Awesome. Thank you very much for joining us today. My name is Mohit Bansal. I am one of the biotech and pharma analysts here at Wells Fargo, and I am joined by Shattuck Labs. With us today, we have Taylor, and we have Andrew with us, CEO and CFO of the company. Thank you very much for joining us today.
Thank you, Mohit.
Thank you for having us.
Great. A lot of excitement in Shattuck lately, as you are turning into an IBD company a little bit. Let us talk a little bit about the story right now. What is the investment case, and what are the company's core pipeline assets that investors should care about right now?
Sure. Shattuck is these days entirely focused on blocking DR3, which is the sole receptor for TL1A. This is a very simple axis where you have a single ligand TL1A binding to a single receptor, DR3. We will get into this in a lot of detail, I know, but right now we are the sole company that is focused on blocking DR3. That comes with pretty significant advantages versus blocking TL1A related to immunogenicity and also target stability.
Got it. Let's just talk about DR3 a little bit more, because TL1A has been a hot topic since Prometheus days, and then there have been some deals as well there. You talk about DR3 being a more complete blocking of TL1A. Talk a little bit about that, and then what clinical evidence do you have so far to back that up?
Sure. The relative potential durability of axis blockade assertion relates to the fact that DR3 and TL1A have very different biology as proteins. DR3 is primarily expressed by circulating lymphocytes and also endothelial cells, and when a cell has undergone a fate decision where it has decided to turn on DR3, that cell never turns DR3 off again. It represents a stable target. TL1A, on the other hand, is not constitutively expressed. It is expressed by tissue-resident antigen-presenting cells, but only when those cells have been exposed to immune complexes or different toll-like receptor stimuli. When that happens, TL1A gets turned on and off in very short pulses. The implication of that is that when you are trying to block TL1A, you are chasing a moving target. When you are trying to block DR3, you are not.
Let's talk about the aspects of our existing data that might speak to this. When folks who have developed TL1A-blocking antibodies are trying to derive a pharmacodynamic marker that might help inform their dose, the way that they have gone about this is by measuring the magnitude by which the circulating concentration of TL1A goes up after treatment with an antibody. You can think about whether that is a good or a bad thing, but that is sort of separate from the logic I am walking through here. You are measuring whether you reach a maximal plateau in the amount of TL1A that is in circulation, right? That is not telling you what is happening within the tissue, and it is also not telling you whether the antibody is actually occupying all available TL1A.
When you are measuring whether we have achieved blockade of DR3, the way that we are doing that is using a TL1A binding assay. We are collecting samples from the subjects that are treated with our antibody, and we are measuring whether there is any ability of TL1A to bind a DR3-expressing cell. It is an assay that is much more directly speaking to the pharmacodynamics of the axis and is telling us not just that all cells are occupied with our antibody but there is no ability of TL1A to bind cells that have been bound by our antibody.
Got it. That's very helpful. One question that comes up a lot is that there's so much focus on TL1A development, but not so much on DR3. What is your secret sauce that you could do it while others could not do it?
Yeah. There's a couple of layers to why this might be the case.
Yeah.
Number one, until relatively recently with the tulisokibart positive data in ulcerative colitis, all we had for the axis was a failed trial of duvakitug in asthma. Right. There wasn't proof of concept for the axis until fairly recently. The other variable here is that when you're trying to build a TL1A-blocking antibody, all that antibody has to do is provide steric hindrance for the ligand blocking to the receptor, because TL1A itself doesn't signal.
Right.
When you're trying to build a DR3-blocking antibody, you have to have an antibody that binds an epitope which interferes with TL1A binding and that doesn't cause what's known as residual agonism for DR3.
Okay.
That is a significant challenge in picking a good antibody. Many of the antibodies that we moved through preclinical development, you get them into certain sensitive cell-based assays, and all of a sudden, an antibody that you thought was a blocker ends up having this residual agonist liability. SL-325, we were confident based on the preclinical data that it wasn't an agonist. That's why we put it into monkeys. Now we've proven that in humans.
What is the theoretical risk if there's an agonism for DR3? What could be the safety issue with that one?
You could exacerbate any inflammatory disease.
Got it.
That TL1A is driving.
