Right. All right. Welcome, everyone, to Jefferies 2025 Global Healthcare conference. My name is Roger Song, one of the senior analysts covering SMID-cap biotech in the U.S. It's my pleasure to introduce our next presenting company, Aclaris, Neal and Hugh. Welcome, gentlemen. Thank you. Awesome. All right. So we have this fireside chat, even while standing here. Why not we start with a high-level elevator pitch for the update, recent updates for Aclaris because you have some change in terms of the strategy and then the pipeline, and then we can dive into those details. Sure. Aclaris is a clinical-stage biopharmaceutical company focused on both large and small molecule targets. We have a drug discovery engine that underpins everything that we do, including a proprietary chemical library with world-class expertise in the development of small molecule inhibitors. As Roger alluded to, we recently onboarded a large molecule portfolio and with that brought five to six full-time employees from Biotion, who we licensed the assets from, who also have decades of experience at large companies like J& J. Currently, we have three clinical-stage assets. First one is 2138. It is an oral small molecule targeting ITK and JAK3, a very unique pharmacology, nothing like that in the market. We have a TSLP mAb, which we licensed from Biotion. That is in phase II. We have a bispecific that we recently announced had an IND allowed, and we will be starting phase I SAD/MAD work this quarter. Finally, we have a next-gen ITK inhibitor that is due to get into the clinic in 2026. We have a lot going on, a lot of catalysts in 2026 for sure. We also announced in our latest earnings release that we were able to effectively extend our cash runway by about a quarter and a half through mid-year 2028. We are well capitalized with $191 million on the balance sheet and three clinical stage assets, again, spanning large and small molecules. Excellent. Great updates. Maybe we can focus on the O45 for now for your TSLP monoclonal antibody because that's in the clinic and then in phase II. I believe you recently started phase II, and then that just announced. Great timing. How much the study design, you can tell us, I believe you have some high level, but any of those regimen and anything additional detail you can tell us? Yeah, sure. O45 is the TSLP mAb, and we had a phase II-A where we were in AD with 24 weeks of therapy, and we're recapitulating that same study design in the phase II with placebo control. It's a highly powered study with high, moderate to severe patients in AD with a 300 mg dose, which is the same dose we used in the II-A where we saw 90%+ EASI-75 response and 88% IGA 0/1 response. We're looking to recapitulate that with a placebo control. Got it. Yeah. You mentioned the phase II-A in the U.S. open-label study without the placebo control, but the effects, the drug effect is extremely high. When you design the phase II, you say it's well powered. What is your statistical assumption in terms of the drug versus the placebo? Yeah. We've seen the higher placebo rates in recent months, and we're really focused on ensuring that we maintain a patient population that's going to be highly relevant. We're using a central reader to really make sure that that's going to work around pictures coming into the trial. Then again, we're looking to show again that robust activity and efficacy along with obviously the same safety profile that we had earlier. It's really about robustness of response, but really maintaining a really solid normal placebo rate. Okay. Normal placebo rate, but likely similar phase II drug effect. That's the power. Yeah. I think if we got that same drug effect, we'd be ecstatic, and that would be the best AD drug of all time for sure. I think when we modeled it out, we assumed a little bit of a discount factor for that just because of the single arm bias. Even with that, when you're talking about IGA response rates of 88%, EASI-75 north of 90%, even if you discount that by a third, it's still industry leading. The design of this study, just to be clear, we don't want to squint at the end and just, oh, it's slightly better than maybe standard of care. We think there's an opportunity, and this is why we're dosing every two weeks, even though we think the PK/PD supports Q two months. We're trying to max the effect out, and we want to see obviously early onset of action, but that sustained action through 26 weeks and further in the drug-free period. We feel very strongly about this, and I know there's a lot of debate about TSLP in AD just due to the Amgen TEZE study that didn't work out. However, I think the key difference here is the potency. We've made a lot of this narrative, and I do really think it matters, and I think it's being missed that if you assume a certain concentration gets into the skin, then potency has to matter. If you have an off rate that is exceedingly long, then you're going to effectively block that alarm from initiating the whole cascade, and why wouldn't that be more meaningful? We have a couple of slides that we're going to add to our deck in the coming days to weeks where we've done some of that work showing the distinction between TEZE and our molecule as it relates to potency in the skin specifically. Yeah, that'll be very helpful. I understand when you acquire the molecule, you already did some diligence in terms of the PK/PD and then the mechanism, right? You see the very low dissociation, a very long tissue residue. You have the phase II data, right? That really leads to why you think this drug can work in AD while Amgen drug does not work, right? That is there. Yeah. No, that's correct. I think that's a very important point to mention. We've done an extensive amount of work pre-deal to fully characterize the molecule versus not the entirety, but the relevant competitive landscape. It's pretty clear just looking at the data. We repeated these experiments numerous times. You