All right, everyone, I think we will get started here with our next session. My name is Derek Archila. I am one of senior biotech analysts here at Wells. With me, we have Alumis, and from the company, we have Martin Babler, President and CEO, as well as Jörn Drappa, Chief Scientific Officer. Gentlemen, thank you so much for joining us. Thank you for having us. Thank you. Excellent. We just had some data for your lead product, envudeucitinib, phase II in lupus. Maybe first just recap what we learned, and then we can dig into a little bit more of the specifics. Yeah. This was a phase IIb dose-ranging trial of envudeucitinib, three different doses versus placebo in patients with moderate to severely active lupus. Was a one-year trial with a primary endpoint being BICLA at week 48. The trial did not meet the primary and its key secondary endpoints in the overall population. It became quickly apparent that in the population that has the type 1 interferon signature, there was a strong response and consistent response across multiple different endpoints. That includes the BICLA, the SRI-4, the CLASI, joint counts, as well as remission. But in the type 1 interferon signature negative population, there was really no benefit at all. In fact, some of the active group appeared to be doing even worse, which is primarily due to an extremely high placebo response in that subpopulation. Since this interferon signature negative group constituted an unexpectedly high proportion of the overall trial participants, that sufficiently diluted the overall outcome to become negative. In the past, we've typically seen approximately 80/20 distribution between signature positive and signature negative ones in trials in this population. In our trial, it was approximately 60 to 40, so this was a large enough population to render the all-comers outcome negative. Got you. I guess, what do you think explains that lower than expected interferon high patient in the population? As you said, generally we see that 80/20 split. What do you think went wrong? Was it more a geographic thing or race and ethnicity? What kind of mix did we end up getting here? Yeah. We're still digging through this data. We only got the top line data a week ago, and the biostats team is buried in a mountain of work. We're trying to dig through by site, by region, by country level, where all these type 1 signature negative patients came from. My preliminary sense is that a lot of them actually came from the U.S. Fewer of them came from Latin America and especially Asia. In Asia, typically, patients have a higher proportion of the signature than in other regions, and that, in our hands, was also reflected in a much larger clinical response in Asian patients than in, for example, the United States. In the United States, we were in a situation where there's a lot of competition for patients with moderate to severely active lupus, and especially at the time when we began to enroll in North America, because other countries joined later on, we had initial very slow enrollment and had to compete with a lot of other companies that had late-stage trials going on. I think that probably led to the fact that we had a somewhat milder phenotype than we had expected, and that was then also reflected in the lower proportion of the signature negative patients. Got you. Beyond just your data that you generated here, I guess, how predictive do you think the interferon gene signature is for envudeucitinib's response, across maybe other trials? Maybe just give us the totality of the evidence that points that way. I think it's been a very consistent observation by now with drugs that target the type one interferon pathway. We've seen that first in the anifrolumab program that I was involved in many years ago, where basically the type one interferon negative subgroup did not contribute almost any response. The delta was close to zero, and all the delta came basically from the type one interferon positive subgroup, and that was primarily due to an elevated placebo response rates in the negative subgroup. It's again been seen with the deucravacitinib program, where the responders mostly came from the positive subgroup, and there was very little of any delta in the negative subgroups for most of the dose arms. Now we have seen it again consistently, no benefit whatsoever. Across three different programs now, we have seen the same thing over and over again, and I think we can now safely conclude that there is just no benefit for these patients for this type of therapeutic approach. Got you. Although a failed trial, it does add to the learning of trying to almost homogenize this patient population to a degree where you can have and run a successful trial. Is that fair? We're just narrowing the population to some degree? Yeah, I think so. Obviously you want to target treatments to patients who have a good chance of responding to them and not to those who have very little evidence to support that they would derive any benefit from it. Going forward, I think the rational way to proceed to next steps is to hone in on those patients that have a chance of responding, and that is the type 1 interferon signature positive ones. And we have a lot of work ongoing to see whether in addition to the interferon signature, we can come up with other markers that are associated with response. We've basically obtained RNA samples at multiple time points from every single patient in the LUMUS trial, and over the next several weeks and months, we will analyze all this data to see whether, in addition to the type 1 interferon signature, there's other things