Got it. Very helpful. The other question is ultimately IL-23 is this gold standard right now, so to speak. Still it causes only 30% or so endoscopic improvement, but those are the best drugs out there. How do you think DR3 targeting versus IL-23 in terms of could there be an efficacy advantage over even IL-23 as well? The prevailing wisdom as of now for TL1A is that it is probably a good combinatory agent rather than something that replaces IL-23.
Yeah.
How do you think about this argument?
You referenced 30%, and so this involves sort of thinking through on an intent to treat basis, what happens to the proportion and number of patients in clinical remission from induction to maintenance.
The TL1A class has stood out from the IL-23 class so far because it looks like it achieves a higher rate of clinical remission at induction than the IL-23s do. Let's just say IL-23s are roughly 15% placebo adjusted remission at induction. But then when the IL-23 class, what happens is that between induction and maintenance, you have about a doubling of the absolute number of patients in remission, right? So that's where it goes from 15% to 30% from induction to maintenance. IL-23 antibodies have fairly low rates of anti-drug antibodies.
Right.
When you look at the available data from induction to maintenance for tulisokibart, ofimitabart, and duvakitug, there is no numerical improvement in the number of patients in clinical remission from induction to maintenance.
Right.
On a percentage basis there is, but it turns out that that's due to dropouts in the denominator, not increased numbers of patients in the numerator.
Got it.
This is a phenomenon of re-randomization trial designs. Then you have to ask yourself, what evidence might there be that somebody treated with a TL1A or DR3 inhibitor should have improved efficacy from induction to maintenance? And where that comes from is the ARTEMIS-UC trial that was run for tulisokibart phase II study in UC, and that trial included a reinduction arm. So what they did there is they took the patients who were non-responders after the first three months of tulisokibart, and gave just those folks another three months of 1,000 milligrams of tulisokibart. And in that case, they converted the same proportion of patients into response as responded the first time around, yet the folks that achieved response the first time around in induction and then moved on to low dose maintenance response waned by 1/3 .
Okay.
Right? The only logical explanation for those two data points is that there is a higher probability of dosing through rising ADA titers when you keep folks on a continually high dose of antibody.
Right.
But that it also then proves that you should have a doubling of the absolute number of patients in remission from induction to maintenance.
Right.
You also might expect that because the TL1A DR3 axis is upstream of IL-23s, and so absent ADA, it should perform more like IL-23s. So what might that mean to get back to your original question, Let's say that it holds that the TL1A DR3 class achieves between 20%-25% placebo adjusted remission at induction, but then in the absence of ADA, that does double from induction to maintenance. That means you are going to be in the 40%-50% range of remission from induction to maintenance, which would beat the IL-23s.
Right.
Right? That is exactly what we believe SL-325 will achieve because of its low ADA rate.
Got it. Going back to this, if you keep the patient on the high dose to maintenance, we are not seeing doubling at least for tulisokibart, right? I mean, you are basically seeing same. What is your-.
Well, they haven't shared their phase III data yet.
Right.
What we have from their phase II data, all of the developers, is no accumulation on an ITT basis of patients in clinical remission from induction to maintenance.
Right.
This reinduction arm, where when you kept the initial non-responders on high dose tulisokibart, you converted about 40%-45% of those patients into remission, which would have doubled the overall number of-.
Got it.
Patients in remission.
Got it. So basically when you go from induction to maintenance, you go on lower dose, and you just increase the risk of ADA basically at that point.
Yeah.
Very helpful. So just talk about this ADA then, because at least with SL-325, we have seen very low rates of ADAs in phase I. So what is the biological rationale here that makes you comfortable that in bigger trials you will probably see a low rate as well here?
Yeah. The high rates of ADA that are seen with all of the anti-TL1A antibodies are due to immune complex formation. It is not a liability necessarily of the antibodies themselves.
When TL1A is expressed, it is initially a membrane-bound protein that assembles into a homotrimer. As one of the natural means of down-regulating TL1A signaling, there's a protease cleavage site proximal to the membrane in those trimers, and that leads to liberation of the extra site, a homotrimer of TL1A that is then measurable in the blood. When somebody is treated with a TL1A blocking antibody, the antibodies bind those circulating trimers probably before they bind the TL1A that still remains membrane bound in the target tissue of interest. When you have these antibodies that are bound to these circulating trimers, that creates high molecular weight immune complexes that are the source of immunogenicity for all the TL1As, and you simply can't engineer around it. With DR3, there is no shedded form of DR3. There is no risk of immune complex formation.