add on to that the respiratory data, which we talked about qualitatively in our last earnings release, and you layer onto that the phase II-A data that Hugh and the team generated, and albeit single arm, it still showed such an effect size that it's hard to ignore. I think the abundance of all of that data all points in the same direction, and we're really excited about that program. Yeah. Excellent. Just one quick final question about the powering. This is phase II, right? You have multiple efficacy endpoints. I believe you're looking through all the EASI and then the 50, 75, 90, and the IGA. In terms of powering, what are the endpoints that are powered? How should we think about when you read all the data and then we see the statistics? Yeah. I mean, it's the standard way. We looked across not only our own data, but across what's going on in AD and looking at a delta that would make sense from a p-value. Obviously, EASI-75 response is a primary endpoint, but IGA 0/1 is a real key secondary, which is important for this because, again, we want to show robustness of response for these patients. Got it. You power for those two endpoints. Yes. I believe once you power for that and then EASI mean reduction probably already powered better, that typically is more powered than the responder analysis. Correct. Okay. Got it. All right. We should, and then you start phase II, and then when we potentially can see the data? Second half of 2026. Yeah. That's an exciting timing. Okay. So that's for AD, which I believe is your key main focus for the O45 program. Also, we know recently you have, because this is acquired from China, you have a China partner. They released some top line data, very qualitative, in the asthma and the CRS. You have some common, very interesting, you say, basically validate the clinical potency is higher than TEZE. Just tell us a little bit more to the extent you can disclose to us and how much data you have seen and how you're going to categorize the data. I think I'll stick with what we mentioned in the earnings release, but suffice to say, we're very happy with what we've seen. It is a partial data set. Unfortunately, until we get the complete data, we're not going to put data out, and we just don't have that ability at the moment. The key things from our standpoint were one is to validate the potency narrative because up to that point, what we had had was the in vitro work, which is meaningful, but still not clinical work. We had the single arm phase II-A AD data, which was conducted in the U.S. It was helpful just for us to validate that hypothesis with larger data sets and another indication. That was kind of the biggest point. The second point was to get a sense of the efficacy, and we certainly got that. Third, and this was not a surprise, just get a sense of the safety profile, which is of course good. The good news is along all those parameters, we are very happy. I do not usually like just putting out qualitative statements, but it is the box that we are in at the moment. I think that in conjunction with all the other data we just mentioned makes us really excited about this program. Now we kind of turn our attention to partnering activities. We have already had a lot of inbound interest on the respiratory front post that earnings release. It is because of how advanced that asset is that it is going into phaseII large phase III studies in both indications in China. I think it is one of arguably the most advanced TSLP assets out there. We are excited about that. It gives us a way to potentially bring in some non-dilutive capital, get a partner engaged in that, validate what we've already said about the asset. I think it's exciting times over the next few months. Got it. I understand that the focus for the respiratory franchise for O45 in the U.S is to the partnering, right? We can talk about that in a moment. The reason investors, including myself, are interested in knowing this China data is what's the reason to your AD, right? How would you say the reason based on what your data you've seen to give you more or less confidence in AD going to work? I think, as you know, in those studies, you have all sorts of endpoints. What you'd like to see is some kind of translation of the potency narrative into clinical effect. When we say we've seen some of that, that's kind of what that means, right? I would say that is meaningful. However, we actually have direct read-through from the AD study that was single arm. Again, you have to discount that, right? Because there's some bias in a single arm study for sure. Again, the effect size was so robust. We just haven't seen numbers like that in an indication where another company previously failed. To me, that in conjunction with all of the assay work, I'm talking about a dozen different assays, makes us feel really confident about that read-through. Hopefully we get the opportunity to surprise people late next year. Okay. Very good. Yeah. I know people are waiting for that surprise, positive surprise for sure. And just one last one. I just want to press one more time, and then you can tell me you cannot say anything more than that. You say the enhanced potency. Just want to clarify that's more on the biomarker side or on the clinical efficacy endpoint side? That would be on both. Excellent. Thank you. Thank you for the clarification. Okay. I think that may be, oh, maybe the partner discussion. You already know the data, I think a couple of weeks, and then I believe you start a conversation with the potential strategics before that. What's the conversation so far? Yeah. We've had interest both global ex-China and regional. And that predated our earnings release disclosure. That's since accelerated. Look, you can't predict BD. Who knows what happens with that, but it's good to have inbound interest. I don't think it's surprising when you think about that this particular target is only, there's only two large pharmaceutical