Welcome, everyone. Good afternoon. Thanks for being with us at this session of the Morgan Stanley Global Healthcare Conference. We are very excited to have Lonnie Moulder, CEO and Chairman of Zenas BioPharma, with us. I am Judah Frommer, one of the SMID biotech analysts here at Morgan Stanley. Let me just read a quick disclosure, and then we will jump into it. For important disclosures, please see the Morgan Stanley Research Disclosure website at www.morganstanley.com/researchdisclosures. With that out of the way, Lonnie, the company has evolved over the past year. Maybe we can start with a high-level overview of how the pipeline and the balance sheet have deepened since we saw you here last. Yeah. First of all, thank you for having us here. It has been a great day so far. This was number 13 of 14 or 15 meetings we are having. Let me just make a comment on our disclosures. I would refer you to our SEC filings, since we may be making some forward-looking statements here. Of course, the company has progressed quite a bit over the last year as we deepened our pipeline. If we talk just financially first, because you mentioned that, over the last year, we put in place a royalty financing with Royalty Pharma that helps us fund obexelimab and its launch. We executed on a pipe transaction. We then followed up with an equity offering and concurrent convertible note transaction and a term loan with Pharmakon. We do have an active ATM. We use that judiciously, and we had two opportunities this year where two top mutual funds wanted to get a starter position, so we utilized the ATM twice that way. We ended the second quarter with about $674 million in cash. For us going forward, if our obexelimab for IgG4-RD is approved next year, we are eligible for $75 million more on the Royalty Pharma financing, and then we have the potential to tap into another $75 million on the Pharmakon term loan. Got it. That would provide us cash through the second quarter of 2029. Okay. With what we have going on in our pipeline that I will mention in just a moment. That positions us really well. Priority number one, of course, for the company, now that we have a BLA under review with the FDA with a PDUFA date of late May, is preparing for the launch and then effectively launching obexelimab, if approved for IgG4-related disease in the U.S. Along the way, we are progressing other programs. I would highlight a few, and we will get into this more. Sure. Of course, our two large phase III global programs in progressive MS for our BTK inhibitor, orelabrutinib, and then our newer molecule, ZB021. It is an oral IL-17 inhibitor that is in the clinic now. In addition, we are expanding the obexelimab opportunity and have a lupus phase II-B study reporting out at the end of this year. Okay, great. We will touch on all of it. Maybe just starting with obexelimab and IgG4-related disease, maybe just set the stage for us a bit with unmet need here and the advantages that a B-cell inhibitor can offer versus a depleter. You have talked about the dosing profile, the ability to pause therapy, but maybe just highlight that unmet need and what you are trying to solve here. Yeah. If we back up and look at this disease, which it is a newer disease. It was identified just about 20 years ago, and up until the recent approval, well, now just over a year, there were no approved drugs. A few drugs were put into randomized phase III trials, but not by typical sponsors. They were really phase IV trials of older DMARDs that were not highly effective. Patients were treated primarily with steroids, which are highly effective. The problem with steroids, because this is a chronic disease, is chronic steroid administration just is not possible. It was identified that targeting B-cells, specifically with rituximab, could be beneficial. If you administer a regimen of rituximab, you can put a patient into remission, and if you periodically re-administer it, you can maintain that remission. The drug, though, has not been the subject of a phase III trial, so the evidence is not necessarily there for some payers, and it is not approved by the FDA, so it made it a challenge to get it for the vast majority of patients. If you look at the IgG4-related disease market in the U.S. there are about 20,000 patients who we know are diagnosed and are treated with a variety of different modalities. We believe the actual market may approach 30,000-40,000. With 20,000 today and just over half of those patients flaring frequently enough that they require chronic therapy, the options are limited except for the approval now of UPLIZNA. If we think about that, the opportunity is really to bring to the clinicians and the patients an alternative. Today, when a patient is flaring, they think about administering a steroid, and then whether that is a patient that should get continuous therapy because they flared enough in the past and that they have a choice of UPLIZNA or rituximab, and much of that is driven by that clinician's experience and whether they can get