Right.
The ADA rate that we see of 3.7% is exactly what you should expect to see going forward.
Got it. Very helpful. The other element is that DR3 occupancy with SL-325 should be durable. Can you talk a little bit about that? Yours is not a YTE molecule, but still you could probably have a better durability. What is the mechanism behind that?
Yeah. We have a YTE molecule, we call it SL-425.
Right.
SL-325 is the antibody that has been through phase I and is now in phase II. We made the YTE because until we had the phase I data, we did not know how durable might the occupancy be, what might that translate to for dosing frequency going forward. We did know that we picked SL-325 in part because it bound an epitope on DR3 that did not cause internalization of DR3.
Right.
We believe that that could lead to highly durable occupancy. What the phase I data has now shown is that, first of all, DR3 became fully saturated even at the lowest dose of 0.1 milligram per kilogram.
At the two lowest doses, we gave 0.1 and 0.3 milligram per kilogram, there was no loss of occupancy whatsoever for more than 30 days. When we got up to that 1 milligram per kilogram dose and higher, there was no loss of occupancy for at least 76 days, which was the last time point we measured in the phase I. What we were able to do is look at the relationship in that 0.1 and 0.3 milligram per kilogram doses between when receptor occupancy began to fall and what was the circulating concentration of SL-325 at the time receptor occupancy began to fall. It coincided with when the serum concentration of SL-325 falls below about 150 nanogram per milligram.
That becomes a trough that is required to maintain full receptor occupancy. You can look at the 1 and the 3 and every higher dose and project out when might we lose occupancy at those doses, which are still relatively low doses. Those are the analyses that underlie the assertion that with SL-325, we think quarterly dosing will be achievable at a dose and volume of less than 2 ml, which would be compatible with a subcutaneous auto-injector pen.
Got it. That's very helpful. There's this phenomena, there's a thought process from some doctors we talk about that they like Velsipity because it can be dosed more frequently than SKYRIZI. That somehow, at least in IBD, doctors do not mind treating more. In your talking to doctors, is this because these drugs are not necessarily every eight weeks or every quarter drugs, that's the reason, or it's just like these patients are really sick, that's why they need to be dosed more frequently?
Yeah. I don't really know, to be honest.
Right.
I think the community is pleased now that they've moved from antibodies that have to be dosed every two weeks to antibodies that have to be dosed every four weeks.
Right.
That's a huge benefit for patients.
Right.
Is that really where the field still is two, three, four, five years from now? I don't know.
We don't know.
When we picked the doses of our antibody that have advanced into phase II, the middle dose is at the high. We expect full receptor occupancy throughout the dosing interval for all three doses. The middle dose is at the high end of what we can give in less than a 2 ml volume in a subcu auto-injector pen. The low dose is a much, much lower dose than that.
Right.
What we believe is that when we come out of the phase I, or sorry, the phase II, we will definitively answer the question of whether maintaining full receptor occupancy of DR3 is the predictor of maximizing efficacy or not. We believe it should be. Should that be the case, we'll have flexibility within that dosing range, to dose quarterly at a higher end of dose that's compatible with a subcu auto-injector pen, or maybe more frequently at a much, much lower dose, should market research suggest that that's the right way to go.
Got it. So talk about the ongoing trial, the RECEPTIVE-CD1 trial. What are the timelines and what do you expect to learn from that trial?
Yes, of course. First of all, the decision to begin with Crohn's disease rather than ulcerative colitis is based upon a few things. Number one, we believe there's proof of concept in Crohn's similar to what we have in ulcerative colitis with the other TL1A programs.
Right.
Secondly, the translational association between single nucleotide polymorphisms in TL1A and Crohn's disease has always been stronger than the association of SNPs in TL1A and UC. Crohn's is quite a bit less crowded these days than UC from a trial execution standpoint. You talk to most docs, and what they will tell you is that if you have a positive signal in Crohn's, you'll get credit for UC. It doesn't necessarily work the other way around. Importantly, you don't have to run phase II trials in both UC and Crohn's in order to run phase III trials in both UC and Crohn's. We would go into phase III in both indications following positive data in Crohn's into phase II.
