Nektar Therapeutics

Good day and thank you for standing by. Welcome to the Nectar Therapeutics fourth quarter 2024 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Vivian Wu. Please go ahead.

Thank you, Crystal, and good afternoon, everyone. Thank you for joining us today. With us on the call are Howard Robin, our President and Chief Executive Officer, Dr. Jonathan Slavsky, our Chief Research and Development Officer, Dr. Brian Codson, our Interim Chief Medical Officer, and Sandra Gardner, our Chief Financial Officer. On today's call, we expect to make forward-looking statements regarding our business, including statements regarding the therapeutic potential of and future development plans for drug candidates and research programs, the timing of initiation of clinical studies and the availability of clinical data for drug candidates, the timing of plans for future clinical data presentations, the formation, future development plans, or success of our collaboration agreements, financial guidance, and certain other statements regarding the future of our business. Because forward-looking statements relate to the future, they're subject to uncertainties and risks that are difficult to predict, many of which are outside of our control. Our actual results may differ materially from these statements. Important risks and uncertainties are set forth in our Form 10-Q that was filed on November 8, 2024, which is available at scc.gov. We undertake no obligation to update any of these forward-looking statements, whether as a result of new information, future developments, or otherwise. A webcast of this call will be available on the IR page of Nectar's website at Nectar.com. With that said, I would like to hand the call over to our president and CEO, Howard Robin. Howard?

Thank you, Vivian. Thank you all for joining us today. 2024 was a productive year for Nectar, and I'm very proud of our team for executing on important clinical development milestones for our lead autoimmune pipeline program, Respec Aldis Lucan, also known as Respec. The achievement of these clinical development goals prepares us for meaningful data catalysts for ResVag in 2025. Earlier this year, we announced the enrollment completion for both our Nectar-sponsored Phase IIb studies. Our 400-patient Resolve-AD trial in ectopic dermatitis opened enrollment in October of 23 and completed enrollment in just 14 months. Our 90-patient Resolve-AA study in alopecia areata opened in March of 2024 and completed enrollment in roughly one year. Both studies were completed on schedule in highly competitive clinical trial landscapes for both indications, which I think demonstrates the enthusiasm from patients and physicians for RESPEC's novel mechanism of action and for the data that has been generated to date. Jay Z will discuss in a minute some of the unique operational features of our studies that are designed to minimize clinical operational risk. We look forward to data from both trials in ectopic dermatitis and alopecia areata in the second quarter and fourth quarter of this year, respectively. Now in the U.S. alone, there are over 15 million people living with moderate to severe ectopic dermatitis. And we know that less than 10% of those patients who could receive biologic treatments for this chronic skin disorder are actually receiving treatment. New mechanisms are the key to growing this underserved market. This belief also extends to alopecia areata. According to the National alopecia areata Foundation, nearly 7 million people in the US alone have or will develop this disease and a treatment market that is estimated to reach 5.2 billion in the United States and Europe by 2023. This disorder significantly affects the quality of life for patients, and the approved JAK inhibitor therapies with their high relapse rates are not durable and can carry significant potential safety risks. With RESPEG, we hope to offer a more durable treatment option in the form of a novel immunomodulating mechanism. And moving on to type 1 diabetes, we recently announced the clinical trial agreement with TrialNet, an international clinical trial network at the forefront of diabetes research, in which they will conduct and fund a Phase II clinical trial to investigate RESPEG in 66 patients with new-onset type 1 diabetes. We're proud to support TrialNet's mission of advancing innovative mechanisms aimed at slowing or stopping the progression of this disease. Nearly 2 million people in the U.S. have type 1 diabetes, and the disease incidence continues to rise at a rate of 3 to 5 percent per year. And Brian will talk more about this later in the call. And turning to the progress we've made with our preclinical programs, over the past year, we expanded the company's preclinical pipeline in immunology and inflammation. First, we continue to advance our novel TNFR2 agonist antibody program, Nectar 0165. IND-enabling studies are ongoing with the goal of preparing for an IND submission in the second half of 2025. Last year, we presented the first preclinical data at ULAR showing that this antibody demonstrated selective enhancement of Treg cell function. Given the importance of TNFR receptor 2 agonism in a number of autoimmune diseases, Nectar-0165 could potentially be developed in autoimmune diseases such as multiple sclerosis, ulcerative colitis, and vitiligo. We're also designing a pipeline of bispecific molecules that pair TNFR2 agonism with other antibody targets, and we're planning for the first bispecific in this program to be ready for an IND-enabling studies within the next quarter. We look forward to providing more color on our early pipeline as these programs progress, and Jay Z will discuss more on this later. Now, before I turn to the R&D discussion, I want to reintroduce Brian Kotzen, who we announced last month would be returning to Nectar to lead the development of ResBag as interim chief medical officer. Brian has over 40 years of expertise in immunology and has extensive development and management experience. He's also been supporting the clinical development of RESPEG in various capacities since 2017, and his intimate familiarity with this program has provided a seamless transition. And before I hand the call over to Brian, I want to highlight that Nectar remains in a strong financial position with a cash runway that extends into the fourth quarter of 2026 ending 2024 with $269 million in cash and investments on hand. I'm going to ask Brian to share a few comments on his enthusiasm for RESPEG and also comment on our recent announcement for the program in type 1 diabetes before we turn it over to Jay Z to review more details on RESPEG's ongoing phase 2b studies and our early pipeline programs. Brian?

