Good afternoon, everyone. Welcome to our Piper Sandler Healthcare Conference. My name is Yas Rahimi. I'm a Senior Biotech Analyst here at Piper Sandler, and the covering analyst of AnaptysBio. Dan, it's wonderful to have you. We have lots to cover over the next 25 minutes, and you have a packed schedule, so you've been on since 7:30 A.M. till 5:30 P.M. without a break, with many, many individual meetings, so let's start off with an announcement that came a few weeks ago, which was the announcement of sort of the biopharma operational split. That is a key objective to kind of split the royalty splits up by year-end 2026, so maybe first question is, how's the process progressing, and what is left to do to sort of finalize this? And what was the rationale for doing it?
Yeah. Thanks for the question. Great to be here today. And we're in the fortunate position to have multiple programs that I think are high value. And the simplest way to state this, splitting the business into two, what we're calling the royalty management business, with AnaptysBio as the parent, and then separating the biopharma assets allows investors to focus on the programs or the portfolios of their choosing. And they're very different types of assets. We are in the unique position where the royalty is an aggregate between Jemperli d ostarlimab are of such size or consequence that they really can be an independent business. And the biopharma operations speak for themselves. AMB-033, our CD122 program, has a broad development path in front of it. We're in a celiac trial that reads out next year. We're going to start a second trial.
And there's a lot happening in that class. And of course, we have rosnilimab on. We're working through how to advance that program into phase III for RA. So two very different businesses. At the core of this is we're looking with the royalties to protect and return the value of those royalties to shareholders. Minimally, there's a major cost of capital arbitrage between the two types of businesses that you saw partially unlock just by the announcement of a future separation. I think there's a lot more upside across both businesses from here. But there are going to be different flavors or different types of investors over time as each individual company continues to progress and have success.
Okay. And what is sort of the cadence going to be between now and the next 12 months to complete that by 2026?
So we've announced the separation, the intent to separate by the year-end 2026. And it gives us a wide window. There's minimally a regulatory process with the SEC. There's financial audits. There's just things that have to happen in the background. You do ultimately have to set up, in this case, it would be the parent company. We'll need a certain number of employees. We need to figure out the boards of the parent. So there's logistical things that get us substantially through Q1. But we have been explicit that a separation could happen in the first half of the year. And one of the critical pieces here is what are we doing with rosnilimab? How are we advancing that? If there's an operational role, it clearly needs to stay with the biopharma business where the core of the employees are.
But to the degree there's other solutions that involve outlicensing or partial economics where you can leave behind in the royalty business, there could be value. But once the separation happens, it's two independent publicly traded businesses. So if you own 1% of AnaptysBio today, the day after the separation, you'd own 1% of each of the two companies. So it's a spin-off, a dividend of the biopharma business. So what stays behind the royalty business beyond Jemperli d ostarlimab could be part of rosnilimab. We just need the time to work through what that looks like. And we promised a first half of the year update on where we are with the advancement of rosnilimab.
Are you going to be the CEO of both companies?
Great question. We have announced that I intend to stay on for the biopharma business, which actually requires a substantial part of the time. It's more or less the job today. But I think the board of the parent company out of the gate right now is the board of AnaptysBio, which I also am on. So we have to work through who's going to run the royalty business and what the infrastructure looks like. But we are committed to having a de minimis infrastructure. If the base plan is really protecting or returning the value, you're not doing BD. You're not trying to be a royalty consolidator. It's a very simple business. I think that's to the benefit of everybody.
The royalty feeds back into what fit into AnaptysBio, potentially.
The royalty business is AnaptysBio. We'll rebrand it at some point. But the parent company is the royalty business in the end after the separation. Yes.
Recently, you also announced right before Thanksgiving the recent litigation with GSK and Tesaro. So just help us understand if those litigations have any changes to the timelines or impact the timelines.
Yeah. The short answer to that question is the litigation is independent of the optimization we think we're going to achieve by separating the biopharma business. The biopharma business has nothing to do with the litigation. The value of the Jemperli and the royalties to us is intact regardless of this litigation, in our opinion, and we could address this a little bit more, but it's not directly related. The separation is independent of what's happening with GSK.