The final reason is that, again, this relates to target stability of DR3 versus TL1A. If there is efficacy to gain by going after the more stable side of the axis, we would expect our ability to detect that to be greater in diseases that have more foci of inflammation, and that's more so the case in Crohn's than it is in UC. This study is now open, and we expect that we'll share. It's a typical three active dose versus placebo phase II design, endoscopic response at induction as the primary endpoint. We've done something a little different from the TL1As in that this is a treat through study design.
Okay.
Rather than a re-randomization, we've done that because it allows us to maintain power at the maintenance endpoint as well. What we've guided toward is unblinding the induction data in the first half of 2028.
Okay.
In this study, I think that this will allow folks to make a cross trial comparison to how SL-325 stacks up against the TL1A antibodies, not just at induction, but also in maintenance.
Got it. In first half of 2028, you'll have maintenance data as well, not just.
First half 2028 will be induction.
Got it.
Maintenance data will come later in the year.
Do you expect to have differentiation on induction, or do you think the anti-ADA differentiation will play out more in the maintenance phase of the trial?
It'll play out more in the maintenance phase.
Got it.
There's a flat line for the TL1As. We expect to see a doubling, but that's based solely on the immunogenicity part of the analysis.
Got it.
If target stability is playing a role, that could lead to better responses early as well. We also can look at published data for ofimitabart, the Roche TL1A antibody. What they shared in a paper in The Lancet last year was that in the data supplement for that manuscript, they broke down efficacy at the time of induction by anti-drug antibody quartiles. What they showed is that from the lowest ADA quartile to the highest ADA quartile, there was a 50% drop in efficacy at induction. That translates to between 5 to 8 percentage points of remission that are left on the table at the time of induction.
Got it. So that could be the benefit you can provide.
Okay. We'll see.
Very helpful. In the meantime, we'll have bulk data, and you'll see probably some other companies will also report their data in the meantime. What are you looking at from those data set that'll help you inform or think about whether or not DR3 is differentiated or not?
Yeah. First of all, it's great that the Merck phase III data is positive for tulisokibart at induction. It's a great point of validation for the class.
Right.
Now we're seeing that there is activity in hidradenitis suppurativa outside of IBD for the class as well. That's fantastic and also very consistent with what was in phase II, right? Our expectation is that those induction data sets will continue to hit. Our expectation is also that we will see a flat line of remitters from induction to maintenance. Merck will probably have that data later this year or early next. When they have those maintenance data, I think if it is a flat line, people will want to know why.
Got it.
Right? So we'll see.
Got it. Very helpful. Another argument is that you see, especially for TL1A mechanism, you see, like you also pointed out, Crohn's may be a better trial given that there's a fibrotic component as well in Crohn's, not so much in UC. Can you talk a little bit about the fibrosis and disease modification aspect of TL1A DR3, and then how that could play out, and which diseases it could play out in?
Sure. So there is a very strong preclinical corpus of data that describes an anti-fibrotic role of interfering with TL1A DR3 signaling. Studying that in Crohn's disease is not straightforward because there are no standard endpoints for evaluating a reduction in fibrosis in these patients. The field will evolve and someday we'll be able to see that. But it's not part of our or anybody else's trial designs in UC or Crohn's right now because there just aren't any standard endpoints. I think from all of the trials, we will get glimpses as to whether there's reduced strictures or fistula formation or other complications when patients have been treated with an antibody in this axis, but it will remain anecdotal.
Got it.
For some period of time. The diseases where you might get more anti-fibrotic information faster, obviously systemic sclerosis was negative for Merck. But I don't think that's a referendum on the axis because that antibody has high rates of ADA, and looking at delayed endpoints related to fibrosis for antibodies that have high ADA is complicated.
Merck is also saying it is disease as well because the disease doesn't progress that quickly, so that could be part of it.
That's the other thing. You have to monitor these patients for a long, long time.
Right.
Another disease that the TL1A DR3 axis is very strongly implicated in is something like primary biliary cirrhosis. That's more of a rare disease, obviously, but that would be a place where you might get a good indicator of anti-fibrotic activity for the axis as well. This will emerge, but it's going to take longer to emerge than the pure anti-inflammatory aspect of the axis.
Got it. Very helpful. RA did not work, but hidradenitis suppurativa did work, so there are indications beyond UC and Crohn's where these drugs are working. Are there any indications where you could probably have an edge there? Are there any indications where you think beyond that you could go, so PBC you mentioned. Anything else there?
