everyone, back to Oppenheimer's 36th Annual Healthcare and Life Sciences Conference. I'm Leland Gershell, one of the analysts here at the firm, up next, we have Spruce Bio, ticker SPRB. This is a company that we cover, we like the story very much. We have an outperform rating. On behalf of the company, we have the CEO, Dr. Javier Szwarcberg, who will join us for a fireside chat as we discuss the opportunity in Sanfilippo Syndrome Type B, for which the company's asset is soon heading into the FDA for a potential approval. Javier, welcome very much. Welcome to joining us to this call, thank you very much for participating. Of course. Thank you, Leland. My pleasure to be here, and looking forward to our dialogue. Great. Yeah, let's talk a bit about your asset. This is, you know, so-called TA-ERT. It's an enzyme replacement therapy, you know, given into the cerebrospinal fluid, which surrounds the brain and spinal cord. You're seeking approval in MPS type IIIB or Sanfilippo type, you know, syndrome B. Maybe just some history for those who are less familiar. This was originally developed at BioMarin, and then came through, you know, some other hands before coming to you. If you could just sort of briefly provide us a snapshot of the development history here and kind of what's made this a very attractive asset for Spruce to be advancing. Yeah. Typically, ERTs are delivered systemically, right? MPSs or mucopolysaccharidoses affect the whole body. There are some organs that get affected more selectively than others and in different MPSs. Typically, when the ERT gets given intravenously, there's a very tiny amount, if any, that penetrates the brain. Some MPSs, like MPS IIIB, MPS IIIA, subsets of patients with MPS II have a more profound brain CNS involvement, and for those, systemic injections wouldn't do it, wouldn't actually have an effect. That explains why our product, gene therapy products for MPS II, enzymes using translocator products that will actually allow for brain penetration, are being studied and are kind of the possibly the solution for these type of diseases, right? Our drug works. gets administered into the brain, in through the lateral ventricle. It's called ICV administration through an Ommaya reservoir and works where it's supposed to work, right? We know that the CSF circulates around four times a day, that through lymphatics are cold, and that CSF fluid is gonna get into the systemic circulation, and we know that we actually clear heparan sulfate to a very similar extent to what we clear in the brain peripherally. As patients hopefully live longer with this disease, we ought to be able to also take care of the systemic manifestations of MPS IIIB in the body. History of the product, it was developed by BioMarin as a fusion protein. BioMarin was frankly trying to solve for a lot of failed therapies in MPS IIIB in the past. They were all developing the enzyme and synthesizing a product, but the issue with recombinant enzyme or this recombinant enzyme is that the amount of residues of mannose 6-phosphate typically requires to penetrate the brain, were not very large. Little enzyme was actually, I mean, enzyme was sitting in the CSF, but it wasn't really penetrating into the neural cells. They developed a recombinant protein that has the NAGLU enzyme, which is N-acetylglucosamine. It is a missing enzyme, using an amino acid linker tacked with a truncated IGF-2, insulin-like growth factor 2, and that allows for proper brain penetration into cells and after that, into lysosomes, which is where the enzyme works. Our effect on heparan sulfate, which is the accumulated glycosaminoglycan or GAG in the brain, is very profound. Heparan sulfate is the kind of the GAG that accumulates not just for MPS IIIB, but also for MPS IIIA and MPS II in the brain. It's the common in glycosaminoglycan pathway substrate that accumulates. BioMarin, you know, in 2019 was seeking to develop products that were going to have a bigger bang for their buck. They were seeking for stronger needle movers, and that's when they pivoted to ROCTAVIAN and VOXZOGO. I happened to join BioMarin about three months after the asset was out-licensed to Allievex, which was a prior sponsor. Really nothing innate, intrinsic, deficient with the product, but rather a strategic corporate decision of BioMarin to pivot to things that were going to be greater cash flow generating in the future. Allievex took on the asset. FDA was, frankly, fairly resistant to using heparan sulfate as a surrogate endpoint up until FDA convened a Reagan-Udall Foundation forum in February of 2024, when academics, patient groups and FDA attended this meeting, discussed the usefulness and the correlation between heparan sulfate and brain damage. At the end of that meeting, unanimous consensus that heparan sulfate does or is a viable, appropriate surrogate endpoint. FDA met with a number of companies acknowledging that heparan sulfate could be used as a viable surrogate endpoint that's reasonably likely to predict clinical benefit. That's what kind of opened up the floodgates, right? Many companies, Abeona, Progenics, Denali, REGENXBIO, JCR, all started doing work in this space. Since then, we've seen a couple of hiccups in the space with REGENXBIO getting a complete response letter, partly explained by the FDA not accepting heparan sulfate. The D2S6, which is a subtype of heparan sulfate for them as an RLSE or reasonably likely surrogate endpoint, I believe is explained by the very modest effect size that they have had on the surrogate endpoint. The lack of proper patient selection is acknowledged in their press release from their complete response letter of having neuropathic MPS, and also issues with patients in their natural