Okay, we're going to go ahead and get started. Thanks, everybody, for being here. My name is Chris Raymond. I am one of the senior biotech analysts at Piper Sandler. It's our pleasure to introduce our first presentation of the afternoon for day one of the 36th annual Piper Sandler Healthcare Conference, Aclaris Therapeutics. So we have with us Neal Walker, Hugh Davis, and Joe Monahan from the company. So just to kind of go over the format here, this is a fireside chat, so it's meant to be very informal, so participative. If you guys have any questions from the audience, please raise your hand, and I'll make sure your question gets asked and answered. Before we get into this Q&A that I've got, maybe Neal, just provide us a little bit of a level set on the company.
You guys have had a lot of news, kind of almost transformative, maybe not almost, very transformative news. Maybe just walk us through the company profile, the story, the setup going forward.
Great. Thanks, Chris, and thanks for having us here today. Aclaris has been quite active. We're a clinical-stage biopharmaceutical company focused on both small and large molecule therapeutics for the treatment of various immunoinflammatory diseases. What Chris is alluding to is we just announced about two weeks ago an in-licensing deal where we took in a TSLP monoclonal antibody and a bispecific on the same TSLP. We got those assets from Biosion, which is a leading drug discovery company based out of China. What this gives us now is two clinical-stage assets in 2138, which is our ITK/JAK3 oral small molecule, O45B, which is our TSLP. Both of those are deep into phase 2 work. We also get a near-to-clinic asset in the bispecific, which means we'll be in IND in about three to four months or so.
So that's coming down the pike pretty quick. And then, of course, we have our drug discovery platform, which we've had for many years, and that's headlined by our work on the ITK selective, which will come into focus in early 2026. Concurrent with the deal, we also announced a financing which allows us to execute on all the catalysts that we'll be talking about going forward and gets us through 2028. So along with that, we also had an addition of a couple of senior leaders from Biosion, including Hugh Davis, who joined us as President and COO.
Great. Okay, so let's jump in on this Biosion deal. Obviously, the market liked it, saw it as transformative. Maybe some top-down questions, and we'll get into sort of the specifics of the assets themselves. So first off, a question we heard from folks almost unanimously when the deal was announced was, "Okay, if these assets were so great, why didn't somebody else jump on the opportunity?" A lot of economists maybe in the audience are thinking that the market's too efficient for you to have been able to get this. But you gained access to these for a pretty low amount upfront and 20% of the company. But just thinking about the markets they address, these work out clearly deal of the century sort of category here. So just maybe talk about the process, maybe, Neal, that led up to this deal.
Yeah, and look, we agree. We think they're very valuable assets. And throughout our history, definitely through my history, this is kind of what we do is look for deals that make sense. And we looked through hundreds of different asset opportunities and came across this one in May. And actually, it was a hyper-competitive process. We really came late to the game, and we were able to kind of rustle this away from the incumbents and get under exclusivity, I think largely as a function of supplying a healthy amount of equity in a public security. And I always like those types of deals because it's a win-win. You're definitely aligned and don't like seeing cash walk out the door that we could use to develop the assets and create value.
So I think that perception of how did we get it for this is encompassed by the equity component, but it was also kind of the relationship we were able to build with the senior leadership team. And I think two other nuances were the AD data wasn't fully mature yet. So we didn't get top-line data on that till Q3. And by that time, we had exclusivity kind of locked up. We were kind of on the glide path to getting the deal done. So I don't think that part was widely marketed. And I think the other important thing, this is work we did, contingent on getting this deal done, we wanted to understand how this asset comped against the relevant competitive landscape. And so everybody in the TSLP world comps against Tezspire. To me, that's just the price of entry, right?
Of course, you're going to have to show better potency, but what we did is really quantified why we're different, and we did that through all of Joe's great work. That data, I think if people would have had the ability to see that data and it would have been more publicized, you would have had people tripping over themselves ultimately because that was the sealer for me. Look, I think we had a good collaborative relationship, and we were able to strike a good deal.
