Hi everyone, my name is Mitchell Kapoor. I'm a senior biotech analyst at H.C. Wainwright. Today I'm pleased to be joined by the Aclaris team for our Autoimmune Healthcare Day. I have the CEO, Neal Walker, COO, Hugh Davis, and CSO, Joe Monahan. We're going to have a fireside chat, go back and forth with some Q&A, but I wanted to just start off and let you all introduce the company for those who may not be familiar, just talk about the history and the overview of Aclaris.
Thanks, Mitchell, and thanks for having us here today. Yeah, Aclaris is a clinical stage biotech company focused on treatments for immunoinflammatory diseases. We're pretty unique in that we have both a small molecule and a large molecule portfolio. We have a pretty healthy cash balance of over $200 million that gets us into 2028 and quite a data-rich catalyst calendar through 2025 and 2026. We have an IND submission with our bispecific that's going in this quarter. We have clinical data that reads out with 2138, our oral small molecule in AD in Q2. We have an ITK inhibitor right behind that that comes into focus into an IND in 2026. Of course, our TSLP mAb, we have a study getting started in the United States in atopic. A lot going on.
What underpins all that is our drug discovery expertise through our KINect platform and our world-class immunology expertise across the board in various therapeutic areas.
Great, thank you. That's a wonderful overview. Just to start off, you've had a long history in the dermatology space. You have a bit of a respiratory subvertical as well. Could you just talk about kind of the implications for that and what that implies for the company as it evolves?
Yeah, so you know, I mean, my background, of course, is dermatology heavy, but I have a lot of experience in various therapeutic areas. Of course, our company is rooted in having a tremendous amount of immunology expertise vis-à-vis our acquisition of Confluence, where we picked up Joe and a number of the folks there that were all ex-Pfizer who ran the Immunology Group. They have expertise across the board in various therapeutic areas. In addition, when we did the transaction with Biogen, Hugh Davis, who's now our President and COO, as well as five other folks, came over giving us world-class large molecule expertise, and again, across many therapeutic areas. We feel comfortable with the respiratory drug development.
We do have a pulmonologist on our medical team that's been a longtime clinical drug developer, in addition to a wonderful SAB and Marianne Mann and Zuzana, who joined us on our SAB that we formed recently to help with respiratory drug development. We feel well equipped to operate in that space.
Great. Can you talk a bit about the recent expansion of the portfolio into biologics with the Biosion deal and those assets? Just talk about some of the driving prioritization between factors for prioritizing biologics versus small molecules.
Yeah, it's a unique set of assets in that we're able to target the market in multiple different ways. Sometimes therapeutic areas are relevant for small molecules, some for large molecules. I think we can create, we can target a wider target addressable market having both. We think both are quite important. The TSLP mAb and the TSLP IL-4R bispecific that we in-licensed came about after we met with Hugh and the team last year in May. We did a tremendous amount of diligence on these assets. We compared the TSLP mAb versus not only TEZSPIRE, and we repeated these experiments with three different shops multiple times. We also compared against the relevant competitive landscape. What we were able to show is best-in-class potency and also exceedingly long residence time, which we think is really critical for an alarming mechanism of action.
If you bind to the target and you're not coming off, then you don't allow that alarm to hit the receptor. Some of these other technologies that folks have, if it has a fast off rate, then all you're doing is just waiting until it hits the receptor again. I think with this mechanism, having the position of long residence time is quite key to at least our investment thesis. We're excited about that. Of course, we're starting a study in atopic derm. We think very highly of that indication. There's read-through, of course, into the bispecific that we're filing this quarter.
Great. Okay. Just on the TSLP target, could you talk about how hot this target is and contextualize that for the audience? Maybe talk about some unique scientific attributes that are driving the heightened interest in this target versus some of the older, more established pathways in the I&I space.
I will start and I will hand it off to Hugh. I think when you look at all these therapy areas, it makes sense to target the path in a variety of different ways. There is never a one-size-fits-all for every patient. I think you are seeing this evolution now, certainly in the respiratory space, but also in derm, where if you can target at the top of the pathway and start knocking out the inflammatory cascade there, that ought to be a great mechanism for patients. Certainly another tool that docs can use to address patients who are not responsive or do not respond in an adequate way to other therapies. I think there is a lot of headroom in both respiratory and derm, quite frankly. Atopic derm is an evolving market. It is a very nascent market.
It's in the early days like where psoriasis was, and we're just learning about how all these pathways influence clinical results. Maybe hand it off to Hugh for more thoughts.
Yeah, I would just expound on that slightly. We think about this almost like TNF was back in the day. And my experience at J&J for 20 years with Remicade and Simponi and the like, so many indications, 16 in fact for Remicade alone. But really, the reason why there were so many anti-TNFs that came through clinical development ultimately to the market was because there was always room for better efficacy. And so we see with our opportunity with the Aclaris portfolio, with both the 045 TSLP alone, but also with the bispecific, we see that EASI scores of 90% and IGAs of mostly clear skin in AD and even better respiratory endpoints. I mean, look at the COPD approval for Dupixent. It's based on 35% response rates. As Neal said, there's a lot of headroom in terms of enhanced efficacy.
