Nektar Therapeutics

Hello, and thank you for standing by. Welcome to the Nectar Therapeutics Second 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 Corinne Franklin from Nectar Therapeutics Investor Relations to kick things off. Please go ahead.

Thank you, and good afternoon, everyone. Thank you for joining us today. On the call today are Howard Robin, our President and Chief Executive Officer, Dr. Jonathan Zaleski, our Chief Research and Development Officer, and Sandra Gardner, our Chief Financial Officer. Dr. Brian Coxson, our Chief Medical Officer, will also be available during the question and answer session. On today's call, we expect to make forward-looking statements regarding our business, including statements regarding the therapeutic potential of and future development and regulatory plans for ResPeg-Galdas-Lucan and our other drug candidates, the timing and plans for future clinical data presentations, and other 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. 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 May 9, 2025, and 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 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, Corinne. Good afternoon, everyone. The second quarter of 2025 was transformative for Nectar. In June, we reported highly compelling initial data in ectopic dermatitis for our lead clinical program, RESPEG-Aldis-Lucan, also known as RESPEG. These data establish RESPEG as a potential first-in-class novel T regulatory mechanism for patients suffering from this chronic relapsing inflammatory skin disorder. In 2023, we took the bold step to pursue T regulatory cell science across our pipeline. This science is focused on stimulating Tregs in different ways to restore the proper balance between T effector cells and T regulatory cells and achieve homeostasis in the immune system. And we had the goal at that time to demonstrate that this important pathway could represent a completely new way to treat autoimmune and inflammatory disorders by mimicking the way our own immune system works to resolve inflammation. So in October of 2023, We initiated a 400-patient Phase IIb study for RESPEG in patients with moderate to severe ectopic dermatitis, where early proof-of-concept data in patients had shown promise at the time. For our second indication, we chose to run a Phase IIb study in alopecia areata. This is a disease setting where the underlying T regulatory cell deficiency creates a known imbalance between T effector cells and T regulatory cells, leading to hair loss for these patients. The RESOLVE-AD study results we recently reported also validate Nectar's novel approach to access Tregs through the IL-2 pathway with a unique molecular design as compared to the competitive landscape. While other approaches to access IL-2 have focused on the design of mutines, which we believe hindered their development recently and over the years, we instead took a straightforward and elegant approach of accessing Treg biology through a native sequence IL-2 and then applying pegylation, a proven chemistry that has led to the approval of over 30 biologics and small molecules over the last several decades. And many of these are ones in which Nectar played a role. Now that we've been granted FDA fast track designation for both ectopic dermatitis and alopecia, we have the opportunity to move more quickly and align with the FDA to design the most expeditious regulatory pathways. This underscores that there undoubtedly still remains a large unmet need in the setting of ectopic dermatitis in alopecia areata for novel mechanisms of action. And we believe we're well positioned with a first-in-class novel Treg mechanism that is poised to enter phase three development in 2026. Now, since Dupixent was launched eight years ago, the ectopic dermatitis market has grown to around 15 billion dollars in u.s sales with expectations that it could reach nearly 30 billion dollars by 2033. our own recent market research has suggested that physicians would prescribe respec in both biologic naive and biologic experience patients with ectopic dermatitis and so our goal is to design a phase three program that captures this unique opportunity in front of us currently il-13 based therapies dominate the treatment landscape And about 50% of the patients failed to respond to this mechanism. Moreover, IL-13-based therapies are known to have side effect risks, such as conjunctivitis and infection, which can pose a challenge for patients. So in view of these challenges, there's a significant opportunity for RESPEC. With a fast onset of easy response and itch relief, RESPEC is poised to take a differentiated position in this landscape. As Jay Z will explain in more detail, Our Phase III strategy is designed to achieve a broad label in both naive and experienced patients, which would allow Respec to capture a substantial share of the growing multibillion-dollar ectopic dermatitis market. Given the very high correlation between historically positive Phase IIb results and the subsequent approvals in ectopic dermatitis, we're highly focused on moving quickly into Phase III, and our readiness activities are underway. Our oversubscribed $115 million equity financing in June now puts us in an even stronger financial position to complete important phase three enabling CMC and regulatory planning activities to ensure that RESPEC will be phase three ready in the first half of 2026. In addition, the financing also positions us to extend our cash runway into 2027. Looking ahead, The ongoing RESOLVE-AD study will generate additional data in Q1 of 2026, which we expect will further characterize the durability and depth of response for RESPEG out to Week 52. We plan to present patient-reported outcome data, including quality of life and symptom assessments from the 16-week induction period at a medical meeting this year. This data presentation will also include a planned data cut for patients who received placebo in the induction phase and who then crossed over to a treatment escape arm. With this new upcoming data cut, we're excited to see whether easy responses deepen with continued treatment with the RESPEG beyond the 16-week induction. I'll let Jay Z talk more about this key data set in a moment. Now, in addition, We're on track to report data from the separate phase 2B study in alopecia areata in December of this year. This is an indication where we are directly addressing the underlying pathology of hair loss in alopecia patients. Another positive outcome here would position RESPEG as a novel mechanism in a dermatological setting where there is only one mechanism approved for patients, JAK inhibitors. These carry multiple well-known black box warnings and are associated with high relapse rates, upon discontinuation. The market for alopecia areata treatments is projected to grow to $2 billion by 2033, and we believe that a new mechanism, RESPEG, could take a very significant share of this market. And now I'll hand it over to Jay Z for some more details on RESPEG and our earlier programs in our pipeline.

