentioned that there's a few people that are also pursuing this space and maybe ahead of you i guess what have we learned from their programs that will inform both kind of how? you think about the clinical development path and also where there's room for differentiation?
I think with ritlecitinib, as Neal said, is marketed for alopecia areata t hat's the one that's ahead of us i think the Corvus compound is a little bit different pharmacology and is at about the same stage. I think when you differentiate ATI-2138 from ritlecitinib, it's around the potency against the target we're about 5x more potent against JAK3 than ritlecitinib. And we're somewhere in the 30-80 times more potent against ITK. So at a given dose and exposure, we'll be hitting both JAK3 and ITK equivalently, whereas ritlecitinib will focus mainly on inhibiting JAK3 and just be tweaking ITK.
I think the other thing we learned from ritlecitinib is that with this mechanism, the pharmacology that you're looking at is mainly C average driven. It's not driven by Cmax i t's not driven by C12. Based on our preclinical animal models as well as clinical data, we'll be targeting a certain C average as far as going into.
You did a really good study last year for this asset. Maybe walk us through the data there.
Yep. W e did a ATI-2138, and we looked at PK. We looked at safety. We looked at standpoint. We saw a dose-dependent exposure that was linear from the SAD study from up to 80 mg dose and in the MAD study up to 40 mg BID the PK looked really good. From a safety standpoint, it was generally safe and well tolerated.
There was nothing that we saw that would indicate off-target pharmacology as far as findings go, which is good. And then we did a significant amount of PD work we did ex vivo stimulation of whole blood from these volunteers. And we looked at ITK-dependent cytokine readouts w e looked at JAK3-dependent cytokine readouts. And we looked at a combination of stimulating with both JAK3 and ITK. And we saw a dose and exposure and time-dependent inhibition.
At doses between 5 and 40 mg, we saw between 50% and 90% inhibition of both of these readouts over a reasonable duration of dosing interval. When we looked at exposure responses and we plotted that, the potency of ATI-2138 against JAK3 and against ITK, again, as we saw preclinically, was very similar w ith this molecule, we will be able to be testing dual pharmacology.
Remind us which of the cytokines were relevant here that you tested and what you saw on each of them?
Yeah. W hat we looked at is we looked at for the ITK, we looked at anti-CD3 stimulated interferon gamma and IL-2. We also in vitro systems, we looked at IL-17 and saw a blockade of that. And we looked at IL-4 and IL-13, and we saw a blockade of that b ut in the clinical setting, we looked at interferon gamma and IL-2. And with the JAK3, we looked at IL-15 or IL-2 stimulated interferon gamma production. And then we looked at the combination of IL-15 plus anti-CD3 and looked at interferon gamma production.
Okay. Great. In terms of safety and tolerability, I guess what kind of came out of that data? And can you contextualize these versus some of the other JAK programs around?
Yeah. I think it was very well tolerated w e didn't see any severe AEs, no SAEs in the study i t's a small data set, obviously, still. That's what we saw out of the SAD-MAD work I think it was Joe was saying before, JAK3 is very specific to its expression in the myeloid and lymphoid compartments. And so you don't have the same kind of ubiquitous nature of JAK1, JAK2 expression where you would see a broader array of potential AEs. W e're happy with what we saw so far, and that's why we're progressing.
You mentioned earlier that you tried to foresee the average. I guess what did you see on that particular? Was that something you were able to tease out of this data?
Yeah. W hen we looked at the doses and exposures with the SAD and the MAD study and the targeted C average that would give us what we feel is the necessary inhibition of JAK3 and ITK, the dosing interval and the dose levels that were looked at were appropriate. I think in the neighborhood of 5-15 mg BID will give us the coverage that we're looking for. That will give us coverage that would surpass as far as JAK3 what ritlecitinib has. And then as far as ITK, it will dramatically surpass what ritlecitinib has on ITK.
Okay. You pushed this forward. First, you were looking at inflammatory bowel disease, but you've shifted since to atopic dermatitis. I guess talk to us about the basis for that decision.