Thank you, Howard. It's great to be back at that time. As Howard mentioned, I've had the great pleasure to work on RESPEC since 2017, even continuing as a strategic advisor since retiring in 2023. When Howard and Jay-Z called me with the opportunity to work on this program with my colleagues at Nectar again, I was very enthusiastic to help. I have a great passion for the potential of boosting regulatory T cells in autoimmune disease. and ResPig is the most advanced IL-2 Treg stimulating mechanism in the field. Having closely worked for several years on its clinical development, I believe it has the potential to truly address unmet needs for safe and durable therapeutic options for patients battling atopic dermatitis, alopecia areata, and now type 1 diabetes. As Howard mentioned, we recently announced a collaboration agreement with TrialNet to evaluate RESPEG in a phase two placebo-controlled clinical trial in patients with new onset type 1 diabetes. I've had great interest in pursuing RESPEG in this indication since it first entered the clinic, and I'm very excited to work with some of my colleagues at TrialNet on this new clinical study. In type 1 diabetes patients, there is a dysregulation of the balance between regulatory T cells and pathogenic autoreactive T cells, which leads the autoreactive T cells to destroy insulin-producing beta cells in the pancreas. Studies in mouse models and early human research of low-dose IL-2 and other agents have shown that boosting Tregs can lead to the preservation of insulin-producing beta cells. This preservation of endogenous insulin secretion is key to improving long-term health outcomes and quality of life for patients with this disease. This is why I am so excited about the work that TrialNet is recommending for RESPEC. The proposed placebo-controlled TrialNet study will enroll approximately 66 patients while they still have preserved partially preserved beta cell function and insulin production. We will start evaluation in adult patients and move to pediatric and adult patients in different phases of the study. TrialNet's goal is to initiate the study later this year. And with that, I'd like to hand the call to Jay-Z.