Thanks, Howard. And thank you to everyone on the call for joining us today. To start, I'd like to remind you of the key takeaways from our June 24th webcast, where we announced top-line 16-week induction data from the ongoing Phase IIb study known as RESOLVE-AD. RESOLVE-AD enrolled 393 patients and is testing respegalodysleukin in biologic-naive patients with moderate to severe atopic dermatitis. The study met its primary endpoint of statistical significance for mean percent change and EZ score from baseline for all respigaldus lukin arms versus placebo at week 16. All three respigaldus lukin arms met significance on the EZ50, EZ75, and BSA. The every two weeks regimens met significance on VIGA, AD, and itch NRS. And the high dose of 24 microgram per kilogram every two weeks also achieved statistical significance on EZ90. Both EZ reduction and magnitude of itch improvement were seen after the first few doses of RESPEC, which we think could truly differentiate it from other systemic therapies in terms of a faster onset of action. Also, the safety profile for RESPEC in the Phase IIb study was consistent with previously reported results from other RESPEC clinical studies, and there was no increased risk of incidence of conjunctivitis oral herpes or oral ulcers, as is seen with other agents which are approved or in development. The maintenance period of the study is ongoing, and we expect to share the top-line results for 52 weeks of dosing for the 36-week, Q4-week, and Q12-week maintenance regimens, as well as the Q2-week escape arm regimen in Q1, 2026. As Howard mentioned earlier, we are looking forward to presenting additional differentiating endpoints from the induction phase of the RESOLVE-AD study at a medical meeting in the fall of this year. These include quality of life assessments, such as sleep quality, skin pain reduction, overall patient experience, and other important metrics that are meaningful for patients battling atopic dermatitis. In that presentation, we are also planning a data cut which looks at patients who have received 24 weeks of treatment with the highest dose induction regimen of RASPEC, 24 microgram per kilogram Q2 week. You'll recall that our study design allowed patients from induction who had easy scores of less than 50 to advance to a treatment escape arm for up to 36 weeks. As we reported in June, 42 patients who were in the placebo arm during the 16-week induction, had a week 16 EZ score worse than EZ50 and entered into this escape treatment arm. These patients represent a true crossover population for studying the extended duration of Ras-Pag-Aldis-Lukin dosing. By this fall, we expect that more than half of the patients in this crossover cohort will have completed 24 weeks of treatment. So with this new upcoming data cut, we are excited to see whether easy responses can deepen with continued treatment with RESPEC beyond week 16 and out to week 24. This is a phenomenon not observed with IL-13 agents, whose treatment effect tends to be capped at the end of induction. And we are excited about this potential because our reported data of RESPEC at 16 weeks is comparable to 24 weeks of treatment reported with the AUX-40 agents but with a faster onset of EZ75 in its response than what is seen with those agents. As we announced in February of this year, we received fast track designation for RESPEC for the treatment of adult and pediatric patients 12 years of age and older with moderate to severe atopic dermatitis whose disease is not adequately controlled with topical prescription therapies or when those therapies are not advisable. As Howard stated, we have already begun phase three readiness activities and clinical trial design planning as we prepare for an end of phase two meeting with the FDA later this year. Our goal is to position RESPEG to enter its first phase three study in the first half of 2026. We are actively evaluating several design pathways, including those that provide a clear line of sight to approval of RESPEG-Aldis-Lucan in patients who are both biologic naive or in biologic experience. We will finalize the trial design following our end of phase two meeting with the FDA later this year. With the strong data from Resolve AD confirming the optimal induction dose and target patient population, we're focused on maintaining our momentum to progress ResPag as quickly as possible in atopic dermatitis. Now, moving on to alopecia areata. The Phase IIb RESOLVE-AA trial completed enrollment in February, and we're excited to share top-line results in December. In this trial, in patients with severe to very severe alopecia areata, RESPEG is being evaluated at doses of 18 microgram per kilogram or 24 microgram per kilogram every two weeks versus placebo. A total of 94 patients were enrolled. and the week 36 primary endpoint in the study is the mean percent improvement in SALT score. Keep in mind that alopecia areata is another dermal disease, and so our results in atopic dermatitis, and also reinforced by an earlier separate study in psoriasis, point to this T regulatory cell mechanism having strong signals of efficacy in dermatological settings. Alopecia areata is a 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. We know the underlying cause here is the imbalance in T-effector cells to T-regulatory cells around the hair follicle. And this imbalance results in the T-effector cells attacking and damaging the hair follicle and prohibits Tregs from signaling to and promoting the function of hair stem cells. So by stimulating T-regulatory cells, we are seeking to overcome the pathogenesis of the disease and restore immune homeostasis. In Resolve AA, we will assess a number of secondary endpoints as well, including the proportion of patients with a greater than or equal to 50% reduction in salt at week 36 and other assessed time points, and the regulatory approval endpoints for phase 3 studies, SALT20 and SALT10 responder analyses. Following the week 36 assessment, patients who did not achieve a SALT score of less than or equal to 20, but did demonstrate substantial hair regrowth over the 36 weeks, are eligible to enroll in a 16-week treatment extension, which allows us to have a subset of patients that will be treated for 52 weeks. Turning to type 1 diabetes, another autoimmune disease where RESPEC has great potential as a Treg therapy, we believe RESPEC can potentially slow the progressive loss of insulin-producing beta cells, which are the target of the patient's overactive immune cells in this disease. As previously announced, TrialNet is sponsoring and conducting an investigator-sponsored Phase 2 clinical trial evaluating RESPEC in 66 patients, with new-onset type 1 diabetes with funding from the NIH. We expect TrialNet to begin this study before the end of the year. And finally, NECTAR-0165, our TNFR2 agonist antibody program, is progressing through IND-enabling studies with a goal to advance this program into the clinic in 2026. TNFR2 agonism potentiates Treg function as well as maintenance of Treg lineage stability. especially in the non-lymphoid tissue compartments. The first preclinical data from this program was presented last year at ULAR and 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. And we believe this is the only antibody in this class being developed that has this attribute. Since the TNFR2 epitope we discovered can function as a single arm agonist, we have leveraged this innovation into a platform of bispecific and multispecific assemblies. The first agent from that pipeline, Nectar 0166, pairs TNFR2 agonism with a well-validated target, to create a molecule with a novel mechanism of action and highly innovative properties. We look forward to providing more updates on Nectar Rho 166 and other agents in the coming quarters. I'll now turn it over to Sandra for the financials.

