Thanks everyone for joining us. I'm Tiago Fauth . I'm a biotech analyst here at Wells Fargo. We're joined today by Tectonic. Have Elise here for a fireside chat. So we're gonna go through the stories, the newer public market stories. We're gonna try to piece that apart and walk through some of the key drivers here. We can always start with just some brief intro remarks, what the company is, what's the secret sauce, so on and so forth, and then I have a lot of detailed questions that we can get to.
Okay. So the goal of the company is to lead the way in the development of biologics against GPCRs, and I think many people here know that GPCRs have been an incredibly rich area for drug discovery and development. 30% of all approved drugs target GPCRs, but the majority of those drugs are small molecules because biologics have been a real challenge to develop. And we have a platform that enables us to develop biologics. Not trying to go head-to-head versus small molecules, really trying to find those opportunities where we think a biologic is the right modality.
Got it. Okay, that makes sense, and I guess we can start talking about your most advanced program right now, which is TX-45. Again, that's all based off of biology that was developed based on relaxin, right? So perhaps can you just give us a quick overview, what does it do physiologically and where that can actually be relevant? I know you had Novartis exploring the mechanism of action a while back. So what's the historical context behind the first program?
So when I was in medical school, we were told relaxin was, quote-unquote, "The hormone of pregnancy," because it's upregulated during pregnancy. And what it does in the pregnant woman, it's a systemic and pulmonary vasodilator that results in a pregnant woman being able to increase cardiac output to accommodate the increased demands of the developing fetus over the nine months of the pregnancy. There's other aspects to it. It's not just a vasodilator, though. It also is an antifibrotic and a remodeler, and you actually see evidence of that in pregnancy as well. It remodels the pelvic ligaments to enable the woman to have a vaginal birth. What else we know about it came from a Novartis program-
Yeah
The serelaxin program, which was the first attempt to use native relaxin in the treatment of cardiovascular diseases. But a key issue with that molecule was the half-life. It was hours, so you could only give it by continuous IV infusion, which limited the development of it to acute heart failure, where they had a very large program, where they gave a two-day infusion and then looked at five-day worsening heart failure in patients who were admitted with acute heart failure to the hospital. And they actually showed efficacy, if you look at the totality of their 11,000 patient program, where they showed about a 23% decrease in worsening heart failure. So why isn't the drug on the market? One of their two pivotal studies failed, and probably for two reasons. They had a co-primary endpoint of six-month cardiovascular mortality that they failed on.
It's a lot to ask a two-day infusion to impact cardiovascular mortality six months later. And the other is, to power for that, they, it was a very large study, about 6,000–7,000 patients. They ended up, they think, in retrospect, with operational issues, and at some centers, especially in Eastern Europe, they're not sure that patients actually had acute heart failure. They may have had other causes of respiratory decompensation. Because if you look, there's five other studies that had very, very consistent effects.
Very consistent, yeah. And then you're developing TX-45 based off of that, but again, you're choosing your indication a little different. You took a different approach there. So again, Group 2 , pulmonary hypertension. Everyone knows Group 1 . Let's compare and contrast, like, given that I don't think the market is as aware or doesn't pay as much attention on the rare disease space to Group 2 relative to Group 1 , can you just kinda give us the-
Yeah
the quick rundown on what's comparable, what's not comparable?
So what's Group 1 pulmonary hypertension? The disease is basically in the pulmonary arteries, where you get a narrowing of the arteries, muscularization of that. And with that, as you're trying to push the same amount of blood through a smaller pipe, you get an increase in what's called PVR or pulmonary vascular resistance. The outcome of that is you get less blood flow to the left side of the heart, and that's really what causes, exertional dyspnea, in other words, exercise intolerance, because there's less blood going into the left side of the heart and less blood being pumped out of the heart. That's Group 1 . Group 2 is, elevations. They both have elevations in pulmonary pressures. That's how you define pulmonary hypertension. It mainly is caused by left heart failure.
