Great. Good afternoon, everyone. Happy to have Dan Faga, CEO of AnaptysBio, joining us this afternoon for a fireside chat. Maybe to kick things off, maybe Dan, if you'd like to maybe give a quick status update on where we are at Anaptys, and we'll get into more of a Q&A.
Yeah, absolutely. If we think about where we're going into 2026, we have three core areas of value in the core biopharma business and drug development. We are going to work through how to best advance rosnilimab, our PD-1 pathogenic T-cell depleter, through or into phase three for arthritis. There's a lot going on in the IL-15, CD122 landscape. Overall, we have a program called ANB033 that is enrolling patients in initial celiac disease trials. There's two different cohorts of different types of patients. We'll have data by the end of Q4 of next year, and we'll initiate a second trial as well, another on autoimmune disease. Then third, we're actually splitting the company into two different businesses. If you own 1% in Anaptys today, you would own 1% in each business, the biopharma business, which I just gave the two highlights on, the two lead programs.
And then the royalty business, which is featuring royalties from GSK on a drug called Jemperli PD-1 antagonist that we think are of large size today and quarter over quarter increasing very rapidly. We will get into that. Two different businesses in the future. Next year is going to be a pretty dynamic year where Anaptys will become two.
Yep. Great. Yeah. Starting this week, I just wanted to talk about you gave an update around the rosnilimab study in ulcerative colitis did not really meet your criteria for moving forward. Maybe you could go through some of the highlights of what you did share in the press release to sort of maybe understand what happened and maybe the implications for rosnilimab.
Yeah. We ran a 136-patient trial in ulcerative colitis, much smaller than what we did in arthritis, which was 424 patients. Fundamentally, it was driven on there hasn't been human proof of concept for T-cell driving antibody being successful in UC. We had tons of evidence going into this and why we ran the trial. There's no regrets on this. What came out is that T-cell, this is not a T-cell drive-driven disease. T-cells are implicated in the disease. That's fundamentally what we learned. Importantly here, it was a one-year-long trial. Most patients were through six months. A lot of them were somewhere in the continuity of six months to a year. Drug was completely safe. No malignancy, no MACE, no infection of any imbalance, nothing of serious nature, no increase in liver enzymes. I mean, the whole thing was clean.
Then secondly, on the PD, if I showed you the curve of what was happening in the periphery on translational TPH impact or PD-1 impact, it looks identical to RA. We took a dose that was the same as the mid-dose in RA. It was 400 milligrams monthly, and we looked at 800 milligrams every other week, so higher doses than we use in RA. It looks the same in the periphery. Importantly, both doses, we saw the same depletion in the lamina propria, the tissue that's inflamed in ulcerative colitis in the gut, as we did in the synovium. The PD is spot on. At Q8 week dosing, which is what we used from month six to month 12, we saw a continuity of the PD. We also, I mean, in terms of the responders, we saw stable responders too.
We had a very high bar at six months looking at remission that we wanted a differentiated drug. When you step back, and I was consistent going to this, it's not the outcome we wanted. If you're not going to hit that bar, we're not going to look at the gray zone and say, all right, could this did it work fast enough? Could it work faster in a different trial or subpopulation? We have a clean, very attractive data set in RA, and that's just the rational choice to move forward in the one that looks great.
I think the other question, I think with the trial and some recent other data sets in UC is trial conduct, was this a well-run trial? Was placebo where you would expect it to be?
Yeah. The answer is it was. There are two bookends, I think, on placebo. On one, there was the Merck Prometheus trial. That was like an all-time low and has not been repeated. On the other end, there is the Morphic study that said we were way below Morphic. We were better than the Sanofi, Teva, TL1A readout. We were in the pack. It is not the lowest placebo ever. This was not a placebo issue. This was the drug was not as effective on very high-end bars like endoscopic remission in month six that we were looking at.
You have said in the past that you did see somewhat of a deepening from 12 to 24, correct?
We very specifically did. The issue is that we did not have enough at three months where the deepening got us to a TPP that was going to definitively be differentiated. I needed to see that.
Yep. Do you plan to present or publish these data at any point in the future?
We haven't committed to that yet, but we're going to wind up the trial. We have a lot of patients. We just don't have the data on the six-month and the one year. Let's get the data. There's a ton of translational information that's downstream gene expression impact, impact on BC, like there's a lot of information we want to learn, and we'll figure out how to utilize that information for moving forward.
Rosnilimab, so prior to this update, the plan was to look at the six-month data for UC and understand what the path forward would be for rosnilimab, either in RA or UC. Now there's no path forward in UC, and you have RA. How would you articulate your plans heading into next year for rosnilimab?
