Hello again, everyone. Gena Wang, a Senior Biotech Analyst at Barclays. My pleasure to have AnaptysBio CEO, Daniel Faga with us this morning. Maybe just to kick us off, Dan, if you could just give us an overview on AnaptysBio for those less familiar with the story.
Perfect.
Yeah.
We're in exciting times right now. We're approximately a month or two out from creating a second company called First Tracks Biotherapeutics.
Mm-hmm.
which will be the biopharma operations from AnaptysBio that we're spinning off. AnaptysBio has been around for over 20 years developing antibodies. We have two successful programs so far out of our platform. One, Jemperli, the dostarlimab, which is being sold by GSK. It's an oncology drug, a PD-1 antagonist. The second has a phase II readout at the end of the year. It's called imsidolimab for GPP, which hopefully will be sold at the end of this year by a company called Vanda.
Mm-hmm.
Those two programs will stay behind, forming a royalty-based financial company that will retain the name AnaptysBio. In the biopharma business, we have a couple of exciting programs. One is ANB033, a CD122 antagonist.
Mm-hmm.
It's being developed in Celiac Disease as well as EoE, phase I-B . We have Rosanilimab, which is a PD-1 depleter. We had positive phase II-B data in arthritis this past year, and currently we are assessing how best to move that program forward into phase III.
Mm-hmm.
We're meeting with the FDA this quarter, and we'll be looking for strategic or other financial capital to further finance the program, with an update in the Q2 . Last, we have ANB101, which is a BDCA-2 modulator in phase I-A . There's a proxy program being developed by Biogen, which is in phase III in SLE and CLE. I think we have best-in-class programs across all three, those antibodies. Excited to get that second company up and running in the next month.
Great. I think, you know, we've sort of heard both sides of the debate about sort of separating a company where, you know, whether you have the ability to self-fund or to be able to kind of unlock value, if you will, for the two individual entities. Maybe just go over sort of the rationale for now being the right time to be able to separate those two businesses.
Yeah. I mean, I think we've had a great response from the separation.
Yeah.
Well, we will have two very different businesses in the end. You know, one is a financial instrument that, you know, again, with what we're leaving behind at Anaptys will be very high, EBIT margin in the mid-high 90% range.
Mm-hmm.
Less than 10 FTEs or contractors, less than $10 million OpEx a year. You know, on the top line with the royalties, you know, just with the lead program with Jemperli out of GSK, last year Jemperli did on a run rate coming into this calendar year, $1.4 billion of revenue. It translated into approximately $100 million of royalties for us, and that is a very fast-growing, mid-teens, quarter-over-quarter growth asset. That's getting very big quickly, just from the monotherapy development that's
Mm-hmm.
Ongoing there and the approval already in endometrial cancer. That's really exciting and very different type of investor that's looking for profitability and high EBIT profile. It's really a proxy of the high growth vertical at GSK, which overall is a neutral growing big pharma.
Mm-hmm.
Very different and unique in what we're creating relative to the biopharma business, which is, you know, pretty typical in terms of the shape and size. When we split out, almost every employee will be transferred over to the new business. Our labs will be transferred over along with the assets.
Mm-hmm.
We will fund that company off our balance sheet out of the gate. We'll have cash through milestones being driven by Celiac and EoE disease into next year.
Yeah. Great.
Minimally.
Yeah. Got it. You know, you talked about sort of, you know, allocating capital obviously across the pipelines for First Tracks Biotherapeutics. I'm assuming ANB033 is gonna sort of take the bulk of that. I mean, maybe kind of talk through sort of how you're thinking about capital allocation?
Yeah.
in the new business.
Yeah. We hit $310 million coming into the year, which is approximately $10 a share.
Mm-hmm.
On AnaptysBio share counts, a large portion of that will move into the biopharma business. You know, as I was saying earlier, the AnaptysBio company on an OpEx basis, it does not need a lot of cash to get through cash flow positivity. It'll be GAAP positive right out of the gate. We project cash flow positive when we pay down non-recourse debt with Sagard, which we expect to be into mid-2027. It doesn't need a lot of cash. The biopharma business does need capital. More specifically, $100 million will put us into Q3 of 2027.
Mm-hmm.
$200 million will put us into the back half of 2028, fully funded, which is dominantly ANB033.
Mm-hmm.
We have a choice to make, which we'll make over the next month, of where within that range off the balance sheet we look to capitalize. Any capital that we do not put into First Tracks will remain behind, it'll be available for return of capital to shareholders and out of the gate, potentially things like share buybacks.
Got it. Maybe shift gears to ANB033. Obviously a product candidate that you're excited about. First, maybe the design strategy for celiac disease, which we'll have obviously an update in the second half of this year, how it's sort of different from what others have done and we'll just take it from there.
