Healthcare Investment Banking Division here at Morgan Stanley. Before we get started, I have to read a brief research disclosure. For important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative. We have the distinct pleasure of having John Fowler, CEO of Kezar Life Sciences. Thank you very much for making the trek out here. Happy to be here. Yeah. So John, maybe just to get us started, maybe you can tell us a little bit about your background, and also tell us how the Kezar story evolved over the years, and how you got everything started. Yeah, I'd be delighted to do so. Great to be here. Thanks for having us. It all goes back to 2015 with Kezar. I co-founded the company with two really remarkable scientists in the spring of that year, Chris Kirk, who'd been the head of research at Onyx Pharmaceuticals, and Jack Taunton, who's a professor at UC San Francisco. We had right from day one a vision to advance very novel, small molecule drug candidates into the clinic based on their respective research. They'd been collaborating for many years before I hooked up with them, and we really believed that we could bring first-in-class kind of highly potent small molecule agents into immunology and into cancer, and that's what we've done. So we're now in the clinic with KZR-616, also known as zetomipzomib or Zeto. And, it builds on really more than decades' worth of work prior to 2015 at Onyx, and then also a predecessor company called Proteolix. And, we're just really fortunate that the learnings that those teams brought together, we've been able to bring into the clinic to benefit patients, and excited to kind of share a lot more about what we've learned along the way today with you. Yeah, great. So obviously, there's a lot going on right now at Kezar. You have two phase II trials in AIH and lupus nephritis currently enrolling, as well as the ongoing dose escalation trial with your protein secretion program. And also, I think you have an upcoming identification of a second protein secretion candidate. Am I missing anything? No, it's a lot. You're absolutely correct. Our trials... The Zeto program are named after neighborhoods in San Francisco, so we have the PRESIDIO trial and lupus nephritis, and the PORTOLA trial, and autoimmune hepatitis ongoing right now. And I know we'll have a chance to talk about those. But these are two very different trials, but in the case of PALIZADE, a very large global effort to treat a lot of patients with tough-to-treat lupus nephritis, and very excited to build upon the strong track record of data we posted with our MISSION Phase IIa study last year. And it's been great being in the clinic as well, now with the first-in-class and first-ever-in-man protein secretion inhibitor, KZR-261. So that's been a long time coming. You know, Jack had the vision for this over nine years ago, and it's really gratifying to be in the clinic now. I think we'll have a chance to talk about that unique kind of anti-cancer profile of that we get with protein secretion inhibitor- Mm-hmm. Like KZR-261. So a lot on both sides of the house, both early-stage research and discovery work, as well as kind of late-stage clinical development on a global scale. Yep, great. Now, you know, as we look at Kezar with these assets that you have, what we think is really sets you apart is the novel mechanism of action, and how you can really go after a broad set of potential indications. Really, it's really a true pipeline in a drug business model, but you have multiple drugs. How, how were you able to accomplish so much in such a short period of time? You know, I think, you know, kind of the credit really goes to, the scientific team at Kezar, really led by Chris and Jack, but many, many other leaders underneath them, who, have a unique ability to do both very, very early-stage discovery and medicinal chemistry level work to successfully target, heretofore not targeted, drug targets, like the immunoproteasome or the Sec61 translocon. And combining that capability, which is really something really special about what Chris and Jack can do based on their careers, with the kind of savvy to actually design a clinical development strategy and program, especially in tough-to-treat diseases like lupus and lupus nephritis, where there's been so many, so many failures along the road and over the years. But, it all goes back to the mechanism of action and the faith that they had, and that they convinced me, you know, very quickly, to believe in around the unique immunomodulatory properties of a drug, like an immunoproteasome inhibitor. In the way that even on the preclinical basis, there was a vision towards a true kind of best-in-class profile, both on an efficacy standpoint, but also on a safety standpoint. There's so much of a trade-off, as you know, in many of these drugs, even the ones that are described as pipeline drugs, where you have immunosuppression over a long period of time, and other sort of drawbacks. We really are hopeful that with, you know, each data set we are able to present with Zeto, we seem to be able to buttress our case, that we have really, I think, one of the safest long-term administrable immunomodulators out there. And then we hear every day