Thank you, Jay-Z, and good afternoon, everyone. On today's call, I'll briefly review our quarterly financials and share updates to our financial guidance for 2025. We ended the second quarter of 2025 with $175.9 million in cash and investments and with no debt on our balance sheet. As Howard stated earlier, on July 2nd, 2025, we completed a secondary public offering resulting in approximately $107.5 million in net proceeds. This fundraising further strengthened our financial position extending our cash runway into the first quarter of 2027, while also enabling us to invest in our RESPEG program to progress to phase three and further develop NECTAR-0165 and NECTAR-0166, our TNFR2 agonist antibody candidates. Our expanded 2025 plan includes RESPEG phase three clinical startup activities and securing additional manufacturing for RESPEG. We now expect to end the year with approximately $180 to $185 million in cash and investments. Turning to the income statement, our non-cash royalty revenue was $11.2 million for the second quarter of 2025. We still expect our non-cash royalty revenue to total approximately $40 million for the full year. Our R&D expense was $29.9 million for the second quarter of 2025, and we now anticipate full-year R&D expense to range between $125 and $130 million, including approximately $5 to $10 million of non-cash depreciation and stock-based compensation expense. Our G&A expense was $17.1 million for the second quarter. We now expect G&A for the full year of 2025 to be between 70 and $75 million, including approximately $5 to $10 million of non-cash depreciation and stock-based compensation expense. This increase in guidance reflects updated estimates for professional services in the second half of the year, including legal and other accounting consulting services. Non-cash interest expense for the second quarter was $5.4 million and is expected to remain at a similar level for the remaining two quarters, totaling approximately $20 million for 2025. As a reminder, in the first quarter of 2025, we began accounting for our investment in the new portfolio company, Gannett Biochem. Under the equity method of accounting, we calculate our non-cash gain or loss based on the change in our share of Gannett Biochem's equity each quarter. Our non-cash loss from equity method investment was $2.4 million in the second quarter of 2025, and we still expect a non-cash loss of approximately $10 million for the full year of 2025 on our income statement. We have no commitments to contribute cash to Gannett as an equity investor. Our net loss for the second quarter was $41.6 million or $2.95 basic and diluted net loss per share. Excluding the non-cash loss from our equity method investment, our non-GAAP net loss totaled $39.2 million or $2.78 basic and diluted net loss per share. And as I stated earlier, we now expect to end the year with approximately $180 to $185 million in cash and investments with our cash runway now extending into the first quarter of 2027. And with that, I will ask the operator to open the lines for Q&A.

