Nektar Therapeutics

and thank you for standing by. Welcome to the Nectar Therapeutics First Quarter 2025 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. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Corinne Franklin, in Nectar Investor Relations, who is filling in for Vivian Wu, who is on maternity leave. 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 Zaleski, our Chief Research and Development Officer, Dr. Brian Kotzen, our 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 the initiation of clinical studies and the availability of clinical data for drug candidates, the timing and plans for future clinical data presentations, the formation, future development plans, or success of our collaboration agreements, financial guidance, and other certain statements regarding the future of our business. Because forward-looking statements relate to the future, they are subject to uncertainties and risks that are difficult to predict, many of which are outside of our control, or actual results may differ materially from these statements. Important risks and uncertainties are set forth in our Form 10-K that was filed on March 14, 2025, which is available at sec.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 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, Corinne, and thank you all for joining us today. During the first quarter of 2025, we've been concentrating on the successful development of our immunology pipeline with a focus on advancing RESPEG-Aldis flukin, also known as RESPEG, in three separate phase two studies and completing the IND-enabling studies for our lead earlier stage program, NECTAR-165, a TNFR2 agonist antibody. RESPEG is a first-in-class T regulatory cell biologic therapy with the broad potential in a number of immune disorders. As a novel immune modulator mechanism, RESPEG is poised to help a significant number of patients battling chronic conditions. In June, we plan to share our first top-line results from the 16-week induction period for the 400-patient Phase IIb study known as RESOLVE-AD, which is studying RESPEG in biologic naive patients with moderate to severe ectopic dermatitis. I will let Jay Z review the upcoming important data milestone and the study design in a moment. Our objective in this study is to demonstrate efficacy and safety and establish a dose to take forward in phase three studies. The study also has a 36-week maintenance period where patients will receive the same dose from induction, but at every four-week or every 12-week dosing intervals. The data from this maintenance period will be available in early 2026. Ectopic dermatitis is a significant opportunity as there's a high unmet need for new mechanisms to treat these patients. There are currently 30 million adult patients with ectopic dermatitis in the U.S. and 220 million adult patients globally. About half of these patients have moderate to severe disease, and this means their eczema covers a significant portion of their body and can severely affect their overall quality of life. According to the National Eczema Association, adults with ectopic dermatitis are three times more likely to experience anxiety and depression, which increases with the severity of the disease. Eczema could also cause severe itching and inflammation, impact a patient's sleep, and lead to body shame. Currently, approximately 8% of the patients with moderate to severe disease are treated with a biologic, most frequently dupexant. And yet, we know that about half of those patients ultimately either don't benefit from treatment or become refractory, and once treatment is stopped, their ectopic dermatitis returns. We believe this is because the approved biologics are effective at controlling the signs and symptoms of the disease, but they do not therapeutically target the underlying disease pathology to restore and heal the skin. As a T regulatory cell therapy, RESPEG instead regulates multiple immune pathways to address the overall disorder, and so we believe it could provide a much-needed alternative to the IL-13 and IL-31-based therapies currently approved for these patients. For our RESPEG-AA Phase IIb study in alopecia areata, we will report top-line results in December of this year. The patients enrolled in this study have severe to very severe alopecia areata, These are patients who have lost at least 50% of the hair on their scalp. In addition, this disease can impact the patient's eyebrows, eyelashes, and facial hair. Nearly 7 million people in the US have alopecia areata and 160 million people worldwide. Many of these patients also have other autoimmune diseases. Our 90-patient study is evaluating a 36-week treatment period for patients with alopecia areata as compared to placebo. We will then evaluate patients once they are off therapy to understand the long-term remittive potential for RESPEG. Today, JAK inhibitors are used to treat alopecia, and we know that when therapy is removed, patients lose their hair again very quickly. Our hope is that RESPEG can provide a new treatment paradigm and a long-term solution for patients battling this chronic condition. In type 1 diabetes, RESPEC has great potential as a T regulatory cell therapy to slow the progressive loss of insulin-producing beta cells, which are the target of the patient's overactive immune cells in this disease. We're looking forward to the start later this year for the important proof of concept study in new onset type 1 diabetes, which is being sponsored and funded by TrialNet. Finally, With respect to our early-stage immunology pipeline, we're advancing NECTAR-165, our TNFR2 agonist antibody program, through IND-enabling studies this year, and we've made great progress on this front. We're on track to complete these studies in 2025 and will be prepared to submit an IND filing. In addition, the bispecific program, NECTAR-166, which incorporates a TNFR2 epitope with a validated antibody target, is also on track, and we're advancing this new program into preclinical studies. Lastly, we remain in a strong financial position with a runway into the fourth quarter of 2026. And with that, I'll hand the call over to Jay-Z for review of the upcoming data milestones. Jay-Z?