that that's what physicians want, you know, in terms of the long-term ability to reduce the drug burden of, you know, stacked immunosuppressive that patients have to endure. ... Great. I think the mechanism of action is really what makes these assets truly, you know, pipeline in a product, right? Yeah. So, can you just give us a little bit of a scientific overview of the MOAs, and how that allows these assets to go after broad, potentially broad- Yeah Set of indications in immunology and This will be fun. I usually have the benefit of a couple of fancy slides with animation, so I'll do my best to, to just describe it with words. So the immunoproteasome, the proteasome, in general, in our bodies is very, very highly conserved and incredibly central to life. It's about 1% of us, all of our intracellular protein is proteasome. Mm-hmm. Mother Nature evolved a very unique form of Proteasome long, long ago to serve the unique workloads of immune cells, and we've named it, creatively, the Immunoproteasome. The way to think about the Immunoproteasome is both its very narrow expression pattern. It's a tiny fraction of Proteasome in our bodies, but it's really expressed in the entire immune system, not just B-cells, but also T-cells, macrophages, dendritic cells, neutrophils. The entire immune system expresses Immunoproteasome, not regular Proteasome, effectively. It gives us an opportunity to really be selective in the way we, we immunomodulate and avoid off-target activity. We've yet been able to find any off-target activity. So this Immunoproteasome in immune cells is really what drives cell cycle, antigen presentation, and many other aspects of of kind of immune cell function. So obviously, a very profound target, and one that when we modulate it, when we hit it with our small molecule, we're not lymphodepleting, right? So when you think of an MOA, it's easy to use a blunt instrument and kill off your B-cells, and it can lead to some great effects in certain diseases. But long term, if you really want to treat a chronic autoimmune disease, you need something that patients can take and tolerate for many years, and we think that's what we've got. And that allows us, as we've seen in our data, to have very rapid and very deep responses across many different measurable symptom scores with an immunoproteasome inhibitor. So, that is the very kind of ABCs of immunoproteasomes. On the other side of the ledger, I think what attracted Chris and Jack to each other well over a decade ago, as Chris had been really pioneering new approaches in proteasome inhibition, was Jack's work at which was really hypothetical at that point, in an ability to target the Sec61 translocon. The way to think about the Sec61 translocon is like a gate, another very highly conserved piece of biology that resides on the endoplasmic reticulum and is the single gate through which all secreted and transmembrane proteins must pass if they want to enter the ER, and then eventually, the Golgi apparatus, and go to the cell surface. And that's every single target of a biologic drug, with one exception, IL-1. So Jack, of course, got excited about the potential of stopping basically all these validated drug targets, everything from TNF alpha to PD-1 to IL-17 to IL... You go down the, it's everything. Secreted and transmembrane proteins need Sec61 to begin their journey. And what we've, over the years, engineered, built, discovered, and now brought into the clinic, are a class, fundamentally new class of drugs that can selectively modulate the handoff of a newly created, polypeptide or secreted or transmembrane protein to the Sec61 and keep it from beginning its journey. So, and our drug in the clinic now, that it's going through dose escalation, is knocking down a veritable rogue's gallery of validated oncology drug targets, both IO targets, like PD-1, PD-L1, CD47, CD73, go down the list, but also oncogenic growth factors. So we believe that this single small molecule, because of where it's acting on this very important piece of biology, this MOA, as, as it were, can have both, kind of cytotoxic cell stress effects as well as IO properties that are beneficial to patients. So we're really excited to see what this drug will be able to do as we continue moving into higher and higher doses in our phase I. Yeah. I mean, Sec61 is really almost like a bazooka of all the targets that you want to hit in oncology. So yeah. They all start, they're all dependent on that. And one of the big innovations that our scientists have been able to tease out over the last few years is, almost think of it like a rheostat. You can turn the dial, and you can either inhibit a lot of the targets. There's almost 6,000 or so proteins that go through Sec61 to get to the cell surface or be secreted. We're blocking about 10% with KZR-261, but the, you mentioned the upcoming potential clinical candidate in KZR-540. It's very narrowly dialed down to only PD-1. Mm-hmm. So, the idea that over time, this type of a platform approach, and with the unique proprietary know-how that we've developed, allows you to develop a pipeline of drugs for, and also not just oncology. You could also develop drugs, theoretically, that could target IL-17 