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 while we compile the Q&A roster. And our first question will come from Jay Olson from OPCO.

Your line is open.

Oh, hey, thanks for taking our questions. This is shown on the line for Jay. And just want to congratulations again on the very impressive results you share recently. I'm just wondering, first, have you maybe started to engage with regulators with the 16 week data? And since you started some activity to prepare for the phase three initiation, any coloration share on how are you thinking about the trial design and also maybe the number of 12th, you are planning for the phase three program. And maybe separately, just wondering if you saw some partnership opportunity for RASPAC and AD, and specifically, when would be the optimal time to bring a partner on board, and any kind of characteristic would you define the partner? Thank you so much.

This is Howard. I'll let Jay-Z answer the first part of the question. I'll take the second part. Go ahead, Jay-Z.

Yeah, thanks, Howard. Thanks, John. So in terms of your first question was how we began to engage with the regulators. So that's ongoing. So our plan, as I mentioned earlier, is an end of phase two meeting. that we intend to hold before the end of the year. And so at this time, we're basically putting together the meeting request and the briefing package that will go in. And the substrate of what we'll be discussing there is indeed the trial design. And so our basic concept in the trial design is we expect to have two monotherapy studies. that are basically identical in design, as well as a long-term extension study, which enables you to collect long-term safety data. And then for this division, there are a number of additional studies that are required that are typical, you know, for every single BLA submission for a new molecule. In terms of the studies, you know, as we mentioned earlier in the call, we understand that there is a significant opportunity for RESPEG in multiple lines in atopic dermatitis. We have very strong data in biologic naive patients, and we've shown that right in our Phase 2B results that you commented on. And so that will be a substantial portion of our patient population. But our plan is to also include biologic experienced patients in the trial as well. So in that regard, similar to the kind of studies that Amgen and Keoharan with ROCA where they combined both naive and experienced patients in the same study. We think that was a very efficient approach. And our goal is to use that same approach and also have both patient populations into our phase three program, which would enable us to have the broadest label when we move to register RESPAC. So I think that addresses your questions about some of the health authority engagements and trial designs, and Howard, I'll turn it over to you about partnership and timings.

