All right. I think we'll go ahead and get started. All righty. Thank you everyone for joining us in the room and online for TD Cowen's 46th Annual Healthcare Conference. I'm Joseph Thome, one of the senior biotech analysts here on the team at TD Cowen. and it's my pleasure to have with me today AnaptysBio, and we'll hear maybe some new names during the conversation today too. but for a overview, we have Daniel Faga, President and CEO. maybe just to start things off, and then we'll kinda dive into, you know, the business split and the individual programs. at a high level, kinda what were the main accomplishments recently with AnaptysBio, and what should investors be expecting for 2026? Obviously, you provided the update last night.
Yeah. Thanks, Joe. It's hard to not be really excited sitting here today. A number of months back, we announced that we'd be separating our business into two publicly traded companies. We did publicly file the Form 10, which is, you know, a pretty big accomplishment to enable this, we are on track to complete the separation of our biopharma operations from a royalty business that we're gonna leave behind. We're on track to have this completed in the next couple months. Look, at a high level, we see the royalty business having substantial upside from where we are today. We're excited about the royalties we are already generating on a drug called JEMPERLI
Mm-hmm.
We receive these royalty rights from GSK. That drug is on a well north of $1.4 billion run rate trajectory coming out of this year. I think they're gonna do upwards of $1.7 billion, $1.2 billion of royalties or of revenues this year at GSK, you know, that's, you know, close to $200 million of royalties that will come into the company this year. IMSIDOLIMAB is the second drug that will stay behind in the royalty business. Our partner, Vanda, filed the BLA in December. They now have a PDUFA date of this December coming out. We should end the year with a second commercial stage royalty. We'll be behind NOLs and cash. Then we're separating out the biopharma operations, like I mentioned earlier.
We'll be anchored with a drug called ANB033, which is a CD122 antagonist. We also have ANB101, our BDCA-2 modulator in there, as well as ROSNILIMAB and cash, plus all the employees that'll be going. This is becoming a reality very soon, and it's exciting.
Awesome. Great. Maybe we'll start with the business separation. Obviously, the stock has reacted very well over the past sort of, you know, months to almost a year of when you announced this. What was the rationale behind the business separation? What do you think was maybe not getting enough credit, and how can the split kind of benefit shareholders of both companies, you think?
Yeah. There is where we were before, and I think the benefits still exist today, even given the run-up in the shares. There was a major arbitrage when you have a royalty anchored on JEMPERLI of this size.
Mm-hmm.
that was embedded under a traditional biopharma business. I started talking about this publicly in a very big way about 15 months ago, to no traction.
Mm-hmm.
I get that because it's atypical for investors to invest around a royalty out of big pharma relative to the principal thesis of the biopharma operations. We bought back over 11% of the company yesterday in stock repurchases. Like I said, I think there's still a lot of upside in just JEMPERLI alone relative to the value where I write this second. The idea here was to protect and return the value of those royalties to investors, and by leaving it behind in a, what is gonna be effectively a virtual company, less than 10 FTEs, less than $10 million in OpEx annualized. I mean, what this is implying is high 90% range EBIT margins in a business we're gonna leave behind. You haven't seen something like that before in biotech happen.
We're doing something that I think is first innovative in what we're creating that has the principal target of returning the capital. We're not trying to create a business that's gonna go out there and spend a lot of money figuring out what to buy and compete on cost of capital. We're creating a business that's gonna return value. What we're spinning out then leaves an unencumbered biopharma franchise that's going to utilize cash-
Mm-hmm.
Be able to then separate for investors that are interested in biopharma drug development, really interesting targets where we're 100% focused on the development of, and we're excited about unlocking that value. I think when you look at us today, you could still make real good arguments that the biopharma business is worth 0.
Mm-hmm.
in our current market cap, which doesn't make any sense.
Mm-hmm.
We still have a long way to go.