Yeah. ANB033, like I mentioned, is a CD122 antagonist. It blocks the signaling of IL-2 and IL-15, which are two pathways that target inflammation within celiac disease. Gluten is digested, the byproduct gliadin is picked up. It's the antigen in this disease. It's picked up by APCs that are then presented to TH1-
Mm-hmm.
CD4 cells. You see a release of IL-2 and instigates the inflammatory cycle. We're hitting that pathway directly by blocking the activation and proliferation of the CD4 T cells. We're also blocking IELs, which are very similar in phenotype to CD8s, and they survive off of IL-15. By blocking that signaling, you see a reduction in IELs. We're hitting both sides of it.
Mm-hmm.
In order to test the hypothesis, we've taken a very creative design of phase I-B . It's traditional to see patients who are very well controlled, that have celiac disease, treated with a gluten challenge or targeted with a gluten challenge. You're inducing damage or mucosal injury in patients who don't see it otherwise. We measure that via histology look of the destruction of the villi, measured by VHCD, villous height-to-crypt depth ratio.
Mm-hmm.
These patients start with a higher VHCD. We're giving them drug versus placebo, one-to-one randomization at subcutaneous at baseline, week zero, week two, week four.
Mm-hmm.
For 14 days, they're ingesting gluten. Now it's week six, we're doing a scope. If you take in the placebo, the gluten will induce that damage. You should see a deterioration of VHCD. On drug, you'll see something more neutralized in terms of the impact, and we're looking for statistically significant difference between placebo and drug at week six on those biopsy results relative to baseline. The second thing we're looking at is severity and frequency increase of symptoms for patients that were on placebo relative to drug. We're looking to prevent symptoms.
Right.
This trial design is relatively standard. You see it typically with all celiac drugs in phase I-B .
Mm-hmm.
The second cohort that we're assessing is patients who show up thinking they're well controlled, but via the biopsy results, we're finding that their VHCD is less than or equal to two, meaning that their villi is showing signs of mucosal injury. It would be unethical to give them gluten.
Right.
Instead in this cohort, one-to-one randomization again versus placebo, giving subcutaneous drug at baseline week two and week four. Instead of administering gluten, we're waiting till week 12, so eight weeks later off drug, to assess if there's been healing. Is there improvement on VHCD on drug relative to placebo?
Hmm.
This patient population is more representative of the commercially viable population for patients with Celiac disease.
Mm-hmm.
The difference here, these patients have mild symptoms. Whereas in a phase II-B , you would be assessing patients with mild, moderate, and severe patients.
Mm-hmm.
It's a good proxy to show that we're driving at targeting the inflammatory pathways and inducing improvement via the histology assessment. In this population or in this cohort, we are not expecting or putting a prerequisite for ourselves-
Mm-hmm.
That we need to see statistically significant results versus placebo. It's exploratory. We're looking for numerical trend on VHCD. No one's done this before with this cohort.
Right.
It's an exceptional additional piece of information that we'll have to then go off and design a more robust phase II-B that should be further de-risked than we would typically see from just a gluten challenge and the information there.
Got it. With that information from the two cohorts, what would the phase II look like? Would you sort of design maybe two separate trials? Would you ultimately find sort of some way to kind of measure and include sort of both cohorts of patients in a phase I-B ? How would you think about that?
Yeah. There is draft FDA guidance on the primary endpoints.
Mm-hmm.
I've now spoken to both of them. You need a histology outcome, which VHCD would the ratio there and the change of ratio there would qualify, and you need a PRO.
Mm-hmm.
The PRO that we're assessing is the celiac disease symptom diary. It measures frequency and severity of symptoms over time. Again, statistically significant results in the phase I-B in the gluten challenge on both of those that we're assessing. In the second cohort, we're looking at only VHCD numerical score. We're also capturing symptoms, but I'm not sure what we're going to see since patients present feeling better controlled.
Yeah.
-than the typical population. So we know what the primary endpoints would be. The difference is we have a three month trial in that second cohort. We'd be looking more at six month, one year long plus endpoints, in a much larger trial. We'll probably look at multiple doses. We're looking at one dose in the phase I. It's to be determined how phase II-B into phase III looks like. We'll generate the data, this year. We should have results from the phase I-B in Q4 of this year, and then we'll go speak with the FDA on how to move forward in the fastest way possible.
Got it. Sort of on the competitive landscape, on one end, sort of you've had data from competitors. I think that ultimately gave people more confidence around the mechanism. Inevitably the question around differentiation will come up. How are you thinking about sort of the competitive landscape here for ANB033 relative to what we've seen from others?
Yeah. You know, like I think there's encouraging signals that targeting one or both of these inflammatory pathways can drive meaningful results for patients.
Mm-hmm.
There's three other programs that are in the IL-15/CD122 pathway right now that have proof of concept in celiac disease specifically. Teva and Novartis have IL-15 blockers.