So it's the left side of the heart that's not working, and in those, in most of those patients, what happens is you get elevations in pressures on the left side of the heart that, if there's severe enough backflow into the pulmonary circulation. Now, there's two subtypes. The majority of those patients have normal pulmonary vessels, and the reason for their elevated pulmonary pressures is just backflow. That's called IpcPH, isolated post-capillary pulmonary hypertension. There's a minority of patients, 20%–30%, that have what's called combined pre- and post-capillary pulmonary hypertension, CpcPH. They have that same backflow, but also they look almost like they have PAH. They also have a narrowing of the lumen of the pulmonary circulation and an increase in pulmonary vascular resistance.
And again, just in terms of actual prevalence, we're talking about, of-
It's-
Or like much bigger.
So much. It's the Group 2 is the largest. There's five groups of pulmonary hypertension. Group 1 has 25-50 thousand patients in the U.S., and as we all know, it's about a $4 billion market, five groups of drugs approved for it. Group 2 , if you read the literature, you'd come up with anywhere from 600,000 to 1.5 million. My guesstimate is it's about 800,000 patients in the U.S., and no drugs approved for it. And mortality is the same or even worse in the CpcPH population than Group 1 PAH. So you have a very large patient population, a very high unmet need, and wide open space 'cause there's no approved drugs.
In terms of not having approved drugs, I know a lot of the Group 1 therapies were tested in Group 2 , usually with negative outcomes, if not harming patients. So again, mechanistically, that makes sense, but perhaps can you give us a little more historical context on why that's the case?
Yeah. So, what do most of the Group 1 pulmonary hypertension drugs do? They're pulmonary vasodilators, right? And that acts to increase blood flow into the left side of the heart, which is critical in Group 1 . If you--if all you do is increase blood flow into the left side of the heart, and you're not doing anything to increase heart function in patients with Group 2 PH, you're gonna put more blood into the left side of the heart, and the left side of the heart is gonna have no way to pump that blood out. It's gonna end up in your lungs, and you actually can make pulmonary. You can make the heart failure worse.
It's really critical for any drug that you are taking into Group 2 PH, not only that it brings pulmonary pressures down, but that it actually improves left heart function. Most of the drugs for Group 1 PAH do not do that.
Yeah. And let's tie that back to the mechanism of action again. So what's the therapeutic hypothesis then underlying TX-45? There is, as you said, some remodeling aspect to it. There is some vasodilation involved with it. What's the overall hypothesis here?
High level, it's gonna both impact, it's gonna impact the pulmonary pressures, bring down pulmonary vascular resistance, but also importantly, along with that, it's gonna improve heart function. And it's gonna do it for each of them in multiple ways. How is it gonna impact the pulmonary circulation? Well, it's a pulmonary dilator, similar to the drugs for Group 1 PAH. It also inhibits TGF-beta. That's the same pathway that sotatercept inhibits.
Sotatercept.
Long-term use is gonna remodel the pulmonary arteries, especially in those patients with CpcPH, the ones who look like they have PAH.
Yeah. Yeah.
So that's one thing. That's how it's gonna impact the pulmonary circulation. How is it gonna impact left heart failure? Three different ways. It dilates the systemic circulation, so it brings pressures down there. Easier to pump blood out, that's called decreasing afterload. Also, in HFpEF, preserved ejection fraction heart failure, which is the subtype of Group 2 PH that we're initially focused on-
Yeah
you get a thick and stiff left ventricle that doesn't adequately relax during diastole, and therefore, it doesn't adequately fill with blood. And, relaxin has what's called lusitropic effects. I just learned that word recently. Which means that it actually enables the myocardium to relax during diastole. So it's gonna better fill with blood, it's easier to pump the blood out, and then with long-term use, we think you'll get remodeling of the fibrosis in that thick heart. So you'll actually have a muscle that contracts better as well. There's also a side benefit that you get with relaxin. Many of the patients with heart failure have renal dysfunction as well, long-standing hypertension, long-standing diabetes, and relaxin's actually been shown to improve kidney function.
When you have impaired kidney function and you're trying to treat heart failure, it can make it a little bit complicated. This is another beneficial effect that relaxin will have.