companies working on this target or has it in their portfolio. To me, that's not a surprise. I think the safety profile with a mAb like this is quite attractive. We'll continue to have those dialogue and hopefully have something towards the back part of the year. Awesome. All right. Great. That is for we spent almost half of the time for O45, which makes sense because that is the lead program. You do have other pipeline as well. One is the ITK JAK3 inhibitor small molecule 2138. You will have data very soon. That is also open label, no placebo controlled. How should we expect the data coming? If you can give us some context to interpret the data when you have that. Sure. We tried to accomplish a lot with this study. It was numerous kind of outputs. One would like to see efficacy on par with JAK inhibition in AD. I think that makes sense. We have JAK3 within that molecule. The way to think about it is it's about a 50/50 contribution from the ITK side and the JAK3 side. That's on the efficacy front. On the safety front, this was the first time we took it through 12 weeks in patients with disease. Certainly this will give us a first real look at the safety profile, and we would expect to see a pretty well-tolerated molecule there. On the PD side, what we're trying to do is you can run assays that tease out the ITK effect versus the JAK3 effect. We have a very heavy PD component. We're doing biopsies, tape strips, everything in between, ex vivo stimulated work. What we hope to do there is make it very clear the contribution of ITK as to the efficacy. That does two things. One is it paints a picture for that particular molecule as we transition into indications like alopecia areata, where we know JAK3 and ITK both work. It also paints a picture for our ITK selective that comes into view in 2026 for AD and other TH2-related diseases like various respiratory diseases. We're really excited about the ITK selective where we've engineered out the JAK component. That has very real potential to be a massive drug because you basically have an oral medication that's knocking out all the key cytokines that a lot of the biologics do and can do so in a safe manner. That's the objective of that study. It's really to really lay the groundwork for both the asset itself, 2138, but also the next gen to come. Yeah. Got it. To be clear, 2138, the next step will potentially be the alopecia areata, right? And then for AD, you will start to select the selective ITK for the next step. That's correct. We think 2138 is a better molecule for alopecia. There's a little bit less sensitivity to having JAK in a compound because the entire alopecia areata commercial landscape is composed of JAK inhibitors. We happen to have one that we think is going to be more effective. It's 5x more potent on JAK3 than ritlecitinib, 40x more potent on ITK. We think we have a great approach to fast-follow ritlecitinib, which is doing quite well in the market. That just seems to be a better place for us. Yep. Makes sense. Can you give us a sense what are the key assays that can differentiate the contribution between the ITK and the JAK3? I know they have some overlap, but also it may have some distinct kind of biomarker effect you can see because clinically you cannot see that. Yeah. One of the key things to look at, I mean, first you can generate gene signatures, and that's some of the work that we're outsourcing, but also looking at CD3, CD8, CD28 stimulated work on an ex vivo basis where you can look at the differential effect of ITK. Got it. Okay. Good. I think that's the ITK side, and then you have that two paths forward, right? That's how we're going to see the data pretty soon. You have very exciting bispecifics. I know the INI, the future, it's probably the bispecific, different ways to combine, multi-complex. You choose to use TSLP and the O4, so that's your, and the receptor, that's your approach. Maybe just take a step back, say, okay, why you choose that as your lead bispecific, and then we move on to the clinical development. Yeah. With the TSLP portion, we already know we had that real long residence time, and the molecule is actually chosen based upon its lack of or a great amount of lack of dissociation off of TSLP. You are inhibiting this environment, and we wanted to do that completely. The 400-hour residence time and neutralization of TSLP was key. That is the first component. On the IL-4R side, we wanted to have something that was a similar affinity as DUPI because that has already shown good effectiveness because we also wanted to inhibit IL-4 and IL-13, and IL-4 antagonists would do that. In effect, we have a trispecific, if you will, where we are inhibiting both the action of TSLP, IL-4, and IL-13 with this bispecific. We also have a YTE mutation in order to enhance the half-life on that. It was built with the idea to completely neutralize the TSLP overactivation in disease and then be able to have additional potency on top of the IL-4R side of the equation. Got it. How should we think about the synergy or additive effect between the IL-4 and the TSLP? I believe they have some overlap, but also they try to kind of broaden the coverage for the past four, I think the lead indication and a couple of different indications. Yeah. That's a good question. The way we looked at it was by using that same peripheral blood mononuclear cell assay where you activate with TSLP and IL-4, you can then see CCL17 produced. It's a chemokine. What we did with the bispecific is we showed that if you use TEZE and DUPI combined to inhibit that CCL17 release from the activated PBMCs, the O52 bispecific is about 3x- 5x more potent than DUPI and TEZE combined in inhibiting the chemokine secretion. We know this molecule not only has that long residence time on TSLP, but it also has enhanced potency. Got it. Okay. Great. This is not, I think you already cleared the IND, so it's not that far away from the clinical. Where are you in the development stage and then what will we be able to see in the near future? Right. We're initiating the phase I in healthy volunteers, SAD, MAD this month. We would expect that we would have output from that by the end of the year in terms of PK, safety, and tolerability. We would move in 2026 into a patient population that we haven't yet defined. You can imagine it could be in respiratory and/or atopic derm in order to show activity and safety in a patient population in 2026. For the end of the year, phase I PK/PD data, what will give you the confidence for the different indication considering you already have the TSLP side and then maybe you want to see a little bit better on the IL-4 side? It is very interesting because that data will come before you have your own TSLP U.S.