Global Healthcare Conference. My name is Roger Song, Senior Analyst covers med tech. It is my great pleasure for our newly IPO'd company, Avalyn Pharma. Then we have CEO Lyn, and then CFO Doug here with us. Welcome. Thank you so much. We're so happy to be here. Excellent. All right. Lyn, right after coming out of the party, what's the state of our for Lyn, for Avalyn? What should we know about the story? We can have a conversation. Sure. Yeah, that sounds good. Thanks for the opportunity to be here and present today. We did an IPO just over a month ago, really excited. This is our first investor conference as a public company. Really excited for the first one, and hopefully it will not be the last. We're working here in pulmonary fibrosis, many of you may know the disease. It is a deadly diagnosis. Survival is typically three to five years. Survival rates in this disease are worse than most forms of cancer. What is, I think, really shocking to understand about the market is despite the fact that we have a few drugs approved for the disease, really less than 10% of patients with this disease in the U.S. are taking either of the oral meds that exist today. The reason so few patients are treated is because those oral drugs are very difficult for patients to tolerate. Patients may start therapy, but they cycle off incredibly quickly. pirfenidone is one. It causes horrible nausea and vomiting. nintedanib is the other, causes horrible diarrhea, and that's layered on top of the symptoms of the disease, which are really characterized by significant cough issues, breathlessness, quite limited exercise capacity. We're effectively asking patients with this deadly diagnosis to spend that limited exercise capacity to go back and forth to the bathroom to deal with the consequence of the drugs. What we're doing at Avalyn is actually taking those same two drugs that are approved and we know work in the disease, but we deliver them to the lung directly with an inhalation. That actually does two very important things to the molecules. With both drugs, we're able to drop the dose considerably as compared to the oral version. pirfenidone as an example, goes from 2,400 mg a day orally to 200 we think is the right dose with the inhaled. Despite the fact that we're dropping the dose by more than 10-fold with both programs, we actually had better exposure in the lung at that much lower dose because we're targeting the correct organ. When you put your drug into the lung and drop the dose, hopefully it's obvious that you avoid most of the systemic exposure that you have with the orals. We think that is what is now allowing us with this inhaled delivery to really resolve those tolerability challenges that prohibit adoption and limit continuation. Our data suggests that when we can do that, we actually improve tolerability considerably, make it possible for patients to stay on therapy over the course of years. The clinical data also suggests that it may also be possible with this better lung exposure to improve efficacy. We're moving ahead with both inhaled monotherapies. Our AP01 is our inhaled pirfenidone, AP02 is our inhaled nintedanib, and then we're also now starting to work on combinations, which I'll come to. AP01 pirfenidone, we're underway, wrapping up enrollment now in a large global phase II-B study called the MIST study. We think we'll have that fully enrolled here in the next few months. Once we're fully enrolled, we know then that we'll be just over a year to data. It's a 1-year study, 375 patients, really designed as the first pivotal. Really excited to be now stepping towards a period where we're going to have a massive data read in that program. Our AP02, our inhaled nintedanib, is also now underway in a global phase II program. That one's a 12-week study. We think that one will also be fully enrolled and reading out probably by the end of 2027. That six-month window is going to be really important for us with some great catalysts. Finally, I spoke to the potential to combine mechanisms. When we can solve the tolerability problem of the orals, which is currently the rate limiter, it's going to allow us to really do two things. One is to combine these drugs together in fixed-dose combos. That is our AP03 program. We're going to get that into phase I later this year. Importantly, we're hopeful for patients' sake that other companies in this space might succeed with their novel mechanisms. If they do, we can use these drugs that we have as background standard of care and layer them in loose combination with those oral agents. I think really what we're up to at Avalyn here is not only solving the problem that exists with the current medicines, but also really potentiating this evolution in the treatment algorithm towards one where we can start using medicines in combo. That's very similar to what's happened in other lung diseases like asthma and COPD, like pulmonary hypertension, where we routinely want to put multiple mechanisms together. Is that a good overview? Yeah, that's fantastic