Got it. And again, you're not at this by yourself, right? So again, historically, we had Novartis in the space. You also have ongoing programs from Astra, Lilly. I'm sure you got this question a million times by now, but what's the differentiation between TX-45 versus some of the other agents that are currently in clinic? And again, they're running. You guys are all running slightly different trials or expect to run slightly different trials. Let's talk first about the molecule and then about the application.
We did. The most important thing we had to do first was to extend the half-life. That's what everybody's done, so that you could give all of us who are going to be giving these drugs subcutaneously. We did some things that we think extended our half-life, so our half-life is longer, we think, than the competitors. And we also did some engineering to improve the PK and decrease the positive charge that relaxin has. And how does that help with decreasing the positive charge? It enhances the PK and we think also enhances tissue penetration. High level, our base case is that we'll be able to differentiate on dosing intervals. Lilly is studying their drug weekly. AZ is every other week, and we think we have the potential for monthly dosing.
Now, we may be studying it every other week in our phase two study as well. We don't want to leave any efficacy on the table, but we really think there's the potential for monthly dosing. And then there are some other theoretical, but I'm going to call them theoretical places where we're lowering that isoelectric point, lowering the charge may also provide benefits.
It's tough because, like, there's no head-to-head trial, but is there enough for clinical or potency assays that kind of support that overall thesis, right?
Yeah, we did renal blood flow, where we compared our molecule to high pI molecules, and we had, you know, we were more potent-
Yep.
-on renal blood flow. How that pans out, I think, you know, Lilly, for instance, has some renal blood flow data. I think ours looks quite similar to that. So I think the real question is, in terms of, fibrotic effects, could you see something there? But to me, that's like an upside. I don't want to. That's not my base case.
Got it.
There may be some other mild things that you get, in terms of injection site reactions, for instance.
Yeah, we've seen some of that.
Where we think a highly charged molecule, you can see that maybe with immunogenicity, but those are all TBD. We'll have to see what happens in the clinic.
Got it. And again, kind of going back to the mechanism of action, like, what are some of the key biomarkers that you've seen with the serelaxin experience and whatever else there is in terms of evidence to support that you can have a benefit, the left heart disease, and that I would actually improve patient group. So it's kind of a two-part question, so.
Okay. So first of all, I think if you look at the totality of their data, even a two-day infusion had an effect on acute heart failure.
Yeah.
They also did right heart cath studies, where both in acute heart failure and chronic heart failure, where they put a catheter in, they measured pressures in both the pulmonary circulation and pulmonary capillary wedge pressure, which is looking at heart function and pressures on the left side of the heart, and then they started a 20-hour infusion of Serelaxin versus placebo, and what you saw was you got reductions in pulmonary pressures, you got a reduction in the pulmonary vascular resistance, you got reductions in systemic vascular resistance, and you got reductions in pulmonary capillary wedge pressure, and that's a really good measure of left heart function.
Okay.
When wedge pressure goes up, patients' exercise tolerance goes down. If you can bring wedge pressures down, their exercise tolerance gets better. So what we're now doing and then in chronic heart failure, they also saw a reduction in wedge pressure and an increase in cardiac output. So we're now doing a Phase 1b study in patients with Group 2 pulmonary hypertension and preserved ejection fraction heart failure, HFpEF, that's our Phase 2 population, where we are looking at baseline hemodynamics and then giving a dose IV of our drug and then monitoring them for eight hours, and what we really want to see is a replication that we can decrease pulmonary vascular resistance and that we can decrease the pulmonary capillary wedge pressure. If we can do that, our chance of success in Phase 2 are much higher.
First of all, pulmonary vascular resistance is going to be the primary endpoint in Phase 2. But we know from Group One and Group Three pulmonary hypertension, if you bring down pulmonary vascular resistance, you increase exercise tolerance. And we know in heart failure, and also in Group 2 pulmonary hypertension, the higher your pulmonary vascular resistance, the worse your outcome, the worse your exercise tolerance. And we know, as I said, if you bring down pulmonary capillary wedge pressure, you can increase exercise tolerance. So I think if we see that, we're showing that our drug works both on the pulmonary circulation and importantly, on the left side of the heart, and it'll really increase our chance of success for Phase 2.
