Hi, my name's Akash Tewari. I head our pharma and biotech research efforts at Jefferies. I have the pleasure of hosting the Apogee management team. Michael, why don't I hand it off to you to give some introductory remarks, and then we'll get started with Q&A?
Thank you. Also thank you for the exceptionally bright light.
I know. It's flashy.
It's very nice.
Yeah.
I won't stay awake. Thank you all for coming. Thank you for the opportunity. At Apogee, we're developing zumilokibart as our lead program for Type 2 inflammatory diseases. We recently released data from our phase II-B showing that with four dosing days during induction, we get to very competitive efficacy in atopic dermatitis. Earlier this year, we showed that with every three- six-month dosing, after that, we can not only maintain efficacy in patients but also lead to improved responses over time. We're very excited about this as we, and many physicians that we speak with, feel that this could be the next exciting launch in frontline atopic dermatitis. We also announced plans for asthma and EoE, eosinophilic esophagitis. We believe we have full pipeline and product potential for Zumi, launching later this decade, and a mega blockbuster in the works.
We're kicking off phase III later this year. We're fortunate to have also announced, in addition to our robust balance sheet, that we did a $1.3 billion financing with Blackstone, a collaboration that gives us cash through launch and even commercialization and profitability. Headed into phase III without a financing overhang and a very exciting drug on our hands. Co-formulations of fixed-dose combinations, including OX40 ligand and TSLP coming behind that, could expand patient populations and further raise the bar on efficacy. Very exciting time for us. Yeah, excited to dig in.
Understood. We should maybe start with that Blackstone partnership, because again, I do think it's quite unique to have that type of an announcement co-current with a data release, and then also for an asset that is still in clinical development. Jane, I'd love to get your perspective. We've seen deals that have been done with this kind of royalty private equity partnership in the past. One of the things your team's been insistent about is there are unique attributes about this deal that investors may not be paying enough attention to. Can you highlight what are the big takeaways in terms of why this deal is actually different than what we've seen historically?
Yeah. Please, Jane.
Yeah. First of all, the largest pre-phase III deal. It does reflect the conviction that Blackstone has in Zumi. As we were negotiating the transaction with them, three things were important to us to optimize the deal. One was the quantum of capital, making sure we had access to capital that would take us not only through commercialization but also profitability. That quantum of capital also means we have no need for equity. The other piece was the cost of capital, negotiating royalty rates, negotiating rates that would go down with sales, as well as having the flexibility of how much capital to take down. Third, the strategic optionality. Creatively working with Blackstone to have a strategic, if appropriate in the future, ability to buy down the royalty to a very low single-digit royalty rate. Those three pieces, in addition to features that were also unique.
There are no onerous governance features here. There is, again, quite a bit of conviction from the team, not only in Zumi but also in the track record and execution of the Apogee team. All in all, as you add up all of those features and are now going into phase III with no financing overhang, it was almost a no-brainer for us to do this deal now.
Understood. I know obviously Blackstone was here, they can go over their deal assumptions, but I think when we've talked to people in the field, usually you'll use a 20% IRR. You'll think about time to break even, not 12 years; maybe let's say five or seven years. When you, let's say, use some of those inputs, the implied valuation and peak sales opportunity for Zumi is in that $7 million + range. I know , obviously, they're not here to speak. Is that ballpark the right way to think about that? When you think about the discussions, was it primarily on first-line atopic dermatitis, or how much of it was the broader opportunity?
Not to speak for them, but I think typically, what is underwritten is the drug that's in phase III late-stage development in the indication it's in. I think it really speaks to the fact that they quickly, along with us, were able to look at our data, speak to physicians, and get conviction that Zumi and atopic derm would be the frontline drug in that $10 billion+ ballpark. Expansions, combinations, or additional value beyond that, which, given how it's structured, similarly to RevMed, actually, the better the drug does, royalties actually cap out after that $8 billion mark. Just very similar to RevMed. Even as the drug adds on value, the blended rate effectively goes down, which is nice.
Understood.
Yeah, I think to your point, last week, my favorite question always from equity investors is Why didn't your stock go up more on good data? I think that there was a lot of Oh, well, this must take strategic optionality off the table right now, but I think people were missing that RevMed also went down when they announced their deal, and I think they're up quite a bit since then.