Okay. And then just one last question around the royalty split is just what will be the expected cash and cash runway of the biopharma company?
So we anticipate ending this year with $300 million, which includes accrued cash from GSK, a $75 million payment when Jemperli milestone and the royalty hits $1 billion commercially within a calendar year. That'll happen this quarter. So we might not have it booked on the balance sheet, but it will have accrued by the end of the year. So that's $300 million that will continue to get deployed into the biopharma business, whether it's within Anaptys or separate. When we separate, we're committed to separating the business with at least two years of capital to run that business. And we have that sitting on the balance sheet today.
Okay. Wonderful.
At the end of the year.
Let's talk about ANB033 and celiac disease. I think you recently hosted a really well-conducted R&D day to kind of unveil, discuss the target, its differentiation, the path forward. And celiac disease actually was a really well-done event and probably still on the website for individuals to listen to if they missed it. So maybe a few questions to kind of connect the dots for people who haven't paid too much attention on ANB033 is it's a CD122 antagonist with dual actionability, working on IL-15 and IL-2. Maybe put us in perspective for investors who are maybe not the experts in celiac disease. What is the pathophysiology of celiac disease, and why does this CD122 antagonist make mechanistic sense?
Sure. Yeah. And there's been a lot of investor interest here, which is great to see over the last month or two. That's because there's a lot happening in this space between IL-15 pathway and blocking CD122. And you reminded us to set this up. Blocking CD122, which you see on CD8 T cells as well as CD4 T cells, you're inhibiting the signaling of IL-15, which is what the IL-15 antagonists are going to do. But you're also inhibiting the signaling of IL-2. And so in diseases like celiac disease, what happens is you ingest gluten. This could be trace amounts of gluten. And the breakdown of that gluten initiates, again, trace amounts will initiate APCs, which present an antigen, to CD4 T cells, which instill a very rapid IL-2 increase on those CD4s. And that's what initiates the autoimmune cycle.
There's a breakdown in the epithelial layers in the gut. You see the villi, which absorb the nutrients. You see a degradation of the villi. You see an increase in IL-15, which recruits and then proliferates IELs, intraepithelial lymphocytes. These IELs are found in disease. They are principally made up of CD8 T cells. There's a small component that are NK cells, but the reporting of them tends to be CD8 T cells, and they all express CD122, and they are highly sensitive to IL-15, as well as IL-2, but blocking IL-15, and this is what's interesting about what we're doing here in celiac, there's good proof of concept where IL-15 blockers reduce IELs. So the sensitivity of IL-15 is significant, so in that sense, what we're looking to do here with all these drugs and these pathways is start to target the inflammation of disease.
There's a long history of trying to develop drugs in celiac disease, but the vast majority of them have been targeting the gluten or the breakdown of the gluten, i.e., the antigen, not the inflammation. And in autoimmune diseases, there's consistency of what works to treat autoimmune diseases is targeting the inflammation directly. So you're reducing the IELs and the proliferation of the IELs. But with CD122, because it's on IELs directly as well as the CD4s, which are at the beginning of this initiation cycle, you can reduce the proliferation of the CD4s, which will reduce IL-2. You're blocking IL-2, which reduces IL-2, which initiates the IEL progression, as well as reduce things like interferon gamma, which also attracts and recruits the IELs. So you're hitting it from two different sources with a CD122 antagonist that you're not getting directly from just the IL-15s.
That said, there's been great proof of concept with IL-15s as well as another CD122 inhibitor. So to some degree, there's early de-risking of what we're looking to do here in our trial.
Okay. Very, very helpful. Let's maybe spend some time understanding the part A and part B studies of the phase I-B. So there's six weeks up to 30 weeks phase I-B. There are 60 patients with celiac disease. And there's a cohort 1 and a cohort 2. Maybe frame sort of the cohort 1, cohort 2, what the selection criteria was, and why separating these two cohorts first.