overview. Good. Okay. I think Avalyn, the story to me is, I think it's a very validated biology with local delivery or local PK can for sure, or highly likely going to improve the safety based on the data, and then potentially can improve the efficacy. Yeah. The massive opportunity in terms of the market. Yep the patient population. Okay. We zoom in for AP01 and AP02 later. For AP01, you're running the phase II-B- MIST data. You already have a phase I-B. I think the data, just like I said earlier, so safety looks great. Yeah Nearly half of the order unit of interest. On the FVC side, stunning, right? You are stabilizing after four and a half year. Yeah 5+ year. One thing we want to caveat is this is mostly in the IPF patients. MIST is studying PPF. How should we think about this translation? You do have a COPD, kind of a small population in the phase I-B. Maybe walk us through the evidence that can support your confidence for the MIST on the FVC side. What's the right assumption there? For PPF you mean? Yeah. Yeah. Okay. It's a great question. There are two indications in this field. There's Idiopathic Pulmonary Fibrosis, IPF, and then the newer indication in the space is called Progressive Pulmonary Fibrosis or PPF. Just looking at the two diseases distinctly for a minute, IPF, idiopathic in nature, meaning we don't understand the reason for the disease onset. That affects in the U.S. about 100,000 patients. PPF, the difference between it and IPF is the etiology. PPF, we do understand the reason for the disease onset, often driven by an upregulation in your immune response, driven by some kind of antigen in your lung. We often see patients with PPF that have underlying connective tissue diseases. Those translate into becoming interstitial lung diseases. Those are CTD-ILDs. That population is about 180,000 per year in the U.S., and those patients often start to become fibrotic because they've got an upregulation and some inflammation in their lung that becomes fibrotic. We know the pathophysiology of fibrosis is identical between IPF and PPF. The distinction we make in the indication is really just about the underlying cause of fibrosis. Now clinically, we've learned in the field from some of our colleagues that when you study PPF correctly, and there's a caveat I'll come back to, but when you do study PPF correctly, you actually see the data is literally superimposable between IPF and PPF. If you think about the oral nintedanib program, if you put them side by side, very similar efficacy between IPF and PPF, and pirfenidone, which is the new BI launch, also very similar. The nuance I described is around how to study PPF correctly. PPF by nature can be a little bit more heterogeneous in terms of the rate of downward decline in lung function on enrollment. We've learned to control for that, thanks to our colleagues at Boehringer Ingelheim. They created a set of criteria in their INBUILD study. That was the first study for approval in PPF ever done. What they do in that study is they look back at patients' historical lung function on enrollment. They make sure that patients are declining with PPF analogous to how an IPF patient declines. They're picking the right patients to study clinically. When you do that, you get the superimposable data. We're using that same criteria in our study. I think all of that, combined with the fact that we actually ourselves have PPF data. In that phase I-B study you mentioned, ATLAS, we actually allowed in the open label portion of the study for the inclusion of some patients with different forms of disease, with compassionate use in mind. These were last line of therapy, no other treatment option patients. We had a group of 28 PPF patients come into that study. We've seen now in both one-year data between IPF and PPF in that study, as well as long-term data that we actually just released yesterday. in over four years in IPF and PPF, the same profile, by which I mean we see the same stabilization of lung function in all these patients. Hopefully, Roger, that answers your question. I think that gives us confidence that we've got the right population and right approach here. Did I miss anything? No, that's great summary. Okay. Yeah, no, this is great. I have to highlight one thing is your team has significant experience in the IPF and the PPF clinical development space. That's why you know where to refer and what's the benchmark. Absolutely. Yeah. I have to say, I think we've just got the best team in the business. I know we're biased Yeah. An amazing group of professionals that spend their day every day thinking about how we can do better by these patients, and I think that's the thing that unites us culturally, is we're a company that cares a lot about patients. We really think deeply about them and how to do better by them every day, and very fortunate to have built this incredibly high-performing team. Many of whom in the clinical team came from Boehringer Ingelheim. Worked on that oral nintedanib program and then oral pirfenidone as well. Deep