that we can potentially use to narrow down the population and hone in on those that have the best chance of responding. Can you talk to the efficacy in those patients with the interferon high signature? Was it fairly consistent across many endpoints? Is there variability? And what else could you show maybe at a future medical meeting that would even reinforce the potential for you guys to move into a phase III in just the interferon signature high patients? Yeah. So they were consistently large differences between active and placebo. With respect to the BICLA, there was about a 30% delta. With respect to the SRI-4, I can't remember the exact number now off the top of my head, but also in that order of magnitude. There was a large effect on CLASI, which is a skin-specific instrument that's conceptually similar to the PASI. It measures the area of skin involvement and the severity of skin rashes in lupus. And there was a good proportion of patients who actually achieved the LLDAS, which is a remission-like state of low disease activity. So there was a more than doubling of the rate of patients that achieved the LLDAS compared to placebo. So all of these point to the fact that there was a really good treatment response in this subpopulation, and consistent across multiple domains. The only two endpoints that were not statistically significant, although they showed a trend, were steroid-sparing and flare reduction. There were relatively few severe flares in this trial, and that's why the number was too small to achieve significance there. But all the other key secondary endpoints were clearly positive. Can you also talk about the dose? You guys were evaluating a couple of doses in the trial, and just what we should take away there in terms of looking forward to a phase III. Yeah. First of all, we looked at pharmacodynamics. There was a beautiful textbook dose response. The lowest dose achieved some degree of inhibition of type I interferon-mediated genes, and then the higher you went in dose, the further it was suppressed, up to almost baseline at the highest dose. The dose response was less clear when it came to clinical outcomes. We did have a dose response, and for the primary endpoint, which was the BICLA, there was no clear dose response for the SRI-4 and for some of the other secondary endpoints. And exactly why that is, we're still working through. It could be just variability in the relatively complex clinical outcome measures in lupus, or it could be that you perhaps don't need the type of complete target coverage that you clearly need in psoriasis, that we've consistently observed that you really need to hit the target very hard in order to achieve optimal efficacy. It may be that in lupus, you don't need to hit quite as hard, but we're still working through that. Understood. I guess, as we think about, and I think I asked this question on the call last week, but there's no established precedent for just enriching for interferon gene signature patients in a lupus trial. There is precedence for narrowing patient populations and, as you were just alluding to, going to the patients that you know are probably highest probability of having a response. I don't know, maybe walk through some potential precedents that you guys are looking at and the conversations that you'll have with the FDA around a future phase III in this enriched population. Yeah. I think that the collective body of evidence that I've talked about in your previous question is now strong enough to make a case to the agency that the risk-benefit ratio is actually not appropriate for these patients, that they have very little chance of deriving benefit while still being exposed to the risks of a clinical trial. That's the argument we are going to make. There could be several different scenarios. It could be that the trial is geared exclusively towards that subpopulation in the first place. It could be that we include at least some type 1 signature negative patients to further strengthen the body of evidence supporting that these patients derive no benefit, but then analyze it in such a way as to have the primary analysis geared towards the subpopulation and- Sure a secondary supportive set of analysis for the all-comer population. Got you. Do you think the base case here is that you would have to run two additional trials, or do you think you can leverage some of the evidence from LUMUS in just that population of the interferon high signature patients? I think it is hard to predict. I think the agency recently has shown flexibility to approve drugs based on a single phase III trial, particularly in a situation where we have a relatively large phase II trial. But it is hard to predict what they are going to say. That is going to be a topic of discussion when we meet with them towards the end of this year, hopefully early next year. Got you. I was just going to ask you on the timing. Is that the earliest you probably do it after you get it? That is what we are shooting for. We have obviously a lot of analysis still to complete and so we need some time to assemble a data package. Then we aim to request a conversation with them in an expeditious way, depending on their calendar, which is not in our control. Hopefully in the fourth quarter or first quarter of next year. Got you. How will you communicate to the street? Will it be more just like, "Here's the plan, this is the phase III we're going to run, and have the whole design," or is it just that, "Yes, we can move forward." How comprehensive an update will you guys plan to provide? Martin, you want to answer that? Let's get Martin in