Got it, and I think that's fair. And let's talk then about newsflow, right? So for your own program, yeah, what's the expected next milestones here? You did mention the Phase 1b with the hemodynamic. How do you quantify what would be a win in that particular scenario, in that particular clinical trial? I know there's some comps, both in PAH and some other literature associated with that. Are those benchmarks applicable in this patient population? What should investors be looking for here?
We're looking at for about a 15%-20% reduction in PVR, pulmonary vascular resistance. That's about in line with what you get with the Group 1 PAH drugs as a percentage-
Yep.
- 15%-20%. So tadalafil was in the 20% range in Group 1 PAH, and we're looking for something similar in pulmonary capillary wedge pressure. It's harder to get benchmarks for pulmonary-
For this-
Capillary wedge pressure, in heart failure, but the closer we can bring it to normal, the better.
Got it. Okay. And again, you're basically studying this in HFpEF, not HFrEF. Well, again, mechanistically, I know you weren't supposed to expect the same amount of benefit, but can you just, why are you using that subset specifically? I know it theoretically reduces the TAM a little bit, but not by much necessarily. What are some of the key drivers there, based on the clinical frame?
Yeah. Why not do HFpEF and HFrEF?
Yeah.
Okay. High level, Phase 2 study, smallish studies, we really didn't want to have too much heterogeneity. I think it'll work in HFrEF. I do. But, by going into HFpEF, we take full advantage mechanistically of what the drug does. It's also the higher unmet need population.
Okay.
There just aren't as many drugs available to treat those patients, and they're not great drugs, so it's a higher unmet need population as well.
Got it. Okay. And then again, I feel like there's gonna be a lot of read-through from competitors' updates as well, right? I think Astra is one of the key ones here. In terms of clinical trial design and the kind of data, the kind of patient population they're studying, can you kind of compare and contrast versus what you expect to do and you're doing in your Phase 1b, but also what you expect to do in your Phase 2?
In phase two, we're the only ones that did a Phase 1b study.
Yeah.
I think we'll be the first to, in our patient population, hopefully be able to show that hemodynamic data. So AZ for phase two is also growing into Group 2 pulmonary hypertension. We were actually gratified to see that. We didn't know that when we chose our indication-
Okay.
and we were like, "Okay, somebody's thinking like us." And but they're going into both HFpEF and HFrEF, preserved ejection fraction heart failure and reduced ejection fraction heart failure. And we don't think they're enriching for CpcPH, which remember I said, are the patients that sort of look like they have both left heart failure and, have group 1 PAH. They're doing a hemodynamic at baseline, hemodynamics at six months. That's basically their, what their study is. We're doing Group 2 PH in HFpEF only, and we are enriching for CpcPH patients. We're also doing a six-month study, hemodynamics at baseline, hemodynamics at six months. Will be primary endpoint for both us and AZ is pulmonary vascular resistance, and of course, we'll be looking at six-minute walk test.
Yeah
As well.
So again, if that's a positive trial in the overall patient population-
Okay.
That's much broader than what you're currently studying. It's a negative study.
So-
Let's look at the detail.
I, of course, want my cake and to eat it, too. If it's positive, I wouldn't hesitate to, you know, broaden our population. If it's negative, I really want to know about the subgroups. So what did HFpEF look like versus HFrEF? And did you have CpcPH patients, and what did the efficacy look like there as well?
Got it. And again, kind of keeping to the same mechanism of action. Similar question to Lilly's program. Again, Lilly's going even broader, it seems, right?
Lilly's-
So perhaps even less of a read-through potential.
Lilly's going into HFpEF.
Yeah.
I think the drug will work in HFpEF. And I don't see any reason if Lilly worked in HFpEF that we couldn't go into HFpEF. So I think there is some read-through that's there. Now, they have a primary endpoint of left atrial strain.