Thank you, Brian. It's exciting to be working with you on a daily basis again. As Howard mentioned, we announced in January that we completed enrollment in the RESOLVE-AD Phase 2b trial in patients with atopic dermatitis in just under 14 months. We are grateful to the patients and physicians whose strong interest in this novel mechanism and proof of concept clinical data led to enrollment completion of this large Phase 2b study. And we look forward to reporting the top line data from the 16-week induction period in June of this year. In February, RESPEG was granted fast-track designation by the FDA for the treatment of adult and pediatric patients with moderate to severe atopic dermatitis. This designation allows us to collaborate closely with the agency on the design of the registrational program for RESPEG, and we'll be leveraging it as we work on our phase three registrational strategy in atopic dermatitis. As a reminder, the RESOLVE-AD study randomized approximately 400 biologic naive patients with moderate to severe atopic dermatitis across three different dosing regimens of RASPEG or placebo. Guided by our scientific advisory board of industry-leading dermatologists, we designed this study to ensure high-quality sites were used and implemented criteria with the goal of addressing some pitfalls in operational execution from past trials. Patients were recruited from approximately 110 sites globally to ensure adequate geographic representation. Patients were stratified based on geographic region, as well as baseline disease severity. 67% of patients were enrolled in Europe, across Poland, Bulgaria, Germany, Czechia, Spain, Croatia, and Hungary. 17% enrolled in the United States, and the rest were enrolled in Canada and Australia. We had a goal to balance U.S. recruitment due to the recent phenomenon in the last several years of a rising placebo effect observed in the U.S. We are very pleased with the 17% ultimate U.S. recruitment figure, which aligns more closely with the recent winning atopic dermatitis studies in terms of site distribution. Other important criteria that we used in the study include requiring that most of our sites be board-certified dermatologists or immunologists. with prior experience participating in other atopic dermatitis studies. We also required that patients enrolled met a strict, easy threshold that was consistent in both screening and randomization, unlike some other trials that have only required easy measurement at screening. Reconfirming that the patient's disease severity has not changed significantly between the screening and baseline time point, allows us to reduce the potential for enrolling patients with flaring or episodic disease into the study. Patients with unstable disease or with a significant change between screening and randomization are screened then. After randomization, patients receive either RESPEG at 24 micrograms per kilogram twice a month, 24 micrograms per kilogram once a month, and 18 micrograms per kilogram twice a month, or placebo for a 16-week induction treatment period. After the induction period, patients that meet an easy 50 or better efficacy threshold to advance from induction to maintenance are re-randomized into one of two maintenance regimens at their original dose level to receive that dose on either a once a month or once every three month regimen. The maintenance portion of this study is 36 weeks, which will in total provide 52 weeks of treatment duration for patients in the study. We are following participants for one year after the conclusion of the 52-week treatment period, enabling us to evaluate RESPEC's potential for long-term remittance effects. As I just mentioned, we anticipate top-line data from the 16-week induction period of this Phase IIb study in June, and we expect data from the 36-week maintenance period of the study in the first quarter of 2026. Now, turning to Resolve AA study, alopecia areata is a dermal disease in which the patient's immune system mistakenly attacks the hair follicle and disrupts the body's normal ability to keep and grow hair, leading to hair loss. There is strong rationale for RESPEC in this indication based on the role of Tregs to either prevent or downregulate the underlying pathology of the disease. Last month, we announced enrollment completion for our 90-patient Phase IIb study in our Apicia area. The trial recruited patients across approximately 30 global sites. Patients had to present with severe to very severe disease to find a SALT50 to SALT100 for at least six months in order to be eligible for inclusion. Sixty-two percent of patients were enrolled in Poland, 24 percent in Canada, and the rest in the U.S. Randomized patients will be treated for a period of 36 weeks and observed for up to 60 weeks in total. Our primary endpoint for this study is mean percent improvement in SALT, or the severity of alopecia tool, for week 36. We will also be looking at a number of other secondary endpoints, including the proportion of patients that was observed to have varying degrees of improvement in SALT score, including the regulatory approval endpoint SALT20. We expect top-line data from the 36-week treatment period in the fourth quarter of this year. Turning to our preclinical programs in immunology, I'll start by talking about our novel TNFR2 agonist antibody program, Nectar 0165. TNFR2 agonism has been shown to potentiate Treg function, as well as maintenance of Treg lineage stability, especially in the non-lymphoid tissue compartment. Genetic studies show that if TNFR2 is absent, the phenotypic effect is autoimmunity, as well as other conditions that resemble FOXP3 loss of function. In contrast, its presence and activation of its signaling has been associated with immune regulatory function and tissue protective effects. The first preclinical data from this program, presented last year at ULAR, demonstrated that Nectar 0165 has a very high specificity for signaling through TNFR2 on Tregs, and enhancing immunosuppressive activity. It also showed that the agonists we discovered are able to signal through the TNFR2 multimeric receptor single-arm monovalent antibody, which is a very novel finding for a TNFR2 agonist antibody. We are very excited with Nectar 165 unique and differentiated profile, and we believe it has the potential to become a first-in-class treatment for various autoimmune diseases, including multiple sclerosis, ulcerative colitis, and vitiligo. And we are rapidly advancing this program into the clinic with plans to submit an IND in the second half of this year. Since the TNFR2 agonist antibody specificities we discovered are active in single-arm antibodies, we have leveraged this to design a pipeline of TNFR2 containing bispecific molecules that pair TNFR2 agonism with other specificities. First of these is known as Nectar 0166. These assets take advantage of multiple mechanisms to bring about novel molecules to target autoimmune diseases. We will nominate the first development candidate, Nectar 0166, from this pipeline in the second quarter of this year and look forward to providing more color around this in the future. Overall, we have observed growing interest for a selective TNFR2 agonist like Nectar 0165 As we move forward with our IND-enabling study and develop the bispecific pipeline, we remain open to opportunities to work with companies interested in these areas, strategizing the best path forward. Before turning the call over to Sandy, I'll make a few comments on Nectar 255, our IL-15-based oncology program. Last year, we presented data on Nectar 255 that highlights its potential to augment the response and patient outcomes of a variety of cancer treatments in both solid and liquid tumors. Data published in Blood, the peer-reviewed medical journal of the American Society of Hematology, from Stanford's IST, demonstrated that Nectar 255, when combined with Stanford's CD19-CD22-BICAR T-cell therapy, doubled the 12-month relapse-free survival rate for patients with B-cell acute lymphoblastic leukemia at 67% compared to 38% in Stanford's historical controls treated with the same CAR-T cell therapy. At ASH, we shared supporting data showing that Nectar 255 enhanced complete response rates following CD19-directed CAR-T therapy in patients with relapsed refractory large B-cell lymphoma. 73% of the Nectar 255 treatment group achieved a complete response in six months, compared to 50% in the placebo group. This clinical benefit surpasses the published historical benchmark data from multiple pivotal trials and real-world meta-analyses of currently available commercial CD19 CAR-T cell therapies. Finally, interim data presented in CITSE from Dr. Stephen Lin's Phase II study suggests that Nectar 255 has the potential to confer clinical benefits in patients with locally advanced non-small cell lung cancer. Results show that Nectar 255, in combination with drivalumab, demonstrated a statistically significant improvement in the eight-week absolute lymphocyte count compared to historical controlled data. And these data strengthen our belief in Nectar 255's therapeutic potential as a new application in combination treatment with checkpoint inhibitors. The growing body of evidence showcases its broad applicability to be combined with a variety of therapies across cancer indications. Looking ahead, We'll continue to collaborate with Able Zeta to evaluate Nectar-255 in combination with their tumor infiltrating lymphocytes in patients with advanced non-small cell lung cancer who do not respond to anti-PD1 therapy. And we continue to work with Merck KGA to evaluate Nectar-255 in combination with Babencio in their Phase II javelin bladder medley study with the first potential PFS readout expected in the middle of this year, as this is an event-driven analysis. As we continue to generate supportive data in these combination studies, we continue to explore the best areas for continued development of this drug candidate in partnership with collaborators. And with that, I will turn the call over to Sandy for a review of our financial guide.