history study that was to be used for comparison. Compounded on top of that is the fact that they were on clinical hold at the time of the CRL. A number of complicating matters. I'm optimistic that, you know, our interaction with the FDA have confirmed what the FDA has told Allievex, that, as I said earlier, heparan sulfate could be used as a viable endpoint supporting the approval of product. Yeah, I think that's kind of a summary, Leland, on kind of the history and where we are and our optimism today. Yeah, no, that's a really thorough overview. You recently announced that you know, you had a couple of meetings with FDA. You've guided to a BLA submission in the fourth quarter of this year, and I think that the FDA again reiterated that, as they've said in the past, that the natural history data, together with the, you know, so-called HS-NRE, which is the key biomarker in MPS IIIB, you know, could serve as a reasonably likely surrogate to support accelerated approval. You know, as well as, you know, the PPQ batches, which you are working on, and I think that led to a bit of a shift in your timeline. Nonetheless, you know, from an investor's standpoint, obviously want to see the company doing what the FDA has guided to. Anything further you can share on kind of agency's tone and stability with the reviewing team and other people involved, maybe on the FDA side? Absolutely. Yeah, the people at the FDA are super stable on at the level of the office, Janet Maynard, Office of Rare Diseases, as well as, the division, Catherine Pilgrim-Grayson and folks underneath, the medical reviewers, the statistical reviewers and on clinical, the CMC reviewers, all fairly stable and unchanged. The tone that the FDA conveyed to us during the meeting was very positive, collegial, collaborative, wanting to partner with us, acknowledged from the get-go during the meeting, how aware they were of the unmet need in this disease base. The first thing that we tried to accomplish in our clinical meeting was to ensure that the FDA was on board with the data package that we have as an adequate and well-controlled data package, and that includes the treatment trials, as well as the natural history. They agreed with that, as well as the fact that heparan sulfate could result in a reasonably likely surrogate endpoint. you know, all in all, even under an accelerated approval pathway, you have to ensure that you have the right evidence, substantive evidence of effectiveness, right? That's kind of the FDA lingo that needs to be demonstrated. On the CMC side, we cover a number of fronts, but one important point was around the timing of submission of the first PPQ batch for BLA review. We had based our prior timelines on the fact that other products, other rare disease and ultra-rare disease products, have actually gotten flexibility from the FDA on the timing of submission of PPQ batches. FDA is, I think, this, in this day and age, rather lean and fairly burdened with a lot of reviews. They grant this flexibility on the fact that, like, for a standard approval or standard product, drugs need to submit 3 PPQ batches at the time of BLA submission. They were okay with us submitting one PPQ batch with the BLA, the second PPQ batch, around the time of the mid-cycle meeting, and the third PPQ batch, post-approval as a PMC, Post-Marketing Commitment. All in all, very good. I think that, you know, we want to obviously play game here. What matters here is that we get this product approved for patients, and it really pains me to see a delay, because a delay in product approval results in, you know, more time patients being untreated and more neurocognitive damage. Time is really of the essence in this type of neuronopathic MPSs. You know, ultimately, hopefully, we'll get the drug through and we've be able to benefit the patient community. Yeah. Just so people who, you know, are aware, you know, you guys have had pretty substantive data showings in terms of reducing HSNRE in the CSF. You had recently at the WORLDSymposium, you had long-term data. Maybe just have you share with us kind of like some of the key highlights there and how, you know, the durability of you know, I mean, the curves to me look terrific. Please go ahead. Yeah, yeah, happy to talk about that. You know, this therapy is lifelong, so long it can be tolerated. Most patients in our trials have tolerated the drug quite well. Bearing in mind that it, again, it goes through an Ommaya reservoir, and there are periods of time where patients need to take breaks of therapy due to pleocytosis or concerns around infection, and have been very well tolerated. The drug is so profoundly powerful that even through periods of prolonged breaks, the heparan sulfate has not accumulated back in the CSF amongst the tested kids. Sometimes people ask me about, "Have you seen anti-drug antibodies?" Typically, folks with MPS IIIB have. are null on the enzyme, and upon seeing a kind of an external enzyme, anti-drug antibodies are formed, some of which are neutralizing, especially over a long time, long treatment. We have seen those, but they don't seem to affect the potency of a product. The neutralizing antibodies are generally in the periphery. They rarely cross the blood-brain barrier, which is where the drug is given and where the drug is thought to have most of its effect. The effect sizes that we've seen on heparan sulfate, which is the surrogate endpoint, are very profound on almost all patients and nearly all visits through six years of therapy. We've also seen very strong clinical benefit on cognition measured by the Bayley's questionnaire, the BSID raw score questionnaire, which is what the FDA considers as the ultimate endpoint, and which, you know, they have