Awesome. Can you talk a little bit about the dynamics of the split? Maybe, how much funding will each of the component parts need? Obviously, you kind of just indicated that the royalty co. won't need a lot. You announced some management kind of updates for each of the individual parts, if you wanna touch on those.
Sure. Thanks. We had $310 million of cash coming into the year. You know, we're obviously using that cash right now on the biopharma business. We do not need a lot of cash in the royalty business. We do think it'll be cash flow It's gonna be GAAP positive out of the gate. We think it'll be cash flow positive into the back half of 2027. $20 million gets us well beyond what we need with runway. We have a choice on how to then break down the cash, and as the CEO of both companies, the royalty business, there's an arbitrage. I think that'll continue to exist. We can leave cash back and buy back stock. We've done that before. Makes a lot of sense to continue doing that.
The biopharma business wants every dollar it can get. With $100 million of cash, we'd have cash into the back half of 2027, fully funding ANB033 into phase II trials in celiac and EoE, assuming success. If we had $200 million of cash in the business, we'd have cash into the back half of 2028 doing the same as well as initiating additional trials in phase II. There's a bit of a natural range. We have a choice of where and how to deploy the capital, and you can make good arguments for both. The answer will be somewhere in that range, and we'll work through that this month. It's one of the last things that need to fall into place.
In terms of management, we did announce the board of the biopharma company will be a super majority subset of our current board of directors. I'll be running the biopharma business. It's more or less my day job today, as well as our CMO or our CBO will be coming over with us into the biopharma business. We have not yet announced what the board makeup and management will be on the royalty business, but I can assure you, given even the OpEx comments, we do not need a lot of management, and we do not need a large board to run the royalty business. We need custodians of the capital aligned with the strategy that we've already articulated, which will not be changing the day after the separation.
Maybe can you talk about JEMPERLI's current kind of run rate here. It seems like the street has been impressed as many others have been in kind of like the rate of sales coming through. I guess, what do you think are those major drivers? Obviously consensus has had to play catch up. I guess, where do the estimates fall between GSK, AnaptysBio, and the street?
That's one of the best tee ups ever. All right, GSK exited 2025, over $1.4 billion run rate growing in the mid-teens quarter-over-quarter. It's driven on only endometrial cancer, frontline endometrial cancer, revenue growth, which is, in a large sense, stealing share as well as the markets growing in that disease from KEYTRUDA . The reason it's stealing share is we have better data than K. We have survival data that KEYTRUDA does not. Major differentiator in oncology. It's 18 months into the launch, in the U.S. They had approval in Europe about a year ago. Reimbursement comes online, you know, over the last number of months. It takes a little bit longer.
We do expect, this is our guidance, not GSK's, to see substantial ramp-up in Europe over the course of this year as the United States continues to grow and take share from KEYTRUDA GSK is on record last year talking about the value of having differentiated data. This year, they will have survival data in a pivotal trial in rectal cancer. As a reminder, the phase II data showed a 100% ORR. I think most folks assume it'll work, but we have to get that there and see the data. They did receive a review voucher from the FDA, which allows them, based on rolling submissions, a one-two month approval timeframe.
It's feasible based on their guidance that not only do they have the data this year, but again, our guidance, that they could also get approval this year depending on when that data hits, in rectal cancer in the United States. If you grow the revenues from JEMPERLI 10% quarter-over-quarter, we will have paid down their outstanding non-recourse debt we owe Sagard by the end of Q2 of 2027. Substantial opportunity. If you also just grow at 10%, again, this is a reduction in growth that's substantial given the dynamics, by the time you get to the end of this year, you will be at a higher number for JEMPERLI royalty or JEMPERLI revenues than consensus 2027 numbers.
You know, look, I don't completely understand how some of this works other than while this is an important asset for GSK, it's not the number one ,two , or three in the business, and they have other macro things going on there with vaccines and HIV deterioration where this is just not the biggest driver today for an investor for GSK. Again, that's the arbitrage. When you're in the royalty business, you can invest in the number one growth asset at GSK, highest growth rate in the company, highest growth rate by a multi-fold of drugs over $1 billion of revenue and substantial readouts, not just this year in rectal. There's MMRP colon cancer phase II this year that based on ClinicalTrials.gov will have data before the end of the year.