Yeah, so we were impressed with the data that you guys presented when you announced the deal. We look forward to the presentation when you have it at a medical conference. But I guess another question you had to have anticipated. This is, okay, so a decent amount of it was of the data from these assets were and are being generated in China. Maybe sort of address the reticence that exists with respect to that setup.
Yeah, I mean, I certainly think that's true historically, and I think that's changing over time. We've seen a lot of deals now with large MNCs and small companies, VCs doing spinouts. I think it all depends on the context. Like I said, one of the things we harped on for basically six months was repeating all the great work that Biosion had already done. So we were able to validate that in our own labs, and then we repeated it again at WuXi AppTec. And that took a long time. And then we layered on the competitive landscape as well. So that was key to get ourselves comfortable. The AD data happened to be U.S.-based data. But I think also importantly, and this is something that I really liked about this deal, is we get a free call option, and it comes in two forms next year.
That is respiratory data in severe asthma and CRS with nasal polyps in the first half of next year. And that's through the partnership that the Biosion folks had established with a large company called CTTQ, which is a sub of another large company called Sino Biopharmaceutical. So not all companies are the same. These are large established players that do great work. And these are big phase two studies, 52-week study on the severe asthma, 24-week study on the CRS. And to me, that's going to position us quite well because we'll be the leading development stage TSLP out there.
Yeah, I want to get into that specific setup. But maybe first, Hugh, it sounds like you had other options. Why was Aclaris the right partner to shepherd this forward, these assets?
Yeah, so I think everyone can recognize that Aclaris has a very world-class scientific leadership team. They were able to take many derm programs through into the clinic and beyond. And then when you look at people like Joe that Neal mentioned who were doing all this due diligence and really dive into the data and be able to create really important data that could differentiate the assets from competitors. And Neal's experience, of course, in derm were really two key points. The skill sets are really a key overlap, right? So now that we're bringing together five people out of the Biosion team into Aclaris and combining that with all of the experience and knowledge that has been within Aclaris in the small molecule, derm field, rheumatology area really allows now Aclaris to move into this small and large molecule approach portfolio. So it's a huge upside.
And then, of course, being able to see the equity value of these assets, you need to make sure that you're going to be working with a team that is going to be able to carry them out to fruition, get the most value out of those assets. And so again, the history with Aclaris was key to that. They already had the infrastructure in place. They have cleanups and a regulatory and clinical team that could really get the job done. And that was something that Biosion really looked at very closely was really getting to a point of success for these assets to their fullest opportunity.
So when the deal was announced, you guys showed what I thought was really interesting preclinical data showing greater binding affinity for TSLP than Tezspire and has a lower dissociation rate for Tezspire, which to your point, Neal, it's more potent. And you have phase 2A data that shows it's a tough comp because patient baseline characteristics are not maybe the same in an atopic derm. But maybe a couple of questions on this. So the 2A data, very specifically going into one of the slides on your deck, that data looks pretty intriguing. Just curious, you measured response at 26 weeks. Maybe, Hugh, since you were part of the team that conducted this study, that was versus 16 weeks for Dupixent. Why was that time point chosen, I guess, in the first place?
Yeah, so when you look at the Tezspire data in AD, they had a two A study that showed after 12 weeks of dosing, there was no clinical significance. But if you let those patients move forward four weeks without further doses, they showed clinical significance on IGA 0/1 relative to placebo. And so from Biosion's perspective at that time, that seemed like a reasonable validation that the target was valid in AD. When you look at the two B study, it was a question around study design in my mind.
But knowing that we had a molecule that had a very long dissociation time and this long residence time, and again, Neal mentioned the work that Joe did, able to show 400-hour retention time on TSLP during the due diligence really allowed for us to move forward in AD knowing that we had a more potent molecule, thinking that the target was valid in the indication, and that others weren't taking that space. But to Neal's point on the call option idea with the China data, we had already seen that CTTQ, our partner, was already moving forward in severe asthma, and so we figured they would be sort of the respiratory clinical data partner, and we would be the derm partner, and then we would combine these data sets together and take the molecule forward, and that's where we are today, so it worked out well from that perspective.