Yeah
Which is an echocardiography, a very speckled left atrial strain. It's a very specific, echo endpoint. I understand people speak well of it as a potential endpoint for looking at left heart function, but it's never, I don't think it's ever been used in a clinical trial before. And so if they quote-unquote, "fail" on their primary endpoint, I think you'd really want to go one step level. They'll be looking at NT-proBNP. They're looking at heart failure hospitalizations. Did the drug work or not? Rather than just looking at that primary endpoint.
Got it. No, I think that's fair, because again, it can be a trial design, it can be a different patient population. And again, we got some questions also on sotatercept because they are going after CpcPH. To your point, that would be the patient population that most closely resembles PAH, and I guess that's part of the rationale underlying that. Mechanistically, how do you feel that that could work relative to TX-45?
It's only gonna work if their drug also has specs on the left side of the heart. I don't think remodeling the pulmonary arteries alone is gonna do it. And so, will they have remodeling effects on the left side of the heart? Maybe. Remember, it inhibits the TGF-beta pathway. It does that, however, by trapping multiple ligands.
Yeah.
Some of those ligands have been associated with positive effects on cardiac function and some on negative effects on cardiac function. We'll have to see how that plays out. If it does, it lends some credence that inhibiting TGF-beta works in CpcPH patients.
Yeah.
I think these are all large indications that can have room for multiple mechanisms of action, and I think there's plenty of ways for us to differentiate from them, both on the efficacy side because sotatercept is a remodeler. You're not gonna get acute effects. It's gonna take a couple months until, if it works-
Yeah
those patients start feeling better. We both have the vasodilatory effects, the lusitropic effects, and the remodeling effects. Patients are gonna feel better, I think, very quickly because of the acute effects of that. So that's one way that we potentially would differentiate on efficacy. I can't speculate on magnitude of the efficacy. And then I think that there are multiple ways on safety that we will differentiate. People don't talk about it a lot, but sotatercept actually causes elevations in blood pressure, which is not a problem in PAH because most of those patients have borderline low blood pressure. It actually can be positive. But raising blood pressure in a HFpEF population, where many of these patients developed their heart failure because of long-standing hypertension-
Sure
might not be so great. As you know, it also, in some patients, can drop their platelet counts, and many of these patients are on anticoagulants because they have AFib. So there may be some questions on that as well. And then as I also mentioned, relaxin will have positive effects on kidney function, which we don't think sotatercept will have.
Fair. I think that that's absolutely fair. Anyway, we started talking about just in terms of patient numbers, but can you common size the actual market opportunity? And we can use Group 1 as a, as an example, or you can just talk more broadly, how well identified are these patients? How much of the market would be accessible if you were to get a drug approved? And what some of those, those slices of the pie could look like from a revenue perspective.
Because there are no therapies in Group 2 PH, we definitely think it's an underdiagnosed patient population, but diagnosis is readily available.
Yeah.
Now, the current gold standard is doing a right heart cath. That's how you diagnose Group 1, and that's how you would differentiate Group 2 versus Group 1. Right heart cath itself is a routine. It is invasive. I'm not gonna say it's not, but it's about a fifteen-minute procedure, and it's done in hospitals all over the world. That's how you diagnose Group 1 PAH. But it turns out, if all patients with heart failure get an echo, and you can see elevations in pulmonary pressures on echo. Typically, today, most patients are not then sent for right heart cath because there's no therapy.
Oh, fair enough. Yeah.
So why do you have to do it? We think if there are therapies, more patients will be sent for right heart cath. But the other thing that we're gonna do in our clinical trials is do both echo and right heart cath and look at the correlation. And if it looks like you can pretty readily diagnose them with echo, then maybe eventually you won't have to do right heart cath.
Okay.
Exactly.
Got it. But again, just from a prevalence perspective, different price points, potentially given PH is seen more as a rare orphan disease. But again, if you followed what PH could be potentially just in terms of patient numbers, correct?
Okay.
Yeah.
PAH is 25-50 thousand patients in the U.S., and it's about a $4 billion market.
Yeah.
I don't know if you've seen. Merck thinks they're gonna sell $4 billion of sotatercept alone, is I think what I wrote is what I've read, or the analyst-
I think the sell side is north of that by a wide margin.