Yeah, sure. Thanks, Jay-Z. Look, as we said on the call, we hope to end the year with, you know, $180 to $185 million. And, you know, we will be prepared to put ResPeg into the clinic in Phase 3 in 2026. We have a runway that goes into 2027. We don't have any plans for additional financing at this point. We have a number of important data catalysts ahead of us, and we're actively talking to partners about the potential to collaborate on RESPEC, including strategics as well as financing partners. There's ways to do this that are a collaboration with another company. There's also ways to do this with non-dilutive financial methods. So we also have some, we also have other sources of non-dilutive capital. For example, we own, you know, three to four percent of Dapamab, UCB's drug for, in phase three for lupus. So I think there's, you know, and we're certainly looking at, you know, monetizing that asset. So there's a lot of opportunities for us, but I would say that right now we're, you know, engaged in partnership discussions.

Got it. Thank you so much, and congrats again on the progress.

Thank you. Thank you. Our next question will come from Yasmine Raimi from Piper Sandler. Your line is open.

Good afternoon, team. Congrats on all the updates and all the great commentary. I guess my question is, as the next near-term data catalyst is the upcoming AA readout, if Jay-Z could walk us through how your thought process around what is a competitive product profile to advance to a later stage development and whether also we will see at the time of the top line data some of the patients who continued into the longer extension or should we not expect that? And I'll jump back into the queue.

Yeah, sure. Thanks, Yaz. So, you know, it's a great question. One of the things that's really important to consider about alopecia is that there are currently no approved biologics for alopecia areata and there's really no therapy that's demonstrated a sustained treatment effect. So JAKs are efficacious, and even most recently, RENVOQ posted probably class-leading JAK inhibitor data in the space in the first of their phase three studies it read out a few weeks ago. And it still has a profile that's well-known. So it's a mechanism that requires continuous dosing. If you stop dosing with the JAK inhibitor, the patients lose the hair that they may have grown. And then also you have to carry the additional safety liability. And it's particularly challenging in this disease as many patients are younger, they have their disease for their entire life. And the concept of chronically taking a JAK inhibitor for many, many years is difficult. For us, the way we designed the study for this phase two is a primary endpoint based on percent change from baseline and SALT scores. And while we don't need to necessarily sort of hit some of the JAK metrics, we still use the JAK metrics. They're very useful as frames of reference as we put together the TPP that we're considering for this indication. And so just as like some kind of benchmarks to keep an eye on, For that endpoint salt percent change from baseline, low dose JAK achieves about a 30% reduction in salt score and high dose JAK about a 40% reduction in salt score. So we're looking to be in that range. And ideally, if, you know, RESPEC shows the kind of scientific approach that we think is very meaningful for this particular biology, then obviously our goal is to even push that. And then, of course, we'll also be focusing on the key registrational endpoints, as those are very informative as we sort of continue and look beyond, you know, the Phase IIb study in alopecia areata. So, specifically, the SALT20 and SALT10 endpoints are key. SALT20 is the FDA-accepted threshold, and SALT10 is the standard in Europe. And the JAK inhibitors have about a 20% and 10% for SALT20 and 10% at the low-dose, and 35 and 25 at the high dose. So again, we're using those as benchmarks along with the data that RINVOC posted. But we're very excited about the data set that's coming for us later this year. I'm very excited about the opportunity of taking RESPECT forward for yet another dermatological indication. one where we know T-Rex plays such an important role in even just the fundamental biology of hair growth and having the chance of being potentially the first biologic in this space.

Thank you so much, Daisy.

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

Hi. Thank you for taking the question, and congrats on all the recent progress. It's great to hear that you plan to include biologic experience, atopic derm, in your first registration program for RESPEG. Can you remind us of what underpins your confidence that RESPEG will be active in the segment?

Yep, certainly. Thanks, Julia, for the question. You know, it's interesting. I mean, we're tending to see that multiple agents are showing activity in bio experience, right? We've seen that now for a few examples. Leveri had that example. ROCA seems to be also, you know, having that example. But for us, we have this basic understanding that our mechanism is in no way overlapping or canceled out or contra to any of the post-IL-13 kind of biology. For example, if a patient has a disease that's more mixed in presentation, say, TH2, but additional T helper endotypes that are driving the inflammation. I mean, obviously, if you take a TH2 inhibitory mechanism, like an IL-4 or IL-13, you leave other parts of the immune system, you know, kind of untouched. But we know that we have a breadth, you know, of ability to block multiple kinds of polarized T cell inflammation. And there's also really no additional kind of, you know, a priori knowledge or scientific reason why there wouldn't be an effect. Also, because we're an agonist and not an antagonist agent, and we're a cellular agonist You know, it gives us confidence that RESPEC should have activity, whether the patient is biologic naive or experienced. And, of course, you know, there are multiple ways that patients fail those agents, whether it's tolerability signal or a loss of efficacy signal. Again, in both of those cases, we think RESPEC has potential.

