Okay, let's get started. Welcome, everybody. For those of you who don't know me, I'm Mike DeFuria, one of the biotech analysts at Evercore. With me today, I have Daniel Faga, President and CEO of AnaptysBio. Daniel, welcome.
Good morning.
Thank you for making the trek down here to sunny Miami. But lots to dig into. But before we get into Q&A, we'd just love to hear your overview of the story, which we look forward to maybe in the next 6- 12 months.
Yeah, we had an exciting year here at AnaptysBio in 2025 with a number of different catalysts moving into 2026. There are three parts of this business overall that I want to highlight. On the biopharma operations side, we have ANB033, which is emerging as its own anchor asset in the portfolio. It's a CD122 antagonist. We've initiated a trial in patients with celiac disease this year. It'll read out in Q4 of next year with data, and we'll initiate a second trial in EOE in 2026. For Rosnilimab, which is the latest stage program, we had positive data in arthritis, a large robust phase 2b study, 424 patients that read out through the course of the year. We presented ACR, and we will be looking to move that program into phase three development in 2026 with the support of strategic or other financial collaborators to move that forward.
And then finally, on the royalty side of the business, the lead program there is Jemperli. It'll exit this year, selling $1.4 billion at GSK. It's a PD-1 antagonist. We have large royalty rights to that program. I think the kind of cover story on this is the program has gotten so big that we are going to be separating the business into two next year. The royalty management business will stay behind in the parent company, and we'll be separating out those biopharma assets led by ANB033 and potentially Rosnilimab.
Got it. Got it. Lots to dig into here. So obviously, Rosnilimab is your most advanced asset being developed for rheumatoid arthritis, but you also had a phase 2 trial in ulcerative colitis. So when you say you saw that the expected 90% T-cell depletion had good safety, but the efficacy just wasn't enough to continue. And so you've got it to a first half of 2026 update on advancing Rosnilimab in rheumatoid arthritis with strategic or other funding. So has that UC experience shaped your thinking on the RA path forward, including phase three design and perhaps patient selection?
Yeah. Well, coming into the colitis data, we took a shot in two different therapeutic areas. So unfortunately, the drug didn't play out on the efficacy side, hitting the TPP at six months of remissions. The drug was active. And like you said, we saw the required PD that you would expect to see with the program coming out of arthritis. And then importantly, there were no safety signals. We were at higher doses than in arthritis, and we were dosing patients out through up to a year when we terminated the trial. And I think importantly, after six months, we were also looking at Q8 with dosing, and we saw a sustained PD effect in the long term. And that was both in the periphery and in the tissue of the lamina propria.
So that does help translate into the thinking of how we would design the phase three in RA with an induction of maintenance phase. Coming into the colitis data, I think we were positioning that we can't do colitis and arthritis on our own. We thought there was a very clear independent path forward in colitis. With arthritis, we do believe that ultimately, particularly on a global basis, we're going to need a commercial partner at some point. So as we think through the phase 3 design, there's a pretty standard box of what you need to do with two placebo-controlled trials and long-term extension. We will be meeting with the FDA by the end of Q1 in an end-to-phase two meeting. That's the bigger operational update that will come out of the first half of the year.
But I think more importantly is the financing to move this forward through the phase 3, which we are going to be looking for support. And importantly, we will not be diluting out the royalty business ahead of a separation or recapping the business around ANB033. We are going to be looking for independent financing to do this.
Got it. Got it. So just as we think about RA, it's not a single, it's a very heterogeneous disease. ACPA positive disease, that tends to be much more T and B cell driven, while ACPA negative can be just more myeloid dominated. So your phase 2b works focused on seropositive RA. So just given Rosnilimab's T-cell focus mechanism, have you thought any more about RA subpopulations where it may be most likely to benefit as you think about a potential phase three?
This drug worked across a broad swath of the population. So seropositive is the majority of these patients with severe RA. We had 69% of patients by week 14 hit CDAI low disease activity. And at week 12, in the hard placebo-controlled portion of the trial, it was north of 50% of patients hit low disease activity in a very fast time frame. And we had a placebo-adjusted delta at that point in time, north of 20%. I think more importantly, what we presented at ACR then is a deepening of response rates. We saw of the patients who hit LDA, we were able to stay in the trial out there six months. We saw a deepening of response. We saw 20%, 25% remission rates of this disease at six months. And then 14 weeks off a drug, stable outcomes. And that kind of speaks back to the PD.