experts in understanding the right sites to study, the right patients to study, the right protocols to write. Really enthusiastic about the potential. Yeah. Good. In terms of this MIST phase IIb study, what is your base case TPP versus upside case TPP based on ATLAS data, based on the current drug? Yeah, I'll ask Doug to weigh in. Yeah. It's a great question. Our base case has really been to unlock the tolerability challenge with the oral antifibrotics. If you look at ATLAS, although we did show lung stabilization, which was incredibly exciting, the real value in this category is keeping patients on medicine. For example, if we show the same tolerability that we saw in ATLAS, even with similar efficacy as the orals, that's a meaningful opportunity with a very large patient population too, that either has failed the orals or quite frankly is afraid in some cases to try the orals. That's a major opportunity for us, and we've tested that extensively in market research with both payers and physicians. Really the upside is if we were to replicate the efficacy data, which would be lung stabilization at 52 weeks, that's what we call the grand slam scenario, where a meaningful game-changer in the field where, quite frankly, no data has been seen yet in terms of approved products. We're really excited about the base case, but also the opportunity to achieve that upside case. That echoes earlier Lyn's point is the local PK, the drug exposure. Yep. Even your much lower systemic exposure, but it's way higher for the lung. That's right. We know the disease is in the lung, right? Yeah. Maybe that can have the upside potential for the increased efficacy. 100%, yeah. I think it's important to say for investors listening, in this space, this is a lung disease, okay? We are targeting here the epithelial cells and the alveoli. We actually can measure and understand the lung exposure in this disease. This is different from some other diseases. In pulmonary hypertension, for example, that's not possible. Here you can. We do what's called a bronchoalveolar lavage, and then we can actually dose the oral drug in healthy volunteers as compared to inhaled, and then we can look at the lung exposure in epithelial lining fluid data to understand if we're in the right dose range. We've done that here, I think in a really elegant way for the program. To Roger's point, we do know that we can derive considerably better lung exposure at a fraction of the dose. The inhaled nintedanib program, by way of example, oral is dosed at 150 mg b.i.d. We think the right dose is either probably two or four mg. At that four mg inhaled dose, we have 27 times better lung exposure than the 150 mg oral. When you put so much less into the lung, you avoid most of the systemic exposure. In the phase I program for the inhaled nintedanib, I mentioned earlier diarrhea. Diarrhea is the AE that is just synonymous with the oral molecule. We didn't see any diarrhea in the phase I program because we're dropping the dose so considerably and avoiding most of the systemic exposure. I think clinically, I would expect that we're probably going to see some diarrhea, just to manage expectations. If pirfenidone is any example, it'll probably be much lower rates of diarrhea and probably much less severe grades given the much lower systemic exposure that you have with inhaled delivery. Got it. I think I just set the expectation clear. For the safety profile at the base case, you want to replicate ATLAS, what you see. Any kind of a range of the rates you are looking for compared to the oral and the ATLAS? Yeah, we're doing research now to sort of understand those different questions. It's a great question, and one I think that we don't yet, probably not yet ready to comment on. As Doug said, our base case for MIST is that we likely will replicate the tolerability profile of ATLAS. Again, in ATLAS with the oral versus the inhaled, we do see the same AEs that you have with the oral. Again, much lower rates and much less severe grades. What that fundamentally unlocks, I think we've talked about here, is the ability to keep patients on therapy. I think this is worth mentioning for a minute. The oral drugs, you only really have one year's worth of data. FDA requires one year endpoint for primary pivotal. There really is very little long-term data on the orals. Very little long-term data in the natural history because, as I described, survival here is typically just three to five years, and patients don't come to trials until typically they're a few years into their diagnosis. There is no long-term data in this space. What is, I think, really exciting to us about the data set that we have is we've been able to keep patients on therapy over a much longer- term horizon. In the program, we have data in IPF and PPF out beyond four years now, and that is, I think, just really remarkable. In ATLAS, patients were actually diagnosed, as I said, two years before they enrolled. They're actually now six, in some cases, seven years into their diagnosis. For