Yeah. I think all these, I guess, indications are competitive, and the landscape is always kind of evolving a nd I think towards the end of last year, the IBD landscape evolved once again. And so from our standpoint, just given where we're at as a company, we didn't necessarily want to take the risk of the spend and the time that it would take to do a longer study in IBD.
And atopic dermatitis was a very good match from a mechanistic standpoint y ou can get that study completed in 12 weeks and generate good POC data in patients. And so we thought that was a better route to go in terms of just proving out the concept. Once that study is completed, I think then we'll have, if the data comes out how we expect from a safety and efficacy standpoint, we'll have the optionality of continuing with AD b ut also, Joe mentioned ritlecitinib is approved in alopecia areata, fast following into that indication. Vitiligo is another area that might be of interest.
And I think those studies are just more cost-efficient than perhaps embarking on IBD. Maybe we'll go back there at some point, but I think right now, in where we're at with the company, this is a better spot to be.
Okay. As you think about unmet need in atopic dermatitis, I guess where do you think there's kind of the main unmet need that this product could serve?
Well, I think when you look at the pathophysiology of AD, it is heterogeneous a nd I think this product, by hitting JAK3 and ITK specifically, we're really taking out the TH2 side of the house, which we know is a key driver. And then also, we know that some patients with chronic AD have a little bit more of a TH1 component. And so we hit that as well with this product.
When I kind of look at the landscape, and obviously we have oral JAK inhibitors and we have biologics, certainly the biologics can perhaps put up a little bit stronger safety profile than the potential around the black box, although sales of drugs like Rinvoq would say otherwise, right? At the end of the day, patients want to get better. But we think there's a tremendous amount of unmet need i mean, if you think about mirroring psoriasis, psoriasis has gotten to PASI 100 i t's 100% clearance. We're nowhere close to that in atopic dermatitis a nd I think that's why you're seeing a lot of people pile into this space.
Yeah. This is a bit of an aside, but given it's JAK3 pretty exclusively, do you anticipate that there would be a black box warning for this kind of product?
Well, it's always hard to judge that. I think when you look at the history, Tofa obviously got maybe one of the more draconian black boxes b ut then as time went on, they kept watering it down a little bit a nd it's a data-driven sort of thing a nd we saw TYK2. So TYK2 didn't get any black box.
And so I think if they take a data-driven approach, there's a possibility that if you're really targeting just JAK3 and you don't have that broad-based effect, that perhaps you wouldn't. But you would never be able to predict that until NDA. It's not something you would learn in the near term. But I think there's a better than average shot.
Okay. You mentioned a 12-week study, but maybe you could talk a little bit more about the trial design that you would take forward for proof of concept in AD, things like number of patients, what are the right endpoints, things like that?
Yeah. So we're looking to enroll approximately 15 patients. It'll be a small study, all AD. We're going to do an open label design i t's going to be over 12 weeks, 10 mg BID. And we're going to look at all the traditional endpoints, EASI scores, IGA, all of the kind of tried and true primary and secondary endpoints in addition to a heavy PD component.
And we're excited about it w e think it's going to enroll quickly because it's open label and we're able to comp against historic kind of placebo rates in that moderate to severe population. And so we're excited about it. This mechanism, I think, is interesting. When you look at the literature, ITK is all over the literature for affecting TH2 and allergic-based diseases, mast cells, etc. I think just because it wasn't able to be drugged in the past, it was kind of pushed aside as a target versus maybe its close first cousin, BTK, right? We're pretty excited about it.
It sounds like a pretty efficient development strategy there. I guess when will you be able to enter the clinic with the study?
We will be starting imminently. We haven't given any guidance on an exact kind of top-line data readout since we haven't started the study yet. That will be shortly, and we'll be providing updates in the coming months.
I know this is kind of downstream, but as you think about the bar for a new oral, you mentioned the safety questions with the JAKs o bviously, biologics are a more complicated delivery. What do you think the bar is for a safer oral in that space?