I mean, I think maybe to that point, again, that perception that, hey, you did this royalty financing, ergo the strategic value has changed in one meaningful way or not. We've seen precedents of this in the past, when you can go into strategic discussions, both with external partners or something more broad, having the ability to say, Look, we don't have dilution risk," versus previously we did. How does that change your, I think, bargaining position?
I think I'm hard to comment on too much, aside from.
Yeah
You always want to be in a position of strength, not weakness, in any sort of discussion. I think that we've set ourselves up quite well to have a clear independent path to launch this drug if that's the optimal path before us. Of course, our goal is to get this to as many patients as possible. Someone with a lower cost of capital that can do our combo development and maybe even other expansions in a more accelerated fashion than us could do that. Right? $2.6 billion on the balance sheet is sufficient for a lot, but there is still more that could be done with our collection of assets. We are a public company with a responsibility to shareholders.
we'll act in those interests. I think we're set up quite well now for the future in a variety of paths.
Understood. Maybe lastly, and this is more of a niche question, but one attribute is there is kind of a 180-day clause with that agreement you had with Blackstone that I don't think is well understood by investors. Can you talk a bit about what that is and then why that was put into the agreement?
Yeah. We looked at various timelines and, of course, leading into phase III. Deals are often done leading up to phase III or post -phase III data. It was important to us to also have a favorable term around the next 180 days, recognizing, one, the money that went in from Blackstone and the appropriate return to them. Of course, over time, as more tranches came in, a strategist could do on the buy-down option. It was very favorable to us to have the overall clause, but in particular this first 180-day time period.
That is, of signing the agreement?
Correct. From signing of the agreement.
Understood. Now, Jeff, I want to get you into this discussion and thinking about, really, this is one of the things your team's been insistent on, is Zumi is a first-line atopic dermatitis drug. Can you hit on really why SKYRIZI, what happened there, and why they were able to get such broad uptake relatively quickly in a very competitive market? Again, you have unique insight on this. What is the difference between, let's say, a drug that is 75% adherent at year one versus one that's 95% adherent when you think about payer economics?
Thanks for the question, Akash. When you look at SKYRIZI's launch, they launched into, I would say, a much more competitive market of plaque psoriasis from a biologic perspective versus what we'll be launching into in AD. If you look at efficacy, you could argue that it's fairly similar to the IL-17s, right? When you look at that launch curve, and it's not just the launch curve, but it's also the extended success that they've had, it's really about meeting patients and physicians where they needed support in their disease state, which is that extended dose option. Even with similar efficacy and similar safety, the every three-month dose, you've seen that quick uptake. Your question is really important around compliance and persistency.
For example, Dupixent in the first year has about a 73% persistency rate. By the end of the second year, about half of the patients discontinue. Versus comparing that to an extended dose option like Skyrizi in plaque psoriasis, that first year is a 95% persistency rate. That matters for a number of reasons. I think first and foremost, it matters because the product is going to do what it's meant to do if it's taken appropriately. You're going to have less office visits, less polypharmacy, or additional products like topicals added on, but you're also going to have less switching. Switching matters from a payer perspective because every time a patient switches, that patient then goes back into another product in induction, which is the first year, which is the most costly. Payers really do care about keeping patients on product.
I think lastly, for the first line, zumilokibart is the perfect first-line product. If you look in AD right now, yes, Dupixent has first-line access, meaning just after topicals, but so does NEMLUVIO, so does Ebglyss, so does ADBRY. We absolutely expect first-line access. If you look at first-line access following topicals, a patient is much more likely to move to a product like zumilokibart that has four dosing days in induction versus nine for others, and then just two to four dosing days throughout the year in maintenance. They're much more likely to start on Zumi than a product that's dosed every two weeks like Dupixent.
Understood. Now, Carl, a question for you, and I think one of the things that I've sensed with your team is when you're thinking about the development of your portfolio across the board, you've been very prudent about answering the scientific question. Right. Not necessarily saying, You know what? We've seen this signal, we've done some subgroup analysis. Here's what we hope. It's like, No, here's our trials.It seems like you're behaving very much like a pharma company. If they were running this program, this is what they would be doing. I think that also matters as we think about your Respiratory Development Program. Really, my question is, because you've got different agencies of the FDA that approved Dupixent.
