All set? Yes, sir. Okay. Hi everyone. My name is Maury Raycroft, and I'm one of the biotech analysts at Jefferies. It's with great pleasure that I'd like to welcome Chris Kirk, the CEO of Kezar. Thanks so much for joining us today, Chris. Happy to be here. Maybe to start off, for those who may be unfamiliar with the company, if you can give a brief intro to Kezar. Kezar is a 10-year-old company based out in the San Francisco Bay Area. We are solely focused on the development of zidomipzomib, the first and only selective inhibitor of the immunoproteasome in clinical development. Zido is being developed for the treatment of autoimmune hepatitis. We recently reported positive top-line data from our Portola study, which is the first randomized trial of a new agent in the treatment of refractory autoimmune hepatitis, a disease that affects approximately 100,000 people in the U.S., and for which there has not been a change in the standard of care in more than three decades. Got it. Yeah, that's a great intro. For the disease setting, you're mentioning 100,000 patients. That's in the United States. Pretty big market opportunity potentially there for this one. There's no other drug being pursued for AIH currently. Novartis, their phase two study, was discontinued last year. Maybe mechanistically talk about how Zido is uniquely positioned to address current gaps in the standard of care that involves long-term use of steroids and immunosuppressants. Zido is a very unique molecule in the autoimmune and immunology space. The immunoproteasome, the target of Zido, is expressed in cells of the immune system and in all cells of the immune system. Think macrophages and dendritic cells, T cells, and B cells. Zido can modulate immune responses by acting upon all arms of the immune system. It does so selectively without inducing cell depletion or cell death, and without inducing immunosuppression based on not only our non-clinical data, but now results from two randomized trials in which we did not see an imbalance in infections. The result is rapid resolution of inflammation. We've been able to demonstrate this in the autoimmune hepatitis patient population that we're addressing and did address with the Portola study. We've also seen it now in two separate trials in lupus nephritis. This is allowing patients to get off their steroids or at least reduce their daily steroid burden more rapidly, which is a major goal in the treatment of autoimmune disorders. Got it. You mentioned the phase two A data that you recently reported a couple of months ago. Data looked promising, showing responses in difficult-to-treat refractory patient population. Talk about the biochemical responses that you saw, as well as the emerging safety profile. Yeah, so let's take a little step back and talk about the journey a patient with AIH faces. Initial diagnosis is an elevation in liver enzymes, particularly ALT and AST. Sometimes patients have IgG elevated as well. It has to be diagnosed through histopathology. There needs to be signs of inflammation in the liver. Once that happens, the patients go on to receive high-dose steroids as their initial treatment. This works in about 60%-80% of the patients to start to get their liver enzymes back to the normal level. There is a patient population that doesn't respond to this initial therapy. There are those for which, once they have gotten their liver enzymes under control, they try to taper their steroids to an acceptable level. The treatment guidelines, both in the U.S. and Europe, are the same: get that daily steroid dose to 5 milligrams or less per day of prednisone. There are going to be a number of patients who do not respond to that tapering, and their liver enzymes come back up again. The physician has to raise their steroid dose or change the immunosuppressant, azathioprine or mycophenolate mofetil, that they are on. This leaves the patients in a sort of game of whack-a-mole with their doctor: change the drug or lower the steroid dose, see if enzymes come back up again, and hit them with a higher dose of drug or a different drug. What we did is take those patients who had failed to achieve an adequate response, demonstrate that they had AIH by biopsy, put them on a high dose of steroids randomized to placebo or Zido, and then tried to get them into remission and, importantly, taper their steroids to that 5 milligrams or less. The placebo arm, none of the patients who came on study who were already taking steroids in the placebo group were ever able to achieve remission with steroid taper. We saw greater than 30% of the Zido patients achieve that. Actually, a quarter of the Zido patients achieved steroid-free remission, something that's sort of the long-term goal the field has is to get patients into steroid-free remission. Got it. You showed a pretty nice efficacy signal there with the greater than 30% complete remission. You did not see any disease flares in those patients. What are the expectations that the durability will hold up in the open-label extension over time? When we presented