Jay- Thanks, Howard, and thanks to everyone on today's call. To begin, I'd like to share with you some of the trial design details for our RESPEC studies which will be providing Nectar with numerous data catalysts over the next nine months. First, in atopic dermatitis, Resolve AD enrolled approximately 400 biologic-naive patients from October 2023 to January 2025 across multiple geographic regions globally. The 52-week study is designed in two distinct phases, the induction phase and the maintenance phase. As you'll recall, we only had the induction phase, which was 12 weeks of treatment in the prior RESPG Phase 1b study. The goal of our Phase 2b study is to identify a proper dose for an initial 16-week induction period, which can be our Phase 3 dose, and also to identify a maintenance dose regimen that would be used for an additional 36 weeks after induction to maintain or potentially even improve effect for patients. For the induction, we are evaluating three dose regimens as compared to placebo with a three to three to three to two design. A high dose of 24 micrograms per kilogram twice monthly, a mid dose of 18 micrograms per kilogram twice monthly, and a lower exposure dose of 24 micrograms per kilogram once monthly. with the goal, as I just stated, to establish a dose for induction treatment to advance into phase three studies. As you will recall, the 24 microgram per kilogram dose given every two weeks was carried over from the phase 1B study of RESPEC in atopic dermatitis. And this dose arm achieved statistical significance as compared to placebo following only a 12-week induction treatment period in that study. RESPEG resulted in an 83% decline in EZ scores as compared to 47% in placebo. After withdrawing the treatment in the phase 1b, we observed a strong signal of a remittive effect with patients maintaining their reduced EZ scores for 36 weeks once the 24 micrograms per kilogram twice a month dose was stopped at week 12. The mid-dose of 18 micrograms per kilogram given twice a month is a dose that is in between the 12 micrograms per kilogram level that was studied in the Phase 1b and the highest dose study of 24. And finally, in order to approximate the PK exposure for the low dose of 12 micrograms per kilogram from the Phase 1b study, we also gave the 24 micrograms per kilogram dose once a month. Importantly, because Restag is an agonist, we maintained weight-based dosing in our Phase IIb study in atopic dermatitis as well as in the alopecia study. And our primary endpoint is the mean change in EZ score from baseline. And we are also measuring a secondary endpoint, EZ75, EZ90, BSA, itch, and VIGA scores. As you will recall, in the Phase Ib study for RASPEG and atopic dermatitis, all patients were enrolled in the U.S. Because we observed an increased placebo effect in the U.S. in our Phase 1B study, and other investigators have experienced the same challenge, we targeted a lower enrollment number in the U.S. for the Phase 2B study. As a result, we enrolled only 17% of patients in the U.S., with 67% in Europe, primarily in Poland, and the remainder in Australia and Canada. we took other important measures to address the high placebo rates observed in other atopic dermatitis studies. First, prior to randomization in RESOLVE-AD, baseline scores for patients were collected at screening and again at randomization. Patients with high variability in their baseline EASY scores were screened down, and this was done to eliminate patients with unstable disease. Another key objective in the Phase IIb study was to utilize primarily sites that were led by board-certified dermatologists who had specific prior experience in successful atopic dermatitis studies. This ensured higher quality sites were participating in the study. We enrolled patients across 110 global sites, and the sites were carefully chosen and trained as part of our study operations. As I just stated earlier, we saw a strong signal of remittive effect after the 12-week induction period in our Phase 1b, even after removal of two twice-monthly dose regimens after Week 12. For the Phase 2b, we are exploring what continued treatment with ResPeg will look like after the induction period for a 36-week maintenance period. At the end of the 16-week induction period, patients who achieved at least an EC50 score were re-randomized to receive one of two maintenance regimens at their original dose level for a 36-week treatment period on either a once-a-month or once-every-three-month regimen. We're excited to see the effect of continuing to treat after induction for respite, which, as Howard said earlier, will be a future data readout in early 2026. Patients that did not meet an easy 50 or better efficacy threshold at week 16 were permitted to go into an escape arm which is the 24 microgram per kilogram dose given every two weeks. Because RESPEC has an immune-modulating mechanism, we are also following participants for one year after the conclusion of the 52-week treatment period, enabling us to evaluate RESPEC's potential for a long-term remittive effect in patients. We want to understand how RESPEC differentiates from the IL-13-based mechanisms and JAK inhibitors, where disease recurs in a substantial fraction of patients after discontinuing treatment. Now, moving on to alopecia areata, as Howard stated, we expect top-line results from the 90-patient alopecia study in December of this year. This study was started in March of 2024, and we completed enrollment in February of this year across 30 sites globally. 62% of patients were enrolled in Poland, 24% in Canada, and the rest in the U.S. The study has a 36-week treatment period and is a similar design compared to the Phase II study of varicidinib and alopecia. 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 severe hair loss and lack of hair regrowth. 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. Patients had to present with severe to very severe disease, define the severity of alopecia tool score or SALT50 to SALT100 for at least six months in order to be eligible for inclusion. We are evaluating two doses. the 24 microgram per kilogram and the 18 microgram per kilogram given every two weeks as compared to placebo. Placebo rates tend to be quite low, under 10% in this disease setting. Our primary endpoint for this study is mean percent improvement in SALT at week 36. We will also be looking at a number of other secondary endpoints, including the proportion of patients that had certain levels of improvement in SALT score including the regulatory approval endpoint for a Phase III study to solve 20 responder health. As Howard stated, we are also excited about the start of the Phase II trial net-sponsored study, type 1 diabetes for RESPEC. The 66-patient placebo-controlled study will enroll Stage III new-onset type 1 diabetes patients, and we look forward to providing the RESPEC drug for this important indication. Finally, we are making great progress in the IND-enabling studies for our novel TNFR2 agonist antibody program, NECTAR-0165. TNFR2 agonism potentiates Treg function, as well as maintenance of Treg lineage stability, especially in the non-lymphoid tissue compartment. 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 their immunoregulatory phenotype. It also showed that the agonist we discovered is able to signal through the TNFR2 multimeric receptor as a single-arm monovalent antibody. We believe this is the only antibody in this class being developed that has this attribute. We are very excited with the unique and differentiated profile of this antibody and we believe it has potential to become a first-in-class treatment for various autoimmune diseases, including 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've identified the first bispecific antibody, Nectar-0166, in this program. This first bispecific antibody incorporates a TNFR2 epitope with another validated antibody target, and we are initiating our preclinical studies now. We look forward to providing more details on this antibody as the studies progress. For Nectar 255, our IL-15-based oncology program, I am excited to share the data from our collaborators at the Fred Hutchinson Cancer Center in Seattle were accepted for an oral presentation at this year's European Hematology Association Congress being held in Milan. This will be the first data presented from their investigator-sponsored study of Nectar-255 following CD19-directed CAR-T cells, Brianzi, in the second and third-line large B-cell lymphoma patients. We believe these data reinforce the potential for Nectar-255 to improve upon existing cell therapies for patients. We continue to explore opportunities for continued development of this drug candidate in partnership with collaborators. And now I'd like to turn the call over to Sandy for a review of our financials.