asked us to use that endpoint for the confirmatory trial, which I'm happy to tell you a bit about later. We've also seen benefits on the Vineland questionnaire, which measures adaptive behavior, and subdomains of the Vineland on communication, receptive and expressive, as well as motor skills, fine and motor skills, where we've seen very delineated separation between natural history patients and treated patients, right? The sooner we treat, the better. I mean, we and Ultragenyx and Denali have shown that. You can catch kids early in their disease, you're much more likely to preserve cognitive behavior and everything else. There are two children that were featured. We had a few presentations on children. I'll tell you, the podium presentation that Nicole Muschol presented at WORLDSymposium, she shared two of her kids, whom are still getting therapy. One girl started before she was overtly symptomatic at around age two and a half. She speaks three languages, skis, goes to regular school, and all that. Her brother, who started therapy a little later, both of which have the same genotype, he manifested with overt disease and a much more advanced course. He got treated when he was three or three and a quarter. doing very well, still going to regular school, but not doing as well as her sister, as his sister. We also presented a poster at the World Meeting, of two kids, two siblings, one treated in the trial and one that did not make it to the trial, and compare their neurocognitive function at different ages. It is very clear in that exercise that the kid that was treated, did a lot better and met developmental milestones to a better extent than the brother that wasn't treated. Anyhow, very strong data overall, I think, speaks to just the clinical package that is going to be accompanying the surrogate endpoint. Yeah. You'll have the BLA in toward the end of the year. Presume you should have a review that would take you to potential approval in the middle of 2027? That's right. that sounds about Yeah. That sounds about right. You have, you know, fortunately, I think for the industry, we've had a re-up of the PRV program, so you should be getting a voucher. You know, with that, you can monetize it. I think we're seeing sales. They've gone up, perhaps due to scarcity, maybe they'll soften a bit, but, you know, $125 million, I think, is kind of the typical number that people quote, somewhere between $100 million to $150 million. You have, you've been pretty successful with your fundraising, so you have cash anyway, to that approval and beyond, correct? Well, let me tell you a little bit about that. 2026 is a very important year for us. As you said, we'll be submitting the BLA. Hopefully, FDA will be accepting the BLA this year. We'll be manufacturing product, drug substance and drug product to support the PPQ batches, which is very important as well. And also we'll be initiating the confirmatory trial, which the FDA required for us to have underway while the product was under review. All in all, many important milestones on deck for us in this context. Our cash runway extends into the early part of 2027. There might be a small gap between, you know, the end of our cash runway and the approval of a product. We are in fairly strong financial position right now. There are many ways to fill that gap. I think we raised a debt facility of $50 million. We've drawn $15 million and have a remaining $35 million, which could be drawn to close the gap. We're seeking partnership opportunities in other regions, namely Asia, which could also allow us to have a non-dilutive source of capital. Yeah, I mean, always a possibility of accessing capital markets if the timing is right and the situation is appropriate. Right. As you, yeah, you took down 15 from the facility, and I think you have two more tranches that are kind of key to certain milestones. Correct. That's another source. You know, let's talk about this market opportunity, and, you know, so speaking back to BioMarin, we have Brineura, which looks like kind of a nice example, right? They got that approved, I think, what, 2017-ish 20 18-ish timeframe and launched it, and it's now, you know, doing about $200 million, maybe plus, as like a annual run rate, and continuing to grow. You know, share with us kind of your view on the MPS IIIB market versus, you know, CLN2 and what those numbers look like and also how accessible those patients may be at this point. Yeah. Again, huge unmet need. We're incredibly close with the patient community and close with the patient groups, Cure Sanfilippo Foundation, MPS Society, both tremendous groups that are representing the patient community and frankly, centralize the connections, right? I mean, there's a lot of social media, unlike, you know, developments and launches in perhaps a decade ago, social media plays a huge role in aggregating the community, right? And making people aware of what are their options. That's definitely embedded in the context of a patient find type of effort, right? Patient ID type of effort. I'm sorry, tell me the first part of your question. Oh, yeah, just to give us a sense of, you know, the numbers of, MPS IIIB patients. Oh, yeah. Yeah. You've asked me about Brineura and all that. Yeah. Brineura is a drug that is also a BioMarin drug, administered through the ICV, through the Ommaya reservoir. A bit different than other than ours. It leads to, I mean, a fair number of patients develop hypersensitivity reactions to the product. Our drug and hence, the slow infusion of Brineura, people need to be pre-medicated with antihistamine, steroids, and sedatives because the drug is usually attached to an infusion pump over 40 minutes, 25 to 40 minutes for infusion into the ICV. Our drug is actually a slow push between five and 10 minutes. 