Afternoon, everyone. Welcome to Day Three of the Goldman Sachs Annual Healthcare Conference. I'm thrilled to be joined today by the team from Aclaris. Maybe I'll let you guys introduce yourselves first, and then give us a bit of an overview on the company.
Sure. Yeah, I'm Hugh Davis. I'm the President and COO. I have a 30-plus year history in developing biologic drugs, and I joined Aclaris with a deal made with BioSHIN in November.
Kevin Balthaser, CFO, been with Aclaris for eight years now.
How about an overview? Particularly, over the last year, the complexion of Aclaris has changed relatively significantly with the acquisition that you just referenced of two assets. Maybe you can talk to us about the current pipeline and what you view as key value drivers over the next 12 months.
Yeah, we have quite a catalyst calendar, actually. Aclaris is an immuno-inflammatory, full R&D type of company. We have a great research group in St. Louis. And then we have three clinical assets. In terms of the clinical catalysts, we have 2138, our ITK JAK3, that's finishing up an AD study and moving into alopecia areata later in this year. And then the biologic assets, 045, which is the TSLP antibody, that just initiated a phase II globally, so U.S., Canada, and Europe. And then we have our bispecific antibody, which is a TSLP IL4R, and that was cleared by the FDA and will be initiating our phase I in SAD MAD and Healthy Volunteers this quarter.
Yeah, great. Okay, let's spend some time first on some of the new acquired pieces of the business, the bosakitug and ATI-052. Maybe let's talk about the acquisition last year and just why you guys felt like this was an interesting set of assets for you, and why did you think the core competencies of Aclaris lend themselves well to developing this program?
Yep. I think for us, last year, we were going through a strategic process. We looked at a lot of different assets. We're fortunate, as Hugh mentioned, that we have a world-class team of scientists in St. Louis. For us, these assets were particularly interesting because we were able to replicate some of the preclinical data that the Biogen team had generated, not just in our own lab, but also at a third-party lab as well. Really, the differentiation and the potential best-in-class characterization of those assets was confirmed with those preclinical tests. For us, we thought it fit well strategically into our portfolio, particularly, obviously, because we have history in dermatologic indications as well.
How do you think about moving from small molecule development to more of an antibody approach? Did you have to add any competencies, and how did you kind of make that transition?
Sure. Yeah, I think Hugh and team coming over as part of the deal was a big benefit in our eyes. Obviously, we were moving into large molecules. Hugh and team had that expertise. Really, bolting that team on, I think, was particularly important and really has allowed us to really accelerate into the clinic, as Hugh just mentioned.
Just to add on to that, coming out of the BioSHIN side, looking at Aclaris, and why Aclaris made sense for us as the licensing partner for these two key assets for BioSHIN. When we looked at Aclaris, even though the previous study had not shown promise, the team that's there, right, the management and the clinical team and also the scientific expertise with a pipeline of kinase inhibitors that had already moved into the clinic with the experience they had in derm, made a lot of sense. Like Kevin's saying, myself and a few others that came on from the biologic side with tens of years, decades of experience in biologic drugs, it really merged together beautifully. Interestingly, now we're even developing a discovery portfolio of assets in biologics with our team in St. Louis.
It's not just now bringing forward new small molecule discovery candidates, but also large molecule candidates for future development.
Okay. The common theme that runs through it is the focus on INI or the focus on derm?
Derm and respiratory. So any immuno-inflammatory diseases are certainly within our bailiwick. And so respiratory, for sure, severe asthma, COPD, chronic rhinosinusitis. You can look at eosinophilic esophagitis. You can look at any of those. COPD is really key for us as we think about the bispecific.
Great. Maybe we can drill in a little bit more on the individual assets then. For both bosakitug, the anti-TSLP monoclonal antibody, I guess, how do you think about the avenues of differentiation within the class? It's somewhat of an increasingly well-trodden target. Where do you see potential for differentiation?
First of all, virtually none of the other clinical candidates from others are moving into atopic derm. One of the differentiating points for us was not only did Aclaris do a really thorough due diligence bringing these assets in, but during that due diligence, the team showed that we have 400 hours of residence time on the target, TSLP, which compared to Tezo is eight hours, Upstream Bio 15 hours. All of the other, the GSK, the Merck, these other clinical development candidates are 15 hours-20 hours residence time, and with bosakitug is 400 hours. That is important because you really need to neutralize TSLP completely. Because it is an alarmin, it has a very potent effect of its own.