That is where Aclaris is really going forward with our highly potent assets because we are looking to really drive greater and more robust disease amelioration. That is the goal.
Okay, very helpful. Moving to the competitive landscape and how you all view that, both for the atopic derm side as well as asthma as well. Could you just talk about what does that look like for you? How attractive is each indication based on the degree of which it's being addressed by existing drugs and just any other factors about how you're positioning in the competitive landscape?
Yeah, I mean, I think for right now, we're focused on atopic derm. That's the study that we're initiating in the U.S. And we're really excited about that. I think there's a ton of headroom with AD right now. Again, we're learning about all the aspects of this pathway. It makes total sense that if you're going to have a disrupted epithelial barrier that kicks off all of this inflammation, that's central to the pathophysiology of AD. From my perspective, the biology is quite sound if you look at the literature there. We think there's an opportunity there to really drive a tremendous amount of value in that space. Right now, Dupixent is dominating the market. You have JAK inhibitors and you have things like OX40 and others that actually OX40 is directly in that same pathway as TSLP.
We think that makes a lot of sense. On the respiratory front, again, still a lot of room to improve the efficacy. I think people are taking two different approaches these days. They're looking at driving better efficacy and they're also looking at basically extending the dosing interval. In my mind, it makes more sense to go after optimizing the efficacy because that's what really patients care the most about is does it work. On the respiratory front, what we've told people to date, and this is still true, is that once we get data out of China from our partner there, we do have data sharing rights. Our main position is that if it's great data, we will immediately look for a partner on that front. Those studies are quite capital intensive in these markets.
I don't think it makes sense to be messaging that you're going to go and raise $500 million. These are big Pharma indications from my perspective. If the data is really good, then we ought to be able to find a partner on that front and move that forward in that manner.
Okay, very helpful. I want to move the conversation, you touched a bit on it in China. It's a huge topic in biotech right now, as you know, Aclaris and several other companies have entered into licensing transactions to get things out of China. Could you just talk about the trend that's going on here, your expectations, what kind of innovation in the space, whether it be target validation, new biology, or fast followers, is likely to come out of China in the near to medium term? How do you position in that field?
Yeah, you know I'll start and hand it off to Hugh, who's had many, many years of experience working in China with J&J and then Biogen, of course. Look, it's expanded the ecosystem. I think everybody's got to be thinking about the competitive landscape in a much broader fashion. Our colleagues in China are quite good at moving assets along in the discovery process. There's a lot of folks that trained at large Pharma companies here that went back home basically and started companies. Now you're kind of seeing the output of that. I think you have to look across the board for interesting asset opportunities.
That, as we all know, influences the competitive landscape, which I think no matter what area you're in, from our perspective as a management team, and all management teams have to be thinking long and hard about how you're positioned, not just today, but three, four years down the road. Hugh, maybe some additional thoughts there?
I'll just say quickly, yeah, I've been in China for 20 years as a China biologic leader for J&J. As Neal pointed out, many returnees, they had a thousand talent program where they brought a lot of Chinese back into China and really supported the biotech industry. What you're seeing is just a global ecosystem. It's always been ready to go in terms of novel new assets. There's really just a greater opportunity to bring more of those to clinical development.
Yeah, and maybe just to build on that a little bit more. I mean, one of the things that we tend to think about is how can you continue to leverage our core competencies with various partners that may be in China. There are opportunities, I think, to look at establishing stronger relationships there where perhaps they're handling a lot of the discovery work and then they hand it off and you carve up whether it's China and/or global market. There are new models that I'm hopeful will evolve that perhaps can give companies like ours a competitive advantage.
One of the questions we get a lot from investors on many different companies is about the reproducibility of data. Could you talk about for 045, what that might look like to reproduce that data in the U.S.?
Right. Yeah, I mean, I think it depends what indication you're talking about, how the study was conducted, size, design. If we look at the dermatology data that Hugh and Biogen produced, that was conducted in the U.S. It was a single-arm study, but in the U.S. with seven U.S. sites run by dermatologists. So all folks that actually I've worked with in the past, so I think even though it was single-arm data, it's a robust data set. On the respiratory front, there are some differences just demographic-wise, baseline characteristics between China patients and U.S. patients. You just got to keep those in mind. As long as the study is run in an acceptable way, then I think you can learn a lot.
At the end of the day, it's always better in my mind to have a little bit more data than less to help inform your decision. You just have to look at the aggregate of the data and how it stacks up when you're making your decision to evolve into different indications. Maybe Hugh, since you've had a ton of experience working in China.
Yeah, no, China now is OECD and ICH compliant. They are following global expectations. Companies like Tigermed, which was part of Frontage Labs where I was CBO, Tigermed is one of the world's clinical CROs that does the same quality work that our CROs do around the globe. I think the quality of the data, like Neal says, is really key to understand those demographics, standard of care, and how you design those studies in order to be useful in the global submissions.
Great. For the trials that are being conducted for 045B in China, are there any key things you're looking for to come out of that trial that could be clear indicators that you could accelerate development on your side?