Mm-hmm.
Now, that's only gonna hit one side of the two inflammatory pathways in this disease. There is another CD122 program that had positive trending phase I-B results. The Teva program should have data from their phase II-B as a gluten challenge later this year, as well as the CD122 competitor with phase II-B gluten challenge data later this year.
Mm-hmm.
Again, the distinction here is the gluten challenge. There will be read-throughs, not just from the phase I-B data that exists from these competitors, but also from phase II-B , which will be longer tenured trials beyond three months, but also only in gluten challenge. I think we'll be generating something very different with that second cohort.
Mm-hmm.
I described earlier how the mechanism of action at a high level works with the CD122 antagonists. We have a subcutaneous format that is very potent. It's based off the combination of the affinity and the epitope at which we bind onto CD122, which on CD8 and CD4 cells, the way this works is there's a dimeric or trimeric receptor. You're targeting one of those receptors, but based on where we are in the epitope, we think we have distinguished signal blocking of IL-2.
Mm-hmm
which is really bound directly to CD25, which is part of that trimeric receptor on CD4 cells.
Right.
There's differences between the drugs. We think we potentially have something that's more potent, and like I said, the administration profile is differentiated. Excited about what we have. I think when you look on paper in a year, we're all more or less on the same place in celiac disease and development timelines. However, we have that additional information.
Yeah
from that second cohort, which I think gives us a distinct advantage as we think about moving and de-risking phase II-B .
Right. Obviously, celiac disease is just the tip of the iceberg here with ANB033. If you can maybe talk about EoE, the opportunity there, and then sort of, you know, what we can expect next from that program.
Yeah. We're, you know, excited about the second trial. It's just initiating EoE right now. We'll have data in 2027. It's a 50 patient trial, one-to-one randomization, and we're looking at, again, two distinct endpoints that we are powered for, which are also the co-primary endpoints in phase II-B, phase III trials in this disease. There's a histology look. It's really actually measuring a cell type that gets infiltrated in this disease, called eosinophils. We're looking to target the inflammatory pathways and block eosinophils from being recruited into the inflammatory environment. The second is our PRO. This one's called DSQ. We're powered to assess statistical significance versus placebo on both of those endpoints. EoE is. It's different than celiac in that we're going to be able to show in this trial that we're targeting TH2 CD4 cells as well as ILC2s.
Mm-hmm.
The reason I bring this up, that's one side of the inflammatory cascade. This is the side that Dupixent targets, which is the only approved therapeutic in EoE.
Mm-hmm.
We've shown preclinically through an Aspergillus, eosinophil-induced model, the reduction or prevention of TH2 proliferation and ILC2 increases, and we've shown this on the cell types as well as other biomarkers, that you would tend to see. What's important about that is just by targeting that pathway as well as CD8s.
Mm-hmm
We are upstream from those eosinophils, and we're preventing their increase. We don't target them directly. I think that's one of the key differences, and it's one of the key differences with Dupixent, which is the only other drug that's shown to be effective in this disease, is that drugs that have targeted eosinophils directly downstream or other proxies of that, you might be able to prevent eosinophil influx, but you're not actually treating the inflammatory pathways of the disease. There has been failure in this space.
Mm-hmm
We're taking a very different approach by hitting the TH2 ILC2 side.
Right
... as well as the CD8 side. There is proof of concept here. Novartis' IL-15, the precursor company that they acquired, CALYPSO, did run a small EoE phase I-B in just targeting CD8 cells, again, not eosinophils upstream.
Right.
In that study, they showed a prevention of eosinophil recruitment and a reduction or prevention of symptoms getting worse, by treating that disease. There's a proof of concept surrogate in humans from treating that, just that one side of the pathway. We're doing both with a CD122 antagonist. The opportunity here is Dupixent is only effective or modestly effective in 60%+ of patients. The other 30%+, you do see an increase in IL-15. We actually think we have a potential solution in here for all patients, and we will be recruiting patients who are both Dupixent-experienced and Dupixent-naive.
Hmm.
Excited about the other, opportunity here, different than celiac, and if we're successful, it will open up the pathway to many other diseases. This landscape has, across the competitors I've already mentioned, there are folks focused in atopic dermatitis, vitiligo, alopecia. Teva's talking about EoE as well as a potential additional indication.
Hmm.
A number of places that folks already are playing, plus expansion opportunities for us or maybe others in the future. A lot of data coming out across the landscape over the next 12 months in celiac disease and the other diseases I mentioned.
Got it. Yeah, actually to that point. We'll see because the devil's in the details, but you know, one of the competitors has vitiligo data this half, alopecia data sometime in 2026. Does failure read through in those specific indications read through to ANB033's mechanisms given sort of the differentiation there, or do we still see sort of a viable opportunity because of what you've seen preclinically for those other indications?