Over the next couple years, two other pivotal trials ongoing in dMMR colon cancer as well as head and neck cancer. Lots of equity driven readouts coming with data that already exists in earlier stage trials that's been positive.
There is a bit of an ongoing dispute between yourselves and GSK around JEMPERLI and sort of the, you know, sort of their obligations. Can you kind of walk us through the origination of that and maybe the potential outcomes of the litigation? It sounds like this won't impact the timing of the split or anything related to that, but if it does, maybe you can comment on that.
Yeah. The separation of the biopharma business has nothing to do with the royalties at all. Right? They're gonna be arm's length, separated by design long before this litigation that you're referring to at GSK spilled into the public domain. I also want to clarify one point. Our litigation has nothing to do with the quality of development GSK has done in monotherapy, development for JEMPERLI. The dispute's origin have to do with combination development of JEMPERLI and in our view, GSK's material breach of exclusivity obligations they have to develop only with JEMPERLI as the PD-1 based on our contract, as well as a material set of breaches in disclosure to our company that they're obligated to. Third, a breach of driving towards optimal commercial return of JEMPERLI. Describe the importance of optimal commercial return.
It's a very high threshold, obligation for commercial reasonable efforts and said very simply, if you're gonna develop your oncology portfolio in combination with KEYTRUDA and spend active development dollars in doing it, that is at odds with optimally developing in combination with JEMPERLI. What we're litigating on is all three of those claims of which we need one to then, result in a reversion right of JEMPERLI back to us based on the definition of our contract. Our jobs as custodians of this contract are to collect royalties and to enforce the contractual rights, and we think that GSK is in violent breach of all three of those claims. We found out about the initiation of some of this last summer. We tried to work with them through a dispute resolution process in the background.
GSK did file litigation against us in November of this past year, claiming that we are reputing our contract by claiming that they are in, that they are themselves in breach. That's an interesting argument. We then filed suit ourselves in follow, this contractual matter will be settled in Delaware Chancery Court with a trial date scheduled for July 14th.
Great. Maybe we'll hop over to the biopharma aspects of the business. Obviously, we saw the ROSNILIMAB interesting data earlier last year, and seen some pretty good persistence. The company indicated, obviously, this wouldn't be an area where you would go it alone, just given the size of the RA market. You indicated last night you'll potentially have an update, hopefully in Q2 of this year. I guess what do you see as the opportunity for ROSNILIMAB in RA? Then maybe we'll dive into the potential kind of ways this could move forward.
We had very compelling data from a large phase IIb trial in RA that we read out over a course of time last year. It was statistically significant at three months relative placebo. It showed deepening of response and deepening of remissions into six months and then off drug out through nine months. The data's compelling. It's the first drug to actually show disease modification in RA in well over a decade in a market where you have half a million patients that are cycling through, just in the United States alone, cycling through multiple classes of biologics and then have nothing else to go to. The opportunity here is large.
You have to acknowledge that a phase III program does cost a lot of money, we are meeting with the FDA this quarter in Q1 in a phase II meeting that will help define the parameters of what the phase III program will look like, as well as then a read through into what's the cost of the program. What we've stated for a long time is that we don't have the intention to commercialize an RA ourselves. It implies you eventually have to have a partner. We've also clarified over the last many months that we won't use our balance sheet cash that we were talking about earlier, which will be used for ANB033. We will not use that for ROSNILIMAB given this constraint.
At least in my view, is if you're not gonna commercialize a drug, you shouldn't be running the phase III program if you know that's where this is gonna end up. I think there is interest in this asset. The operating gate and then the phase II meeting with the FDA matters, and just given the timeline of the separation is the number one corporate priority since we've announced this a number of months ago. We are in the kind of the upside case on timing-
Mm-hmm
... on how things have progressed with the SEC and all the dynamics internally to prepare for a separation. At some point, these timelines just converge. It just became a lot easier to push ROSNILIMAB into the biopharma business and work through trying to finalize the potential capitalization of that after the separation, given the timing of the separation and this end of phase II meeting.