here. Yeah. We haven't decided yet how we're going to do that. I think the most important thing for us is, at this point, we mostly want to have an understanding on what the path forward is. Whether and how and when we move forward, I think, is a question in the bigger context who we are as a company at that point. Got you. Just going and revisiting the question around dosing. Do you feel like you've done enough dose ranging to understand just to bring in one single dose into a phase III trial, or would you still look at multiple doses? I think we would ideally look to bring in one single dose, but as I said, the dose response, we're still working on all the analysis to see whether we can come up with a sufficient rationale. Certainly, the safety seemed to be fine at the 40 BID at the highest dose, so there's really no concern from that point of view to taking the higher dose and having potentially more side effects. That did not appear to be the case. Understood. Okay. Then maybe just to talk about deucravacitinib's trial. They're going to have a readout by the end of the year in lupus as well. I guess, what do you hope to learn from that? I don't know how much detail we'll get, but what would you hope to learn from that trial, whether it be at the top line or at a future medical meeting where they actually show the granular data that support your hypothesis here? Yeah. So my expectation based on their PAISLEY phase II program is that they're going to have a positive outcome overall. This is a large trial, well-powered. I think the biggest question is what is going to be the magnitude of effect, right? So they showed a really strange dose response in the PAISLEY trial, where the lowest dose had a huge delta, the middle dose had almost no delta between active and placebo, then the highest dose, again, had sort of an intermediate kind of delta. So on which end of that spectrum between almost no delta and a large delta the phase III is going to come out, I'm not sure how to predict that. The second question is going to be what is their proportion of type 1 interferon signature positive versus negative going to be, and how is that going to influence the results, and will they have the same observation that we did that really the negative patients have no benefit, whereas all the delta really is derived from the positive subpopulation. If it's kind of an 80/20 split, it's probably positive, but if it's kind of drifting down to where you guys are, does that produce more risk? I haven't done the powering and I don't know if you guys have looked at, but I don't know. I guess for you guys, it would seem like if it's heavily overweighted to the interferon high, then that supports the thesis. But if they hit and it's kind of 50/50, then maybe not so much. But I don't even know if that's possible. It's hard to predict it. It depends on exactly where and when their phase III patients were enrolled. Of course, they now also have the ability to potentially learn from our trial and modify their analysis plan accordingly. Fair. Okay. I guess looking forward, we'll get some updates next year, hopefully on lupus. But your other plans for envudeucitinib has been centered around potentially bringing into CLE, so kind of a derivative of SLE, but also Sjögren's. Do you think the data from the phase II LUMUS trial kind of helps validate those indications in any way? Maybe just walk us through your current confidence in the development for those indications. Yeah. We've seen a very strong response on the CLASI specifically, which is the skin instrument, which is both more quantitative and more objective than some of the composite endpoints, such as the SLEDAI and the BILAG. Based on that, I think it would increase my confidence in CLE. Of course, in CLE, there's the same or a similar distribution between type 1 positive and type 1 negative patients, so we will need to take that into consideration as we expand into CLE as well. Sjögren's, is it slightly different or- Sjögren's is slightly different because there's really no prior evidence up to this point of TYK2 drugs in Sjögren's. We know that there is a type 1 interferon signature in Sjögren's, but there is no prior sort of clinical validation. I think the first point of validation is going to come from Bristol's trial of deucravacitinib in Sjögren's. Got you. Just revisiting, so one of the components of the LUMUS trial was enrolling patients that had some skin manifestations. But ultimately, that didn't translate to whatever their interferon signature was. I guess, what actually happened there? I mean, ultimately, that's what we thought we were enriching, but ultimately it seems like we didn't. Yeah. So what it seems like in my mind is that the association only works in one direction, right? So those patients with skin manifestations tend to have a good response to type 1 interferon-directed drugs. But the presence of skin disease in and of itself is not necessarily sufficient to ensure that they actually have the signature. So there may be skin manifestations in the negative subpopulation as well. And so that is an important learning, so in the future, they will just need to directly test the signature in a prospective way and then select accordingly. Got you. Okay. Anything else that we should be paying attention to near term around the SLE program for envudeucitinib, either internally or externally? No, I think we covered it, right? I think an important inflection point is obviously going to be the outcome of the deucravacitinib trial- in lupus. Our next inflection point internally is the conversation with the