top-line data in March, it included some of the patients who were in the open-label extension, some who had completed, and some who were still ongoing. The median duration of response for those patients who achieved a complete remission with Zido treatment and steroid reduction was just under seven months, which I should point out is about double what our high-end expectations were from our discussions with KOLs. There were some patients who were still ongoing in study, so that duration of response number may change when we read out the full data later this year. Most likely, it's going to go up or stay at approximately that eight months of duration or seven months of duration, which we find highly encouraging for us. Got it. For the open-label extension, is there any perspective you can provide there just on number of patients that have rolled over to that? How are you setting expectations for data later this year, likely at AASLD? Yes, let's start with that latter point. We hope to present our data at the AASLD liver meeting in November. Going back to how many patients made it into the OLE, it was a 24-patient proof of concept study. We had one patient who was randomized but failed to be treated due to an infection prior to their first dose. We had three discontinuations on study. That left 20 patients who were able to complete the double-blind treatment period of six months. During that period, the FDA put us under partial clinical hold and told us that four of those subjects were unable to enroll into the open-label extension. Even if they had wanted to, they could not participate. Of the remaining 16 who had the potential to go on to the OLE, 14 of those 16 did. That was a high number of patients who chose to roll over into the open-label extension, which speaks to two things. One, the major unmet need in this patient population. Two, the good safety and tolerability that they were experiencing and likely clinical benefit, at least for those who were on the Zido arm. Got it. You mentioned the partial clinical hold, which came about from the lupus nephritis study. Maybe talk a little bit more about that and why you think the safety issues from lupus nephritis are lupus nephritis specific and unlikely to show up in a larger AIH study. Yeah, great question. Actually, this gets back to what Kezar was as a company before the clinical hold was in place. That is that we had always been focused on bringing Zido forward to patients with lupus nephritis. The Mission study that read out in 2022 showed high complete renal response rates with steroid taper, great biomarker data, great non-renal lupus manifestation improvements. We embarked upon a very large global study of almost 280 patients called the Palisade trial. We had to terminate that trial after four fatalities seen in study: one in the placebo arm, two in the low-dose Zido arm, one in the high-dose Zido arm. A pretty even balance of the fatalities. I should point out that fatality rates in lupus nephritis trials conducted globally range between 1% and 5%. Our rate of fatality, 4.7%. In addition, high rates of fatalities and other SAEs in lupus nephritis trials are seen in trials that enroll a lot of patients from the Asia-Pacific region. We had more than 50% of our patients coming from the APAC region. Two of those patients who unfortunately passed away on study did so in the Philippines and after receiving one or two doses of zidomipzomib. Unfortunately, we did not have blood cultures or autopsy available to us to rule out the potential for systemic infections, which are, of course, a high risk in APAC patient populations. We had laboratory values that were highly indicative of systemic infections. We cannot rule out a potential for Zido, but we also cannot rule out a potential for systemic infection, including septicemia, in these patients. When you take out those four fatalities and you look at the overall safety profile in LN, Zido looked quite good. It compared well with other clinical trials in the LN space. We noticed that there were higher rates of SAEs in LN patients receiving Zido than there were in, for instance, AIH patients receiving Zido or patients with DM and PM who received Zido. It is possible that the LN patient population represents a slightly sicker population that will report higher levels of AEs. Got it. All makes sense. For next steps for the program, maybe talk about that. Where are you at with the submission of full AIH data package to FDA for getting the partial clinical hold removed? Yeah, so I don't want to comment on where we're at with submitting to the FDA for the following reasons. Let me walk you through the process by which we have to get ourselves off of clinical hold. They've asked for specific pieces of information. We have to provide that to them. They then have 30 days to respond to that information request that they gave to us and decide whether they've seen enough information to release the partial clinical hold or do they want to see more information about Zido, more safety data, for instance. We're