a payer to pay for rituximab or not, which can be a challenge. UPLIZNA is getting more and more use o ver time. When we come to market, if approved next year in the second quarter, we anticipate that a large number of patients still haven't been started continuously on either UPLIZNA or rituximab. So there'll be a lot of patients that will end up in a flare, show up in a clinician's office with a diagnosis, and have not been on a therapy in a long time other than maybe a steroid a few years ago, or they're a brand-new diagnosed patient. Right. The clinician will need to make a decision. Our market research and work that's been done by many of your colleagues on the cell side has indicated that clinicians think about our drug as one approach. It's an inhibitory approach. It shuts down B-cell activity, meaning it reduces antibody production, cytokine production, presentation of T-cells or antigen to T-cells, and that's how it works. Or they could deplete a large compartment of the immune system and eliminate B-cells. So they think about that, and they generally talk about it as, "Well, maybe I'll use UPLIZNA, maybe I'll use rituximab. Depends on the setting, depends on what I can get paid for, or I can use your drug. For your drug in my patient population, where almost 50% are over age 65, more than a third of them have concurrent illnesses, that perhaps with your effective agent, an inhibitor that we can pull back at any time, and based on the clinical phase III data where serious adverse events were lower in the drug arm compared to placebo, grade 3 infections were lower in the drug arm compared to the placebo arm, that this could be a good first choice for my patients. Okay. That's how many clinicians are thinking about it, and we think the data supports that thought process. Okay, great. Then maybe just the dosing profile, how could that specifically be tied into the kind of convenience for the patient? What is the feedback you have gotten? Is it more from patients versus from practitioners on that front? It is both. Both are— Sure. —important in the decision. Sure. Of course, in rheumatology, there are many, many medications that are administered by the patients at home via subcutaneous administration. It is sort of a standard now. So, with our drug being an at-home subcutaneous administration, it fits into a typical paradigm as opposed to having to schedule a patient at an infusion center and send them off to find that and have that done. Part of our market research, as we are thinking about the launch of our drug, was to ask that question and understand how important it is. From the survey that we conducted, about I would say, I think it was like 43% of the patient or the clinicians favored weekly sub-Q over every six-month infusions. About 5% favored six-month infusions over our sub-Q, and the rest were indifferent. Right. We asked patients the question, and 75% of the patients said they would rather do self-administered sub-Q. Got it. I think that helps. It fits kind of the paradigm of how medicines are given— Right. —in America today. Got it. And maybe just digging a little bit deeper, for the phase III data, when those were reported, I guess in terms of the efficacy profile versus the convenience profile that's provided by obexelimab, I guess, can you help us with physician feedback on how that convenience profile and that ability to pause dosing, especially in this older population, is being factored in when considering the efficacy versus UPLIZNA as well? Yeah. So from an efficacy standpoint, obviously, the trial met the primary endpoint and all of the key secondaries endpoints. The hazard ratio didn't hit a number that some people had in mind, but to the clinicians, that's an impressive number across rheumatology. So in their minds, it's an effective drug. The next thing they think about is that patient population and what would cause them the least issues from a safety and tolerability standpoint, and they like the idea of this inhibitory approach and the data from our phase III study, and then in addition, the convenience that you mentioned of the at-home administration. Right. I think that is the hierarchy is— Right. —a trade-off of efficacy and safety. In this population, they want an effective drug, but they want something that they are really comfortable with from a safety standpoint. It is not as if the alternatives have a high incidence of severe adverse effects. Right. It is not really that. It is just that these clinicians have used B-cell depletion for many years in various indications off-label, and they occasionally have a catastrophic infection, something really serious. They don't want to experience that again. Right. They don't want to subject one of their older patients to that. That's where they hesitate and think about our inhibitory profile perhaps being a better first choice. Okay, that makes sense. You mentioned, obviously, you have PDUFA coming, but I guess between now and then, I think you've talked about some additional data you