I think in the II-A data that were generated in atopic derm, where you saw 94% EASI-75 response, and 88% response for IGA-01, clear, mostly clear. I mean, those numbers, even though it's the caveat, open label, SIBO controlled, but those are objective numbers. When you compare that to what's going on, even if you took a discount of 30%, a third off of those numbers, it would still be a very competitive asset against Dupi in AD. We think we have a best-in-class asset in the preclinical, but also have shown really the only AD data on an anti-TSLP MAB to date. We are very excited about its opportunity.
Okay. I want to touch on kind of both of the things you just said. In terms of the residence time, you mentioned 400 hours versus 15. So what technically enables that increased residence time? And also, what do you have to think about in terms of trade-offs? Are there any liabilities with that kind of exposure?
No, it's a great question. In terms of liability, something we considered also. The residence time is interesting because when BioSHIN developed the antibody, the screening was to look at load dissociation off of the target. That's how this was picked. When Aclaris showed that it's 400 hours of residence time and it hardly dissociates at all, we did some background work to understand that. There is an understanding now that not only is the antibody bosakitug binding to the C-terminus of TSLP, where it interacts with its receptor, it also binds at the N-terminus. There are two binding sites on TSLP. Each of them have their own affinity. Together, the antibody itself is not leaving the TSLP molecule, giving you that long residence time.
This is important because if it was just affinity, you say, "Oh, I have a high affinity anti-TSLP." If it was only at one site and affinity is on rate and off rate, when you're off of TSLP, it's able to engender its activity. In this case, it's pathophysiological. You need to keep it neutralized and have that residence time in order to really get that kind of deep neutralization and effect.
Okay. One of the things too that I think I've seen in this space is there's a ligand versus receptor targeting. You made the decision to go after the ligand. Why? And what do you think? How do you see that debate?
The way I see it is when you go after a receptor, you have the risk of lower half-life and shorter dosing interval. This is dupilumab. This is what they're up against, 8 day-10 day half-life, because you have target-mediated drug disposition at lower concentration. It gets cleared out of the blood. You lose receptor occupancy over time because of that. Once you get down below, I don't know, 30% or 40% receptor occupancy, you're now starting to have that receptor be activated again through the ligand. It made sense in the case of an alarmine-like TSLP to go after the actual target that's driving that response.
Okay. And then you mentioned this, so you've selected atopic derm. You're really the only ones that have started there, at least. How do you think about that versus asthma, which is kind of the more traditional starting point for a TSLP molecule?
Yeah. So it's interesting because Aclaris, Neal likes to call this a free call option. It turns out that BioSHIN had an agreement already with CTTQ, a China-based company. They're a subsidiary of Sino Biopharmaceutical on the Hong Kong Exchange. They had licensed bosakitug for China development. They chose the normal route of going into respiratory disease initially. They have conducted a phase II trial in severe asthma, a phase II trial in chronic rhinosinusitis with nasal polyps. Both of those studies have moved to phase III now. In addition, they've initiated a COPD trial. Aclaris has data sharing rights with CTTQ. Based on the data that comes into us, we'll make decisions on looking for partners to go after those respiratory indications also.
Okay. Sounds good. Maybe you could get more specific then on the data set that we see from your Chinese partner. Maybe you can walk through what we saw in the phase II readouts and then talk to us about how those things can translate to a U.S. market.
Yep. Like I said, we have data sharing rights. So far, what we've seen are partial data. We put out a release earlier this month that put out a qualitative statement that we've seen some of the data that have come out of those trials. We had three goals looking at the data that they presented to us. One, did it support the potency argument? We say we're the most potent clin dev anti-TSLP out there. Secondly, did it support the efficacy and show us that the drug had its expected effect in severe asthma and chronic rhinosinusitis? Thirdly, did the safety profile—and I forgot to answer your other question earlier, so I'll come back to it right now—was the safety reasonable and the liability? The answer is the safety profile was identical to what you see at tezopelumab.
We saw all three positives that came out of that. We were very happy about that. In fact, we are looking for licensing partners for the respiratory indications out of that. Of course, we made the decision then to move forward with the phase II AD trial and initiated that at the same time.
Yeah. I think you guys have said that the respiratory studies in the U.S. would require a partner, but you can take forward the atopic and derm indications. I guess talk to us about the strategic decision-making there. Why do you think that bifurcation makes the most sense for Aclaris?
Yeah. I think from our perspective, there are two things. One, on the respiratory side, obviously, we're getting into later stage development. I would think that those indications, phase III studies, they're much more traditionally run by large pharma. There's a huge capital investment that needs to take place to run those studies. Obviously, we're on the smaller side. With the way the macro environment is right now, we're not going to go out and raise $500 million to run those types of studies. On the AD side, obviously, the headwinds are that Amgen was not successful with their study. From our perspective, running an efficient phase II study in AD that's going to cost somewhere between $12 million-$15 million is a reasonable bet than what otherwise, I think, is seen as a show-me story.