So maybe I'm asking a cart before the horse question here on this. But just in terms of what we saw in that data, I mean, is it too much of a stretch or a leap to think that you're going to see maybe a slower uptake or slower disease modification profile, or is it just too early to say?
Maybe a little early to say, but I would say some leading indicators are that when you look at the curves where we've compared versus historic curves with Dupy, SOLO One, and Two, the initial dive down is about the same. And I think that the idea of getting out to 24 weeks or so is we want to tease out the max effect, right? Because AD is a treat-the-flare disease. I want a sustained maximum effect. I want to know where that is. And then something that a lot of people don't talk about is the durability of that effect. And so from my standpoint, you're going to pick up that earlier time point anyway, like in the data set, but it may not be the highest percentage.
If you just look at that 2A data for what it's worth, between week 18 and week 24- to 26 timeframe, it's about 10 points of incremental bump. And you don't see that with Dupy. Dupy comes down just flatline. So from my standpoint, in order to capture all the ways to win within the market, because we don't know how the competitive landscape will evolve, better to do exactly what OX40 assets are doing, right? Take it out 26 weeks, get that full data set, and understand what that whole course looks like.
This is an unfair question maybe to ask you. Because of the Tezspire experience, investors have a lot of questions about TSLP as a validated target in AD. You've shown differentiation on this molecule, obviously. Maybe more broadly, Neal, why is TSLP a validated target? Why is that?
Yeah. No, it's a good question, especially when you see a large company maybe not get the desired result. But I do think going back to what Hugh said is that to me, they absolutely generated a signal, and it's hard to tease out maybe the shortcomings of the trial design because there were many of them there. But the biology is very clear in this regard. Tons of literature on this space. It's in the same path as the OX40 ligand receptor approaches. And so there's a wealth of literature data on this. There's also a wealth of studies on this path. And I think just knowing what we were able to do preclinically to establish the value prop and then get this initial signal in AD, to me, it's more than enough to advance into a definitive two B study.
And look, we got to see when we do that work. But I don't think there's any question that it's a validated target. The question I think then becomes is how does it comp versus all the other approaches?
Okay. And so you've referred to the asthma and the CRS readouts as free call options. But it would seem, depending on the outcome, that you could see a priority shift potentially from towards these. Maybe just talk about the likelihood there. You're thinking of prioritizing these indications. And another opportunity, obviously, is COPD. So any sort of thoughts there across that list of ways you can go?
No, it's a great question. And maybe that will give us an embarrassment of riches of things to invest in, right? But it is everything that we've seen so far leads us to believe that those will be positive. And I think that'll click off a lot of different work streams. We already know that they're currently, right now, investing in a COPD study. So that's just adding to the mix. So again, feel pretty good about their, I guess, enthusiasm around that program. For us, if that's all positive, one of the keys to the deal was to make sure we had data sharing rights. And we've talked to some regulatory consultants about then, how do we roll that into maybe getting further up the curve, like a phase 2B, 3 in the U.S., if that's possible?
That's not a definitive, but it could put us, advance us very quickly if it all works out. And I think if the data is great, we would absolutely start deploying capital into the respiratory work.
I'm going to ask you this next question, not asking you to throw shade at any particular competitor. But you've got other players in the TSLP space. Q32 Bio has an indirect TSLP targeting mechanism. Zura Bio has theirs. You had to have performed a pretty detailed landscape analysis before doing this deal. Just maybe in broad strokes, how does BSI-045B compare in your view? And what's the setup there?
Yeah. No, it's a great question. And again, it was key for us. So no matter what would have happened, we would not have advanced the deal if we would have not been able to take all those relevant players, test them in our own labs kind of head to head, and figure out where we stack up. And the good news is that we really feel like we've got a lot of basis for best-in-class potential. We've only put out a couple of those slides. We'll be putting more slides out as we go. I think it is challenging when you look at you have direct competitors who are TSLPs, you have TSLP receptor inhibitors, and then you have maybe some of those a little bit orthogonal or indirect competitors. So it's hard to compare apples to apples against IL-7 competition. But to me, it's broader than that.