could share, maybe at medical meetings. How could additional data kind of further round out the profile for it? I think what will be important is the upcoming meetings, IgG4-RD Biennial Symposium, and that's run by John Stone out of Massachusetts General Hospital, and that's where the world's experts in IgG4-related disease get together. Later in November, or late October, November, is the American College of Rheumatology meeting, ACR. We submitted information from our open-label extension. Previously, we had released that at six months, remember the randomized control portion of the study was 12 months. Yep. At six months in the open label extension, we had a 92% protection from flare. We will update that with the probability of flare at 12 months. Yep. That was submitted. In addition to the flare protection, there is a vaccine sub-study underway in the open label extension, and that is where patients at select sites pause their obexelimab treatment, then are administered either a flu, COVID or both vaccines, and then wait two weeks and then measure titers that would indicate protection and then restart obexelimab. We also submitted those data sets and hope to have that presented. Okay, great. You talked about the off-label nature of utilizing rituximab. I guess, how could you see that dynamic changing with another drug potentially coming to market? This is more a prediction. Yeah. If you look at the current utilization, rituximab is still used more than UPLIZNA. UPLIZNA's growing. When you have a launch of a drug, has an indication in the disease, and rituximab is the current drug that's used but doesn't have an indication, you see the launch drug surpass it at some point in time. So I believe UPLIZNA will surpass rituximab in utilization, of course, with an FDA approved label and payer support. Then we'll come along, if approved, with an approved drug, with phase III data. And payers will make that decision recognizing that UPLIZNA and rituximab are on the medical benefits side of a payer as infusions, and our drug, obexelimab, will be on the pharmacy benefit side. The decision process a little bit different group of people in many cases. But UPLIZNA has broad access across the country right now, and we would anticipate having the same as the only approved drug on the pharmacy benefit that exists. Right. That makes sense. And maybe, I'll ask this question this way, I guess within the BLA submission process, and you mentioned the PDUFA kind of late in May in this upcoming year, any indication of FDA's appreciation of the remaining unmet need in IgG4-related disease that you could highlight? Yeah, they're very actively engaged in the review. Yeah. They don't really comment on that. Yeah. It's not a discussion point. They correspond, send you questions, you respond to the questions, and then you don't hear anything back or further clarification of a question. Right. There's nothing really to point to there, except the review is very active. From a statutory standpoint, there'll be a mid-cycle part of the review as we approach early November, and then a late cycle in March, and t his is all statutory. You can calculate it, and then if things are moving along, they will give us feedback on the label in April. Okay, perfect. You touched on the commercial opportunity briefly, and I think you will have an investor event upcoming, so I do not want you to front run your own event. I guess maybe we could start with, I think you have talked about a $3 billion opportunity domestically. Maybe we start with just how does pricing factor in there? How are you thinking about maybe where pricing could come in relative to the appropriate comparators? The way we arrive at that is, I will go back to what I said earlier, although we believe there are 30,000- 40,000 patients with the disease in the U.S., we know there are 20,000 diagnosed and treated today. Then that other number of patients who flare frequently enough, they should have continual therapy, and that is 10,000 or 12,000. So that is a conservative TAM today. It could grow. If you just apply the UPLIZNA annual cost— Yeah. —which is $300,000 to that is how you get it $3 billion. What I am not including in that is the first year of UPLIZNA because there is an extra dose, it is actually $450,000 in the first year. So the $3 billion is maybe a slightly conservative way to look at it. We are not declaring our pricing. For this type of disease and the benefit that comes from that disease, and we have done some of the health economics work around this, that is a reasonable price point to consider for sizing the market as we enter it. We are not going to declare the price now, but that is in the range. Okay. That is helpful. Yeah, no, that is great. Then maybe just the second layer of that is you have done some payer and market access work already. Right. I guess, what are you hearing on that front that helps support your thinking on pricing? This is an orphan disease. From an overall budget and focus standpoint, it is not really