agency. Then we will need to decide whether or not to move forward in SLE, or whether to focus on psoriasis or potentially to change directions and go into CLE. Yeah. Maybe, let's move to psoriasis. The envudeucitinib data there look great. I guess, how should we be thinking about the next steps there with the NDA filing, but ultimately the strategy, whether to commercialize, partner, so what's kind of the update there? Yeah. Well, let's start by saying that we are having some additional data, especially long-term data, that will further define the benefit of envudeucitinib in psoriasis. Especially when you have a setback like this, you have to remember what you actually have. We actually have a very strong, highly competitive drug in psoriasis in a market that seems to be growing quite substantially. When you look at the July data at least, it looks like the oral launch actually is going really well for J &J. That tells us that market is indeed actually going to grow the way we anticipated. So we have a molecule for a growing market, and a very substantial market. We have always said we are going to plan to partner this asset, and I also want to remind everybody, we always said the reason is that we want to first see how to value the asset and whether this is actually a broad asset. We kind of have one and a half pieces to the answer here. We have a strong psoriasis drug, and it is getting stronger by the day in our minds. In the interferon side, the hypothesis actually is validated that there should be several indications on the interferon side that it works. I think the other piece that we have shown is, and we had a slide in our deck, that even with patients that have very high interferon compared to psoriasis, we actually really reduce interferon levels down to normal levels and very low. We do so actually at least as good, if not better than the competition. From that standpoint, the validation we have there, we just do not have a clear large positive trial, but we have a lot of learning. Now we know how to evaluate it, and now it is really about can we find somebody and can we find the structure of a partnership that maximizes and optimizes this asset. In the meantime, we are continuing to prepare for the launch. We are submitting the NDA by the end of the year in the fourth quarter. We really prepare the market in every way that is necessarily time-wise. Then we will see how that partnership shapes up, if we have a partnership or whether we actually will go it alone. Our intent remains that we partner this asset for at least a psoriasis launch. Got it. I guess as we think about post AAD, envudeucitinib and zasocitinib data kind of shine in the TYK2 class. Can you maybe talk about the enthusiasm amongst physicians and as well as maybe strategics around the TYK2 class, and is it more centered around the IL-12/23 diseases or a kind of growing enthusiasm around interferon related diseases? I would say in the dermatology community, the IL-23 axis is the most important one because I think what they have seen there is that there is a clearly definable patient population that TYK2 seems to benefit and actually seems to help patients even more on certain aspects than other drugs. That is very clear on the dermatology space. There remains very significant interest, for example, from CLE, from dermatologists, and also for other smaller diseases. I would say on the rheumatology side, it is clearly the interferon side that drives it. Then there is always the key question, which we will get some answers to, is gastroenterology an area where this could really become an interesting target? In our minds there, the most interesting aspect for TYK2 is not just as monotherapy, but possibly combinations. We are waiting to see whether the experiment that Takeda is currently running in that field is successful because they are actually pushing the dose, and we believe that is an important part to understand the effect of TYK2 and IBD. We know the IL-23 path works, so it should work, but how well it works is to be seen. Got you. Still broad opportunities. I guess when I think about maybe the future here, and when you look at a potential partnership, what is the most optimal for you guys? Is it more about completely splitting cost or having someone completely build out envudeucitinib's indication set while you maybe focus on A-005? What would be optimal for you and most value creating for the company? Yeah. This is the most fascinating and puzzling piece of TYK2, because TYK2 already has shown to date that it works in about four different diseases, and a year from now we know about 10 different diseases. Any other mechanism that actually aims at 10 different diseases, people would be super excited about, and we see this in other areas. Because of the history of TYK2 and especially deucravacitinib and Ventyx, people are a little bit more shy about this. But the reality is when you look in CLE at least, when you look in psoriasis, actually TYK2 so far outperforms every other modality. I think for us, the ideal partnership of course would be somebody that shares our vision that this should be a drug that is developed in about five to 10 indications, and we are going to do this together, and we are going to do it on a global basis. That requires a lot of resources on both sides, and so I think we will have to see how strongly we can materialize that vision over time at least. The ideal partnership for us certainly would be one where we believe that the pie that we are creating together is significantly larger, and our piece is significantly larger than the pie we would have