Yeah. So we're looking to de-risk the phase II development as much as we can here with phase I-B. That's the intention. We have two different cohorts. The first cohort is a pretty standard gluten challenge. We're taking subcutaneous AMB-033, a specific dose at baseline, week two and week four. Then you initiate a 14-day gluten challenge. We're giving six grams of gluten as a cookie over that period of time. Now you get to week six. At week six, you take a biopsy. You compare that to the biopsy done at screening. You're looking to see in the placebo cohort that you've induced gluten-induced symptoms. Then from the biopsy that you've seen damage on the villi measured by VH:CD, villous height versus crypt depth ratio.
To get into this, you need to have well-controlled patients who are on a gluten-free diet. Their symptoms are managed, and from the initial biopsy, you don't see damage that results in a VH:CD ratio less than 2, so you have to be greater than 2. It would be unethical to give patients less than 2 gluten. You're going to make things worse, which is the design, so that leads us to the second cohort. In the second cohort, we're looking at patients who don't qualify in that first cohort, patients with a VH:CD ratio less than 2, so these are managed patients on a gluten-free diet, but they have the inflammation and deterioration of the villi, so those patients will also be dosed at week 0, week 2, and week 4 versus placebo, and then we'll wait eight weeks, and at week 12, take the biopsy.
So there's no gluten being administered in this trial. But we look at week 12 to see if there have been healing. And we have seen a trend to healing versus placebo of targeting the inflammation. Now, this population is more aligned as a proxy to what ultimately the phase II-B, phase III, commercial population would be. These are patients with inflammation that we're trying to target to see healing. They're controlled. They might have symptoms, but they're not complaining of the symptoms. But on placebo, you might see a difference between placebo versus the patients who ideally on drug are getting healed. You should see a trend there as well. So it's novel to do this. This hasn't been done before in the phase I-B. But to the degree that we see the right trends here versus we need to hit on stats in the gluten challenge.
But if we see a trend towards benefit, what we don't know is, do you need more 12 weeks to get to a full healing? That's a risk. Do you need to dose beyond week 4? But the PD for our drug stays above the IC90 based on our modeling out through week 12. So we think we're managing the risks here, but we'll have really good information on how to target and treat the types of patients we would end up enrolling for a phase II-B population, which we do think is the commercially viable way to introduce a drug into this market.
What do you need to see in this VH:CD ratio or the IEL count or the PROs?
It's interesting.
That's sort of first POC response.
What's interesting here, I get this a lot. I get asked this a lot. What's the absolute threshold you need to hit? There's no drugs approved to benefit patients with this disease. So there's a population of over two million patients that have celiac disease. Only half of them are diagnosed via biopsy to prove they have celiac, which is the actual autoimmunity cycle and the injury of the mucosal system measured by VH:CD. The reason I'm taking you through that, then maybe 250,000 patients are estimated to be on a gluten-free diet, but again, trace amounts can instill this cycle. That's the target population for right now. So what do you need to hit to be commercially viable? I think you need to show that statistically you're better than placebo at healing the mucosal injury and that patients are feeling better.
There's draft FDA guidance that those are the two primary endpoints, co-primary endpoints in a phase III. Is placebo just a delta in VHCD and on symptomatic improvement to hit some threshold of commercial viability? Now, at some point, someone's going to get approved here and there's going to be bars to beat. Our trial design right now is greater than or equal to 2.0 on the VHCD as a level of the regulatory agency to say is unethical to just give gluten to freely. Sanofi is running a trial with their OX40L right now, a phase II trial, completely different type of mechanism. They're actually blocking the APC antigen presentation for the CD4 side only. We should be doing CD4 and CD8. What's interesting there is the trial design. To get into that trial, they're looking at non-responding celiac patients.
It's less than or equal to 2.5 on VH:CD. So again, this will get sorted out over time, but you got to beat placebo.
So as long as you have a specific declaration.
This would be a first approved drug as of right now in a disease that has nothing for patients.
The way that these two cohorts are enrolling, help us understand, are they coming top-line data sort of concurrently? Could you share one with us now?
We haven't been specific on that. We've given general guidance right now that Q4 of next year, we'd read out the totality of the study.
Is there a mechanistic rationale to think that it could work, AMB-033 could work differentially or better in one population versus another?