Thank you, Jay-Z, and good afternoon, everyone. We ended 2024 with $269.1 million in cash and investments with no debt on our balance sheet. On December 2nd, 2024, we completed the sale of our Huntsville manufacturing facility for consideration of $64.7 million in cash, net of transaction costs, and approximately 20% equity ownership in the new portfolio company, Gannett Biochem. Turning to the income statement, our revenue was $29.2 million for the fourth quarter of 2024, and 98.4 million for the full year 2024. Our R&D expenses were 28.7 million for the fourth quarter and 120.9 million for the full year. Our G&A expenses were 17.1 million for the fourth quarter and 76.8 million for the full year. In connection with the sale of our Huntsville manufacturing facility, we recognize the gain of $40.4 million. Our non-cash interest expense for the fourth quarter was $10.2 million and $28.1 million for the full year. And our net income for the fourth quarter was $7.3 million or 3 cents basic and diluted earnings per share. For the full year 2024, our net loss was $119 million or 58 cents basic and diluted loss per share. I will now review our 2025 financial guidance. We remain strong in our financial position and still expect our cash runway to extend into the fourth quarter of 2026. We plan to end 2025 with approximately 100 million in cash and investments. Our revenue for the full year of 2025 is expected to be between 40 and 50 million, which primarily includes non-cash royalties. As a result of the sale of our Huntsville manufacturing facility, we will no longer have product revenue and cost of goods sold. We anticipate full year R&D expense will range between 110 and 120 million. including approximately 5 to 10 million of non-cash depreciation and stock-based compensation expense. We expect R&D expense to remain consistent with 2024 levels as we continue our Phase IIb studies in atopic dermatitis and alopecia areata. We expect G&A expense for the full year of 2025 to be between 60 and 65 million, including approximately $5 to $10 million of non-cash depreciation and stock-based compensation expense. Our full-year non-cash interest expense is expected to be between $15 and $20 million. And, as I stated earlier, we expect to end the year with approximately $100 million in cash and investments. And with that, now we'll open the call for questions.