So 14 weeks off drug, we're seeing stable outcomes for 85% of patients. The few patients that weren't there, they weren't in flare. They just missed the line. So really great data over time. I think the other important thing that we presented, again, just very well received in the medical community, was whether you initiated with TNF, with IL-6, with JAK, 29% of the patients in this trial had prior JAK experience. The data was stable regardless of prior therapy. So it gives us a broad way to think about third and fourth line development minimally. Potentially second line development depends on who we work with moving forward. But when you think about just the third and fourth line, this is $6-$8 billion in the US alone in terms of the market size. Patients cycle through these drugs. 500,000 patients move into second line therapy.
250,000 patients move out through salvage after third, fourth line, so there's a lot of patients that are just in a need with a class cycling effect, and we think we potentially have a longer-term solution for them.
Got it. And for folks not as familiar with the story, just maybe briefly comment on the safety profile you saw in this phase 2b study.
Unremarkable. So no malignancy, no real MACE. We had one event in a patient who had prior history of MACE. No serious infection. So it looked like placebo out through the trial that was consistent in the colitis trial as well.
Got it. So you've been very clear that any advancement of Rosnilimab and rheumatoid arthritis would rely on strategic or other external capital while protecting the royalty stream. So with that in mind, is the first half of 2026 update meant to outline an internally defined phase three plan, or is it really a point at which you'll determine whether the right external funding is in place to move forward? And how are you approaching that decision?
A consolidated overview of how we're progressing in the phase three, where we are with the financing, how the interaction with the FDA went.
Got it. Okay. Just given what you said about exploring strategic capital for RA, how should we think about the purpose of the Q1 FDA meeting?
Like I said, I think there's a box within which development generally is lined around. Certain types of things around dose, dosing profile, profile over time, active comparators, things like this go into that type of discussion. So I think we'll have more to say on this once the meeting occurs.
Okay, so just pivoting now to ANB033 at your CD122. How are you thinking about the opportunity for that program, and how might that potentially anchor the biopharma company?
So there's a lot of opportunity here, potential numerous areas of development moving forward. There's, I think, also a lot of excitement in this class. So CD122 blocks IL-2 and IL-15 signaling on various immune cells, subsets of CD8 cells, TRMs, CD4s, and NK cells. So in diseases like celiac, where you have an influx of IELs, intraepithelial lymphocytes, those are primarily made up of CD8 T-cells that are expressing CD122, and they're very sensitive to IL-15 expression. There's been proof of concept in the space with celiac disease by IL-15s blockers only, as well as another CD122 program. We saw a reduction of IELs, but I think more importantly, we saw histological benefit on villus height versus crypt depth ratio. We saw a protection of the villi in gluten control challenge studies where we saw deterioration there of the patients on gluten on placebo.
There's good proof of concept in this space. Like I said, we initiate our phase 1B trial readout by the end of next year. I think uniquely, we have two different cohorts. We have the gluten challenge, but we're also looking at patients who have more severe mucosal injury that are not eligible for the gluten challenge. We will be treating those patients as well with subcutaneous ANB033 of three doses over a month, and then looking out to week 12 and assessing is there actual mucosal healing for those patients. That's more representative of what the phase two population is going to be outside of the gluten challenge controlled setting. We have a couple of different populations that we're going to be looking at in the phase 1B.
I think we're the first company to look at the second population, and we'll be informative of how we design the phase 2s moving forward.
Got it. And as we think about mucosal healing, how are you measuring that?
That's the villus height to crypt depth ratio. So you're looking at a deterioration of the villi relative to the crypt depth, and you're looking for an improvement of the villi in that ratio.
Any certain benchmarks we should kind of consider the bogey in terms of when that data readout?