I mean, I think you'd like to be on par at a minimum with the JAK inhibitor products out there, but have perhaps the safety profile of the biologics i t's kind of threading the needle. But at the end of the day, there's always room in these evolving markets for new approaches to what is definitely a heterogeneous disease i mean, you see failure rates on the best drug out there from a biologic standpoint with Dupi that are pretty high.
I don't really think that the market is saturated in the least just yet. In fact, it's interesting because we see a lot of companies that are innovating around extending the dosing interval around perhaps suboptimal targets, which really didn't happen if you look historically back at indications like psoriasis until you optimize the efficacy. So from our standpoint, there's still a void there on the efficacy side. That's why we came up with this approach.
Okay. And sorry, remind me which doses you're taking into the early study and how many doses you expect to study over time?
10 mg BID to start with, and then we'll probably study 3 doses over time.
Yeah. Okay. And then I guess how do you think about pending that you have this product profile that we've described, where do you think this drug, you kind of alluded to it already, but where do you think it fits in the AD market relative to the biologics, JAKs, etc.?
Well, I think, again, highlighting the ITK part of the mechanism and JAK3, those are two novel approaches for this particular indication. I think we can make a lot of arguments that pending what the data looks like in the clinic, that hoping to argue that you're getting better efficacy without some of the safety baggage.
Yeah. You mentioned alopecia areata. You mentioned vitiligo i guess there's a lot of different directions you can go with something modulating TH2. W hat do you think about? in terms of long-term development of an asset like this, pipeline into product potential?
Yeah. Kind of look at it even broader. I alluded to this earlier. Within this franchise, we have the 2138, which is ITK, JAK3 i t's kind of half and half. And then, within our preclinical pipeline, we have an ITK selective, which would probably be most relevant for something like atopic dermatitis. And then you don't even have to have the black box discussion with JAKs, right?
And then we have another asset within that portfolio, ITK-TXK, which might address a different set of diseases. W e actually think that this franchise, if you will, can address a whole variety of different diseases, and we can mix and match a nd I do think 2138 would be a great drug for something like alopecia areata. Just right now, we wouldn't be able to do a six-month study. So that's, again, why we're starting with AD.
Yeah. You obviously just mentioned these. This is stealing my next question, but a selective ITK inhibitor in development. I guess how? do you think about the product profile that you'd like for that asset, particularly if you're thinking about it as an atopic derm program?
Yeah. I mean, I think it's brand new. It would be a brand new target, something that would be, hopefully, from our standpoint, best in class and maybe second in class to the Corvus compound. But when you have a mechanism like that that's just targeting the root pathophysiology of AD, that gets us pretty excited, particularly if you're hitting some of the same targets that an oral biologic would hit, but it's in a pill. W e're pretty excited about it.
What have you shared with respect to that program at this stage?
We haven't shared much just for competitive reasons, but we expect that compound to be an IND-enabling tox in the near term.
To what extent does the healthy volunteer data, potentially positive proof of concept data coming with the lead asset in this context, how much does? that de-risk your ability to go after ITK? Is there a read-through point?
Yeah. I think when you look at the SAD and MAD data and you look at exposures and dosing and you look back at the preclinical studies that we did with exposures and dosing, I think we have a good idea as to where we need to be there. I think importantly, in this AD study, we're going to have a heavy component of pharmacodynamic analysis that will specifically look at ITK effects as well as JAK3 effects. And so we'll be able to compare efficacy with inhibition of both of those. We'll be looking in the skin and in the periphery at that.
So I think having the preclinical models, having the SAD and MAD data, looking at exposure and dose responses and the pharmacodynamics associated with that, coupled with the PD studies that we'll be doing in this AD study, I think we'll have a good idea as to what inhibition of ITK and what inhibition of JAK3 gets you in atopic dermatitis.
Okay. And then as you think about the ITK-TXK molecule, I guess what's the role of TXK there?