That's kind of how we came to the conclusion that we wanted to progress the derm indications and look for a partner on the respiratory side.
How do partners think about that, taking on only a sleeve of the development, like the indications, while not taking on the whole asset? Is that something you would be open to considering a broader agreement?
Yeah, I think the answer is yes. I mean, devil's in the details, obviously, with any type of BD partnership. But I think, yeah, historically, I think full asset goes traditionally in most of these types of deals. There's very few that I can think of that sparse out indications now. If it's something more like a regional deal, then probably more flexibility there. Otherwise, I think we just have to wait and see how discussions progress.
Sure. You are initiating these phase II studies in AD this quarter. Maybe you could walk us through the trial designs there.
Yeah. When the II-A was done, there were a couple of considerations that we've carried over into the logic for the phase II trial now. That is you need to have enough time for the drug to have its full effect. A short 16-week study isn't good enough. When you're inhibiting the TH2 pathway and TSLP is an alarm at the top of that TH2 cascade, you first need to inhibit that completely. You need to shut down the immune cell activation, the chemokine secretion, the eosinophil neutrophil recruitment. You have to have keratinocytes allow time to heal the skin. That takes time. Jonathan Silverberg was our KOL at the time and suggested that that was one key consideration for the development in terms of the study design.
The other thing we wanted to do was because no one, to your point, no one's gone into TSLP in AD other than Amgen, and everybody looks at it as a failure. We didn't look at that as a failure at the time, by the way. They still had 29% response in IGA-01 in their phase II-A trial. We thought with a better molecule and a right clinical design that we would have a better chance of success. We still went in with the highest dose we could at 300 mg every two weeks. I told you the half-life is long and the residence time is long. The half-life is 23 days. We put as much drug on board as we could safely and ran it for as long as we could through the 26 weeks.
That's what we're doing now is, again, we're using the same dose and we're dosing every two weeks, 300 mg and with an induction. We're going to run a 24-week study with that for full effect. Again, this is placebo-controlled, highly powered. If this by chance didn't work, then I'll be surprised, first of all. There's no way that this study couldn't work any better with the exposure, the half-life, the time. This is all in. That's what we wanted to do.
What's the primary input for the trial?
It's EASI-75 response, percent change from baseline.
Okay. What would be considered a good outcome in EASI-75 at 24 weeks?
Dupi and others are at two-thirds, 68% of subjects have a 75% response. It is Aclaris' goal to really show a much greater and robust effect. We would like to see upwards of that. We are also looking at IGA-01 as a key secondary. That is really key for patients. They want to be clear, mostly clear. They do not want to be 75% responders.
Okay. How many patients are they going to be in the study?
90.
Okay. In terms of the next steps from there, what would be the appropriate next steps pending an outcome like you just described?
To your original question before, if we can show real success in AD, that's a huge benefit for patients. You need other modalities in your inventorium. The safety profile for Tezo has been great. We're expecting this to be equally as good. That's important because you're going to be going to younger and younger populations. 045, Bosakitug would definitely be moving forward in AD if we saw those kind of data that we did in phase II-A , especially. We also have the bispecific. That's a TSLP IL4R bispecific. There will be decisions to be made, but it'll be data-driven at the end of next year.
Okay. I want to get to the bispecific, but last question on the monoclonal antibody. What are the timelines in terms of how quickly this kind of trial can get up and running, how quickly you can just enrollment, and when we can get the data?
Yeah. As Kevin mentioned, the key for us was to put together an efficient, reasonably cost trial where we can get an endpoint quicker. We went with the one active arm versus placebo so we can get TLR by fourth quarter next year.
Okay. So let's do the bispecific now. Obviously, this was the other thing that came in with the deal. What do you view as compelling mechanistically between the particular combination between TSLP and IL4? There's been kind of a number of different mixing and matching that's going on in this space. Why these two?
This was all-in approach, basically. The TSLP with the long residence time and the low dissociation is the same TSLP antibody as part of the bispecific. Same 400-hour residence time. We wanted to take TSLP down to as low as possible. At the same time, on the IL4R side, I mentioned the target-mediated drug disposition that Dupi has the issue. We also put a YTE into the FC. That allows for extended half-life. That should overcome the TMDD that Dupi is seeing. We also did not want to go after an IL4R that had more affinity than Dupi. We wanted to match Dupi's affinity and be able to inhibit IL4 and 13 by going after the receptor. Then add on the complete neutralization of TSLP as best you can within the dosing.