those that remain in the open label, they're still stable in their lung function over that period. There's absolutely a responder bias in that long-term data. It's not approvable. We're not here to pretend it is. Just the fact that we have it at all tells us, I think, that we're doing something quite different in this disease, again, with patients in mind to hopefully really benefit them and change the course of this disease for themselves and their families. Okay. You call MIST as a phase IIb. What is the next step? Is the base case running another pivotal, or how likely this will qualify as a pivotal? Yeah early approval? Good question. It's one that we ask ourselves all the time. Our plan is, this division of FDA has always been quite conservative. We're talking about CDER and the pulmonary division. We expect that we will likely have another pivotal to do when MIST completes. MIST is really effectively designed as one of the pivotals. As I mentioned, 375 patients, 90% powered. We're doing dose ranging versus placebo. I think our expectation is that that phase III that will follow will probably be similar to MIST in terms of size and scope and design. That's our base case plan. Having said that, you probably remember Marty Makary talking about single pivotal for approval pathways. He's gone now. I think we're going to have to wait and see how things change over the course of the next year. Our plan is that when we have the data back from MIST, which will be about a year or so from now, we'll then go have a conversation with FDA about, depending on what that data profile looks like, what that means for the program and whether there could be a possibility of filing early. I think we're a team that always just wants to underpromise and overdeliver, not the converse. I think we're best served by keeping the base case that I described in place and having that conversation with FDA with data in hand. Awesome. Okay, good. We save the FDA discussion for another hour, so. Okay. In terms of the competitive landscape, it is a very active drug development space. Which is great. Which is great. Yeah. As an equity analyst, we follow the competitive landscape always pretty closely. People always ask the question. To me, this is not too complicated because you are trying to become the new background therapy or backbone therapy. Correct versus many other IPF, PPF new drugs targeting new target, new MOAs, that kind of stuff. To me, it's easier to say you are not necessarily compete too many competitors. Maybe tell us how you think about this IPF, PPF space, and then where the AP01, AP02 fit into the future landscape. Yeah. Great. Thanks for the question. One of my favorite topics. Maybe let me talk a little bit about the market itself, and then maybe I can ask Doug to kind of comment on the competitors and how that's playing out. When you think about the market, I mentioned about 300,000 patients just in the U.S. diagnosed. When we dollarize the market using the lowest brand pricing in the marketplace today, it's $150,000 per patient per year. If you just do the multiplication, that's a $42 billion market today. That number assumes every patient is on one drug, never mind combos. We've seen in other lung diseases like PAH, patients are now routinely on three, sometimes four background therapies. If patients in this market start to become on multiple mechanisms, that $42 billion will double, triple. The numbers get pretty silly pretty quickly. Just focusing on $42 billion today. OFEV is the largest commercial product in the space today. That's the oral nintedanib. It's about a $4 billion drug globally. We think about $3 billion in the U.S. That's my math. You can sort of do it in your head. $3 billion of $42 billion, they're effectively reaching less than 10% of patients over the course of the year, right, because of how hard it is to tolerate. When we think about the competitive landscape, I think the first fundamental point is this is a massive market that is untapped. There is plenty of space for multiple different companies to be successful, and that is exactly the lens through which we see this competitive universe. Pirfenidone and nintedanib are backbone standard of care. All the companies that are looking at novel mechanisms today are looking at them on top of pirfenidone and nintedanib. We're setting this market up for an evolution in the algorithm towards combinations. nerandomilast is the new BI launch. It was studied on pirfenidone and nintedanib. Actually does better when you combine it with pirfenidone and nintedanib. It speaks to our potential. We're solving background so that now we can hopefully take patients on inhaled pirfenidone or nintedanib or both, layer on top nerandomilast when it's appropriate. We'll leave docs to figure out how to do that, and evolve the market to a place where we can actually do better by patients overall. That is, I think, exactly what we're up to. Doug, what did I miss? Yes. No, I think it's all great points. I think as we think about the later-stage