When you think about skin conditions versus pulmonary conditions, or even more broadly, now that you have data in AD, what indications do you unlock where you can say I feel pretty comfortable that in phase III I can take this exact Zumi dose into another indication?" Why that may not actually be the case in, let's say, asthma or COPD, and why you really want to run dose-finding trials.
Yeah. Great question. I'll touch on multiple things here. One, I think that just in terms of our process overall, I think we always start with a blank slate. I think while some of the things we're doing might look traditional, meaning we do dose range finding, we've done that in AD, and we want to do that in other indications. I think that we're always trying to start with the question of how to optimize our path forward, and that includes two things. Timelines is obviously part of that, but also getting to the right dose to maximize efficacy is part of that. I think that probably no one would be happy with us if we shaved six months off our timeline but took forward a subpar drug, right? We always want to think about that as well too.
When we've looked at that, we've always seen that doing a dose optimization study and then doing a single dose in phase III is actually a timeline advantage, as well as having that benefit of giving us the ability to maximize efficacy. I think we've seen that with the Part B data here in AD, that had we just jumped into phase IIIs, we would've done one of two things, right? Gone with a dose that was not friendly in terms of injection burden and not benefiting patients and potentially leading to things we didn't want, right, with more injections, less differentiation or competition, or we would've underdosed it and not tapped into this additional efficacy that we're seeing in AD, right, with 65% EASI 75, over 40% placebo-adjusted, and both EASI 90 and IGA 0/1, mid-40s for top-line data and mid-30s for placebo-adjusted.
I'm happy we didn't miss out on those things.
Yeah
overall. That would be my first point. We always are looking at what's the best path, and we want to make sure we're advantaging timelines, but not disadvantaging efficacy. On the second point, how we think about it a little, to your point, we're doing a variety of indications across a variety of divisions of the FDA. Really what we've seen historically is that they want to see dose ranging within that therapeutic area because different endpoints and different trajectories for patients mean that the same dose may or may not hold across this. For derm, I think we know where we are right now in terms of the optimized dose, and that unlocks additional derm indications for us where we wouldn't plan on repeating dose range finding. That could be things like PN, BP.
CSU, right, which are now open there. How those fall and what is important to us, I think Jeff can probably answer more in terms of what our descending list is based on potential value for Zumi long term and unmet need overall. Second, we think about the same thing for a different TA.
RESPI would be our next one. We want to do proper dose range finding with asthma before opening up to other indications. Once we get that dose there, that'll open us up for things like COPD, potentially allergic rhinitis like Librela is doing right now, potentially for chronic rhinosinusitis with nasal polyps, and then similar for GI too. We're thinking about that in each of them, maximizing the efficacy by therapeutic area and then expanding to potentially multiple indications where we won't repeat that dose range finding.
Right. Understood. I think maybe to that point, just to set expectations on the RESPI side, because obviously in parallel you're moving the TSLP. If I were to think, okay, there's a potential biomarker agnostic or at least a 150 cutoff in asthma and COPD, when does that combo get announced for Apogee? The realistic expectation is that's probably going to be a 2028 event where you're going to get enough data in-house to feel comfortable about your doses of those two targets and then move that forward. Is that the right expectation?
Yeah, I think we will announce plans for the combination later this year. Exact timing of that start, obviously it won't be this year since.
Yeah
we'll just be announcing plans. Whether that's 2027 or 2028, I think more is to come on that. I think before we do, we think we'll have the optionality to do more proof of concept trials where we might not need the optimized dose, right? You can think about how we moved forward with APG279 in terms of the properties there where we didn't have our optimized dose yet, but we still felt comfortable moving into the combination trial.
Yeah
be beneficial or not. I think we could think of that before we do the big phase II- Bs, et cetera, right? We would want to know what's happening with the monotherapy, at least for the backbone agent, which we see Zumi as the backbone agent here.
Understood. Maybe hitting on APG279. I don't want to spend too much time, but it does seem like the bar is going to be high for your team internally to move that forward. I think probably investor expectations are appropriately low. I just want to make sure we have that well-defined, which is what do you want to see from weeks 16 - 24, and what endpoints in order to justify moving forward with that in a phase III trial?