Let me just recap what we presented at ACR.
Yeah. Great. Yeah.
Yeah. That is going to lead into where we go in phase III. Our trial, our data for rosnilimab was selected as the first late breaker to be presented in the plenary session, packed house. The medical community is really excited about this. Here is what was new that was not in the public domain before ACR. We showed after six months of treatment, you have 14 weeks off drug, 85% of patients either in low disease activity or remission had stable outcomes. We showed the curves that if you were not in those outcomes, what happened, you were just barely missed. These were not flared patients, 14 weeks off drug. The second thing, and this is what you can do with a 424-patient trial, is we had bio-naive and bio-experienced patients. We took the bio-experienced set and broke it up into the parts.
We looked at second line versus third line plus. We also looked at post-class of therapy. So IL-6, post-abatacept, and 29% of this trial was post-JAK. The drug works really well regardless of prior therapies of TNF and a second agent. We are really excited about the profile here. What it shapes up for phase three is we have a number of choices how to think about moving the program forward to phase three. There is the minimalist way we can do this, and then there is the Cadillac version. I think a lot of this is going to come down to who we are working with to finance the phase three trial. What we are not going to do is dilute the royalties. Primarily, in my head, I am thinking we are operating as two separate companies in that regard.
I'm not going to recap my business, which we're very excited about ANB033. We're going to have $300 million of cash coming into next year with a molecule that's best in class in the IL-15, CD122. We're going to have data next year in at least one disease, plus things behind it. We need capital to move forward in RA. What we announced is we'll give an update publicly in the first half of next year. This will be capitalized from either strategic or other alternative asset financing approaches for rosnilimab. That's the plan.
How would you characterize strategic interest in rosnilimab at this point?
There has not been a drug approved in arthritis at all in a new class in almost 15 years since the JAKs. The second line plus market is $10 billion in the U.S. alone. The third, fourth line market is $6-$8 billion. There are 500,000 patients that cycle off one or two rounds of TNF and 150,000 patients in the U.S. alone that end up having no other antibody or small molecule solutions. There is a huge market opportunity here to just have a bio-like drug in a new class. We were clearly bio better, and our trial design was handicapped. We could never get to the max responses.
The reason I just started there with framing the opportunity is there's a huge opportunity for a drug that's been de-risked in a very large trial with multiple trials worth of data and safety and positive safety outcomes in a disease where JAKs, IL-6s, TNFs, rituximab, they all have black boxes. The only one that doesn't is the other T-cell modulator. I think there's going to be interest in this program. There's other things coming behind us now. I want to emphasize it while it's a whole different discussion how well TL1As are going to work in RA or not post-TNF failure. You have two big pharmas, Roche and Merck. One of them is in RA. One of them is not. There's big pharma interest in this disease. There's a real opportunity here.
I don't want to get into more details of what happened, but the market's there.
Maybe sort of obviously, point taken around a late breaker for rosnilimab at ACR. I think the other conversation around ACR that we've talked about a lot is the Lilly phase II-B data set and the malignancies and MACE that they saw in that trial and what that means for the PD-1 agonist depleter class. I guess given the safety that you've seen, but given that data set, how are you thinking about safety? How should we interpret those data?
Lilly had an efficacy problem with the drug. They only showed in their poster data through six months for a 50-week trial. I mean, I could just repeat from now too many discussions with KOLs personally that I had. Plus what was presented at the poster by Lilly is that they were losing response over time. The data they showed between month three, month six was on an LOCF basis. They did not show it on an NRI, ITT, and PDA basis. There was a reason for that. The drug has modest efficacy, which was not as high as what we saw on an absolute or placebo-adjusted basis. They never showed you low disease activity or remissions. They only showed you ACR 20. In ACR 50, they did not even break it out. They have an efficacy issue.
After month six, they just lost all that response. They never showed you the dropout rates. That's the reason their drug's not moving forward. I don't believe they actually had a safety issue from what I've now learned in more context. You have eight malignancies. Four of them were in less than two months. That's an operational issue that you didn't catch tumors that these patients clearly had. That was universally discussed at ACR. I heard seven of the eight can be adjudicated for issues overall. And maybe one you can't ascribe to the drug or not. I heard that from too many people to assume it's not true that know the data. On the MACE, they had eight cases of MACE. All of those patients, they actually had this in a table on their poster. All these patients were flared.
They weren't in response at all. Most of them had a comorbidity of MACE. I think when you ran a huge portion of the trial in Argentina, China, and India, and that's where these malignancy events happened, I wish they would come on record and say this more directly, but you got to do the homework on this. The class doesn't have an issue. Johnson & Johnson never had an issue with their drug. I think they have an operating issue. They have a lack of potency issue with their drug.