Operator? Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. In the interest of time, we do ask that you please limit yourself to one question at this time. Please stand by, we compile the Q&A roster. And our first question will come from Yasmeen Rahimi from Piper Sandler. Your line is now open.

Good afternoon, team. Thank you so much for all the great updates. We're very much looking forward to the data across both of the studies for this year. I guess the first question is, you guys have shown in the earlier stage really phenomenal dose responses in the easy scores. We would love to understand how you're thinking about dose response across the three dose arms. And then secondly, if you could just maybe remind us What is the criteria or responder analysis defined for patients to be eligible to go from the induction phase to the maintenance phase? And I'll jump back in the queue.

Jay-Z, you want to take that call, that answer, question?

Sure. Yeah, thanks, Yaz. So the first question about the dose response, so we addressed that with three different cohorts that addressed both dose level and regimen. So two of our dose cohorts evaluated the 24 microgram per kilogram dose. One of those evaluated that dose twice a month. The other cohort at once a month. And we changed the frequency there because that was sort of designed to model the pharmacodynamic profile of the Tregs that we measure in the blood. And so that's why we wanted to have the same CMAX one time, the different exposures in the once a month versus twice a month setting. So that was the goal there, to assess that based on the PKPD knowledge. And then we also selected 18 micrograms per mil dose twice a month. That dose is higher than the 12 micrograms per kilogram that we used in the Phase 1b study. We felt that that dose 12, while it did separate a little bit from placebo, but a little bit on the lower efficacy side. So we wanted to evaluate a higher dose level than 12 micrograms per kilogram in the Phase IIb. And that's why we chose 18 micrograms per kilogram, halfway between 12 and 24 from the Phase Ib study. So those are expectations around the design of the Phase IIb. And then in terms of the criteria for patients moving from the induction to the maintenance arms of the study, At the end of the 16-week inductions, patients that have an easy 50 or better response are eligible to be re-randomized to enter into the maintenance. And then in the maintenance, they're re-randomized to stay on the same dose level that they were on in the induction portion of the study. But now the regimen is either once a month or once every three months. So we use that easy 50 criteria for advancement from induction to maintenance.