Thank you, JV, and good afternoon, everyone. We ended the first quarter of 2025 with $220.7 million in cash and investment and with no debt on our balance sheet. We remain in a strong financial position and still expect our cash runway to extend into the fourth quarter of 2026 and to end 2025 with approximately $100 million in cash and investments. Turning to the income statement, our first quarter 2025 revenue of $10.5 million was within our guidance range and comprised of non-cash royalty revenue. We currently expect our quarterly revenue to remain at a similar level to Q1 for the remainder of 2025, totaling approximately $40 million for the full year. Our R&D expenses were $30.5 million for the first quarter of 2025, and we still anticipate full-year R&D expense to range between $110 and $120 million, including approximately $5 to $10 million of non-cash depreciation and stock-based compensation expense. Our G&A expenses were $24.3 million for the first quarter. We still continue to 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. Note that our operating expenses are not ratable throughout the year and will vary based on the level and type of activities each quarter. For example, our R&D expenses are higher in the first half of the year with greater study operational activities in our RESPEG Phase II Atopic Dermatitis study. Non-cash interest expense for the first quarter was $5 million and is expected to remain at a similar level for the remaining three quarters, totaling approximately $20 million for 2025. This quarter, we have included a new non-operating line item on our income statement titled gain or loss from equity method investment. As a reminder, 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% ownership in the new portfolio company, Gannett Biochem, or Gannett. Under the required equity method of accounting, our investment in Gannett was recorded at fair value. At each subsequent period and date, our share of Gannett's gains or losses are recorded using the hypothetical liquidation at book value or HLBV method. The HLBV method calculates the change in the hypothetical amount we would be entitled to receive if Gannett were liquidated at book value at the end of each period. This is a non-cash charge recorded outside of Nectar's operating expenses and from period to period could fluctuate from a loss to a gain. In the first quarter, due to this accounting methodology, we recorded a non-cash loss from equity method investment of $4.5 million, and we currently expect a loss of approximately $10 million for the full year 2025. And importantly, as I just said, this is non-cash. We have no commitments to contribute cash to Gannett as an equity investor. We are simply providing this information as housekeeping items so that you can forecast the rest of 2025 for this new non-cash line item. Our net loss for the first quarter was $50.9 million, or 24 cents, basic and diluted net loss per share. Net loss before the equity method investment totaled $46.4 million, equating to a non-GAAP basic and diluted net loss per share of 22 cents. And as I stated earlier, we still expect the year to end the year with approximately 100 million in cash and investments with our cash runway extending into the fourth quarter of 2026. Finally, as we head into our June data reporting, We intend to enter into a quiet period for the month of June until we report the top line results for the RESPEG atopic dermatitis study. And with that, we'll now 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. Please stand by, we compile the Q&A roster. And our first question will come from Yasmin Rahimi from Piper Sandler. Your line is open.