Yep. Maybe wrapping up biopharma co-discussion here, I want to talk about CD122 before we talk about Jemperli. Maybe you could spend a little bit of time talking about this mechanism of action, how it's been validated historically, and sort of the breadth of indications that it could be relevant in.
For the CD122?
CD122, yeah.
Yeah. So look, we're really excited about this class. There's data that exists from the IL-15s that block that cytokine that's implicated in a number of diseases, including celiac disease. CD122 is a receptor that's expressed on NK cells, CD8 cells, CD4 cells, or at least subtypes of them that are pathogenic. IELs, intraepithelial lymphocytes, 95% of them are made up of CD8 cells. They all express CD122. These cells are highly sensitive to IL-15 as well as IL-2, but principally IL-15. The IL-15 blockers, there's proof of concept from Novartis or the precursor. They acquired a company called Calypso. They had successful data in celiac. Teva ran a III-B that was successful, they're now in a phase II-A. A competitor of CD122 ran a phase I-B in celiac disease and showed differentiation from placebo. There's clinical proof of concept.
What we've done is we've shown differentiation relative to those drugs in vitro. We have an animal model in celiac mice that show prevention of disease when given gluten with drug versus control. We ran, I discussed a little bit the trial design.
Yeah, for sure. Let's talk about the I-B.
Yeah. So we're now in the phase I-B. It's initiated. Yeah, I guess finally, we ran the phase I- A study, and we showed a very significant impact on the CD8s that CD122 expressing. We're the only company that's shown of all these that have shown the CD8 impact in the periphery. We're able to use that to model the right exposure of what we're doing in the celiac trial. We've initiated the phase I-B in celiac disease. We're enrolling patients. We have two different cohorts there. There's a novel component of this in the second cohort. Cohort one in the gluten challenge, it's one-to-one randomization versus placebo in 30 patients. You get dose subcutaneous drug or placebo at baseline, week two and week four. You then go on a 14-day daily gluten challenge. You get a 6-gram cookie.
At week six, you get a biopsy. You are looking to see that the patients who are well-controlled coming into this trial on placebo should be getting worse. You should see inflammatory damage to the villi, and you should see symptoms go up. On drug, it should be materially less or none. We are looking for a placebo-controlled, statistically significant result on the two endpoints, histology and the PRL. The second cohort, we are going to enroll patients who do not qualify for the celiac challenge. These patients have a Vh:Cd ratio of less than two, i.e., they have enough mucosal injury where it would be unethical to give them gluten. These patients, one-to-one randomization, another 30 patients, baseline, week two, week four, subcutaneous dosing. We are going to wait till week 12, so additional eight weeks, and do a biopsy.
We're going to look for there in these patients, have you healed? Are you getting a benefit on the Vh:Cd? Plus, is there a symptomatic difference of these patients versus placebo? What's interesting with that population is that's a better proxy for the phase two commercial population that we'd be looking for. Patients who are not well-controlled on a gluten-free diet and generally speaking have or do not have symptoms either way, can you actually heal this disease? That's the market that you can go price an antibody for and show long-term outcomes on benefiting on antibody over time. It's exploratory. That hasn't been done before. This class, IL-15s and CD122s, this is really the first class that's truly driving at preventing inflammation in this disease. There's been a lot of failure in celiac, really mechanisms that have been targeting the gluten or the antigen, not the inflammation.
It's a very different approach that this class is now taking in disease. Like I said, there's multiple trials that have been read out with clinical proof of concept that's positive.
You've talked about, again, starting a second indication next year. I think if you look across the potential trials that you could run, there's a lot of indications implicated here. Can you talk about some of the ones that you're more interested in at this point?
Yeah. Thanks for the question. I mean, just to go through the landscape, Teva is in a second celiac trial. They'll read out in the first half of next year. And they're in a vitiligo trial that reads out next year. Novartis just started an atopic dermatitis trial. They're talking about CD8-driven AD. And they said they'll launch into other trials as well. And the other competitor, CD122, is in celiac, vitiligo, and alopecia. Another disease that we are focused on or interested in, now we haven't decided to initiate this. We're still working on the phase I- B trial design, is EoE, eosinophilic esophagitis. This is another disease where there's multiple pathways of inflammation. DupI is the only thing that works on weekly dosing. Dupi targets the receptor specifically here in ILC2s. CD122 is also expressed in ILC2s.