Very helpful. Thank you.

Thank you. Our next question will come from Arthur He from HCW. Your line is now open.

Hey, good afternoon, Howard and team. Congrats on the progress you reported. I just had a quick question on the potential of the pivotal study for the respect for the AD. Regarding the biological experimentation cohort, what's your thoughts around the biological, prior biological therapy, would that be heavily focused on the new pixelation or are you going to do kind of the basket patient cohort?

Yes, thanks, Arthur. That's a great question. So, you know, our goal is to begin our first phase three study in the first half of next year. At that time, you know, the major approved mechanisms would be the IL-4 and IL-13 class, right? So that would be Dupixent, Lebrecizumab, right, Adbre, Trelacizumab as well, and then Nimalizumab is also approved as IL-31 antagonist. That would also be bio-experienced. You know, in our case, you know, while the OX40 class will not yet be approved likely, you know, by the time we begin, likely the first entrant will probably reach approval during. Obviously, there aren't as many people that have taken those drugs yet. But again, that would also represent a biologic experienced patient population. I hope that answers your question.

That makes sense. Thanks, Jason.

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

Hi, team. Thanks for taking our questions and congrats on a very productive second quarter. As part of the phase three, I was wondering what your expectation for the induction efficacy primary endpoint duration of therapy would be knowing that you're not getting to the peak easy and edge efficacy at 16 weeks. The thought you might be putting in to get the remitive efficacy signal, and obviously, you know, is there anything to learn from the Oxfordi trials that are sort of trying to get to a comparable goal? And then I have a couple of follow-up.

Yeah, sure. Thanks, Mike. So one of the things that our Phase IIb study really gave us clear understanding of is the dose level and the regimen that we want to take forward into our Phase III studies. And we've already used, since our top line, the results of the study to create a population PK model. as well as an exposure response model. As you know, both of those are key components of the end of phase two meeting package that are used to defend the dose level for the phase three. So we feel very confident with that. We did mention earlier, right, that the way our study is designed is we have multiple portions of the study where patients are ongoing longer duration of treatment beyond week 16. We're very excited about the data cut that we talked about earlier in our call because that really starts to really sort of drill down, right, into what are those effects and the potential of deepening responses when patients are treated beyond 16 weeks. For example, we know for some contemporary phase three studies, there's been a trend to move to longer induction endpoints. We also feel like we haven't quite even yet reached or seen the maximum efficacy of RASBAC. We think that's ongoing as people take more treatment. There's a strong potential that we can see deepening. So, as we move forward into our end of phase two meeting, we'll also, you know, clarify and propose the duration of our induction. And also, of course, the maintenance arms that we're testing in phase two now, those are both Q4 and Q12. So we'll also get more information about how we want to take forward maintenance regimens, so both the duration of induction and then the maintenance portion of those studies. And we're planning 52-week studies in our phase three program. Your other question was about the remittive potential. And so I want to first just remind everyone that The way the Phase IIb is designed is we had a 16-week induction that was followed by a 36-week maintenance or escape, depending on how patients ended their 16-week. And then there's a 52-week off-drug follow-up. So our intention is to treat people for a year and then follow them for a year off-drug to assess, you know, remission or assess durability and stability, or at the very least this prolongation of efficacy after you stop treatment. So our phase two study is really poised to give us an even richer data set than we obtained after our 12 week induction in the phase one B study. So the way that we would be looking to leverage that in our phase three program is actually going to be similar to what you mentioned, you know, both the MLITELAMAB and the ROCANT-LUNAMAB programs are doing. You do treatment withdrawal, you know, at different points in those studies. And our goal would be to do that kind of an approach. So, for example, one way we might approach this is that we would do a 52-week treatment. And then in our long-term extension, we would have a randomized withdrawal component so that we would be assessing both that remittive potential as well as long-term treatment in a blinded, you know, randomized withdrawal fashion.