moving the needle for the payer. Yeah. They look at orphan diseases like this a bit differently. It is not the type of thing that they manage. It is not a managed class or a managed disease. As I said, on the pharmacy benefit side, there are no other approved drugs. Right. And of course, Amgen's done a really nice job with their market access team educating payers and others about the need in the disease. Okay. Then you touched on the armamentarium here. That has evolved, and obviously there's some off-label nature to it as well, but I guess when you talk to docs, is there a slotting dynamic that you expect to happen in terms of where obexelimab could slot in terms of line of therapy? Or should we be thinking about this as first line for most docs that are going to use it? We did market research before our phase III study and after our phase III study, and interestingly enough, regardless of what we put in front of them, we got the same answer. And obviously, this has to play out with our execution, but about 50% of the front line would be obexelimab, and the remaining 50% would be split between UPLIZNA and rituximab. Got it. That's been confirmed in two large market research studies. Obviously, it's our job to make that happen. Yeah. The reasons behind it, and we talked about this already, is the patient profile. Right. That a lot of these patients are older, more susceptible to infections. If they have an infection, they have a lot of concurrent illnesses, which is more susceptible to greater morbidity or even mortality, and they think about that is top of mind for them. Okay. And then cause the patient convenience— Okay. —of the at-home sub-Q. Super helpful. All right. Maybe we will park IgG4-RD there for now. I want to make sure we touch on the SLE data that is upcoming in the fourth quarter. It is an all-comer design trial. There is a biomarker subpopulation analysis. I guess just maybe from a high level, talk about what you are hoping to see. Is there any way to bifurcate that expectation by the overall population versus the biomarker-enhanced population? You had commented on the event we have coming up for— Yes. —IgG4-RD. We will also be sending out invitations soon. Instead of doing a large Analyst Day, we decided to have two bites. Okay. First, IgG4-RD commercialization, September 29th, and the invite will be for an R&D investor day in late October. There, we are going to spend a lot of time taking people through the SunStone SLE trial, the design of it, the biomarker, the science behind the biomarker, how we are analyzing the biomarker, and we will also touch on other pipeline programs. We will talk a lot about the oral IL-17 inhibitor— Yep. —and put in context to the results we will have later this year of the SAD and MAD study. Okay. But to your question here on the SunStone trial, it's a trial that took all comers. And we were very diligent about the population we entered into this trial. Obviously, there's inclusion/exclusion criteria, but once investigators did their work, the patients were then put in front of an expert. And it's interesting how high the screen failure rate is because that expert discerned that a number of those patients that investigators initially determined were eligible truly weren't eligible. They tend to be a little more mild than they should with their disease, and that increases the placebo response and ruins studies, so we took care of that. And I would point to the Roche study with their anti-CD20 antibody that had a decent effect size, SRI-4 and BICLA just over 20%. They had a screen failure rate of over 50%. Right. So think about our study more in that range. Where we worked really hard to get the right patients. But the primary is BICLA, but we'll display BICLA and SRI-4 results. And then the biomarker population, which was first identified in the original sponsor's phase II-A, we've taken that approach, and we put it in the hands of more of a commercial entity to develop it further. We've worked with them. So we'll put out the overall population and the biomarker population— Okay. —side by side. This phase II study is really designed to help us design a phase III registration program. Right. We are able to look at SRI-4, BICLA, overall population, biomarker-positive population, the effect size, and determine what we want to do next. Okay. All right. That sounds good. Just you touched on it, but the competitive landscape in SLE, it is active, but clearly room for improvement there. What is your sense of where unmet need stands and what demand is for a product like this in SLE? Yeah, I think obviously, this is a heterogeneous disease. The driver to the disease is different in different patients. I am really excited about the opportunity with this biomarker approach to identify a population that is highly responsive to obexelimab. We learned a lot in oncology over the years in how to select patients and pick patients that are really going to benefit the most from the drug. If we could do the same in rheumatology, specifically