Hi, this is Dominic on for Yaz. Thank you for taking our questions and congrats on the quarter. I have a couple questions. One, could you remind us kindly what you hope to see in Resolve AD to move forward into a phase three? And is your plan to move forward with one or two doses for that? And then also, what is your expectation for the placebo response in Resolve AD? Thank you.

Jay Z, would you like to answer that?

Certainly. Thank you for the question. So, firstly, you know, one of our objectives is that we, of course, you know, have phase one data already and have demonstrated proof of concept in atopic dermatitis. One of the things we'd like to see is a replication of that data. So that's one of the components of efficacy that we'd like to see. And then we would also compare the results against the other key benchmarks. And, of course, Dupixent is a very important benchmark. It is the leading standard of care in this space. So we'd like to be, you know, minimum in the range of the efficacy that you see with Dupixent. And then, of course, we'd like to even better improve on that and replicate our results of Phase I. In terms of the number of dose levels that we would like to study, the purpose of the Phase IIb study is it's a classical dose range-finding study. So, ideally, we would identify, you know, a pretty clear dose and dose regimen that we would take forward. We'd have to obviously see what the results show us, but In the ideal case, we would have one dose level that we would be taking forward into the phase three studies. And can you remind me your third question, please?

Yeah, it was what are the expectations for the placebo response in Resolve AD?