10 ml of CSF are drawn and 10 ml of drug are replaced over a short span. We haven't seen a single case of hypersensitivity reaction to the product, probably a much better tolerated, better adopted, and people are likely to be more compliant and continue on treatment. With regards to patients, I mean, we've talked at length with patients and patients' representatives, well, caregivers, right, in essence, to learn about whether or not they would consider a major hurdle or obstacle, the fact that we're going through the ICV. Given that there's nothing out there and the desire is, is fairly large to find treatment beyond palliative care, patients and families do frankly do not object to the current treatment. When you look at our interventional trials, patients frankly, you know, relocate, families travel to different countries to make sure that they have access to this life-saving therapy. With regards to kind of the opportunity here, our product isn't weight-based. A number of other rare disease products, like RAVICTI and drugs for other MPSs are weight-based, and which result in a fairly high yearly price for the product. Us being a not only an advanced therapeutic But one that gets administered through a complex route, I think we have probably the opportunity to price accordingly, but sensibly, of course, to ensure that most patients globally are getting access to the product. I think that, you know, when you compound better diagnoses, and extended life expectancy, ultra-rare disease products become, frankly, very attractive opportunities right over time. We have, you know, a model and believe that at peak, this opportunity could be over $1 billion in sales. Which when you are bringing TA-ERT to market, obviously you'll be developing presumably your own sales infrastructure, at least in the States. Would you want to take it to Europe on your own or other places ex-US? Do you have any thoughts on strategy there? Also just to sort of tag on to that, you know, no need to have all this sort of, you know, be underutilized, would you be looking at other rare disease assets that may be amenable to kind of, you know, adding into the bag, so to speak, for the sales organizations for TA-ERT? Yeah, I think that, you know, this disease is typically cared for by centers of excellence. There are about 15 lysosomal centers of excellence in the country, five of which are MPS centers of excellence, so likely a very limited, concealed, primarily MSL force that will allow for education on the ways of administration and on the key attributes of our product, to the very limited pool of physicians that will prescribe the product. I think that, you know, having a very strong patient hub that can actually handhold the families that are going through the process of getting authorized for therapy and setting up the whole system, is gonna be very, very important for us. With regards to Europe, I mean, we're definitely open to. We definitely wanna do this in the U.S. ourselves, and I think we can do it ourselves in Europe as well, but open to local distributors in smaller markets to help us navigate complexities. As I said earlier, partnership opportunities in Asia would probably be. I mean, we currently have a partner in South Korea, which is LG Chem. Would be, we're in the process of considering options in Japan. Was there another aspect to your question, Leland? Yeah. Oh, no, I was asking about, you know, now that you've as you develop your commercial side of the company, would you be looking at expanding the footprint in terms of assets for rare disease? Yeah, possibly. I think, you know, it is very clear to me that, I mean, my main intent is to ensure that patients get access to this product globally. Definitely a possibility. I mean, if we can find assets that are late stage that actually allow us to leverage the infrastructure that is going to be built, limited and sensibly, but build to ensure the commercial success of a product, we'll definitely do that. Great. Just another minute or so. There's a couple of, you know, other milestones from other companies. You'd mentioned, you know, Denali, they're in FDA review. Their new PDUFA date is, you know, like, April. I guess one might think that, you know, should that be successful for them, that would be a positive read-across for Spruce as we, you know, kind of await your BLA filing? I think so. I think there will be meaningful read-throughs between Denali's MPS II therapy for neuronopathic patients, in our product, given that both share, I think, a very similar clinical database and a very close enough benefit on heparan sulfate. I think our product probably has a greater benefit on heparan sulfate. Their PDUFA is on 5 April, and I'm hopeful, frankly, for patients that the product gets approved. I think it's going to fulfill a huge market opportunity, market need for those people. We look forward to seeing that news, obviously hearing on your regulatory progress. And any other milestones we should be aware of out of Spruce, kind of, for the rest of the year, as we kind of stay focused on TA-ERT? I think those are the bigger ones that are kind of under our control. We have another asset for CAH. It's a monoclonal that is a CRH ligand that we're hopefully looking forward to being able to kickstart as well this year. More news on that when we're ready. Excellent. Good. Well, thank you so much, Javier, for joining us. Thank you all for Zooming into this session with Spruce Bio. I think this may be the last session of the day, so I look forward to seeing many of you back tomorrow for the second day of our healthcare conference. Have a good evening. Thank you, Leland. Bye-bye. Thanks.