programs, that would be, of course, United, Insmed with the treprostinils, as well as the LPA1 antagonists. These are all opportunities to combine. We think we're the company that's going to set that standard, really with the backbone therapy elevating that profile. Of course, we've seen the market evolve, too, with nerandomilast pricing at an annual gross price of $200,000. We'll see, of course, how United thinks about pricing with Tyvaso in IPF and PPF, but a lot of opportunity to grow this category, and so we're excited about that. I just think for patients' sake, again, just coming back to always patients, we need more mechanisms for these patients to do better by them. It's just through that lens, we don't see this as being competitive. We genuinely hope that we can actually do better together with different companies that are working in this space. Yeah. One thing we noticed for those new mechanism, and they do study the patient with or without the background. Yep. As you pointed out, Lyn, for the patient on background therapy combined with the mechanism, the effect size is even bigger. Yep. That's encouraging to see, which means the backbone therapy is still very valuable for the patient. Yep. Exactly right. Yep. It's interesting because you see that same phenomenon both in the nerandomilast data. Nerandomilast does better in combination with pirfenidone and nintedanib, as does it appears treprostinil. Yeah. Based on the UTHRO data, really exciting, again, to speak to the potential to combine. Yeah. How you think about the future, the payer landscape? Because right now you say, branded drug, $150, we may have generic for both of the brands. How ready is the payer to reimburse polypharmacy? I think PAH-ILD is a very good analog here. What have you now, based on your conversation with the payer, the work you have done, so are they ready to do this kind of for IPF, PPF? Yeah. I'll let Doug comment. It does appear, just before Doug comments, just to say as a threshold conversation, payer access depends on changing the profile of the market, right? I think depending on the data that we have, it will perhaps make those conversations even easier than Doug might describe. Go ahead. Yeah. We've done a fair amount of peer research, and of course, prior to the nerandomilast approval and launch at the $200,000 annual price point, that band between $150,000-$200,000 is something that we looked at from a market research standpoint. A lot more to come as we think about with Frank Salisbury, our Head of Commercial coming into the company, optimizing the phase III design in terms of outcomes, that would be very important for payers. We think there's ample room to grow from a value perspective for payers. You look at other ultra-rare inhaled respiratory drugs, whether it's cystic fibrosis or PAH, you're talking north of $300,000 for those products. Each each from an annual cost. Perhaps when you think about pulmonary fibrosis with the prices that were established with Esbriet and OFEV back some time ago, innovation is on the rise, and of course, we have to show that value proposition to the payers and are quite confident that both the base case and the upside case can have significant value to the payers. How much the nerandomilast combined with the nintedanib so far? Do you know the use case? Early days. How much? Early days when we looked at the IQVIA IMS prescription base and follow nerandomilast, it doesn't look like substantial erosion from OFEV. I think it's, of course, the excitement in the field of having another mechanism is long awaited. We're seeing some nice uptake. Of course, still early days, and we'll continue to follow. I think with the orals, the challenge is when you combine, you're exacerbating the tolerability with diarrhea, in particular, with OFEV and nerandomilast. I think that's the Achilles' heel, so to speak, with the oral category right now. Yeah. Just to say a little bit more about that. Yeah. Oral nintedanib is already very difficult on diarrhea as a monotherapy. nerandomilast primary AE, also diarrhea. Putting two meds that both cause diarrhea together may be challenging in the real world, but we're going to have to Yep watch and see what happens. That's why inhaled version address those kind of GIs are very critical. Exactly right. in the future. Exactly right. For lung disease. Yeah. I just think it's important to always come back to that. We're not trying to drive inhaled delivery for something that's not related to the lung. This is a lung disease. Yeah. One thing I have to mention is you do have another inhaled version of the background therapy. They are using different formulation DPI. How you think about that? That's probably the only, I would say, direct competitor to you. Do you agree with that? Yeah. That's right. When we think about inhaled delivery, to me, we have to always think first about the patient population that we're serving. This patient population, as I described earlier, talking about a patient that's older, they're sick, they're