The combination of those in a potency experiment has shown that you could inhibit chemokine secretion five times more potently than Tezo and Dupi combined in a PBMC activation assay. We will be conducting a SAD/MAD initiating in healthy volunteers. We will be able to show what that PK safety and tolerability looks like this year.
Okay. I think you just said that the IL4 and IL13 piece of the bispecific is hitting the receptor. I guess talk to us why that makes sense in the context of IL4 and IL13.
Dupi obviously is the gorilla on the block. They've shown that by inhibiting both IL4 and IL13, they can get maximum effect. Where I know there are a lot of IL13 antibodies and bispecifics with TSLP and IL13 inhibitors. But you're leaving IL4 out there to have its still direct effect on the receptor. It doesn't make sense to me. It didn't make sense when we built the bispecific. We want to be able to inhibit TSLP, IL4, and IL13 action. This molecule does it all.
Okay. In terms of just what these different chemokines drive and how they manifest clinically, are they parallel in terms of the type of information they drive, the way that they manifest, or are these orthogonal sort of approaches?
A little of both, interestingly. One is an immune component, of course, with IL4 and IL13 on T cells. You have TH2 activation at the top of the cascade, which goes through AX40 with dendritic cells, innate lymphoid cells. It is able to inhibit a much broader path of both adaptive and innate immunity. We know that atopic derm is a lot more challenging than psoriasis, for instance, which is a TH17 cascade for the most part. Here, it is very heterogeneous. People seem to respond some to Dupi, some with other drugs, and they do not necessarily cross over. By going after both types of inhibitors and pathway actions, we thought that had the best chance of success.
Okay. Understood. It sounds like it's also a little bit the indication selection or the context specific, why this pair makes the most sense. How are you thinking about indication selection and how you want to maybe sequence the indications you pursue with this program?
The beauty is we get the phase II bosakitug data. Virtually at the same time, we'll get the I-B study data out of the bispecific. It will be a data-driven process at that point. We also know because of the potency of the bispecific and its broad applicability across three target inhibitors that other diseases like COPD, where both Dupi and Tezo have shown modest success, 35% response rates, that if you had the combination of basically Dupi and Tezo in one molecule enabled to inhibit both types of targets in the pathway, we would hope to have a chance of success in making a bigger difference for patients in challenging disease areas. In refractory disease, in atopic dermatitis, for instance, COPD, and the like, we have a lot of opportunities. It's going to be data-driven in the end.
Maybe can you give us a sense for the MAD study, like the scope of that trial, how many patients and how many doses, what can we learn from that?
Yeah, we haven't publicized that just yet. It's a SAD, single-setting dose. There'll be a MAD that will complete. Those will read out at the end of the year.
Okay. The next steps was the MAD data, indication selection, and then moving into phase II. Maybe you could talk to us about how many. Will you do one indication at a time, multiple indications?
With the bispecific at least, we'll go into patient population to get some early data readout. Whether it's respiratory and/or derm, that's still to be determined in 2026. Beyond that, we do have the capability. In our clinical catalyst calendar, we've covered both the bosacatag phase II as well as the bispecific going into a patient population in I-B, two populations in I-B, as well as the 2138 alopecia areata study.
Okay. Before I move on to the ITK JAK3 inhibitor, anything else to note on these programs?
Nope.
Okay. So people generally are pretty familiar with JAK inhibition. We've talked about that with many agents. But can you talk about the biology you're targeting with ITK inhibition and why does it make sense to combine that with JAK3?
Yeah. JAK1 and JAK2, of course, is where we're seeing the black box warning and the like. With ITK JAK3, it's really interesting because you're hitting both the T cell with the ITK, so through the T cell receptor. You're inhibiting its differentiation, proliferation, activation. At the same time, on the JAK3 side, you're looking at a T cell dependent cytokine release inhibition. Really, again, it's this kind of bispecific approach. Our 2138 is about equal potent on both ITK and JAK3. As a follow-on to ritlecitinib, we're about 40 times more potent on ITK and five times more potent on JAK3. As you know, ritlecitinib is already approved in alopecia areata and doing very well. As a follow-on, this would be a much more potent molecule that would be able to hit both of those equally.
If you look at the data with ritlecitinib, at their 50 mg QD dosing and the potency that they have in ITK, they're probably not having full occupancy of that kinase inhibition. We've shown preclinically in our work, and we have a publication out on this, we're showing 50%-90% occupancy at the doses that we're using. That's even at about 20-fold less than what ritlecitinib is. There is advantage to inhibiting both the ITK and JAK3 pathway with this molecule because you get both the T cell activation inhibition as well as the T cell dependent cytokine inhibition.