Is north of that. Okay. All right, so, so 25,000–50,000 patients, very large patient population, very small patient population. Group 2 PH, as I said, is, I don't know, eight hundred thousand patients?
Yeah, and even, like, the CpcPH subset is still-
It's probably-
hundred ish
- 200.
Hundred.
100-200 thousand patients. These are not small indications. D epending on whether we're in the broader Group 2 population, which is where we think we'll be, or in the CpcPH population, that'll probably drive what your price is gonna be.
Price, for sure. Yeah.
No matter what, these are-
Healthy
multi-billion dollar
Market
indications. They have potential. Yeah.
Fair enough. I know-
With room for more than one therapy and, you know,
Yeah, no, you've seen that in PAH with multiple players. I think-
Yeah
even the same mechanism of action and room for multiple mechanism of action, I think, is just early, but not unnatural to assume that that could occur over time, for sure. And again, we've spent a lot of time on TX-45. I wanna give you some more time to talk about HHT and the broader platform. Where do you wanna start?
Okay. Our next program up is for a disease called hereditary hemorrhagic telangiectasia, HHT. It was called Osler-Weber-Rendu syndrome when I was in medical school. When they told me about HHT, I didn't even know what it was. It turns out it's the second most common hereditary bleeding disorder. There's no approved therapy. There's probably 70-75 thousand patients in the U.S. Well, it's autosomal dominant, so once one person in the family has it, everybody else sort of figures it out. And it's phenotypic variability. We're gonna go after the 10-20% of patients who have more severe disease. So how do these patients present?
Well, very often they present with hemorrhages from their nosebleeds, but we're not talking about the nosebleeds that an eight-year-old has in, you know, when you were in grammar school. We were talking about hemorrhages that are very difficult to control, and these patients can have these chronically and become anemic and sometimes, you know, become transfusion dependent. They can get AV malformations in their brain that bleed in their liver or in their lungs. They can have GI bleeding. It's basically a disease of angiogenesis. It's, it's mutations in the BMP9 and BMP10 pathway.
Yep.
That's why, you know, sotatercept can cause telangiectasia because it traps BMP, BMP eight and nine. With that, when you inhibit that pathway, you get upregulation of multiple angiogenic factors, and one of the anti-angiogenic factors that's the most upregulated is the ligand for the target that we're going after. We are very close to announcing a development candidate, which should get us into the clinic by late 2025, early 2026, and we've shown efficacy in a mouse model of the disease.
Okay.
Other anti-angiogenic inhibitors, the VEGF inhibitors, have shown efficacy in mouse model disease and in investigator-initiated studies have shown efficacy. And so we think that increases our probability of success. They're not widely used, the VEGF inhibitors, because, mainly because of their toxicity profile. They're not approved, they're not reimbursed, but I think it's the safety profile that's the most relevant there.
Got it. And again, you just became a public entity right now. Can you just give us a rundown on cash balance? Where does that get you in terms of catalyst data points?
It gets us through into mid-2027. I think we announced with our quarterly earnings, we had $185 million in cash, but we still hadn't paid out all of the money for the transaction, so the pro forma was about $171 million. It'll get us beyond proof of concept for our lead, and it'll probably get us into starting efficacy studies for our HHT for our second program.
Got it. Okay. So again, phase one A, Phase 1b , and also competitor data all within-
Yeah
the next 12-18 months.
Phase 1b data. Phase 1b is enrolling even better than we expected. Our current guidance is mid-2025. We'll see if we do something to bring that up a little bit, and Phase 2 data in 2026. In 2025, in addition to our data, AZ is gonna report out, or they'll have data.
Data.
Whether they report it out, I can't tell you. Second quarter of 2025, and then, Lilly in end of 2025.
End of twenty-five. Got it. So yeah, fairly busy next year again.
I think next year is gonna be a data-rich year.
Got it. Perfect.
Hopefully, we'll talk about it as the year of relaxing.
There you go. Yeah, we're running out of time. I think that sounds like a good stop, natural stopping place.
Okay, great.
So again, just wanna thank you again for joining us today.
Thank you for asking me.
Appreciate it. Of course.
All right.
All right. Thank you.