and IL-6, and maybe other inflammatory cytokines that have also been validated as biologic drug targets. So, I think we're really at the beginning stages of this category of drugs. We have the blessing of being way in the lead on it. There are some fast followers now, which I'm very excited about, because they'll further help educate the investment community about this space. Yeah. That's great. I mean, it's really, you know, akin to, you know, being on multiple combination therapies with just one simple drug so- That's right. Yeah. Now, maybe shifting gears a little bit back to zetomipzomib and the PALIZADE trial. This trial has the benefit of allowing physicians to treat patients in a more of a real-world setting.... Now, between that and the revised definition of CRR, what are you expecting for the data coming out of this trial in comparison to some of the other data readouts that have happened with competitors? I really appreciate that question, because of the track record of the other companies that have developed an LN, we have a really nice defined playing field and bars to define success to go over. I believe unequivocally that we're on track to deliver a truly best-in-class efficacy profile in lupus nephritis, full stop. It is so like I said, well characterized, what Benlysta and Lupkynis, and fairly soon to see Gazyva, what they've been able to achieve both in their placebo arms, but also in their drug arms. It's a very modest delta, I think, of treatment effect. Like you mentioned, with the CRR definition that we had used based on their precedent, if we map that CRR definition to our MISSION data set, which we presented late last year, we would have over 50% CRR rate, right? Mm-hmm. Right now, the best is high 30s. Right. So, that's the opportunity to get to. If we can get, you know, over the high 30s in the overall CR rate, CRR rate, continue our sterling record of kind of lack of immunosuppression, excellent safety profile, we'll be in a tremendous position to treat, you know, all stages of LN patients. And, I'm sure you're aware, we've mandated steroid taper as well. This is of high interest to- Mm-hmm. Physicians. It's not a part of the CR definition, neither was it for other competitors, but it'll be nice to demonstrate, as we did in MISSION, that you can bring steroid doses down well under 10 mg or to nothing, potentially, in the great responders, and have that be a real benefit to patients. So I'm excited for this, the efficacy profile being best in class, first and foremost, safety being in a similar vein, and then the fringe benefits of removing, you know, the immunosuppressants that have other long-term, you know, infection risk, as well as bone density loss issues and beyond, to make us really a mainstay. The design allows us and gives physicians a lot of discretion. As they screen patients, they don't have to only find one tiny segment of LN patients. They can use their discretion about whether or not they administer the full bolus of heavy-duty induction therapy, or they spare them that assault if they have... If the patient hasn't responded to it or tolerated that well in the past, which, again, increases our catchment area, I believe. Yep. Maybe, since it's been, you know, a couple of months, maybe can you just recap the data that you've seen in lupus nephritis for the audience here today? Absolutely. Yeah, so we've done a trial we called the MISSION Trial, another neighborhood in San Francisco. It was a 1b/2a trial, where in both sections of that design, we were able to enroll patients with lupus nephritis. In the earlier portion, we actually enrolled lupus patients as well, which gave us an interesting insight into the extrarenal power of this drug. It's not just an LN drug. But in the MISSION study, where we were in the sort of the beating heart of the COVID pandemic and the headwinds that represented, which were significant, I can assure you, we were able to enroll 21 patients and give them six months of zetomipzomib, weekly injections at a 60 mg dose within a single sort of tolerizing dose of 30 mg. And what we saw was that, patients really stayed on drug very, very well. We only had four dropouts over the course of the pandemic, where they had to come into clinic every week for injections and once a month for all-day lab draw and lab work type things. We enrolled these patients in Europe, North America, Australia, and South America, so it was a nice, pretty diverse geographic catchment. And we saw that these patients really evidenced rapid drops in proteinuria, rapid drops in extrarenal symptoms, the kind of SLEDAI and skin rash and arthritis-related scoring metrics that we had the secondary endpoints. Mm-hmm. And, to do that in a six-month period is really remarkable, right? If you look at the other trial, it's really sort of anywhere from one year to two years to see a meaningful separation from placebo. So the fact that we could, we didn't have a placebo arm, there's no way we could have achieved that, especially during the pandemic. We, with a very quantitative endpoint like proteinuria, to see that coming down from levels well above one to having, I believe we measured seven CRs out of the 17 completers, was right