in SLE, where we are giving the drug to a patient that is more highly likely to respond to it, that would be a great outcome. Okay. Just moving down the pipeline slide, you mentioned ZB021, which again, oral IL-17 inhibitor. You are in phase I with SAD/MAD dosing ongoing in healthies, I believe. That is right. Initial clinical data by year-end. I guess what would be exciting for this asset in terms of what you could see in phase I, PK, safety, tolerability, anything beyond those measures that we should be thinking about? Yeah, I think in this case, because IL-17 is a well-validated target, if you can bring a once-a-day oral option that has efficacy in the range of what's known in IL-17 in different diseases, that could be a significant product for us and really meaningful therapy for patients. In this data set, we have the SAD. But then moving to the MAD study, we're going to have a comprehensive set of ADME properties. Importantly, at once daily dosing, what kind of exposure do you get relative to your IC50 and your IC90? And if you have what you want, and you have the right safety and tolerability, that should be a drug. Yeah. So then the next step is where do you put it into a treatment paradigm for patients? The decision we need to make next year, we'll go into patients— Right. —whether we do the typical rapid psoriasis program, so you can benchmark, or instead go into a phase II indication or a phase II for ultimately an indication you would do a registration study on. We'll land on which one of those we'll do. Okay. But next year we'll have some patient data besides. Okay. But I think this data set of exposure, safety, tolerability really sets us up to have a significant program. Okay, so it sounds like there could be some maybe proof of concept done in psoriasis patients, but that wouldn't necessarily be the go forward indication? That would be one. Okay. Or we could do a phase II next year— Yeah. —in the go forward indication. Got it. When we have the results, we will talk more about that. Okay. Maybe just help us with the oral nature of this molecule and what the differentiation is there within the IL-17 development landscape. Yeah, this is a true small molecule. Yeah. The molecular weight around 600. In primates, it had 80% bioavailability. Good metabolic stability, all the characteristics that say this is a developable molecule. It's gone well through SAD, well into MAD. Right. We have internal data. We're pleased with what we're seeing. Okay, great. You touched on orelabrutinib up at the front. You in-licensed this asset from InnoCare in October of last year, and like you said, you have two global phase III running. Can you help us with your thinking, just behind the in-licensing of the asset, what made this BTK inhibitor potentially best in class in your view for progressive MS? Yeah. For us, we are focused on a rheumatology franchise around IgG4-RD, lupus. For our IL-17 inhibitor, there are rheumatology indications we're thinking about. Leveraging, first the obexelimab to generate multiple sclerosis data, but we have our extended half-life molecule we can talk about that might have potential in MS. So we have our neuroimmunology franchise that's behind the rheumatology franchise. We have a brain-penetrant TYK2 inhibitor, and bringing in the BTK inhibitor. Progressive MS is a significant unmet need. Yeah. PPMS, SPMS, specifically naSPMS, which is the definition the FDA likes. With this molecule, really targeting, we think, a mechanism that's important in progressive MS, and specifically being one that has the greatest brain penetration IC90 ratio. Let's look at it this way. If you take the different BTK inhibitors that have been investigated in progressive MS, and you line them up, and you look at their, first of all, how clean they are on the kinase scan, this is a very clean molecule. Then you look at the brain penetration, because central compartment macrophages, microglia, B-cells are critical to this disease, and especially impacting disability progression. So you want brain penetration, and you want a highly potent molecule once you get to the brain, and orelabrutinib stands out there. There's practical things. The BTK inhibitors that are moving forward, it's once a day. The other two are twice a day. When we conducted our diligence on it, the phase II data was best in class— Yeah. —in RRMS, which is where you go in phase II. Importantly, and first of all, this came from InnoCare, but this was a global study run by a U.S. CRO. This wasn't a Chinese focused program. Yeah. It was global. A U.S. CRO ran the study, and when we conducted our diligence, we actually had 96 weeks of follow-up data. So we had disability progression data, NfL data all the way out to 96 weeks. Yeah. That gave us the confidence that this is a very special molecule. Progressive MS, there's great unmet need, and we like the way this matches up compared to every other molecule in the class. Okay, great. We'll look out for that. Just touching maybe on the earlier stage assets, you