These are immune cells that are expressed in certain disease types. We know we hit that pathway. We also hit the CD8 pathway, as we were discussing earlier. In EoE, there is proof of concept from Calypso, which is the company that Novartis acquired. That is in IL-15. Just by blocking IL-15, there is reduction of CD8, and they showed symptomatic benefit. As we all know in EoE, one of the primary endpoints is reduction of EOs. Our mechanisms do not reduce EOs directly. If you treat the inflammation, you should see a reduction in EOs. Just like Dupi does not target the EOs directly. Calypso showed a reduction in the EOs just by blocking IL-15. As I said, we should hit both pathways together. 30% of patients are non-responsive to Dupi. In those patients, there is a correlation with an increase in IL-15.
We think there's a really interesting disease state with clinical proof of concept already for part of our mechanism with the Calypso data. When you take that all together, can we run a trial where we show EOs reduction, but importantly here, show the other co-primary endpoint in a statistically significant way, reduction of symptoms? If we could work through a phase I- B trial, we think it's a very good trial for us to run at this stage of the life cycle for ANB033. It's one of our choices. If we see positive data in vitiligo or some of these other diseases, it's probably rational for us to also look at those markets as well.
It's more to come next year. The other key part of the story here, if we have time, I want to talk about the rest of the pipeline, but royalty co. I guess maybe can you frame, I guess, the rationale for splitting this royalty out separately from the business?
Yeah. I think what investors need to appreciate first is just the raw size of this royalty and how unique that is. A lot of times when we think about royalties in biotech, they have a $50 million value, $100 million value, $2 million. And they're utilized often to subsidize future R&D development. We are talking about a royalty that's worth far north of our current market cap. It could be a lot bigger than that. We are in the billions. It's a very different magnitude of the potential here compared to what you typically see. I think it's hard to value that royalty encompassed in a traditional R&D-based business. The second is, in order for us to move forward over time in the R&D business, ultimately you need more capital. There's a big arbitrage here on the cost of capital differentiation.
This is a royalty management company we're going to create that's going to have a single-digit cost of capital with exceptionally little expenditure. We're not trying to be a royalty consolidator. We're not trying to buy smaller companies and tuck them in. This is a company that we're going to protect and return the value generated by the royalties to shareholders. The Jemperli royalty is one, and it's a big one. I'll spend another minute or two on that. We're also going to put the Emsidolamab royalty in. We outlicense that drug. The BLA will be filed from Imsidolamab. It's an IL-36 receptor antagonist in a disease called generalized pustular psoriasis. The BLA goes in that royalty stream with Cytonus company as well. Just to put in perspective, GSK for Jemperli is guiding to far north of GBP 2 billion, which is $2.7 billion. Far north, right?
We'll see if they re-guide at some point. The year they hit that, which we think could happen over the next four years, it's $390 million of royalty value to the company. We have a 10-15 year life on this royalty through the composition, matter, and extensions beyond. It is a long ramp from here. They're going to exit this year at GSK with $1.4 billion-$1.5 billion run rate on Jemperli. This is rapid growth, significant double-digit, 16%-20% quarter-over-quarter growth rates over the last three quarters. There's no slowdown in sight for that. There's an approval in endometrial cancer, which is driving this. Keytruda does not have overall survival data in this tumor setting. Jemperli does. Rectal cancer, pivotal trial reads out next year. The phase two data is 100% complete response rate. Their head of oncology was talking just yesterday.
It sounds like they pulled in the guidance to 2027 for a readout in a pivotal trial in head and neck cancer. They are also looking at MMRP colon cancer in a phase II trial, clinicaltrials.gov, that reads out next year too. The only area of overlap with Keytruda where Keytruda is either playing but does not have survival or not playing at all, the only overlap is DMMR colon cancer. That is a pivotal trial that looks like 2027 readout for clinicaltrials.gov.
You're not worried about Keytruda LOE?
It does not impact 90% of the monotherapy value that could be created across the board. They just do not have the data. I think the medical community is aware of the perilous study that read out in lung cancer. It was a head-to-head Jemperli-Keytruda, non-inferiority that showed superiority, that Jemperli is superior to Keytruda in that phase two study. That is the basic setup. GSK is also talking about combinations with Jemperli. There is a lot of biotech typical upside that come in here. Endometrial cancer and rectal cancer alone, and in some cases endometrial cancer, depending on when GSK has talked about this, just those indications, there are records saying it could get to their GBP 2 billion guidance. Just those two. There is a lot of upside here from where we are trading at today for the value of these royalties to come.