Thanks. Very helpful, JV. And maybe just staying in that same topic of learning from aux 40, the alopecia data we've seen so far maybe doesn't get up to the benchmarks you shared for JAK inhibitors, but was just curious, given that, you know, you're somewhere in the middle in AD, does that read through to the alopecia trial? And maybe just lastly for Harvard, any updates on the Lilly litigation? And if your belief, you know, with the resolved AD results now with you, any changes to your belief in the outcome and the related liabilities that you might be claiming? Thanks for taking the questions.

J.Z., why don't you start, and then I'll take the Lilly question.

Yeah, sure. Yeah, I'll start with the alopecia. So firstly, remember, we have a 36-week endpoint in alopecia. And remember, we just discussed about longer duration of dosing beyond week 16. So I urge you to keep those two things in mind. We think there's an opportunity for a very exciting outcome for us in alopecia areata. And we use the JAK inhibitor as benchmarks. But again, there's really not been a biologic that has established itself in this space. And we're very excited with our mechanism to do that. And so we think that if anything, the read-through that we have from atopic derm is a positive read-through onto alopecia. And Howard, I'll turn it over to you.

Okay, yeah, let me, obviously, we're not going to, we certainly can't comment on, you know, on the Lilly lawsuit. I think we are very committed to pursuing it based upon the RESPEC data that we reported and the data that's developing in I think we believe the potential for this program is significant and will drive a lot of valuation from others. So I think the lawsuit is something that really will, let me put it this way, the results that we have seen so far from RESPEG, I think will help us with the lawsuit. And I certainly don't think that we are in any position to comment on the specifics, other than to say that we're highly committed to pursuing this, and we do believe we were significantly injured by Lilly. In any case, for example, the program was delayed by a few years in the marketplace. You can calculate out what that means in the long term. So overall, I think we have a strong position. We're going to pursue this lawsuit to its completion, and I think we're pleased with the way it's going.

Appreciate the courage, Dean. Thank you.

Thank you. Our next question will come from Cha Cha Yang from Jefferies. Your line is open.

Hi, can you hear me?

Yes.

Okay, wonderful. Hi, this is Cha Cha on for Roger Song. I was hoping that you could give us any updates on your studies being done to better understand the ISRs, whether that's from a mechanistic perspective or if you could give us any updates in regards to developing strategies for mitigating them upon commercialization.

Sure. Yeah. Thanks for the question, Chacha. So in our studies, we have been assessing, you know, the biology of the ISR using various methods. One that's been quite useful for us is using primary skin organoid cultures, using skin that's obtained from tummy tuck surgery. It's very useful because that's abdominal skin and we, you know, inject the abdomen, right? So one of the things that we've learned, you know, so far is that this is really, as we've known for a long time, an IL-2 effect. So IL-2 is known to cause injection site reactions. And that was, you know, discovered in the late 80s and early 90s when subcutaneous studies, you know, started being done with the molecule. And so the pathways that we see induced are related to IL-2. And that's actually a great observation for us to be able to model those in the organoid culture. We can study them at the mRNA level and the pathway level. And then that gives us opportunities to be very specific with the kind of mitigation approaches that we can use because we know which pathways are firing and we can even identify the cells that are signaling the most. Another important element for us is that we've been operating the program basically using drug in a vial. And then the drug is drawn up at the study sites and administered to the patient subcutaneously by the healthcare practitioner. But we'll be launching with product presentation in a pre-filled syringe packaged into an auto-ejector. And we know that will have a positive effect because that will really standardize, you know, the drug administration, the needle depth, the rate, the needle itself will be dry, plus all the things that we're learning from these biological approaches. We'll be doing all of those things while the phase three program is ongoing. And we look to incorporate those into the auto injector that we'll have at the time of launch.