Yeah. Okay, thank you. Yeah, so as I mentioned in the call, you know, in the phase one, we used sites that were 100% in the 13th cycle. And we saw about a 47% placebo response, which was a little bit on the higher side, you know, still in the range of modern studies, but on the higher end. And it's certainly reflective of a general trend that we're seeing, particularly in sites in the U.S. And so we took, you know, proactive measures in order to try and control that placebo response rate by only enrolling a proportion of patients in the U.S., 17%. and enrolling in the rest of the world for the remainder of the patient population, as well as some of the other things that I mentioned, such as using board-certified dermatologists in the majority of sites to have consistent and highest quality rating of the disease. So we'd like to see a lower rate, for example, than what we saw in FYB, and we'll look forward to reporting the actual placebo response rate as we prepare and report the top line next month.

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

Hi, congrats on the progress and thank you for taking my questions. On the phase 2b atopic derm data we're expecting in June, or rather the trial, I have a specific question. I was wondering if you're able to tell us how many patients have progressed to the maintenance portion of the trial so far, and of those, how many have crossed over to the escape arm of the trial? Are you blinded to that, or is that maybe something you could disclose now?

Jay-Z, did you get that question? Julian? Yeah, this is Jay-Z.

Yeah, so it's a good question. You know, we can't disclose that kind of information right now, but we will disclose that as well as more features of the data and the actual results, you know, next month when we present the top-line results of the study.

All right. Thank you.

Thank you. Our next question comes from Jason J. Olson from Oppenheimer. Your line is open.

Oh, hey, congrats on the progress, and thank you for taking our questions. When you shared the results from the Phase IIb Results Study, can you just talk about the scope of the data you're planning to share, and of the secondary endpoints, which are most important?

Yeah, thanks, Jay. So one of the kind of unique things about the dermatology conferences is that they're a little bit more lenient than, say, ASCO is in terms of embargo data. And I think that's a good thing, you know, here. So certainly when we present the top line data, the primary endpoint will be a key element that we would present. And that's the percent change from baseline and easy score. And compared to placebo, all of the cohorts one by one. And then there are secondary endpoints. And you asked which ones are quite important. So definitely EZ-75, EZ-90, VIGA, those are quite important. Probably itch is also quite important. I mean, those are the ones that really, firstly, are used as registrating endpoints in the case of EZ-75 and VIGA. And also things like it are just key, you know, for the kind of comparisons that we do. And then we also give, you know, the picture. The picture isn't just efficacy. It would be the total tolerability, you know, the total ability to understand both risk and the benefit of the drug. So I hope that gives you a flavor of the kind of things we would present.

Yeah, absolutely. Super helpful. And maybe if I could please ask one follow-up. Will you be taking weight-based dosing into phase three or will it be a fixed dose?

Yeah, so one of the things that we've learned about this drug as an agonist, it's quite important, you know, to dose it very precisely. And so weight-based dosing is what we've identified is critical. So our plan is to continue to use weight-based dosing. And it's pretty common. You know, there are many, many drugs that are dosed in what you call weight bands. You know, so if a person is between weight A and weight B, they get this, you know, they get this SKU or not SKU. For example, Orencia and other drugs, many other drugs are dosed that way. So we would be using weight-based dosing. And then our long-term goal would be also that we would launch, you know, in an auto-injector and maintain that kind of weight-based banding as our dose approach. Great.

Thanks so much for taking the questions.

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

Great. Thanks for the update and taking on the question. Can you remind us what is the dropout rate for your Phase 1b atop dermatitis trial? I understand the small hand, but what is the expectation for your Phase 2? Anything you can tell us on the blinded fashion? What is the discontinuation you are seeing? And would you report both ITT and Estimant for the efficacy endpoint?

Yeah. Hey, Roger. Yeah, thanks for the question. So, you know, when we published the results from the Phase 1b last year in our Nature Communications paper, we showed that there was between a 30% and 20% dropout rate for placebo and the two dose levels of RESPEG. And it was actually higher for placebo, 30% for placebo, and in the low to mid-20s for the RESPEG arms, for the low dose and the high dose. And so we presented that data. You know, for example, if you consider a study like the leberkizumab phase two trial, There in that study, when they looked at the overall pool analysis, I think they had about a 28% dropout rate. It's just another benchmark. And for us, in the case of June, we'll report the dropout rates, and we'll report that, for example, patients that discontinued during the induction period, as well as the earlier question, patients that completed the induction period, that either went on to re-randomize into maintenance or that went into the escape arm. So stay tuned and we'll report all of those results next month.