-controlled AD study. How should we link those two data and then summary soon? Yeah. That's a good question because what you have is PK, safety, and tolerability. We need to make sure that hitting both pathways, TSLP at the top of the TH2 cascade and the immune component with T cells at the bottom with IL-4 and 13, we need to make sure that that still has the same safety profile that you would expect for TEZE and DUPI. We also are really interested in the PK because, as you know, DUPI is half-life of 8 or 10 days. It really limited the dosing interval for patients. Our expectation is that this molecule should have an enhanced, longer half-life. There, we'll have some really good understanding of what we would take into a phase 1B in terms of extended dosing beyond two-week dosing. Longer half-life, very safe when you combine. On the PD side, you will give us some context between O52 and then O45 and then maybe DUPI and then the TEZE. That is something you will give us some head to head? Yeah. I mean, you could certainly do PD types of assays where you could do ex vivo activation and see how the drug is working over time. That would be more on the exploratory side. Yes. Got it. And And then you have the O45, which is a monoclonal antibody for TSLP. And then I think the indication pretty clear for your focus is AD. And then the O52 you just mentioned can be respiratory and/or the AD. So how we think about, how should we think about the strategic decision between those large group of indications? It's going to depend. If O45 can show the same sort of activity that we saw in the II-A, then that obviously has a path forward in both AD and respiratory on its own. Also, if we do have this enhanced potency with the bispecific, there's going to be populations that are going to require an extra boost, if you will, of activity. We could think about other types of populations where that would even be more effective. Certainly, I'm not saying COPD is one of them, but we know that both TEZE and DUPI, even with DUPI with an approval, you're looking at 35% response rates for approval. There is a huge unmet medical need there for having a much more potent molecule. TEZE itself, with their phase II data, same thing, 35% response rate. There are populations that are still in dire need of a more effective drug. Yeah. Makes sense. Okay. In terms of the corporate strategy and then the capital allocation, how should we think about your cash? What are the, I know you're in the low burn rate and then with a very long runway. How should we think about the cash will support your pipeline considering you have multiple directions you will go? Yeah. I think obviously based on success, we would be looking at the traditional ways to finance that and also supplement that with the various partnerships. We also have an IP estate that we started monetizing last year and will continue to do that throughout this year. We are well capitalized to deliver all the catalysts we mentioned through 2027 with runway to spare. As we continue to flip over the data cards, we will make the right moves to continue to capitalize the company. Yeah. Maybe just to be more specific because you have the phase II AD and then you have the potential phase III for ITK for alopecia areata. And then you have this O52 phase I, phase I- B. Are those all included in the current cash runway? That's correct. I'll just repeat it. We deliver 2138 in alopecia areata in addition to the top line that we'll put out imminently on AD. We deliver the O45 in atopic dermatitis on the TSLP mAb. We deliver the bispecific in SAD, MAD, plus we have in our budget two 1Bs, one in respiratory, one in derm, deliver both of those in 2026. We deliver the ITK through next gen through a POC. All of that comes within the current cash runway. Excellent. Thank you. You do have this small molecule platform. Now you have a large molecule TSLP platform, not just TSLP, but it is a biologic platform. What are the highlights you want to give us for the earlier pipeline into small molecule and the large molecule? Yeah. ITK, obviously we're really excited about that next gen and that includes a portfolio of compounds. Then we've also started to look at, again, based on the data we saw out of China, having the confidence we do in the TSLP mAb, looking at various bispecific constructs utilizing that, in our mind, best-in-class TSLP mAb component. We haven't disclosed what those are, but work has already started. The good news is it doesn't cost a lot of money to do that in the early days. Yeah. No, I agree. Okay. All right. I think that may be most of the questions I have. Anything else you want to highlight to people that we haven't really discussed? No, I just say again, we have $191 million on the balance sheet, three clinical stage assets with meaningful readouts through 2026, a really exciting preclinical program with the ITK next gen and pretty prudent use of capital with the ability to bring in additional non-dilutive capital over the short term that gets us well into 2028. I think it's a good setup given where we're trading. Agree. All right. Thank you. Thank you, everyone, for listening. Thank you. Thank you.