ITK and TXK are both kinases downstream of the T-cell receptor. They're not right at the initiation. That's more of the ZAP70. W hat you have with ITK is ITK is expressed in all T-cell subsets, and it drives the differentiation and activation. TXK is more of a helper kinase that's expressed in a subset of T-cells. So TXK, for example, is expressed in TH1 cells, but not TH2 or TH17 cells. W hen you drive the T-cell receptor activation, blockade of ITK by itself should be sufficient to block TH2 and TH17. If you bring in TXK along with ITK, in addition to that, you should have blockade of TH1 cells.
In what disease context does it make sense to have more complete blockade across T-cell subtypes?
I think when you're outside of looking at atopic diseases, more broad T-cell-driven diseases, both autoimmune disease, inflammatory disease, as well as transplant graft versus host disease, you want to have a broader impact on T-cells i think that's what TXK in combination with ITK will give you.
Are there any prior precedent development strategies or approaches that go after TXK either alone or in combination with other molecules?
I'm not aware of looking at TXK by itself. In that TXK, even in the cells that it is expressed, sort of has a helper function. I'm not sure what kind of effect you'll see i n the mouse knockout mouse, for example, when you knock out TXK by itself, it doesn't have much of a phenotype a nd it's not a phenotype similar to, say, ITK where you have a change in both CD8-positive and CD4-positive cells. So hitting TXK by itself, I don't think is a great approach. There have been other compounds that have targeted TXK and ITK that either have not made it too far or are still in discovery.
Okay. A lot of these programs would be going after large indications. I guess how do you think about partnership in terms of pushing development forward when you can go after such large groups of patients?
Yeah. We always think about that. It just has to be the right deal at the right time. And certainly, even things that are earlier stage that could be of interest to partners. And we're right in the middle of having those discussions along the lines of our topical soft JAK.
In the past, I think the goal was to monetize kind of post-proof of concept data. I guess how do you think about at what stage of development you can kind of optimize the value versus your own spend outlay?
Yeah. I mean, it's a hard question. It's just value-driven, right? You just have to look at the context of the whole deal and what you get upfront versus along the way and where the de-risk points are and what else we have within the portfolio that we're excited about. And step one was to kind of craft a capital-efficient story to get our feet under us again and then kind of move from there.
Given that you kind of described this as a bit of a franchise, would it be your view that the three assets should come together in some way, whether it was staged or not? Or do you think about them each individually?
I mean, I think for us, it's an interesting franchise where we can get leverage out of that. But certainly, somebody might be interested in one versus the other. So I don't see them as inextricably linked.
Okay. You've also talked about monetizing the topical JAK inhibitor that's in kind of more mid-stage development. I guess talk to us about the progress on that front.
So we're making good progress there. The data was really strong. The top-line readout, the responder analysis was right in line with some of the competition with the value prop of having the soft aspect. W e're looking forward to kind of wrapping that up, hopefully.
But it's a good asset that can marry up nicely with biologics or any other systemic to just drive incremental effect. We know that from the literature with drugs like DUPI where the peak effect at week 16 on an IGA responder analysis can be bumped by 15-20 percentage points, but just by adding in a strong topical, which is just part of the normal treatment cycle for patients.
In terms of, as you look at your discovery pipeline, any sort of favorite targets or targets of high interest that you'd want to highlight here?
Other than the ITK side, nothing that we're particularly disclosing at the moment, just earlier assets.
In terms of the, I mean, you talked about this earlier, but a pretty productive discovery engine, what's the right cadence around INDs for your business?
Well, again, maybe back to where we started with some cost control, we decided to ratchet some of that back. I think, again, as we continue to make progress, we'll turn that on again. But as you know, you're not going to get much in the way of credit for the early-stage asset side of things at this point.
Okay. And in terms of cash runway, I guess, provide post-cost controls, etc., what's the status there?
We're at a really manageable burn at the moment y ou're not going to see much difference from our last cash-reported number through the end of the year, quite frankly. And, we're able to do that in spite of adding in a clinical study for AD as well as moving a couple of the earlier-stage assets along.
Okay. And so the guidance on cash runway is until?
We are formally guided to that now.
Okay. I think that's the bulk of all of my questions. It was lovely to see you guys t hank you so much for joining us here today a nd thanks to everyone who joined us both here and online.
Thank you.