taking an approach, and I can divulge this, to provide them an integrated safety summary of the drug to date. And that's over 300 total patients across all of our clinical trials. We're hoping that by being extensive, there will just be the one review of 30 days, and then we're off clinical hold. I am hesitant to say when and if we've submitted that and setting that clock, because the FDA has the ability to request more information or to ask for more time. Given the recent changes at the FDA and what I'm seeing other companies go through, I'd rather report out that we are off clinical hold and then talking about our registrational program with the FDA than creating more uncertainty with the investment community. Yep. Yeah, that makes sense. You'll basically give them this integrated summary. It should be pretty comprehensive. Okay. Maybe just comment on feedback from FDA divisions so far from FDA people handling the lupus nephritis and AIH studies and also feedback you're getting from KOLs on potential risk mitigation steps? It's been interesting as we've shared the safety data with the KOLs and the AIH. We've been very disclosive with them about what has happened in the lupus nephritis trials. They understand the risks that occur in LN studies. They also know that LN patients are often treated with high-dose intravenous steroids. That's something that almost never happens in the AIH space. They understand the risks that come with that. The LN KOLs have looked at the, some of them have looked at the safety data and said, "Wow, I believe maybe there was a hasty reaction, that this safety profile doesn't look like something untoward or out of the ordinary relative to what we've seen for other drugs in LN and the geographies that you guys enrolled in." The FDA has provided no feedback other than the hold on the IND for the LN study and the partial hold on the AIH program. We have nothing to report back from what the FDA has told us other than they've asked for certain pieces of information. We're doing our best to provide that to them. We have learned some things that we might do different in future studies around patient monitoring for infections. That is something that has been a nice learning from this and something we will build into the next trials. Got it. Okay. Are there any contingency plans in place if FDA decides to keep the partial hold? How could that impact your AIH registrational study start and scope? Yeah, that's a great question. We have to get off that partial hold before we can talk to them about a next trial in AIH. The fact that they put us under a partial hold and not under a full hold gives me a lot of confidence. The rheumatology group that covered LN said, "We've seen enough that concerns us. We don't want you working on dosing LN patients." The hepatology division saw the same information and said, "We would like you to complete the double-blind treatment period. We want to protect patient safety. No OLE, none of the placebo patients should roll over to drug. We want those OLE patients to get a higher dose of steroid just to be safe." That's a very different feeling to me as a drug developer. It means that they want to see full unblinded data from the Portola study and understand the risk-benefit of Zido in AIH. As we've shown the world, we think there's really strong benefit and minimal risk in AIH. Then they'll have a chance to work with us on how to figure out what a registrational study is like. Do you think with the comprehensive data that you submit, do you think the rheumatologist would get back on board with dosing? That is a possibility. We don't need the rheumatology group to say, "You're off hold in LN," to be able to move forward in AIH. We've made the statement and made the decision that we're no longer going to pursue LN with Zido despite positive data from two phase 2 studies. Someone else may want to bring this molecule forward in LN, and we would gladly work with them. We will be submitting all of our same information to both divisions of the FDA. That may help us down the road as we talk to strategics who continue to express interest in the unique and novel mechanism of Zido and its potential to treat multiple autoimmune disorders. Got it. Assuming you get the partial hold removed, what happens next? Would you reach out to FDA right away about discussing the design for a pivotal study? That's exactly right. Within a matter of days from receiving release of the partial clinical hold, we will request a meeting with them to talk about a registrational program in AIH. Got it. You have talked about a pivotal study plan being as close as possible to the Portola study to reduce risks. Based on KOL feedback, I guess what could be the size, scope, and design of the pivotal study to get the broadest label? The KOLs are extremely excited about Zido, both in the U.S. and Europe. They're so excited that they are, of course, saying, "Please figure out a way to treat all of my AIH patients. I would like frontline, and I would like second-line patients." My job as both a