Thank you, Judy.

Thank you. Our next question will come from Julian Harrison from BTIG. Your line is open.

Hi. Thank you for taking my questions. First, on the Phase IIb atopic dermatitis data expected next quarter, I'm wondering if you could talk about what kind of efficacy bar, either on EZ or IGA, you think would be commercially viable and worthwhile to advance RESPEC into pivotal development?

Yeah, that's a good question. I think we've done a lot of homework in that area, especially recognizing that the engine just released its data on OX40. So I'll let Jay-Z give you a more thorough answer on that.

Yeah, thanks, Julian. So we definitely see at least two different versions, you know, of activity. Obviously, like, there's ranges of EZ that are active and that are desirable, you know, to achieve. and also the separation from placebo, both features are very important. We like what we saw in our phase 1B study, right? We showed both the dramatic separation from placebo in terms of placebo adjusted and also an 83% change from baseline. So we're looking to, you know, to replicate that kind of data in our phase 2B. But we also acknowledge that as a drug with a novel mechanism, and an agent that's already shown a remittive effect, as we've shown in the Phase 1b, that even efficacy in the range of Dupixent, the standard of care currently, would also be a very successful outcome for us. We're definitely aware of the recent results in the field, including Amgen's ROCA data. And I think that data is probably considered a little bit underwhelming by some of the folks that have addressed and looked at that data. And we think that we're in a great position to replicate the Phase 1B results that we had with ResPen.

And always remember that, you know, it isn't a zero-sum game. It really is a quite underserved market with a very serious disease. And having a novel mechanism is certainly going to be appreciated by patients and physicians, I'm sure, of that.

Got it. Thank you. That makes a lot of sense. And then one more, if I may. I'm curious how you're thinking about your rights to dipyrrolizumab in light of the recent litophilumab royalty monetization. Are there any differences compared to litophilumab that are worth noting?

Jay, do you want to comment on that?

Yeah, well, there are different mechanisms of action, of course. One is the BDCA2. inhibitor that's targeting more of the plasma cytoid arm. And, of course, that drug has shown activity in both systemic lupus and cutaneous lupus. It seems like it has maybe even more potential in the cutaneous form of the disease, whereas DAPI, right, is a CD40 ligand targeting agent, right? So it addresses different mechanisms of action. And then, so that's mechanistically, you know, both of the drugs have demonstrated, I think, impressive results in phase two. And obviously, DAPI has positive phase three data as well.

All right, excellent. Thank you.

Thank you. Our next question will come from Jay Olson from Oppenheimer. Your line is open.

Oh, hey, congrats on all the progress. And thank you for providing this update. Maybe another question on the top line phase two atopic dermatitis results in the second quarter. Can you just talk about the scope of data that you're planning to share in that top line release and maybe some of the secondary endpoints we should be looking for? And then also, what do you think the profile would be that would help you capture meaningful market share in a first-line setting?

Yeah, I think good questions. I think, you know, we haven't discussed a lot about the exact secondary endpoints at this point. I think clearly as a novel mechanism and a completely different approach than IL-13, I would like to see a drug that's, you know, similar in activity to Depixent with a very different mechanism biologic profile. I'll let Jay-Z talk a little bit more about that. Go ahead, Jay-Z.