frail often, and they don't have a ton of inhalation capacity. They have very shallow breathing. We see in the symptoms of the disease, cough is an issue in 70% of these patients. When we think about inhaled delivery here, we want to think about what the patients can actually dose. Right? We also have to think about the particle size. Here, when we're trying to reach the alveoli and the deep tissues of the lung, we need to create a particle size that will get there. That has everything to do with the technology that you use. Not every inhaler is capable of delivering the particle size that you need to get to the right part of the lung. With that in mind, we're using a handheld nebulizer, so I'm holding it if you can see it. Hopefully you can see this gentle mist that comes out of the top. What's nice about this platform, in my opinion, is this does not require a single breath to dose. You put it in your mouth, you breathe in and out using your normal breathing pattern for about eight and a half minutes twice a day with pirfenidone, about the same with nintedanib. It doesn't rely on a single breath. Right? You're using eight and a half minutes worth of breathing to dose the drug. Because it's so gentle, and such fine particle, it's not a drug that requires a vigorous inhalation. A dry powder inhaler that Roger mentioned, that requires a dose. I can do that because I've got reasonably healthy I've only got mild. Still coughing. I have mild asthma, it's like allergy season. That's exactly what happens. I've got reasonably healthy lungs. The issue from my opinion with a dry powder inhaler is that it's going to be challenging for these patients to dose. I'm sure there's a segment of this market that can dose with a DPI. The question that we're asking ourselves is how many patients that is, how big is that segment? Certainly everyone can dose with a nebulizer, and I just, from a clinical perspective, prefer something where I can rely on time to dose so that if someone coughs, if you're using a single inhaler, if you cough again, you cough it right back out. You're not getting enough drug on board to have a clinical effect perhaps. There are different strategies out there, but ours is really to, I think, consider the patients first, and I think this is the right approach. It's really also the only option for pirfenidone. The volume of drug we need with pirfenidone is such that we need to use an inhaler that has that capacity. This does. Because we want to combine them, that also helps. We need to keep nintedanib in the same device platform so that we can combine them. If we put them in two different device platforms, it makes combining them much more challenging, just much longer path. That's the plan. Awesome. All right. I know we spend most of the time on AP01, but a lot of the discussion apply to your AP02 as well. The only thing is the AURA phase II is also kind of ongoing. The data readout timing is similar to the MIST, but it is a little bit shorter. Yeah a shorter kind of endpoint, and also it's ex-U.S. Maybe the question is how confident you are for AP02 can next step can also be the pivotal? Yeah. We designed it with that in mind exactly. In AP02, we decided to do a 12-week dose ranging phase IIa study. It's 160 patients, so still a large phase II done in most of the same countries we're doing with pirfenidone. Many of the same sites relying on the relationships that we've built. Our view is that we're looking in that study at two doses versus placebo. When we looked back at the oral nintedanib program, you actually see in all of their phase II and phase III studies compelling separation of the doses at between four and six weeks. By 12 weeks in that program, it was definitive. Our view is that with a phase IIa, an inhaled nintedanib, given that oral data, we think 12 weeks is enough to pick the right dose. Because it's large enough and powered, we think that single dose is likely to be able to move forward straight into a phase III program. Very similar, by the way, with what niraparib did. Shorter duration phase II into single pivotal for approval. They did one in IPF and one in PPF and came to market with both. Our view is that we'll have to, again, have a conversation with the agency when it's wrapped up, which will be in late 2027. Our view is that we've designed it such that that should be possible. Excellent. All right. Wrap up the whole session. What's the cash? What's the runway? Yeah. One second. just over $400 million of cash in hand, so a great outcome in terms of upsizing the IPO. That funds us into 2029, so great capital to build the pipeline and really think about multiple phase IIIs for our base case. One phase III for AP01, one phase III for AP02, and then finishing the phase I for AP03. We're excited about the next 12 to 18 months ahead. Excellent. I think that's a great start, and then I look forward to continuing watching your success. All right. Thank you, Lyn, and thank you. Thank you so much, Roger. Thank you, Roger. Thanks, everybody, for coming.