Great. Excellent. Maybe we'll move on to 033, which is gonna be the backbone of the biopharma business. Can you talk a little bit about just the rationale for studying a CD122 antagonist in celiac, first of all, and then we'll kind of go into your other indications in the data?
You know, we're obviously very excited about this drug, and I mean, as the foundational backbone of what we're spinning out the new company into more or less our full attention in that business. The CD122 antagonist, ANB033, blocks IL-15 and IL-2 signaling on cells like CD8 positive, CD8, CD4, TH1, or TH2 cells, but more specifically in diseases like celiac disease, you have an infiltration as a response to the reaction of gluten of intraepithelial lymphocytes, IELs, which are profoundly visible and drive a lot of the symptomatic activity in patients with celiac disease. Celiac disease is characterized as an inflammatory disorder where you see a deterioration of the villi in the gut. It's measured histologically on a ratio of villous height to crypt depth ratio, VHCD.
These are the characteristics. When you look at the disease biology here, targeting IELs as well as with the CD122 program, we're able to target the TH1 cells, the CD4s that are activated when the byproduct of gluten is picked up and presented as an antigen from the APCs. We're targeting both sides of the inflammatory story. Almost all drugs that have been developed for celiac historically have been targeting the antigen, not the inflammation. That's a big difference between the CD122-targeting drugs as well as the IL-15s. The biology is on point for targeting inflammation and inflammatory disease.
There's also good clinical proof of concept with a couple other IL-15s that are out there by Teva and Novartis, as well as one other CD122 program where we already know that you're preventing IEL recruitment by targeting with either an IL-15 or IL-15 signal blocker. With the other CD122, we also saw benefit on VHCD in a gluten challenge. There's human proof of concept multifold now here on gluten challenge studies in celiac. What we are doing though is we're running the celiac challenge or the gluten challenge, but we're also treating patients that don't qualify for a gluten challenge, meaning they had too much destruction of the villi already on presentation, confirmed via biopsy, to ethically give them gluten.
We're actually in a second cohort, we're treating patients therapeutically at week zero, week two, week four with subcutaneous ANB033, then waiting eight weeks and doing a biopsy at the 12th week to then see are we improving healing, are we seeing regeneration of the villi based on the VHCD ratio. We'll have gluten challenge data as well as the second cohort treating patients who don't qualify for the gluten challenge, showing healing, all by Q4 of this year is the target to read out, both data sets. Excited about the biology here, the human proof of concept that exists. Our preclinical data, we have data in celiac mouse models, and then we also show, I think, relative to the field, more potent drug, based on the concentration curves.
We're quite proud of what we've seen in the Phase A and the long-term PD effect on target cells like CD8s and NK cells. We're also administering subcutaneous, which we think is a differentiator in the end.
Maybe on the two clinical trial designs, I don't know if you wanna set kind of expectations for the data later this year, and, like, what would inspire you to move forward? Specifically in the mucosal healing, study, are these patients gonna be followed long enough, I think, for mucosal healing, I guess, to be evident? Yeah.
In the gluten challenge study, just as a refresh on the design as well there, similar to the patients with damage, we're treating at week zero, week two, week four. Then you give 14 days of gluten. Then you're now adding up to week six. You do a biopsy. You're comparing drug at those weeks of dosing versus placebo. 30 patients overall, 1-to-1 randomization. Just in the space in general, that when you give gluten over that period of time, if you're giving enough gluten, which we are, you're gonna increase IELs, you're going to see a destruction in villi. That'll result in a worsening of the VHCD ratio. You're gonna drive symptomatic impact to patients in that two-week gluten challenge.