Okay. There's been a number of different kind of indications proposed for this molecule. How does the biology that you just described map to indications that would be of most interest in INI? And what are you guys thinking now?
Yeah. We did our proof of concept study in AD, but that was a function of having enough tox data to support 12 weeks of dosing. AD made sense, but that was not the plan in terms of the phase II indication. We look at ritlecitinib and alopecia areata , we look at vitiligo, and those make a lot of sense for us. We could not go there initially because we did not have the tox coverage to do that. Those are longer-term studies. That is where we see the competitive market potential. In fact, the market is growing. We have some knowledge around that because we collect royalty stream off of alopecia areata with JAK inhibition. We are looking forward to moving 2138 forward on that.
I would just add on to that as well. I think the TPP of 2138, because it has the JAK component, I think you have to kind of go in with a base case that you're going to get the black box, even though we would argue that maybe JAK3 is the safer JAK relative to JAK1, JAK2. We think 2138 is probably better positioned in alopecia areata and vitiligo, like Hugh mentioned, maybe where there's a little less concern about dosing with a JAK. Then leaving kind of atopic derm potentially for something like our ITK-specific program, which we anticipate getting to IND in 2026.
Okay. I do think we have phase II-A data coming later this year or soon, I guess.
Next couple of months, yeah.
Next couple of months, yeah. In terms of a win from that readout, what would be a win in support kind of moving into the next phase of development?
Yeah. The goal was really to look at the safety to make sure that inhibiting both targets equally with high potency that we have in 2138 still had a very good safety profile. Then on top of that, it's a JAK. In fact, it should still have the type of efficacy that you would expect out of a JAK. Those were the two things we wanted to see.
Just to clarify too, we're expecting data this month. I just want to clarify or add on to what Hugh said that the PD that we're going to have as part of that study is important because we're going to try to tease out the relative impact of the JAK pathway and the ITK pathway, which then provides a nice bridge again into our ITK-specific program.
In terms of safety tolerability thresholds, I guess what do you think is a reasonable thing to see as you think about moving into alopecia areata or vitiligo or one of these?
I think it's already sort of accepted safety profile just with the other JAKs. I would think as long as we weren't any different than that, and certainly if we were slightly better, I think they're already accepted in alopecia areata quite well.
Are there any on-target effects of ITK inhibition that are not seen with JAK that you are monitoring for?
That's a good question. We haven't had that one. I don't know.
I mean, the only thing I would point to is the Corvus data. Obviously, they have the ITK inhibitor. They've had it in T cell lymphoma. Now they're doing the AD study as well, commented on specific in terms of tox liabilities or AE liabilities. So I think at least the literature and at least what we've seen so far would suggest that the safety profile is pretty favorable.
Okay. You talked a little bit about discovery efforts. How should we think about the right cadence for INDs or new assets coming into the clinic from here?
Like Kevin said, the ITK selective, we're looking at an IND submission in 2026. We're looking right now at an ITK-TXK approach and then a follow-on ITK selective. That'll be moving forward to candidate selection this year and then IND next year. As I mentioned, there's also now some biologic ideas around candidates that we're building out, and they'll be moving forward, but those are still very early days.
Okay. Understood. As a company, you guys have done a lot to preserve the balance sheet over the past year or so. Where do you stand now with respect to cash runway, and what are the activities you're embedding in that guidance?
Yeah. So obviously, we've done a lot of work, and we always try to run the company in a kind of shareholder-friendly, efficient manner. You see that with the decisions we made around the 045 AD study. We currently have a little more than $190 million of cash on the balance sheet. In our most recent release, we publicly stated that some operational decisions that we made allowed us to extend that runway by over a quarter and a half. Now we're saying through mid-2028. It was important for us to make sure that within that runway, we can hit all these key catalysts that we've been discussing, and particularly to have kind of that 18 months post the 045 data and the bispecific data to be able to really hit what we feel are going to be major catalysts for us, particularly late next year.
We're pretty excited. Obviously, we've got a lot going on, and we feel like we have a really good portfolio of differentiated assets and in a fortunate position that we have the balance sheet to be able to execute against that.
Right. I think that brings me to the end of my questions. Anything else you'd like to highlight?
No, I think Kevin said it best. We have a lot of excitement ahead of us and certainly a lot of readouts over this next 18 months that are going to be key to success for Aclaris . We have the team that can drive this, and we have the discovery engine that's coming through to continue the sustainability as we continue to move forward.
Great. Great. Thanks, guys. Really appreciate the time this afternoon.
Thank you.
Thank you.