there already in line with sort of the CR rates seen in competitor trials, with a fundamentally more stringent CR definition than the one we're bringing forward in PALIZADE. So really nice, very easy, quite frankly, validation for the investment required to launch, the first of our, our two registrational trials, right? So we're following directly in the validating footsteps of our predecessors in terms of roughly 250-300-ish patient trials to get, a drug registered in LN. Great. Maybe, if I recall correctly, you've seen responses even when some of these patients in the drug arm, stopped taking the drugs. So maybe you can talk a little bit about some of the durability profile. Yeah, we refer to it as the tail effect, and we've seen it before in patients, including patients from our 1b portion of our study. And And I think it speaks to mechanism of action and the unique central role of the immunoproteasome in the human body, and the complexity, quite frankly, of the immune response and how the signaling pathways, once disrupted in terms of signaling out of control inflammation, takes a while to get restarted, right? So, in very crude, non-scientific terms, I often describe the application of zetomipzomib as like pressing a big red reset button on the aberrant immune response and the restoration thereby of normal immune surveillance, right? Because we're not lymphodepleting, we're not killing off immune cells, we're just shutting down temporarily the kind of flywheel of hyperactive cytokine production or autoantibody production, things like that. That's what we've seen, and it takes a while for the immune cells to kind of become autoimmune presenting again, and it seems to be anywhere from three months to longer. We saw patients in the phase Ib who came off drugs. We were only able, with tox coverage, to provide three months of treatment then, but we had patients get, you know, see reduced proteinuria levels for much longer after finishing the three-month course of treatment. So, there's probably much still to learn, and I'm excited for future scientists to uncover the all the unique MOA answers, but it's definitely been reproduced across multiple patients, multiple regions. So we're excited to see that continue, and it obviously introduces opportunities and over the long run, kind of, you know, phase IV to look at potentially different dosing approaches and ways to really maximize patient convenience. Yeah. Maybe just to spend a little bit, just another minute on zetomipzomib. Now, you touched on this, which is some of the extrarenal symptom benefits that you've seen in your LN trial. Now, can you talk a little bit about that and how that compares to some of the other LN trials, whether it's voclosporin or Benlysta? And, you know, from your perspective, what did these patients see from an extrarenal symptom improvement in those trials and comparing that to those patients that were- Yeah ... On zetomipzomib? I am so excited about the long-term commercial potential of zetomipzomib in lupus and lupus nephritis. In our mind, it's a question of not if, but when, and we have to be conscious of resource constraints, and we've chosen to focus initially in LN for a variety of reasons. But we have always been encouraged, as you note, that for things like swollen and tender joint count, where the drug, the counts drop dramatically, CLASI scoring, which measures sort of classic lupus raised skin rashes, which also dropped in a very clinically meaningful way. In lupus, you have to rely on physician and patient global assessments, and those, if you achieve a 10-point drop on a 100-point scale, that's considered clinically meaningful. We're usually in the 30-40-point range on an average basis. Mm-hmm. So across the board, and they line up across the board nicely. It's not like we're only getting one or another to respond. So seeing that type of response in three to six months versus... I love Benlysta. I love the fact that they're a billion-dollar drug. I love the fact that they sort of proved all the naysayers wrong in lupus. I mean, it's an incredible development story, and I love that that's the bar, right? That they have to run two-year trials to see the kind of, you know, 10- to 15-point separation from placebo, and that's enough to make a billion-dollar drug. Mm-hmm. We have, you know, based on the data already in hand, we have an opportunity to just leapfrog that in an extremely vivid way. And in a way that, to my knowledge, other drugs in LN development don't even come close to being able to, to replicate. And the most kind of well-known example is Lupkynis, right? And this is not speaking out of school, that team fully recognizes that is an extremely targeted drug in the renal compartment, right? Mm-hmm. And calcineurin inhibitor will only help. It's clearly been proven effective at improving glomerular health and, and reducing proteinuria, but they will, it will never have any effect extrarenally. And so... By the way, most LN patients also have some manifestations of lupus, so- Mm-hmm ... You would automatically put that, that patient into a category of stacking lots of different drugs ad infinitum, right? So again, we have an opportunity to, you