For APG279, it's our IL-13 OX40 ligand fixed-dose combo. Currently being run head-to-head versus Dupixent, an about 86-patient trial, randomized one-to-one. We've always said that the better that Zumi performs in atopic derm, the higher the bar for that combo. Versus when we talk to docs, a 10-point delta is what they want to see. I think that would imply a 15-20-point delta versus Dupixent in that study to get us a conviction that we should allocate additional capital. If it does that, it'll be profound efficacy and very exciting for the field. It could be the second-line drug of choice, where currently there's only JAKs, and this would mean a JAK-like profile without all the safety liabilities. Obviously a high bar, we'd be excited to hit that and allocate capital, and we'll know if it doesn't hit that.
Okay. Understood. I think maybe just stepping back and thinking about RESPI. Obviously, I think if OX40 didn't have some of the safety issues, I think this would also be a different discussion too. When we think about the chances that Apogee is going to move forward with a combination approach in RESPI, looking at the data you've seen so far, Carl, what's your base case assumption that you will need that TSLP IL-13 combination to get a biomarker agnostic kind of label? Is the take maybe actually that shouldn't be the base case, that it's possible, but we don't have enough evidence right now to really suggest that?
I think we're still trying to learn more about the combination. What I'd say is for zumilokibart monotherapy in RESPI, especially in asthma and potentially eventually COPD, we really expect that to be an enriched population for T2-ness. I'll use Eos greater than 150 as a marker of T2-ness. We think that's really important in terms of having a monotherapy program there, and designing that trial to be successful. I think contrast that with our belief in what the combination could do, so Zumi plus APG333, which is our extended half-life TSLP. There we think the benefit is potentially across the whole population, the true unmet need in asthma right now is that less than 150 Eos population. While tezepelumab works there, it definitely does not work as well as it does in eosinophils greater than 150.
We have seen data from both Dupixent and Ebglyss that there is some signal in that less than 150 Eos. It's even weaker than TSLP, but that's the area that we see the highest unmet need and the potential for the combination to broaden the patient population from what we want to do with Zumi alone.
Understood. When you think about designing that kind of phase II for both the IL-13 and then the TSLP, I think one of the things that stood out to me is a lot of the pharmas that ran those trials, those phase IIs failed. They went for more than they could chew, or they just weren't appropriately powered. I think both of those are interesting questions. A, when we think about enriching for T2-ness with the IL-13, I'm thinking 150 and then maybe a certain amount that had prior exacerbations. Is that the right way to think about how that phase II study would go? When we think about your TSLP, what's the right subgroup? You're probably going to want some data in the less than 150, right? How do you think about designing that trial as well?
Yeah. Great question. I think the history, especially of IL-13 and asthma, is one of being maybe overly seduced by a broad and ill-defined patient population.
Yeah
which we've seen happen not just in asthma, we've seen that happen in many other disease areas too. Our eventual goal for Zumi is to be similar there in terms of efficacy and labeling for Dupixent, which eventually they did a couple different varieties of studies, but eventually was essentially EOs 150 or greater. The label itself just says eosinophilic subtype. Every drug that has that on their label has used slightly different cutoffs too. There's maybe some flexibility.
Yeah
what the cutoff means. That would be the goal there. For the combination, I think how we think about that is we want data across the entire spectrum, but really to see a signal in the subpopulation of Eos zero to 150 too. In terms of eventual trial design, we would want to make sure we're testing it across the whole population, maybe with a little more of a focus on Eos zero to 150. I'd say I think that will be an easier population to enroll because they have less available therapies for them too.
Yeah.
We'll probably naturally, if you open up to an Eos agnostic trial, you probably just will skew towards that patient population in general based on availability of treatments.
Understood. When we think about, and this I'll need Carl and Jane's help here, size of those trials, could the TSLP study be materially bigger than the IL-13 because you're enrolling a broader population? What are really timelines for those phase II studies getting enrolled and then ultimate announcement here?
Yeah. For the combination, I think that what we'll want is making sure we have enough data in the subpopulations, and I would say that broadly again is Eos less than 150, Eos greater than 150. I don't know if Jane, you want to comment on anything else?
Yeah, maybe cost associated there.