Got it. Okay. And then in terms of the next step, given the phase two is biologic malnutrition population, how would you consider to expand this into post-biologics and then in the phase three? Thank you.

Yeah, so, you know, our data is really built upon what we've seen in our own proof of concept study, right? And that's why we ran that phase one in biologic naive patients, and we ran the phase two biologic naive patients. And we would expect to also run our phase three studies in the biologic naive patients. However, during the phase three program, we would also study the drug in biologic experience. And so that would be something that we would do as part of the Phase III program. Different companies use different approaches. You know, for example, Amgen with the ROCA program combined biologic naive and experience into the same study, whereas Leberkizumab and Amlitilumab did separate studies, you know, for those populations. So we'll still be, you know, deciding the best approach for us. We will definitely evaluate both naive and experience-based populations in the Phase III program.

Excellent. Just one last quick question. In terms of the partnership, would you be considering, you know, seeking partnership after Phase II, or you will take this RESPAC into Phase III on your own? Thank you.

Yeah, that's Howard. That's a very good question, Roger. I think Look, if you look at Nectar's current financial position, we clearly aren't in a position to execute on a full phase three program without a partner. So I think what we will be doing is looking at the quality and the strength of the data, and we will be talking to companies about collaborating. Now, that doesn't mean we'll be out licensing the drug. no way we will do that. But we will be talking to companies and come up with a collaboration that allows, you know, the least amount of dilutive financing for our investors and at the same point allows us to retain, you know, a significant portion of ownership of the drug. And there's lots of different ways to do that. But clearly, you know, a collaboration is likely the direction we go.

Excellent. Thank you. That's a fun one.

Thank you. Our next question comes from Mayank Mamtani from B. Riley Securities. Your line is open.

Yes, good afternoon. Thanks for taking our questions. JZ, are you able to provide any color on where your baseline EZ could come at and how much is going from 12 to 16 weeks, you know, in this phase 2B versus phase 1B important for that separation from placebo? And is there expectation for all those levels, including the 24 mcg per kg? once every monthly, everything sort of statistically clearing the STAT-seq bar and 24, the monthly dose being the lowest therapeutic effective dose.

Great. Yeah. Thanks, Mike. So, obviously, when we report the top-line results, we'll give the detailed baseline easy, but I can tell you that with the kind of prospective actions that we took in the study, you know, such as the geographic footprint, as well as focusing on, you know, experienced dermatologists, board-certified derms that have successfully participated in studies, we'd like to see our baseline easy rate be between 25 and 30. And we think that when you look across successful studies, whether they're phase two or phase three, you know, this is a – that's a very good zone to be in. You'll note, of course, from our publications, we were a little bit lower than that in our phase one. We were in 22, 23 range. Again, that was all US sites. So we'd like to see a higher baseline using this study. And then you asked the other interesting question about the impact of increasing the time of dosing, the overall dose interval. And we do think that that's quite important. So the phase 1b was really informative and it showed us that a 12-week twice a month dosing regimen could definitely deliver quite a lot of efficacy and it could deliver a remittive effect I was seen in the majority of people but it was also evident that there were people that could have done better with additional dosing and when you look at that week 12 to week 19 off drug period we lost few people at the different dose levels. That really had an effect, but then that effect waned. So there were clearly people that could have done with additional dosing. So one of the first things that we'll be looking at in this study is the additional extension of the induction period from 12 to 16 weeks. That also gives more, as you described, space in the separation from placebo. But then also, you know, beyond that is the fact that we keep dosing in the maintenance period. which is also something that I mentioned we're very excited about because it's possible we haven't really mapped out the extent of efficacy. And that with continued treatment through 52 weeks, patients could see even more benefits. So we're very excited to see the effect of that additional dosing. And then to your last question about the different dose levels. So we gave an additional color in the call today, you know, about our expectations about the PK exposure. and the kind of AUC that's matched across those dose levels. But also remember, this is a very well-powered study. We enrolled 400 patients into this study in order to fill the maintenance arms. And then the benefit of that is that the induction is very well-powered. So that gives us a very good opportunity and a very good chance to hit significance across multiple dose arms. So thanks for the questions, Michael.