Yeah, sure. Thanks, Jay. Yeah, so just to reiterate what Howard said, we haven't sort of, you know, guided on the specificity of the top line. Obviously, the majority of the data we would need to present at a medical meeting, but we would intend to focus, obviously, on the 16-week induction data, as we've described, and to give at least a minimum directional right, understanding of the performance of the drug. I think that's a bare minimum, but we can cover that more later. And then in terms of the profile, I mean, it's pretty obvious that the greatest way to impact the share in the frontline setting is with efficacy, right? So if we are able to replicate the Phase 1b results that were really quite marked, right, quite notable, obviously that's one of the strongest ways to impact the first-line treatment space. But even all that aside, we're a completely different mechanism. We're not another IL-13. We're not a depleting antibody like ROCA is. We're really providing a completely different mechanism of action. And we're providing the data set that's already demonstrated the potential for really durable responses, which could translate into very, very low frequency dosing regimen, which would at minimum be highly convenient to patients. So we think there are really a number of ways, you know, that we can impact this market. And we're very excited that being a novelty reg mechanism gives us these additional avenues.

Yeah. I think it's also important to point out that while, you know, depiction is certainly an excellent drug, no debate on that. Um, you know, there's a high percentage of patients failed to pick some therapy over time. And as Jay Z just said, you know, having a novel mechanism that works in a completely different fashion, is something this market desperately needs. So when we wind up comparing our results to depiction results, certainly I'd like to see similarities, but recognize that you're dealing with a completely different way of approaching the treatment of this disease.

Thank you. That's super helpful. And if I could sneak in a question on 255, can you just talk about any updates on timing or expectations for the interim PFS results from the javelin bladder medley study and what we should be looking for there.

Thank you. We should be seeing results from that middle of this year. Jay-Z, do you want to comment a little further?

Yeah, that's exactly right. It is event-driven, right? So you need to accumulate PFS events. Merck gave us some guidance at the middle of the year, you know, like summertime is about the kind of time when we might expect to see that. And then in terms of, you know, PFS events, obviously our goal is to improve, right, on the PFS and potentially maybe even the OS of single agent Bivencio in this setting, right, in that post-chemo setting. So that's obviously the objective of the study. That's what we'd like to see. That's what Merck would like to see as well. I mean, and that's how this study has been designed with Bivencio as an active comparator, you know, to directly test, you know, the combination of 255 plus Bivencio versus Bivencio alone.

Thank you. It's super helpful. Thanks for taking the questions.

Thank you. Our next question will come from Roger Song from Jefferies. Your line is open.

Great. Thanks for the update and taking all the questions. I have a quick one related to the phase II atopic dermatitis. Given the enrollment you have completed compared to the recent atopic dermatitis trial. What's your expectation in terms of the patient baseline? And then how will that impact particularly on the placebo arm? What's your expectation there? Thank you.

Jay-Z or Brian, you want to take that one?

Yeah, sure. Thanks, Roger. So one of the things that we'd really like to see is the baseline easy to be in the range of like 25, 25 to 30, right? Because as we've seen, like other studies, you know, historically, those kind of baseline easy scores for the entire population have generally been linked with lower overall placebo responses and also, you know, better studies. There's more dynamic range to measure for patients that are having, you know, higher easy scores. So that's one of the things that we'd like to see in the study, something in that kind of range for baseline. And then in terms of setting expectations for placebo, I mean, you know, we don't know. I mean, this is a blind study, but certainly we would like to see much, much lower placebo response rates than have been reported recently for some of the studies, including the studies that were reported last December, such as from Q32, where the placebo rate was very, very high. One of the things that we did in our study that I tried to cover earlier in our call was that we really had a number of prospective features that we built into the study, such as limiting the US footprint geographically. We only had 17% of our sites in the US. Focusing on board-certified dermatologists and immunologists that had demonstrated experience working in atopic dermatitis studies. as well as measuring the EZ score multiple times before drug was administered and patients were randomized. And all of those things we did prospectively in order to protect the study, you know, and ensure that ideally we don't have a very, very high placebo response rate. So obviously when we present the results of the top line later this year in June, we'll show what that is directly. So thanks for the question, Roger.

Thank you.

Thank you. And our next question will come from Mayank Montani from B. Reilly Securities. Your line is open.