drug developer and someone responsible for raising the money to pay for these trials is to say, "Hey, let's hold on. Let's take this one step at a time." There's a very large market in second-line AIH. There's a high unmet need. These are patients that are at risk for decompensated cirrhosis, for liver failure, for need for transplant, for hepatocellular carcinoma. Let's work with the FDA on this patient population, and we can figure out frontline down the road. We have been talking to them about what that trial should look like. They do believe something like a Portola study should suffice. How large does it need to be? It is partly the size effect that we are going to see. As I mentioned, if it is the patient population we believe it to be, which is steroid-dependent second-line AIH patients, in which we had a 0% response rate in the placebo and a 35%, I believe, or 37% response rate with Zido, you do not actually need a very large study to prove that out. We need a safety database to provide the FDA. We know safety is going to be important to them. It will have to be a number that, based on the overall patient population of 100,000, you need a couple of hundred patients to get yourself in a good, at least decent-sized safety database. Got it. That's all helpful. Maybe just try to bookend potential scenarios for starting the pivotal and then timeline to getting the NDA filing. Aggressively, we believe that we would be able to start a study in 2026. That is dependent upon sort of rapid resolution of the hold responses. It is hard to provide any real detailed timelines until we get off that partial hold because there is an open-ended piece if they ask for more information. Once we announce we are off that hold, we will be able to provide better detail on timelines for meeting with the FDA to get aligned on that clinical trial and then, of course, announce what that clinical trial is and start talking about timelines for study initiation. Got it. AIH treating doctors have said that enrolling refractory or inadequate responders to steroids from the frontline setting could be challenging. What will be your strategy to define the trial inclusion/exclusion criteria to help enroll this study? To reduce risk, you want the patient population to try to look as much like Portola as it could. We heard this from the very beginning when we were working with them that, boy, it's going to be hard to find AIH patients. We had Portola up and running in the U.S., 24 sites for approximately, well, actually all 24 for less than a month. We were at about a dozen to a dozen and a half sort of actively enrolling through nine months of study. We got 24 patients in. We had basically the same number of sites open for our LN study during that same period, and we enrolled four patients. My statement to our investigators was, "We really appreciated that you did a great job of enrolling. Look, AIH is a more enrollable disease than LN is, at least in the United States. We will be working with the KOLs in Europe and in Canada to help bolster that enrollment. Now we've got great data to help support that data. Portola enrolled into a "There are no data for Zido and AIH." Now we have a strong data set to share with them. We believe that this should be a relatively reasonably enrollable study. No trial in autoimmunity is a breeze, that I can say with complete confidence. I feel equally confident that we'll be able to enroll this in a reasonable period of time once we've achieved that alignment with the FDA. Got it. Okay. That's helpful. Just thinking more about the exclusion criteria based on KOL comments, do you have a sense of what proportion of AIH second-line patients have cirrhosis but without evidence of decompensation and then separately portal hypertension? Ooh, two really great questions. In that second line, this is an unknown. We tried to exclude cirrhosis by only allowing Child-Pugh class A patients. But we actually, by FibroScan, probably got a few patients in who had cirrhosis. Newly diagnosed AIH patients have about a 30% cirrhosis rate, which speaks to the significance of this disease because the presence of cirrhosis upon diagnosis is associated with poor long-term outcomes. We believe that there will be a high number of patients with cirrhosis. We think we had a few that got into study. We do not see any safety signals. We know that Zido is cleared extrahepatically. First-pass metabolism is not a way this drug is cleared. It is not going to be a concern for us in terms of exposure. There is obviously the risk of a patient with cirrhosis and portal hypertension. We'll work to make sure we're getting high-quality patients into our trial. We've established really great working relationships with a large number of KOLs across the globe now. Got it. What would be some of the gating factors to deciding whether you want to do a frontline study? What could that study entail? Would you be able to fund that study on your own? A frontline trial, one has to think about what is the response rate for standard of care. There have