Great. And if I may squeeze in an alopecia study question, please. Do you have a sense of what a proportion of patients would be in very severe versus severe subgroups? And if you could comment on the kinetics of response, you know, relative to a pretty fast onset, you get an AD, what would your expectation be on the kinetics there? And then I have just one last follow-up after that.

Sure. So if you just look at the epidemiology, if you look at people that are SALT 50 or higher, you'd find between a third and half are actually in the very severe, which are 95 and higher, right? And those are also the people that tend to be the candidates for clinical trials as well. So that's just where the epidemiology breaks down in that from a third to a half. are in that very severe category, which is defined as 95 to 100 on the SALT scale. And then your other question about onset, it's a very interesting question. The physiology in that disease is very different. Like, you know, in atopic dermatitis, you know, you're dealing with effectively an organ that recovers quickly in the skin. Rashes can come and appear and clear quickly, as you know, and so can other excoriation, lactification, other features of the disease as well. But hair is its own thing, right? There are different stages of hair growth. In patients with alopecia, they have an arrest of the hair follicle, so there's inflammation that slows down and it really interrupts the stem cell, you know, a portion of the disease. And so that's why we actually are doing a 36-week induction period in that study. And we see that even with JAK inhibitors, right, it can take time, you know, to grow hair. So we are doing a longer induction period. And in December, we look forward, you know, to present the top-line results of that study. And there we'll be able to characterize not just the magnitude, but also the connects of the response. So we'll stay tuned until December for that.

Great. And just one corporate question. Anything you guys can comment on the Lilly litigation? Just update on what next steps are, and if it all respects progression, do they say development has any impact on potential damages? Thanks again for taking our question.

Yeah, look, I can't, obviously, I can't go into detail on our litigation. I can only tell you that we strongly believe we've been damaged by Lilly. And we're clearly actively pursuing an aggressive strategy in this legal action. And I think whether RESPEG is successful or RESPEG is not successful, I don't think it has really much impact on the damage that they've done us. So let's watch and wait as we move towards trial.

Yes, sir.

Thank you. Thank you. Our next question comes from Arthur He from H.C. Wainwright. Your line is open.

Hey, good afternoon, Howard and team. Thanks for taking my question. So, Jay-Z, you read my mind about by disclosing the dose level for the AA study. And so I'm just wondering, so assuming this phase 2b starting in the AA turned out meets your guys' expectation, How should we think about the design for when you guys are evaluating the maintenance in the AA patient? Would that follow similar design paths as the AD study?

Yeah, it's a really great question, Arthur. Yeah, thanks for that. So, yeah, one of the things we're going to learn in this Phase IIb study is what happens when we stop treatment, right? So in the study design, there's a nine-month induction and then the six-month off-treatment period. And our hope and desire in designing the study that way was that we could see the same kind of remittive potential in alopecia that we saw in atopic dermatitis in that off-drug period there. that would be a complete transformational change in this indication. So firstly, there is no biologic approved in this disease. And the JAK inhibitors can be effective for people with alopecia. They're kind of difficult drugs to take because you have to take them for so long in this disease, and you also have to step up in dose in patients. But then, as Howard and I described, it's very difficult for patients because when you stop taking the JAK inhibitor, the rate of hair loss is quick and you don't have a regrowth or a maintenance of what you grew. So we do think there's a really unique opportunity. And again, having the potential of being in a very, very exciting position as a biologic being tested and the potential to be so early into the space as a biologic therapy. The way we would approach a phase three study We would, of course, have to see the results of the phase two, where we'd have to learn about the dose ranging that we've done in the phase two study. And then as we look at the off-drug period, we would think about what is the appropriate maintenance regimen. Most likely, we would treat and approach alopecia the way we approach atopic dermatitis, where there would be an induction period that would be a higher frequency of dosing. And then there would be a maintenance period that would be much lower in frequency. That's most likely what we would see. But of course, we'd have to see the final results of the study to make that final design.