Yeah, I think it's really the aggregate of the data. There's lots of endpoints. Just take severe asthma as an example. You'd want to look at FEV1 and AAER and then all of the rest of the clinical endpoints, ACQ, things like that. There's probably about 10- plus that you want to look at when you're trying to understand how you stack up versus the competition and, of course, the safety profile, etc., and dosing. It is more of an aggregate sort of analysis and then taking into consideration the context of the baseline characteristics of the patients in China. What we like about it is that technically we're the most advanced TSLP. We've got data in severe asthma, CRS with NP through the first half of this year.
Like I said, if it's really good, we'll seek a partnership on that front and stay focused on conducting the more capital-efficient study in AD where actually there's nobody else that's playing in that space at the moment that has a TSLP. I like that positioning better than trying to butt heads with 10 other folks.
Very helpful. Okay. Thinking about a little bit further into the competition and the benchmark for success, how do you think about that optimal target product profile for 045B? Do you think about it as benchmarking against currently marketed drugs or do you think about anything else in development that you're keeping an eye on?
I think you have to look at it across the landscape. I think, as we both know, Mitchell, these are super choppy times in the biotech space. I think you have to really be rigorous in how you think about how you're going to stack up before you start throwing hundreds of millions of dollars into a phase three program and try to really have that crystal ball about how the market will evolve because we all always look at these things on a static basis, but you have to look at it two, three, four years out. Just as an example, look at the evolution of bispecifics, right? You talk to some people who think that bispecifics are going to trump the mAbs, and that may be true, but we're still very early on in that cycle.
That's why I like kind of our approach in that we have a TSLP mAb that we're focused on one indication in the U.S. at the moment. We have a follow-on bispecific that will be in the clinic should the IND get allowed this year. We have on the next front, small molecule therapeutics that are targeting indications that we think have less competitive intensity. Our job is to be good stewards of the capital and allocate it appropriately, particularly during these choppy times.
Okay. For 502 versus 045B, could you just talk about how complementary these assets are to one another?
Hugh, do you want to take that?
Yeah, sure. Yeah. The really nice thing, having both of these assets really gives us a lot of opportunity to think about segmenting indications. And 045 and AD, if we can recapitulate the 2A data that we saw in the open label, will be a great success for that asset. As we think about 052, it has the same TSLP antibody, so we have the same great potency and very long residence times, greater than 400 hours relative to TEZSPIRE at 20 hours, for instance. You could go after indications like COPD or even refractory AD with a more potent and long-acting bispecific hitting both targets, validated IL-4R as well as TSLP. We see opportunities for both of those assets to move forward. The potency and long-lived PK of the bispecific will certainly be playing to its strength.
Okay. For 2138, the open label trial in atopic derm, what are you looking for there to constitute success?
Yeah, there's really three things. We designed this study to get an idea of the efficacy and safety profile in patients with disease. It is single-arm, and it's a 12-week study in atopic. What we want to see, of course, is a good safety profile. Given that this is unique pharmacology with the dual ITK-JAK mechanism, which actually is a lot more differentiated than I think people give it credit for, it's really the only one of its kind out there. We want to understand the safety profile. Of course, just driving the efficacy because JAK3 and ITK have been shown from a biologic perspective that they should be effective in an inflammatory disease like AD, which hopefully will give us read-through into other indications. Importantly, we want to see the pharmacodynamic profile.
We're able to look at the differential effect of JAK3 and also ITK in this study. What that will do importantly is serve as a bridge to our next-gen highly selective ITK inhibitor that will come into focus in 2026. We're trying to, I guess, kill a number of birds with one stone in the study and get read-through into some alternate programs as well.
Okay. Moving on to the rest of the pipeline, the legacy Aclaris pipeline, could you just talk about your views on how that looks in the near to medium term? Do you plan to out-license or otherwise partner any of these particular assets? Is there kind of a timeline on that?
Yeah, we're still working on partnering 1777, which is our topical soft JAK that showed a positive result last year in a large phase two study. We're optimistic on that front. Relative to a legacy asset of the MK2 inhibitor, that is in an oncology study. It actually works through a completely different mechanism. It's not something that we're spending against, but we're partnered with WashU through some grant funding, and they're looking at metastatic breast cancer and pancreatic cancer. We'll see on that, but that's not a focus for us from a cost perspective.
Great. The last thing I wanted to round the discussion out with is the current cash runway and upcoming catalysts. If there are any particular catalysts we should be focused on in terms of the most significant value inflection points and just how your cash runway gets through those particular inflection points.
Yeah, we're very well capitalized. With our current development plan, we will read out the AD study with the TSLP mAb. We'll obviously move the bispecific along, which I think is very important through SAD/MAD work and POC work. Those will be two catalysts in 2026. We get the ITK selective into an IND, which I think is another big catalyst. All that comes almost two years ahead of dry well on the cash runway. We feel like we're in a great position there to deliver on a number of catalysts and not really have to worry about fundraising at the moment.
Great. Thank you so much to Neal, Hugh, Joe, and the rest of the team. Really appreciate you all joining us today. Thank you to our investors for joining the discussion as well. Have a great day.
Thank you, Mitchell. Appreciate it.