We think that anywhere a TL1A antibody works,
DR3.
DR3 antibody will work better.
Got it.
Full stop. Our strategy has been to go into the diseases where there is clinical proof of concept for the axis and prove that out. We're going in IBD, HS is something we've been thinking about for a long time, where we could be part of the first wave.
Got it. That's very helpful. AbbVie is moving into SKYRIZI plus strategy going forward, so plus alpha 4, beta 7 or TL1A. You also have a bispecific program there. Talk a little bit about the DR3 plus IL-23 drug, and how do you see this market in five, seven, 10 years, where you can actually position yourself? You had a good antibody company, so you can just probably tailor something around that.
Yeah. There's widely held views that in IBD, the future of therapy will be combos. Combos of mechanisms, whether that's with multiple antibodies or with bispecifics is a little bit to be determined, but that should be the base case. As I mentioned before, with SL-325, if you have a doubling of the absolute number of patients in remission from induction to maintenance on an ITT basis, that would put you into the 40%-50% range at maintenance for remitters. That's better than what AbbVie vax put up. That would be better than what Johnson & Johnson has seen so far, combining IL-23 with TNF inhibition. We will see where the AbbVie combo stacks up, but that is an interesting combo.
We will get the result with SL-325, and if as a single antibody that number is better than what has been seen with other antibodies, that will, I think, allow SL-325 to be your DR3 blockade broadly to be viewed as a desirable backbone of future combination therapies. SL-846 is our first compound that we will start to look at combining mechanisms, and there we decided to go after DR3 and IL-23 receptor, number one because IL-23R is also validated through the icotrokinra experience. But importantly, it is very hard to find IL-23 receptor positive cells that do not also express DR3. You have a cis binding advantage of going after both receptors in cis, and you also have theoretically an immunogenicity advantage by not having an antibody where one or both arms binds a soluble protein. We have just finished our chronic GLP tox studies.
We will be sharing those data in a few months' time and putting that antibody in the clinic early next year. We are really excited about that. There is a number of places it could go, not just in IBD.
Got it. Exciting time. I'll turn it over to Andrew now. You have $208 million of cash as of this year. Taylor has a lot of things going on here. You talk about the cash running to 2029. What does this include and what it doesn't include in terms of which programs are included here?
Yeah, sure. Following our phase I data set, as you know, we executed on a fall on offering of 75+ of 15% green shoe.
At the same time, we received a bolus of cash from the exercise of our outstanding common stock warrants, which we fully expected, but it's nice to see that. As you note, our last reported cash balance is about $208 million. When we were executing on that financing, we were doing so with the RECEPTIVE-CD1 trial design in mind. We believe we're fully funded for that trial, and we have cash into 2029, and we will see not only the induction data set, but also the maintenance data set from our phase II in Crohn's. We also anticipate, with our current balance sheet, being able to put the SL-846, the DR3/IL-23 receptor, into and through phase I, and we anticipate sharing those data at some point next year.
We also retain some level of capital flexibility to potentially evaluate other indications outside of IBD, but that remains TBD. We feel quite good about where we are from a cash perspective at the moment, and looking just simply toward executing on our current plans.
Got it. One last question for both of you, whoever wants to take it. Fast-forward one year, 2027, Wells Fargo conference. You are here, I am here. Hopefully, you decide to come here. What would make you look back at the year and say, "It was a great year for us?
You want to go first?
Sure. First and foremost, we need to execute. Right. We fully anticipate and all of our plans are going as we expect. Secondly, I think, we will see continued validation of the TL1A axis outside of IBD. Thirdly, we hope to get more clarity on the potential impact of immunogenicity in the ongoing phase III studies and from our competitors, and we hope that there is more clarity about that impact. We hope to have shared data from the phase I, from A46, and be in a position to have a portfolio of opportunities in front of us to be best in disease and best in mechanism across the board. I think we're in a good position to do that. Taylor?
Yeah. I agree with everything Andrew said. Got to execute, got to keep our timelines. I think the TL1A class will, from our perspective, continue to find itself in sort of a Goldilocks zone, where the induction data look good, and maybe the maintenance data leave something that's left to be desired t hat we can capitalize on, and have some additional clinical data points on the roadmap that aren't there right now.
Awesome. On that high note, thank you very much for joining us, and all the best.
Thank you, Mohit.
Thank you for having us.
A pleasure.