What you're looking for is a statistically significant improvement over placebo. And what's interesting in this disease is there's nothing approved. So any improvement relative to that baseline on the histology, I think, is important. But when you look at the draft FDA guidance, ultimately for an approval, you're really going to need to hit on two co-primary endpoints. The histology, you want to see that by treating the inflammation, there's actual healing, which prevents the long-term consequences of celiac. But then you're also going to want to see improvement on the symptoms. So what patients feel on an acute basis any given day. So in the first cohort, the gluten challenge, we are looking for a stat-sig difference on those two endpoints. In the second cohort, we're looking for a trend towards improvement.
Got it. So it's interesting that there's really nothing approved. I mean, so this is kind of almost establishing the bar in a sense.
That's what's exciting about this. I mean, relative to something like RA, where it's a mature market, we're going to ultimately need global help. For ANB033 and diseases like celiac, you could take this all the way on your own as a biotech company into commercialization. There's no bar to beat yet. There are other competitors in the space. I don't want to say it's a race. This is a huge market. It's a multi-billion-dollar market. There's over two million celiac patients in the U.S., over a million diagnosed, and we think about 250,000 patients are not controlled or not well controlled and have severe inflammatory damage even while on a gluten-free diet. That's the target population in our eyes. And like I said, that's a multi-billion-dollar market. And it looks like this class of therapy is the first one that's treating the actual inflammation of the disease.
There's been failures historically that have been targeted at the antigen. We're targeting the gluten itself. We're actually targeting the inflammation of disease.
Got it. Got it. 250,000 patients, that's quasi. It's above the official orphan disease metrics, but I know I'm getting very ahead of myself, but if this makes it to market pricing-wise, will the pricing be orphan-like or?
That's one of our KLs. There's drugs approved. There's therapies approved here. I mean, it's almost like it's the third IBD disease, and that's when we've spoken to payers so far. That's about the pricing benchmarks that they'd be considering.
I see. Okay. So as you shape biopharma company and the royalty company, how are you thinking about making each business resilient on its own so that, for example, clinical variability in the pipeline doesn't destabilize royalty co and any royalty or contractual noise doesn't limit biopharma company's ability to execute?
Yeah. When we designed this strategy, it was meant to maximize the value of each company independently, but independence, a key word. I mean, this will be a hard split in terms of any economic value across the two different businesses. So on the biopharma operations, it's effectively AnaptysBio's organization today that would be spinning out. We have the infrastructure built that we need for the next number of years. And like I said, ANB033 on its own could be an anchor product. Forget what's behind it. We have ANB101, which is another program, BDCA2 modulator that's in phase 1A development right now in healthy individuals.
And then we have to work through this. This is one of the big decisions for next year: what happens with Rosnilimab, assuming the base case that we have an operational component of that where we are executing a phase three that will clearly spin out with biopharma operations. In the event that there's another type of relationship in an out-licensing, we will have the choice to put the economic value in the royalty business or leave it behind the biopharma business. But if we separate before that decision's made, it's going to stay in the biopharma business. For the royalties that stay behind, it'll be not just Jemperli, but also Imsidolimab, which we out-licensed earlier this year to a company called Vanda. They'll be filing the BLA this quarter. That was their most recent update. And a disease called GPP, generalized pustular psoriasis.
Hopefully into 2027, that's another program that's now commercial. We'll leave behind the NOLs as well. Jemperli is a large royalty. We'll have approximately $100 million of royalty income this year. We are paying off a non-recourse debt obligation on an ongoing basis with a group called Sagard. We expect that to be paid off by Q2 of 2027, where royalty management business will be cash flow positive. Plus or minus a year after the separation, that royalty business will be a cash flow positive entity. We need to minimize infrastructure, and the whole purpose here is to protect and return the value of those royalties to shareholders. What we mean by that is you could pay dividends at some point out in the future. You could also repurchase shares. It is an equity story.
There's a number of readouts over the next couple of years in monotherapy development for Jemperli in additional diseases beyond endometrial cancer, which is really driving the revenue growth by GSK right now.
Got it. Speaking of GSK, can you briefly just set the scene for us in terms of the ongoing case with GSK? What's the CRE dispute from your perspective, and where do things stand today?