know, really reduce that overall drug burden in a real, in a way that I know patients and doctors really want to see, and in a much, much faster way than Benlysta has to wait for over the course of up to two years. Mm-hmm. Great. I mean, based on the data you've been able to generate thus far, I don't think there's a real question from folks that zetomipzomib is not a drug. It's clearly a drug, that's showing activity and a best-in-class profile. Now, maybe shifting gears back to KZR-261, you know, I think it's really shown some really favorable safety data so far with no real signs of accumulation. So are you expecting to have more than eight cohorts to reach the maximum tolerable dose? Where are you in your dose-finding efforts? Yeah, we are now launching the eighth cohort. We've been pleased that the pharmacokinetics of the drug have been so well behaved. You know, it's very consistent, both inter-subject and intra-subject, and exposures have been increasing with higher doses, with everything you want to see. We believe, based on the overall exposure levels, that we have some room to go. I don't think it'll be much more than eight or nine. Yeah. ... It would be, it would be shocking to me. I think we already have seen exposure levels at a level that slightly was lower than we anticipated. That's why we, we've, you know, estimate that 2024 is the right time to reveal the full story of dose escalation. Mm-hmm. But it's not going to be forever, right? We don't need to run this to 10+ cohorts. Right. It's just not necessary based on what we're learning so far. So really excited to kind of share that data next year- Mm-hmm. And move into some expansion work in tumor types that are predicted to be most sensitive to the 261 profile. So let's talk about that. Yeah. That's probably your next question. Yeah. So what are some of the tumor types where it might make sense for you to evaluate from a MOA science, biology standpoint? Yeah. There's a really, really elegant, extremely well-characterized 20-minute scientific answer to that, that I will not be able to do justice to because of our four minutes left. However, the team did an exquisite kind of bioinformatics-driven analysis, looking at the gene modules that are very, very clearly kind of down-regulated through the KZR-261, and which secreted and transmembrane proteins are fit into the inhibition profile of KZR-261, to predict which tumors would be most sensitive. And it's an amazing array of both liquid and solid tumors. We chose solid just to have a focus initially, but. And obviously, we've named 4 tumor types that were right near the top of the list between colon cancer and prostate, mesothelioma and melanoma. Mm-hmm. We're excited to see what we can do once we move out of the all comers. Yep. escalation into that portion. Great. Now, we just have a couple of minutes left. Yeah. Now, what, from your perspective, do you wish that investors had a better appreciation for, as they, as they look at the Kezar story? Obviously, you know, that you've generated really strong data. There's a lot of data that is to come. Right. But what are maybe a handful of things that you want folks to kind of keep in mind? Yeah. You know, I think that, when times are tough, people flee to familiarity, right? And it's easy to forget that the true epic value is unlocked through true innovation, and what we've built at Kezar is true innovation. Like, fundamentally, by a wide margin, first-in-class approaches in undeniably giant market areas in immunology and now in oncology. So, that is a basic kind of value foundation that may, may not be being bought today by a giant pharma for $10 billion, but if we pass our tests and continue to do what we're doing, it, it's hard to not see that type of future, right? That, combined with the fact that we've, through our two assets and our clinical, strategy, have multiple ways to win, right? We have the funding to deliver on multiple inflection points across 261 and ZTO, and the autoimmune hepatitis program in 2024 and 2025, right? So there's. I understand when you're a micro and small cap biotech, there's one indication that the work gets done, and for us, it's certainly been lupus nephritis, and we earned that through our amazing data, right? And a large trial takes time to read out, but doesn't mean that the company is sort of in stasis and can't deliver real kind of inflection along the way. So that's what we've been trying to communicate, and I think people, once they kind of sit down and listen to the story, understand it, and see that there's a lot of kind of ways to win and optionality in the story. Yeah, and I think, part of what's been going on is, I think folks probably did the most work in trying to better understand the, the opportunity set in Zeto. But I think, with, your 616 and kind of going after a whole, you know, these, oncology indications, I think part of, you know, what people are doing is now kind of learning that science to be able to fully assess the true disruptive value of that. Mm-hmm. You know, I thank you very much for your time today, John. Really appreciate it, and I hope you have a good rest of the day. Thanks, Vik. Thanks for having me. Yeah. Pleasure. Pleasure.