What's interesting is there have been agents that have been tried that have been targeting gluten, that in a gluten challenge study, since it's a very precise amount of gluten that you're administering to patients, have shown to be able to block the effect of that specific gluten. But then in a patient population that's in phase II, we need to show healing, they don't work. Because you need very trace amounts to initiate the cycle. So I don't know if the historical comparisons of things that have failed make any sense. And one of our KOLs on the IR event that you highlighted earlier that was done in mid-October and is available on our website actually went through some of the history of why these other drugs haven't worked relative to this new class of the IL-15, CD122s that are targeting inflammation directly.
The next steps post this data after the dose finding and patient selection would be then a registrational study or a phase II-B?
Probably phase II-B is the safe way to talk about this right now. This is a three-month study. Ultimately, we're going to be looking at healing over a much longer period of time. One of the interesting things about these mechanisms, specifically our drug, and when you look at the PD, it's long-lasting. So we're giving three doses of drug and we're looking eight weeks later in that second cohort. I think this, to use what's been done in other IBD, induction maintenance of how you're inducing a result and sustaining it, some of this needs to be explored a little bit in the phase II to get to the right presentation. I think we're off to a great start with our trial designs. We have a subcutaneous formulation that we're already assessing that we'll be able to move in, and we're in one dose right now.
The dose that we haven't disclosed the specifics of, but if you're going with one dose, you don't underdose and risk missing on efficacy for that reason. So there's opportunity to also potentially have lower doses over time as well than what we're starting with.
No, that's helpful. Would love to spend a few minutes on rosnilimab and RA. Obviously, you guys shared very positive phase II-B data. And you are planning to meet with the FDA to have your end of phase II-B meetings. Help us understand sort of what's left to do to prepare for the meeting and how do you think about sort of the developmental strategy for this?
Look, we looked at multiple diseases for Rosnilimab over time, including in UC, and what we learned in the UC trial is the drug is safe at high doses over a year period, and we have sustained long-term PD, which is consistent with RA. The RA trial, we announced results through the course of 2025, three-month results, then six-month results in June, and what we presented at ACR was the full trial data out through nine months, which includes 14-week off drug period. What we highlighted there was the very deep low disease activity rates and remission rates that we saw at six months, 14 weeks off drug are sustained. 85% of patients are still in those states off drug, and the patients who weren't barely missed. We didn't have flaring, so the drug's working really well over time.
The second thing that we demonstrated was whether it's second or third line or whether you were treated prior with TNF, treated prior with IL-6, 29% of the trial had prior JAK exposure. The drug works really well down the lines of therapy. So the reason I'm bringing you through this is the medical community is really excited about this drug. What we're doing right now is packaging that information and working through phase III trial designs, which we'll put in front of the FDA by the end of Q1 and end of phase 2 meeting. So that's an important operational step for us to take. We've had a lot of time, but the trial is done. So we have more or less had the information we need.
In parallel and through the first half of the year, we'll be working and talking to both potential strategic collaborators as well as financial collaborators on how to finance the phase 3 program, which has different flavors to it depending on how we want to advance and step through that program. So there's more to come on all this. But at the end of the day, whether it's strategic, financial, or a combination of both, the intention here is advancing in RA. That's the first primary goal. And we'll have an update in the first half of next year on the progress of that.
Okay. That's perfect. And then sort of the cash and cash runway for the—I think we discussed that. You gave that earlier in the PowerPoint. So that's good. No, this was super helpful. Dan, thank you again for being part of our conference. And again, a big year next year with the split of the two companies, the data from sort of next steps with rosnilimab and AMB-033 and how you're thinking about it. And then maybe potentially maybe even initial data depending on how things go with AMB-033.
Yeah. And there's a lot going on with the IL-15, CD122 class. Teva has announced data in the first half of next year in celiac and vitiligo. So it's interesting reference points along the way. So there'll be multiple read-through catalysts next year in the field. Rosnilimab, there'll be an update. I think for Jemperli as well. Quarter over quarter, we're still looking for sustained and strong growth in the monotherapy indications, which there's many. So that continues to be a quarterly catalyst that matters to us on what I think GSK is doing a nice job on with monotherapy development. And that'll continue to play through as well. So lots happening on all arms of the business every single quarter for the next year. It's going to be an exciting time.
Awesome. Dan, thank you so much.
Thank you very much.
Wonderful to have you. Let's applaud.