Yeah. So, GSK initiated litigation against us, and we contend that GSK is in breach of their obligations with Jemperli as it relates to optimizing the development of the asset relative to its oncology portfolio and very specifically their ADC portfolio. We're contending that they're in breach of a pretty high bar CRE obligation, attempting to optimize commercial return, material breach of their exclusivity obligations, material breach of disclosure obligations, so there's a lot there. Now, we believed we were working in good faith negotiations with them behind the scenes to resolve these issues. GSK surprised us. They preemptively filed litigation. They brought this into the public domain. They also are accusing us of really being in breach by accusing them of being in material breach. Now, to set the bar straight on this, we have very minimal or no performance obligations.
We collect royalty checks, and our whole job is to enforce this contract and ensure that they're following the provisions to optimize the value of Jemperli. So we don't think their claim has any merit. But this is very serious. We're prepared to go to trial to enforce this contract. Both sides have stipulated to an expedited trial, which we believe will occur by this upcoming summer.
Got it. Got it. So since the disagreements with GSK predated the filing, how are you running the separation plans so that the biopharma business can execute regardless of this outcome?
To get to a decision to announce a separation took many, many months of planning across our strategic choices that we have. So they're completely independent. And the biopharma operations that we'd be separating off have nothing to do with litigation with GSK. The royalties are substantial enough where this business stands on its own, and whether we prevail in trial or not, there's still substantial royalty value there that's going to result from the monotherapy development of the asset, which I think is where most investors are valuing Jemperli today is on the monotherapy opportunity. So they're independent. What we've said publicly is we're going to look to separate the business in 2026. In the background, there's regulatory things with the SEC and financial audits that just have to process through. But we do think it's possible to still separate in the first half of the year.
Got it. So with royalties and the $75 million milestone continuing to accrue as this case progresses, with the trials not until mid-2026, how do you think about the next 18- 20 months as you work toward the separation and Sagard pay down? And what aspects of this plan does this dynamic influence the most, would you say?
Yeah. So in terms of cash, we anticipate ending the year with $300 million, which includes the accrued $75 million from GSK, which comes when Jemperli does over $1 billion for the first time in the commercial year. That'll happen this quarter. I don't think it'll be on the balance sheet, but it'll have accrued by the end of this year. So as we look forward from there, what we've said is the separation of the biopharma business, which is going to be the primary use of proceeds. We will separate that business with at least two years of cash to execute on the business plan, again, from an independent basis anchored by ANB033. So I think that's stable regardless of the quarter of which we separate. For the royalty management business, you really just don't need a lot of capital to stay behind to operate that business.
Like I said, the dollars for Sagard should be paid down sometime into Q2 2027 is our projection, our internal projection. At that point, that'll be a cash flow positive business.
Got it. And that kind of just dovetails into my final question about just thinking about just keeping enough flexibility to kind of run these early studies that could really enhance partnering value. So I think you partially answered that, but if you could elaborate.
Yeah. We want to have a broad-based ANB033 program. Like I said, there's a lot happening in the space. So the other catalysts, particularly from the IL-15 players in 2026 and other indications, the intention here would be to broadly develop ANB033 over time. We're starting to see like disease where there's de-risked data. We're looking at a second undisclosed indication, and we've floated EOE as a possibility for that. There's other choices. And then we'll see other companies read out and into 2027 be able to move very, very quickly into phase twos, whether that's in our proof of concept indications or quickly following others. We think with the best-in-class program, that's subcutaneous dosing, the most potent with the highest affinity.
Got it. Final question, Dan. I guess the final question. What would you say is, what nuance would you say would maybe most underappreciated by the street that you would want to communicate to listeners here?
If you just look back over the last two or three months, and we've been talking a lot around the value of the royalties relative to biopharma operations. We announced the separation. The stock's more or less doubled since then. I think there's a long way to go with capturing the value of a biopharma business that's not appreciated by Wall Street, that's undershadowed by now the value of just how large the Jemperli royalty has become. So I think when you look at these businesses and further through separation, there's a lot of upside in each individually from where we're starting today.
Got it. Excellent. Unfortunately, out of time, but this has been very helpful. Thank you so much, Dan, for being with us today.
Appreciate the time. Thank you.