if we actually did it ourselves. Got it. I think there are two important updates maybe that help de-risk that partnership, at least in our view would be number one, the FDA meeting on SLE, what the path is there, because that certainly would create value in terms of a partner coming and being able to go right into phase III. The other maybe would be around QD formulation. You gave us the update on the FDA stuff and the timing there. Where are you on QD formulation and how important is that, do you think, for a future partnership or just, again, being able to play competitively in the psoriasis market? Yeah. We are actually working on multiple approaches, and they are entering the clinic in the near future. We have not given an update because our plan originally was to basically be able to tell you, "This is what we picked, and this is the timeframe associated with it." I think at this point, I want to make sure that everybody understands we actually have things in our hands that we are working with and that we are pretty excited about. We will give a more detailed update once we have more data from the healthy volunteer studies. But we are basically moving into the clinic with several options to make sure that we have a once a day. We do believe that the likelihood of once a day remains extremely high. We just basically want one that we believe is commercially as attractive as it could be. Got you. Okay. Then maybe just to shift gears to A-005, so this is your brain penetrant TYK2. Maybe talk about how it could be really interesting for neuroinflammatory diseases. I know you had initially thought around MS, moving forward there. It seems like maybe moved forward Parkinson's disease. So what is really the rationale maybe for that change or reprioritization and I guess the confidence level in understanding good proof of concept in PD based on the biomarkers that are out there? Yeah. Maybe I will start on the decision, then Jörn can talk a little bit more about the Parkinson's program itself. I think it is actually a really great example of how disciplined we are as an organization, because we had chosen MS, we were ready to move with MS, but then based on some new information and additional market assessment, realized that the possibility to create significant value in the short to medium term on MS was a lot harder, and we knew that long term we would have to partner the asset anyway. In parallel, we basically developed internal capabilities and actually found a biomarker associated with Parkinson's that is unique to TYK2 and that really we wanted to explore. That is ultimately why we made the switch and decided that the opportunity in Parkinson's is actually significantly larger for us. We can really do additional work there, and that's why we decided to engage in the program. I'll let Jörn talk a little bit more about the program, what we hope to learn. Yeah. To add to this, the issue in MS is that this is a very good way to run a proof of concept trial because you have an imaging biomarker that you can evaluate. But then the problem is, as a small company afterwards, you're stuck, right? There's no way you can finance or enroll these huge trials and long trials that are required in MS. So that's ultimately what contributed to the decision. I think there's growing interest in Parkinson's disease and a growing realization that a lot of the neurodegenerative processes are actually associated with inflammation. At least we are now in the early stages of being able to look at biomarkers that reflect inflammation in the CNS, but also neuronal destruction over the longer term. So I think our first step is really going to be answering two questions. Number one, does A-005 inhibit the target in the CNS as it does in the periphery? So that's question number one. Then as it does inhibit this pathway, how does that actually influence biomarkers that reflect both inflammation and neuronal destruction in the CNS? So that's going to be the question we'll attempt to answer. We will try to run the trial over a sufficiently long period of time and with the sufficient power that it actually at least maybe give us a hint on some clinical outcomes. It's not going to be fully powered for clinical outcomes. It's going to be sized based on observing a biomarker effect. But from our conversations with experts in the field, it does appear like if we run it for a sufficient amount of time, at least we might have a chance of having a hint of a clinical effect. What's sufficient amount of time? Like 12 weeks, 24 weeks, or a year? What do you need to see? There is different outcome measures at different time points. Yeah. For PD, you can measure as soon as four weeks or even at 12 weeks, and then for a biomarker readout, you probably want to run it for at least six months, and for a clinical outcome, perhaps even longer than that. Got you. As you think about the trial design, is it a multi-stage trial, or is it mostly an open label extension? What level of chronic tox have you done with A-005 already so that you can put to play these different types of biomarkers in the trial? Yeah. The tox is done, so we have- Got it. sufficient tox to run long-term trials in any disease, basically. Yeah. The exact design we have not really disclosed at this point, and it is actually still, to some degree, a work in progress that we're trying to optimize and finalize. So I can't really comment on the exact powering and design at this stage. Got you. Then I guess, I don't know if Martin, we were alluding to some maybe TYK2 specific biomarkers that you can look at. I don't know if I caught that