By separating the businesses, we've made that more apparent for investors. That was the key rationale: separate it, create the arbitrage, have people who want to focus on this type of growth. We all invest in the royalty business. Like I said, the first question that you asked me is, how does the separation actually work? If you own 1% of the company today, you will benefit in both. If you believe the royalties are worth something far north of their market cap, I believe that. Everything else is for free right now. We are $300 million of cash and well-funded for the rest of that business, plus really an option set on how do we move our optional map forward. There are multiple ways to do that.
Yeah. Let's talk about functionally how this is going to work. Obviously, you're saying your % ownership in Anaptys equates to your % ownership across both of the new businesses. What's the timing and sort of what can you say about the structure of the royalty business? Are there any good comps to look at to think about this?
Yeah. Fair. Look, so we have a couple of things going on, as you can tell in the business. One is I'm looking for a path forward for rosnilimab in RA. And there's a few ways to solve that. We're committed by the end of the first half. We'll have an update there. On the flip side, we said the separation will happen by year-end. When we announced the separation.
Year-end next year.
By year-end of next year, sorry. When we announced the separation a couple of months ago, we said that the royalties and ANB033 co are their own standalone businesses. And rosnilimab really want to work to solve it. I don't want to get stuck in a guidance issue that we need to have separation happen before rosnilimab solves or vice versa. We are giving ourselves some flexibility to work through rosnilimab first. The split could happen as soon as later Q1 into Q2, just on a regulatory timeline with the SEC. We are not guiding to that, but we have a lot of flex on when and how to do it. As we are thinking about the business today, and the only thing you could do with the royalties is really dilute them. We are not going to do that at all, zero.
When we think about what happens pro forma, we haven't announced what a management team looks like. What you could conceive here is very few people you need to manage the accounting, the SEC reporting, the legal. You need folks to continue to analyze the market research and where Jemperli is going to grow to and how that looks. You don't need a big infrastructure at all. It's a virtual or semi-virtual company. We have no ambitions to grow the business through acquisition, like I said earlier. It's a very simple business that's going to capture the cash flow and return it back to investors.
It's like a dividend, presumably?
Dividend or equally repurchased stock, depending on how it's trading. We have a pretty fundamental bottoms-up view of every single indication this could work in the broader competitive environment. I think another thing investors miss is right now, it's generally speaking a U.S. launch from there. Europe is just coming online. They got approved endometrial earlier this year. You have to get reimbursement at the country level. The rest of the world, I mean, they got approval in India a few months ago. China, they have their studies ongoing. Japan, they have their studies ongoing. You add the standard 15%-20% rest of world sales and total value, that's all the top stack of this royalty that's not being accounted for. There is just a lot of areas of value that when you dig in here, sit and drive our views of our expectations of growth.
You've talked about you're not going to leave Biopharma Co out to dry. Can you talk about sort of what the cash position you plan to leave with Biopharma Co and where the rosnilimab path could go more directly?
We've guided to ending the year with cash or accrued cash of $300 million. The nuance there is there's a $75 million milestone payment we're going to get from GSK this quarter. It'll accrue, but unlikely to be on the balance sheet the day of year-end. $300 million of cash, over $10 a share. That funds ANB033. Now, I don't, again, do we separate the end of Q1, the end of Q2, the end of Q3, the end of the year? That's going to dictate how much cash is left. We have a full development plan in place for 033 for celiac disease and a second indication. We have ANB101, which we haven't talked about.
Yeah, BCA2.
That's in a phase I- A. It's a BDCA2 modulator. Biogen reads out three phase IIIs. They pulled in their guidance. Three phase IIIs i n the back half of next year in two in SLE and one in CLE. Depending on what that looks like, we have generated preclinical and now in phase I- A. It's still ongoing, but we're obviously seeing the data. A differentiation thesis that is playing out and holding now through the phase one A. We haven't obviously put out that data yet. The trial is still ongoing. Depending on what happens with Biogen, we will either have a fast-to-market strategy that follows them right through phase two or other variants across CLE and SLE. There are other indications that could make sense. We're just not going to make a decision on how to do that until we see the data.
Fully funded, I think, is the answer.
Yeah, fully funded. And then to be clear, the split is not dependent on the rosnilimab decision. Is that correct? Okay.
No. Look, that's a little bit of the reason why I announced it a few months ago. When you go through the strategic thinking here of doing this, it took a long time to get to the decision and go through all the scenarios. If rosnilimab didn't work in colitis, that's the situation, and if it didn't work in RA, that was the thinking you had, this is still a rational decision to make to split the companies.
I guess it's possible that you will do the split before you have funded or partnered rosnilimab.
Either way. Yeah, we have flexibility either way.
Great. Awesome. Dan, anything else to flag as we move forward?
It's going to be exciting.
Awesome.
Here, as always.
Awesome. Thanks, Dan.
Thank you for your time.