We should be preventing that with our drug. We should see statistically significant results versus placebo on VHCD and on symptom scores. That is the expectation, and there's benchmarking data out there, and we're powered for this in a 30-patient trial. In the other cohort, this is experimental, truly is. This is where a lot of drugs historically have just targeted the antigen have not worked. When you're only targeting the antigen, not the inflammation, where drugs have failed is you haven't actually seen improvement of the villi. We're targeting the inflammation. In every disease that you've targeted inflammation that the drugs work, you're seeing improvement. That's the goal here, but there's not comparable data sets. What we don't know is at 12 weeks, is that enough time to see full healing? In most inflammatory diseases, at 12 weeks, you're seeing improvement.
What we're looking for is a trend, a numerical trend of improvement on VHCD by treating in that first month and then watching over eight weeks, taking the biopsy results. We should see a numerical improvement over baseline on VHCD. These patients enrolled in this trial, are not high symptoms, right? Patients exist with destruction that have mild symptoms on an acute basis, moderate, severe. These are all mild to no symptom patients. We can't be assured that we're gonna see symptomatic improvement if there's no baseline symptom scores. We might see something. You might get treated and then realize you had symptoms and not realize it, right? Depending on people's baseline thresholds. Look, we're looking for something directional.
The idea here is to de-risk phase II by showing we have a biological response on inflammation, 'cause the phase IIb trials would be in patients that are, that have damage, that you're looking to improve over a longer period of time than three months. It's information that does exist in the space that'll be very useful for us to de-risk the ultimate commercially relevant population in a phase II trial.
Can you maybe talk about the overall opportunity here for the indication? Obviously, there's a lot of, you know, gluten-free foods and stuff available over the past several years. I guess, what proportion of patients, though, you know, don't respond to diet, and especially with, you know, obviously celiac is, you know, more intense than maybe being able to manage with diet. I guess, what is sort of the target real world population that you'd be going after?
Yeah. If you have celiac disease relative to patients out there who are gluten intolerant, celiac disease patients are characterized by the autoimmune response, which is causing the destruction of the villi. This whole second cohort is gonna be driven by patients who are no to mild symptoms, who have villi damage, mucosal injury, that what we're trying to prevent here is the long-term damages of malnutrition, really. I mean, that's what this disease is. It takes trace amounts of gluten to instigate that autoimmune cycle. All these patients who've just been recruited in this trial are on gluten-free diets, yet they still have damage. That's the whole issue with this disease. A quarter of a million patients in the United States alone, which is a small subset of the number of patients who have celiac disease, let me come back to that quarter million.
Over 2 million patients in the US have celiac disease. Only about 1 million are confirmed diagnosed via biopsy today. One of the reasons for that is there's no therapeutic treatment for celiac disease. If you have celiac disease or you're gluten intolerant, there's no difference in your treatment.
Mm-hmm.
Right? You're trying to avoid gluten. The trace amounts actually instill the damage. 250,000 of the 1 million that are diagnosed and confirmed, they are non-responsive to a gluten-free diet, meaning they have damage. That's the target population out of the gate for therapeutic that we could develop here.
Okay. Great.
You could always see that enlarging over time in different horizons, but a quarter million patients with no therapeutic option today is the target.
The second indication that you're gonna be looking at is EoE. Maybe how did you arrive on this as being the second choice for the mechanism? Because just 'cause there have been already a few others that have been, you know, thrown out there as potential proof of concept, and maybe what science led you to EoE and why was that decision?
Novartis acquired Calypso, I don't know, almost a couple years ago, talking about an IL-15 being a pipeline of product. You have it talking about their IL-15 as a pipeline of product. There's a number of indications where this pathway really could have profound effects on disease biology. In EoE, we've talked a little bit here in celiac disease on targeting the CD8 cells. That's similar in EoE. Calypso, who Novartis bought, which is just an IL-15 targeting agent, showed prevention of eosinophil recruitment in EoE patients just by targeting the CD8 cells with the IL-15. That's relevant here because it's upstream from targeting eos directly. There have been drugs out there that deplete eos and have failed in this disease 'cause they're not, again, targeting the actual inflammatory pathways of the disease.