not been a large number of clinical studies of any size in AIH. The most recent one, the Camaro trial, compared the addition of azathioprine to MMF in patients who had a run-in of corticosteroids. Response rates are high, 40%-60%. That means if we are going to see something over and above that, that would require a pretty large sample size. Alternatively, if we learn something more as we move along that the numbers of patients who can get steroid-sparing or steroid-free remissions in six months continues to be very high in the Zido arms and very low in the placebo arms, you can start to think about a frontline study in which you do a rapid and forced steroid taper, which would conform with treatment guidelines but would potentially reduce the response rate in the control arm of that study. Got it. Helpful. Maybe just coming back to the market opportunity, can you comment on how you're thinking about pricing and then also just the total addressable patient population in the second line? You mentioned 100,000. I guess what's the addressable patient population? Yeah. 100,000 in the U.S., newly diagnosed. That excludes patients who have AIH because of a drug-induced liver injury like treatment with checkpoint inhibitors. It includes patients who have concomitant PBC, another autoimmune liver disorder, or PSC, primary sclerosing cholangitis, another autoimmune liver disorder. It's possible that the AIH market is a little bit larger than what we say of around 100,000. Of those 100,000, again, not a whole ton of data, but the natural history studies say around 40%-60% of them fall into this second-line bucket. Somewhere between 40,000-60,000 in the U.S. For pricing, we look to what has been done in primary biliary cholangitis. It's another autoimmune liver disorder with high response rates to initial therapy and then a patient population that doesn't respond or loses their response and needs new therapy. There have been three drugs, one from Ipsen, Intercept, and then Seladelpar, now Gilead's drug, Seladelpar. Those drugs are pricing at around $150,000 per year. The overall risk to a patient with PBC, not too dissimilar to the long-term risk of a patient with AIH. I think we can use PBCs as reasonable comps. If you just sort of use standard conservative metrics of addressable patient population, adherence on drug, and market uptake, given, again, we're the only game in town in AIH, you get to blockbuster that is billion-dollar-plus pretty rapidly once we launch. Got it. Any plans to potentially partner XUS for AIH? The great results from both from the efficacy standpoint in Palisade and the great efficacy and safety results from Portola have led to inbound interest. I suspect that once we have the hold release, there will be more inbound interest that comes to us. We are very much open to partnering either regionally or globally, depending upon the right partner who sees high value in Zido and is starting to understand that there is a large market to be had in AIH. It is truly one of the last white spaces in the autoimmune disease world. Got it. That's helpful. Getting the additional data plus the regulatory clarity could help with some of those conversations. We believe so, yes. Okay. And then maybe just comment on IP for the drug. Is it safe to assume you'll get orphan disease designation, which grants seven years market exclusivity? It's safe to assume that. I guess when does Zido's composition of matter patent expire? Yeah. Factoring in the standard five-year extension to a novel chemical entity, we're looking at 2039 for the current composition of matter patents. The orphan drug designation could extend that, but there's a lot that is dependent upon. There are other ways to look at extensions past 2039. Of course, we're always looking for additional ways that we might capture new IP that further extends it. I don't want to bank on that. Even with a conservative case of 2039, we see this as a high-value asset. Got it. Maybe in closing, if you can recap what key inflection points are ahead that investors should be focused on and then also cash runway and where that gets you? Sure. Our last reported cash of $114 million gets us well past the two key inflection points of this year. The first, as we've talked about, is to get off that clinical hold with the hepatology division and then get alignment with that same division on the next trial so that we can say we're getting started on that next trial. We have ample cash for that, to do that, even in a conservative case in which it takes a couple of rounds with the FDA to get ourselves off hold. Got it. For a pivotal study, would you build in some sort of an interim analysis into that study? Or how do you think about that? I would love to. That is going to be a negotiation with the FDA. That is going to be we have to understand what does that buy us in terms of data analysis or data versus the cost in alpha and therefore the increase in sample size. Got it. Okay. Chris, thanks so much for joining us today. Thank you very much, Maury. Pleasure to be here.