mentioned ZB022, the brain-penetrant TYK2. You also have ZB014, a half-life extended CD19 Fcγ receptor mAb. I guess just maybe high level development plans for those earlier stage assets and what— Sure. —resource allocation could look like. The brain-penetrant TYK2, as I mentioned before, fits in the neuroimmunology franchise. Obviously, there are a variety of diseases that people have thought of to apply that against. We're a little bit behind a few others, and I think we'll learn from them. Our molecule will go into the clinic next year, and we'll have our SAD and MAD data next year. Then we'll determine where we go from there. Okay. For ZB014, which is an extended half-life molecule that leverages CD19 FcγRIIb just like obexelimab, it's a similar molecule. It just has two mutations in the Fc portion to extend the half-life. With obexelimab being weekly subcutaneous self-administration, the preclinical data indicates this could be monthly. Next year,— Got it. —we'll do SAD and MAD to support whether it is in fact monthly. As you think about this, because it really, in all of our non-clinical work, including in animals, we've kind of validated the CD19 binding's the same, the FcγRIIb binding's the same, such that we can move quickly after we have that data, let's say a SAD study, a MAD study in a patient population, into go-to registration. Across our rheumatology and our neuroimmunology franchise strategies, what indications could we consider? Of course, in the neuroimmunology area, a lot of people are focused on myasthenia gravis, so UPLIZNA's doing well there. That could be possible. RRMS, if we can get to a point with the primary endpoint with the FDA as something other than annualized relapse rate, that could be somewhere to take it. In the rheumatology area, we've thought about things like Sjögren's disease and others. So let us first get the SAD and MAD study. Yeah. Then we'll determine the path forward. That's fair. All right. Maybe in the last couple of minutes, we're going to walk through sort of a mini survey we're asking all the management teams at the conference. So curious about your insight specifically on this one. With the rise in Chinese biotech innovation, how are you thinking about competitive positioning, and will this influence internal R&D efforts, business development, or both? Yeah. My perspective comes from experiences where, many years ago at a company called Abraxis, when I was CEO, we built a China organization. We launched Abraxane in China. China's changed quite a bit since then. I've been a member of the Zai Lab board for a number of years and spent time back and forth to China, and as you mentioned earlier, we did a significant transaction bringing in three molecules from InnoCare. We actually have a team in China that manages all of our Asian clinical trial sites. We're quite familiar with what goes on there. I visit every so often, and it's just fascinating how fast things are moving. Some of the government policies that are evolving that are going to position them even better for developing innovative medicines and getting them paid for in China. The question is, how are those medicines going to make it to other parts of the world? I think Europe is going to be an excellent outlet for them. What happens in the U.S. is determined by a lot of geopolitical conversations. Right. I can't predict what's going on there. I just know that there's good science, good medicine, good collaborators, and we'll see where it all goes. Okay, great. How is Zenas leveraging AI in different parts of the organization? Yeah, we're probably a little newer to it. We do not do drug discovery. We in-license, so we do not leverage AI in drug discovery. We do not have drug discovery. Think about data scientists and what they do. Yeah. We use AI that way, to learn everything about targets, everything about other molecules, everything about clinical science. Yeah. How do you put it all together and make some good decisions? In the commercial arena, all of the data we get that we interrogate with AI to bring different meaning to it, and then obviously a human steps in to understand it. Medical writing, but I would say our BLA for obexelimab was done the old fashioned way. Right. Then lastly, just on the regulatory side of things, whether it's changes at FDA which seem to be constant, or pricing, whether that's Most Favored Nation pricing, tariff, anything on the regulatory side that keeps you up at night? Doesn't necessarily keep us up. I know the agency is working hard, active. We're interacting with them. They're busy. I would say Most Favored Nation considerations as we think about Europe. Yeah. We retain rights. We don't want to out-license to Europe because we need to control the pricing. Yeah. Our last several companies, we successfully launched in Europe. We would like to do that again. We are going to submit, but launch will be dependent upon where MFN lands. Okay, great. With that, we are out of time. Thanks again, Lonnie. This was great. Thanks, Judah.