Thanks, Jay. So just a quick one on the technical side for the study design for the alopecia study. So I noticed that For those patients who did not reach a SARS score less than 20, they can get an additional 16-week treatment, right? So those patients will be followed in an additional 24 weeks. So is that right? I mean, for that thing, those patients kind of have the total starting time period will be a little bit longer, right?

It's the latter. So for those people, everybody gets 24 weeks off drug. So even if some people were improving at the end of week 36 and had an extension, they would still be followed for 24 weeks at the end of dosing. You are correct.

Okay, gotcha. Yeah, thanks for taking my question.

Thank you. Our next question comes from Jessica Pfei from J.P. Morgan. Your line is open.

Hey, guys. Good afternoon. Thanks for taking my question. Is it fair to expect that you would wait for the 36-week AD data before pursuing an end-of-Phase II meeting with FDA and preparing to initiate a Phase III trial? Or is there potentially motivation to meet with the FDA sooner on the back of this upcoming data and get the ball rolling on Phase III that much sooner? Thank you.

Yeah. Thanks for the question, Jess. It is the latter. So we don't have to wait for the completion of the maintenance, which would come in the very early part of next year, before we connect with the FDA on the induction regimen. And so, in fact, it is our plan that with the top line data that comes next month, you know, we would begin eyeing end of phase two meetings. with that 16 week induction data being the main substance and substrate, as well as the driver of the phase three study design that we would take forward. So yeah, actually we would, you don't need to wait. And our goal would be to really to keep the momentum, you know, on, on the program. So if the study gives us the kind of results, you know, that we think it can, our intention would be to move quickly, maintain the momentum. And I, phase three, moving into that phase three program as quickly as we can.

Great. Thank you.

Thank you. Our next question comes from Andy Shea from William Blair. Your line is open.

Oh, thanks for taking our questions. So two for me. I'm just curious, for the protocol for atopic dermatitis do you allow patients to be off the drug but still on the trial? The reason why I'm asking this question is perhaps for the first look, you can potentially get a glimpse into potential remittive effects, like you said, Jay-Z, for those patients who are off drug but still on trial. So that's question number one. Question number two is, For the primary endpoint, I'm curious about which imputation method you're using. I think this is going back to Roger's question before, but I also have the same question. Thank you.

Okay, sure. Yeah, so in terms of your first question, so like any other protocol, right, there are rules for either stopping the study or stopping the treatment, right? And then there are, you know, if you fall into one of those categories, like any other protocol, you still keep the patients in the study. They continue to have follow-up visits, not just an end of study, but even after an end of treatment, they could continue to be followed. And so our protocol is no different than any others, and it does allow that. And again, like, so yeah, so that's something that is allowed in our protocol. And then the second question that you asked was about imputation. And so, yeah, the kind of imputation methods that are used are typical of phase two studies, right? So the FDA likes you to use an estimate approach, right? When you report this kind of data. So there are, there are events called intercurrent events, and again, they're well-defined and the FDA gives the guidance to all sponsors when you have a study of phase two size. So we'd be using a primary estimate analysis and Again, the routine kind of imputation methods that are typical of other studies. When we present the results, we'll get into the details, you know, the methodology so you can see that before you see the protocol, for example, when we publish the study results. But I hope that gives you the kind of flavor. It's a standard imputation of primary estimate analysis. Yeah, that's helpful. Thank you, Daisy. Mm-hmm.

Thank you. And I am showing no further questions from our phone lines. I'd now like to pass it back to Howard Robin for any closing remarks.

Well, thank you all for joining us today. And we greatly appreciate your continued support. And I want to thank all of our employees for their hard work and diligence. And I look forward to sharing our RESPEC data in June. So please stay tuned.

Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.