I mean, you got OX40s, you got the BTLAs, you got I mean, you have a lot of things that you have to put into that mix and consider when those data readouts are and how your TPP has to evolve.
So let me ask you a question to you, Neal, as a dermatologist, maybe first and foremost, rather than the CEO of a drug development company. Just looking at the atopic derm market, we've been following it forever with Regeneron and Dupixent. It's been the king, really, of frontline use with really little challenge, even with some newer players. At what point do you feel like the market will be ready to start actually incorporating other biologics as a first-line choice?
Yep. Hopefully soon. I think it takes a while for derms. Derms are very reticent to give systemic medications. Even for JAK inhibitors and Dupy's into that market are pretty low, and that's with this massive machine behind them. Every derm you talk to will admit to that, right? They're always reticent when you see something new. I think now with the adoption of those types of drugs and those approaches like JAK inhibitors and Dupy's and the Dupy's of the world with great innovations, it's primed to pump. That's why you see so much activity in this space. You see that because it's still a terribly poorly addressed market. I mean, the data leaves a lot to be desired in terms of headroom on the upside for efficacy. There's still some safety concerns depending on what asset you're talking about.
And I think something that gets less airtime is just the durability, right? People want to get on something and stay on something. Unfortunately, a lot of Dupy patients got to cycle off before year-end. So I do think there's a ton of room here to compete along numerous levels. And it'll follow the same kind of trajectory as psoriasis, right? It's just psoriasis went from an $800 million fully generic topical market to multi-billion that takes like 15-20 years, but you get narrower and narrower in your efficacy on a bar.
Okay. So we'll maybe jump into 502. This is the other asset that you acquired. We were pretty intrigued by this premise targeting TSLP and IL-4, which is both upstream and downstream, right, in the disease pathway. There are also other similar maybe approaches with some twists. Q32, obviously, IL-7 and TSLP. But maybe just talk about how a bispecific really is the best way to go, specifically when you talk about potency. And you're addressing a potency issue with Tezzy with 045B, but talk about maybe the potency sort of picture with this molecule being a bispecific.
Yeah. So when the molecule was designed, we took the same TSLP antibody that was used as O45B. So we have the high potency, long residence time, etc. And we put two scFvs from an anti-IL-4R antibody that we had in-house onto the TSLP. So it's a 2 plus 2 design. So you get a lot of avidity against both IL-4R and TSLP. At the same time, it's YTE mutated in the Fc, so you have longer half-life because you have the risk of binding to a cell surface receptor where you have enhanced clearance. So we offset that with the YTE. Now, when you look at this molecule, because you have the long residency time on TSLP and still the IL-4R binding, we tested it in a different type of assay where we activated PBMCs with IL-4 and TSLP.
What we were able to show was that unlike all of these monotherapies against single targets, when we have either the combination of Dupy plus Tezzy, we were able to be tenfold greater potency than Dupy and Tezzy in inhibiting CCL17 release. And so this curve shifted tenfold to the left. It's better than additive. It's actually, I won't say that it's synergistic, but it's definitely more than additive activity. And I think this is what's going to be required as we now move to the next stage beyond a single monoclonal against a single target, is we now need to be looking at the pathway in total, at the top of the pathway with TSLP and with the immune cell inhibition downstream. And so this combination in one molecule, I think, is going to be really spectacular.
Okay. One more question, and I'm saving this for the last. Your homegrown asset, 2138, you're going to have a pretty big data event next year in atopic derm. Maybe just walk us through really quickly the trial design, what should be expected, and the internal sort of threshold for success.
Sure. So it's a single-arm study, just POC, about 15 patients, 10 milligrams b.i.d. Look at all the relevant AD endpoints. But most importantly, we've got a heavy PD component to this because what we want to do is separate out the ITK effect versus JAK3. And we get kind of double bang for the buck there because it helps inform development paths for 2138, but also our next-gen ITK selective, which we also think can be a big opportunity in immunoinflammatory diseases.
Excellent. Okay. Well, I've got some more questions, but I don't have any more time, unfortunately.
So, Zura, yeah.
Yeah. But thanks for the great presentation. Look forward to all the.