EoE only has one therapeutically approved drug, it's DUPILUMAB, which is an IL-4 receptor antagonist. IL-4 is present in TH2 cells and ILC2 cells. That's driving one of the inflammatory pathways in this disease. Clearly, the drug works. It does not target eos. The Calypso data shows by targeting CD8 you can reduce eos. A CD122 antagonist does both, and we have the data out there in the public domain in an Aspergillus-induced eosinophil model where we are preventing the increase of CD4 cells as well as ILC2s, doing exactly what Dupi does, but we think we can potentially do that better in addition to targeting the CD8s where we already know there's other human proof of concept. The opportunity here is large.
Dupi is a weekly administered subcutaneous drug in this disease, different than where it's used in other places. Up to 30% of patients do not respond, and those patients are somewhat characterized by an increase in IL-15. When you look at the whole picture here, we think we could be Dupi better in a broader percentage of population by targeting both sides of the inflammatory pathway. We also think this is a disease where relative to IL-15s, if one of these other competitors end up moving there, i.e., Tether, Novartis, we could actually show very significant differentiation of targeting CD122, which has multifunction. Lastly, it would open up a gate for a number of other disorders by showing the impact on TH2 and ILC2 cells in addition to what I think is now generally accepted, a profound impact on disease-driving CD8s.
Lots of reasons to go there next, and it's great to be kind of front-running into another disease area beyond celiac, where I think we're all relatively at the same place in a market where there's nothing for treatment of patients today.
Then maybe, as I mentioned, others have kinda gone into vitiligo and some others, and you indicated this being a potential, you know, pipeline or a product. If you see encouraging data from celiac and EoE, would that encourage you to start looking at some other indications, or what's sort of the bar to move forward in others as well?
Yeah. I gave some numbers earlier on cash runway to expand into other diseases as well, which is completely our intention here. Vitiligo is rational to target with this mechanism of action. We're gonna see data from an IL-15 and a CD122 this year, I think we wanna wait and assess that. Running a 3rd phase Ib knowing there's other proof points out there this year doesn't make a lot of sense for us strategically. We can go run phase II next year in that disease if we like the quality of the data, and it's better than other alternatives for a 3rd or 4th indication, which we'll, you know, on our end rename nameless, but it's an obvious one of the choices for next year.
Mm-hmm. Great. Maybe just in the last minute here, obviously, the BDCA2 is also progressing in a healthy volunteer study. Can you just touch a little bit about kinda what you're looking for in this trial to kinda move it forward and when we'd know about specific indication selection?
There's one BDCA2 modulator that's in clinical development beyond ours, which is being in development in phase III by Biogen. They have two phase III readouts later this year in SLE and another pivotal phase III readout in CLE, the skin formation of lupus. What we're showing, what we've shown pre-clinically and what we're looking at in our phase Ia trial in healthies right now is really for differentiation. I mean, generally speaking, this target is safe. Plasmacytoid dendritic cells, which is where BDCA2 is expressed, don't exist in a significant quantity in healthy individuals. I mean, there's target there, but not a lot. It's a 1,000-fold increase in terms of the interferon they produce in disease or in a setting of disease.
What we're looking for in the healthy volunteers is a lot has to do with PD, so we're confirming half-life, which is distinctly longer than the Biogen drug, and we're looking at a long-term PD effect, which results, from, we think, a differentiated pro-profile in the depletion of pDCs. We saw that pre-clinically. We're seeing that on a preliminary basis in the phase Ia, when that trial concludes later this year, we'll be able to compare those results to what's hopefully a positive outcome in the pivotal trials with Biogen in which we'll be able to show this drug, this target works in these diseases in a very differentiated way, and we have a better version.
Awesome.
That'll play out later this year as well.
Great. Well, definitely a lot going on, so thanks for the conversation.
Thank you. Appreciate the questions.