right, but I guess there are specific biomarkers that I think we've done a little bit of work in Parkinson's that people are starting to look in whether they translate to outcomes. But which ones do you think are the most important, and particularly if there are mechanistic specific ones that we should be focused on in this trial? Yeah. So the biomarker that we discovered is actually something that is proprietary. Okay We haven't disclosed at this point. It goes exactly to the questions you just asked. Is this, what's the chicken and what's the egg? It's an interesting one because we found it associated with Parkinson's disease. Then we could go back to phase I data and see actually whether that biomarker is indeed influenced by our drug, and it turned out it was. Now it's really a question of, is that a predictive biomarker or is it just a consequence of something that we see? This is what we started out as a company to do, which was basically we wanted to be a precision immunology company and figure out, can we actually identify a specific population that might benefit from certain drugs? For us, that's a really interesting aspect. Ultimately, this is very similar to what just happened in lupus, where we basically now have an ability to really look at what actually changes with a TYK2 therapy, and is there a predictive value in that or is it just a consequence of TYK2 administration? Certainly, we've already dug through some of that, but there's a lot more work to do on both of those to see whether ultimately you can identify a subpopulation in a simple way, and maybe even without running a diagnostic test, but just a certain subtype of people that you recognize because of certain features. In psoriasis, we've been able to do that at least with certain subtypes where we can basically describe you the patient that probably is the better patient for a TYK2 compared to other modalities with special areas, with itch, et cetera. Can we do something similar or even with a diagnostic, identify a patient that should really benefit from the drug? Got you. I am sure you guys are monitoring the field. There are a couple other brain-penetrant TYK2s out there like Sudo and Sundance. Have you guys looked at to see how you guys are differentiated? Is it more about brain penetrance or selectivity? What do you think will ultimately rule the day across some of these other molecules? There are two aspects here, and one is the piece that we learned in the periphery, which is you really have to hit this target hard to get the right effect. With that, for brain-penetrant ones, it really comes how well does it get into the brain, and then what is the safety? You know that there is a certain window of safety because we had three out of the four TYK2s that had to dose reduce because of safety. What we have seen so far is that our drug actually, from the data we have seen to date, all the CNS penetrant ones gets into the brain the best, and we have a 1-to-1 ratio. If we apply these principles, we do believe we might have an advantage because we can push the dose to maximal inhibition in the brain without hopefully introducing some of the side effects and having to dose reduce. We will have to see that. That will come out in the clinic, but that is why we are running the trials that we are running. At least from the phase I so far, the data looked really good, and we hope we can repeat that in the phase II as well. Understood. Will there be anything that we could take from the Parkinson's experience and start to apply? It sounds like you were pretty confident in terms of the biological rationale for MS, but maybe just not good commercially. How do you think about other neuroinflammatory disorders and where, again, a brain-penetrant TYK2 can go? Yeah, I think there's potential for applicability across other neurodegenerative processes as well. There's only so many questions we can address clinically at a Sure time. Certainly, if we do get a positive proof of concept, that would certainly open up a window into additional indications that also are characterized by neurodegeneration, whether that's Alzheimer's disease or other diseases. Got you. Then maybe last one for Martin, just in terms of the overall next 12 to 18 months, we probably will find out a variety of different things, including thoughts on psoriasis and what you're doing there. Also potentially approval within that 18-month period. But maybe just kind of tee up the next 12 to 18 months and other things that we might be missing in terms of the pipeline and updates. Yeah, the one thing that we will have to think about very carefully is we do have additional things in the pipeline. We basically said we're going to put another molecule into a clinic next year. We didn't feel like we wanted to share that necessarily earlier on, but we certainly will get there. I think as you said, the most important things coming up here is that data from our own filing. Then we have another molecule, and then we'll get some additional data from the psoriasis program coming out in the not too distant future. Then it's really about preparing for launch. We have external catalysts as well. With the Parkinson's program and with what comes behind it, we really also want to make sure that people realize that there's more to this company than just envudeucitinib. Yeah. We just have to advance those to make sure that people recognize there's a value in those assets as well. Okay. Well, Martin, Jörn, thanks so much for joining us, and we really appreciate it. Thanks for having me. Thank you. Good to see you guys. Thank you again. Thank you.