Yeah. When we think about a cost for a phase II global trial, it would be about $250,000 per patient. As Carl said, we're expecting that that trial size would be larger. Could be up to about 50% larger. More to come as we disclose the plans for that combo the second half of this year.
Okay. Understood. Michael, maybe heading to you. There's a lot of moving parts here. You have multiple phase III studies that you're initiating. On top of that, there's a very in-depth program that you have to do to develop Zumi and your other programs into these RESPI indications. Do you feel like you're hitting a rate-limiting step in terms of the size of your organization, of actually making sure all these things are done in time with the appropriate integrity, also making sure you're moving with this speed? Again, we talked about this yesterday, there is at least an investor expectation that our friends at Regeneron and Sanofi do ultimately move forward with an IL-13 that will be competing with your program. Right? How do you balance getting it right versus making sure you're moving quickly here?
Yeah. I think we're fortunate that we have a lot of highly NPV positive things that we can do in front of us. Priorities: atopic derm approval for Zumi followed by the expansions. I think we're quite well-resourced, not only on the capital front but also on the people front to do that. Right? The nice thing about the program is that we've always had strong belief that we know IL-13 works. It should be quite safe, it should be quite effective. It's been less of a, not a will we get to phase III.
It's when will we get there? We've always invested at risk, right? Think be it on the people front, the CMC front, the CRO front. I think that we wake up and go to sleep worried about how we get approved in that indication as quickly as possible, and then with separate teams that we've also built now, how we get approved in asthma and EoE. I think, right, it is important that we build parallel efforts to go after these so that we don't lose focus. I think other companies that are talking about entering the space, I am confident that we care much more deeply and are much more focused on this than they are because they have many more things that they're working on. This is all that we do.
Beyond that, for combos, I think that IL-13 TSLP, that comes after the prioritization on Zumi monotherapy efforts.
So that's-
Yeah. Go ahead
I think your answer is quite nuanced, and I think it's important because even when you introduce Apogee now, you say, "We're a company that is developing Zumi in Type 2 indications." I feel like there is this kind of divergence of the de-risking that you have in the story in atopic dermatitis and the size of that market, and then the long-term development you're going to have in these other indications. I feel like that also plays into how both the company's viewed strategically. I'll give you an interesting question, and I've asked this to Cam at Spyre too, which was your peer, Mark, and where he was with Prometheus, where he had a compelling phase II data set, and it didn't wait until phase III to look at strategic optionality because there was a sense like, hey, target's exciting enough.
Maybe it's biomarker driven, maybe it's not, but we've de-risked something big earlier than we've traditionally seen. We've seen that across the board with pharma, where the deals are getting bigger and they're earlier stage, because there does seem to be an increased appetite. Do you feel like you have a similar kind of framework investors saw with Prometheus with Apogee here, where again, there's been maybe quicker de-risking of a substantial part of the story than a traditional biotech?
I think, obviously we're biased, right? We all love what we work on. I think the Blackstone deal shows that, right, especially without any kind of debt-like obligations, as Jane alluded to. Right? Very high degree of belief from us and others that this is going to be a very large drug by the end of this decade launching. That's pretty rare for biotechs. We've seen biotechs like that are, right, obviously that marked it quite well, and found a great partner that could accelerate advancement across a number of indications. They go into phase III and they launch a drug, and they start to reach escape velocity, and they quickly accrue value. I think either are really great options ahead of us, and we're set up well to get this drug to a lot of patients, which is the most important thing.
Understood. Maybe just lastly, when we think about really this broader M&A environment, it is something we've heard. I had Robert from Cytokinetics, we've heard this even. You talk to Gilead; they say, This is a unique M&A environment where discussions are more productive, they move faster, and the sets of companies that you can have discussions with are just different." I know obviously there's limited disclosure you can give here. What do you feel like is unique about this environment and also maybe this FTC that investors aren't appreciating?
Yeah. I think it's hard to comment too much except that there are very few kind of independent biotechs that are phase III with drugs that are consensus going to be $5 billion, $10 billion +. Many of those have been taken off the board, or they are at a valuation range that makes it hard, but a very different range than where we are right now.
Understood. We're out of time, but I really do appreciate the conversation, and thanks so much for joining us, everyone.
Thank you.