Yeah. Look, I mentioned very specifically there's human proof of concept that's positive in celiac disease.
Mm-hmm.
I think these are all different diseases.
Mm-hmm.
We are not running any trial in vitiligo. We're gonna wait and watch and look at the results. I think there's a very good thesis for targeting CD8 cells that are present in the setting of vitiligo. It could be a great target for just an IL-15 that doesn't have the power of blocking IL-2 as well or, and the IL-15 signal on multiple different types of cells. You know, we're looking at those results, obviously.
Mm-hmm.
Vitiligo is a potential third, fourth, fifth indication for us, and if we see success in the field, once we get our own data in the two diseases that we're focused on, I think there's a big opportunity to expand in other phase II diseases, and it could include markets like vitiligo.
Got it. I think you've sort of been impassioned in sort of diseases like type 1 diabetes as well as a potential opportunity. Just quickly the rationale there, just sort of given the size of that opportunity relative to, you know, all, I guess the other indications that that could certainly be attractive.
We have not said publicly that it's a disease that we're looking at, you know, explicitly. It's one of the target diseases that is rational given the influx of CD8 cells and the impact it makes on these beta producing-
Yeah.
cells in the disease. I think, like, it's another thing that we will be assessing through the course of this year into next year, but I'm not gonna get into more details. I don't wanna sit here and speculate right now on which diseases we'll be pursuing, but there are multiple options for us for third, fourth, and fifth. I mentioned different capital needs for the company. The $200 million that brings us in the back half of 2028 does include expansion to at least a third or fourth indication beyond moving celiac and EoE into phase II.
Got it. Great. Then sort of back to the royalty business for a couple of questions. You know, obviously Jemperli, you know, significant grower for that business. You know, Vanda could come online with their royalty stream by the end of the year. Other revenue opportunities that you see or could consider that could be sort of valuable for shareholders from that business?
Specifically the business model here, and you could tell by the minimis infrastructure we're looking to put in, is to protect and return the value from the royalties we already have from the Anaptys platform. We're not looking to expand in with other drugs. That said, Jemperli is growing in the mid-teens quarter-over-quarter off that $1.4 billion run rate. GSK has guided to far north of GBP 2 billion, which is $2.7 billion. We believe that that's achievable as early as 2029, which results in, you know, very close to $400 million of royalties given the royalty stack here goes from 8% to 12% to 20% to 25% through all those tiered tiers under that target number set by GSK.
It's important to note that GSK is on record from now multiple years ago, and has repeated over time, just success in endometrial cancer, which is where they're currently approved, with an overall survival, data package that's differentiated from Keytruda, which does not have overall survival data. The second indication is rectal cancer, which they have announced later this year there will be pivotal results available. As a proxy for that, in phase II, they showed a 100% ORR, which is unprecedented. We're excited and have high expectations there. Those two diseases alone, GSK has said, would get to those peak sales numbers of $2.7 billion.
Mm-hmm.
We should also see data, the primary completion in a phase II trial in pMMR colon cancers is scheduled to be this year. There's two additional pivotal trials going on in dMMR colon cancer, where there's phase II proof of concept, and head and neck cancer, where there's proxy read-throughs from Keytruda. What's interesting here, and you think about the growth over time, is we have at least a decade to go of composition of matter in the U.S., then a year later in Europe, and into 2037 in Japan. There's a lot of IP left within the program. GSK, on a monotherapy basis, is competing in spaces where Keytruda doesn't have data or is not being developed. We feel very well-protected here when you look over the horizon relative to what's gonna be going on with the Keytruda franchise with Merck.
I think in the short term, there will continue to be a lot of growth for monotherapy development. In the mid to long term, there's a huge, huge opportunity. It's just this year it's gone from the 20th largest drug in the company. This year it's projected by consensus to be the 6th largest. Consensus is really shown to be laggard here.
Mm-hmm.
Backward-looking, about a third of the analysts are showing negative growth this quarter. It's not a good proxy for value, but just give a good reference point of just how important this drug is to GSK's overall business.
Mm-hmm.
It's the largest oncology program in the company, but it's the fastest growing drug, over $1 billion of sales times three.
Right. Yeah.
Really important to the future of, I think, GSK's franchise, which gives us a lot of confidence here to anchor the royalty business around the Jemperli royalty. Like I mentioned earlier, imsidolimab has a PDUFA December 12, looking for approval in GPP, generalized pustular psoriasis. It's best in class IL-36 receptor antagonist. We should exit this year with two commercial stage royalties.
Mm-hmm.
I'm excited.
Great. We're up on our time. Daniel Faga, thank you so much for your time this morning. And thank you for our listeners, and we'll be back for our next session. Thank you.
All right. Thanks, everyone.