Yes, good afternoon, team. Thanks for taking your questions and glad to see the progress here. Could you touch on just a related question to the last comment, Jay-Z? Anything you can touch on the screen failure rate you've seen on this extra stringent criteria you're using and how that may compare to some other studies that have been done around screening and then randomization, and then have a quick follow-up.

Yeah, that would be the kind of information we would share in the future, you know, when we present the results of the study. Okay, okay, got it.

And then the escape... piece in the protocol, how patients go on the escape arm. Could you just remind me how that's kind of structured for induction and maintenance? And then lastly, this high-level, the read-through from AD data set to the resolved AA study, any translational markers you're looking at would be helpful to know. Thanks for taking that question.

Sure. Yeah, so in the way the study is designed, which was one of the expert pieces of advice also given to us by the steering committee, is that when patients reach the end of the 16 reconduction, if they are not better than EZ50, then they have the option to enter into an escape arm. And the escape arm is the 24 microgram per kilogram dose of Respec given twice a month. Particularly good for patients, for example, blind and steady, but that might have been randomized to a placebo arm, right? It gives everyone a chance to have access to drugs. So that's how that escape arm works. And so the primary entry point is at that 16-week time point at the end of induction for patients that fail to meet the easy 50 or better re-randomization criteria to enter maintenance. The other way the patients can enter into the escape is during the maintenance. If for one reason or another, you know, people lose activity or lose response, then they have a second chance. to enter into the escape arm. And that's really the way that it works. And it's really very standard, you know, to these kind of studies that offer an escape arm therapy to patients that are in the study. And then in terms of other kind of questions you asked about sort of read through, you know, I mean, we selected alopecia really because it is a key dermatological indication. Right, and as you know, with respag, we've seen activity in multiple dermatological inflammatory conditions, ranging from, you know, skin manifestations of lupus, psoriasis, atopic dermatitis, and also the underlying knowledge about the biology of immune privilege and the role the Tregs play in helping to maintain and sustain that immune privilege state. We will be looking at biomarkers across those studies And as you saw from our publication in Nature Communications in October of last year, a number of biomarkers that we measure are induction markers because our drug is an agonist. And so I expect we'll be able to measure those kind of induced pathways independent of underlying disease etiology of the patient. Those will just be based on the signaling of our molecule onto T-Rex, for example. So those will be some very important correlative biomarkers that we'll be collecting in the future. And we're looking forward to the readout of both of these studies. As we discussed, the first point atopic derm is coming in June for that induction. And for alopecia areata in the fourth quarter of this year, we expect to be reading out the 36-week treatment data from that study as well.

Thank you, JC.

Thank you. Our next question will come from Arthur He from HC Wainwright. Your line is open.

Hey, good afternoon, Howard and team. Thanks for taking our question. So, Jay-Z, thanks for the additional color on the dose regimen for the AD study. I just want to follow up a little bit on the rationale to pick those three regimen arms. So why not go for a higher dosing regimen than the 24 microgram per kilo Q2W? Yeah, and I had a follow-up on the trial as well.

Yeah, across the clinical program, we've evaluated various doses, both weight-based dosing, such as what we're using in the study, and also flat dosing, as was used in other studies like the lupus study. And then really when you look at it, that gives you a range of different doses that we've established. So we've gone well above and well below. And actually the 24 microgram per kilogram is really an optimal dose level. It gives us all the things that we want to have from a PK-PD relationship. We engage as a target very effectively. We get very robust Treg expansion. And you can dose for a very long time, you know, at that dose level without seeing any cessation or, you know, any hysteresis in any of the pharmacodynamic responses. And from the biomarker data that was asked earlier and that we published, you can also see very robust induction of immune pathways that we see at that dose level. So that's really an optimal dose level that we're really focused on.

Thanks for that. And the second question is also regarding part of both the AD and the AA study. Could you remind us how the stratification in both studies