Yeah, let me also add to that. I think, look, I think from a marketing point of view, it's not a barrier at all. We had, I think, two patients drop out of the trial for injection site reactions. Most patients, they were mild to moderate. They self-resolved. They did not stop taking the drug because of them. And while we did have a lot of patients that had an injection site reaction, they may have only had one or two, and they didn't have any further injection site reactions. Sometimes patients went months before they had one, and then they had one. and then they didn't have any more. So you have to really understand what happened here with injection site reactions. It's not that a large percentage of patients get them on every injection. That is not the case at all. And in any case, most of them were mild, and the patients didn't seem to care. So I think when you look at the problems associated with IL-13 drugs, such as conjunctivitis infections, I think that's actually much more concerning than mild to moderate self-resolving injection site reactions. And I think Jay-Z made a very excellent point. I think a lot of that will be cleared up by an auto-injector. I think there's a lot of, I don't want to say sloppiness, but a lot of inconsistency in the way patients administer the drug themselves. They put it in a vial, it's a wet needle, et cetera, et cetera. There's a, auto-injectors should solve a number of those issues. And in any case, the level of ISRs that we saw, I don't think are meaningful from a marketing point of view.

Okay, thank you.

Thank you. Our next question comes from Alex Ramsey from William Blair. Your line is now open.

Hi, thanks so much for taking our question. This is Alex Ramsey on for Andy Shea at William Blair. So just going back to the potential remittive effect of RASPEG and atopic derm, that's something that we've been curious about. And so we have the upcoming maintenance data in early next year. So we're just curious about what data points or efficacy bar at this readout could be suggestive of a remitted effect or if we will need to wait until 2027 to get a gauge on this potential advantage of the regimen. So that's part one. And then part two is do you have a sense of how much you have to blunt disease recurrence to achieve a true remittance effect?

Yeah. Thanks. Thanks, Alex. Those are great questions. So starting with the first one, so with remittive effect, the data in this part of the phase 2B resolve AD study is still on treatment data. So the people that exited week 16 induction that had an EZ50 or better, right, they moved into the maintenance arms. And in the maintenance arms, they stayed on the same dose level that they were on in induction. but they switched to either a once a month or a once every three months regimen. And then they were on that regimen for 36 weeks. So, you know, the data that we'll be presenting in the first quarter of next year, that will still be on treatment data. So I'll get to your remittive question for part two in a second. But, you know, just to specify, yeah, that first quarter 2026 data set will be treatment data. But we will have a very low frequency treatment, you know, component, there will be a number of people, you know, about half of the people that entered into maintenance will be on a Q12 week regimen. So we will be looking at a very low frequency dosing and comparing that to a Q4 week. And, you know, earlier in the call, we talked a few times about the potential, you know, deepening responses and the things that we're really interested to look for in the maintenance with ongoing dosing is, for example, the proportion of people that entered that had an easy 50, but not an easy 75. So how many of them deepened to 75? How many of the easy 75 people deepened to 90 and so forth? And also looking at the people that had a response at the week 16 induction, How durable was that in the sense that with ongoing dosing, did they lose, you know, or keep that response? So those are the two main buckets of data analyses, you know, that we'll be looking at. And in the escape barn, we'll be looking at elements like the crossover population and so on when you move everyone to the high dose. So that next part really addresses duration and 52 weeks treatment. That's a very good marker for us, for the overall treatment length. Then the second question you had about the remittive effect was, is there a certain depth of disease that you need to reach before you would have the best durability? I think that's a really great question. I mean, certainly a person that reaches easy 75 and a person that reaches easy 90, you know, those are two different levels of efficacy. It's a really important question to ask is, is there more remission in an EZ-90 person or is it the same as in an EZ-90 and an EZ-75 individual? The only data that we really have to address that is from our phase one. And in the phase one, we saw that people that had an IGA response at week 12 and that had an IGA response of week 48, even though they stopped treatment at week 12, had about 80% IGA maintenance and about 70% EZ-75 maintenance across that kind of six-month time horizon in the six-month off-drug period. So that data might hint that there may be a little bit better, you know, remittive effect in people that have a deeper disease. But I think it really needs a lot more data, you know, to really be sure of that. And I'm excited to see some of the other mechanisms that we'll be trying to address that as well, such as the OX40 mechanisms that are both including, you know, treatment-free intervals in their phase three programs. Thanks for your question.

Thank you, that is super helpful. Really appreciate the add to color.

Thank you. And our next question comes from Jessica Sy from JP Morgan. Your line is open.

Hey guys, good evening. Thanks for taking my questions. For RESPEC for AD, can you just speak to your comfort level with the powering of the maintenance phase of that trial after the dropouts and the induction portion? I think you had sort of planned for some attrition here. Just want to make sure that you still feel good about the powering for the maintenance phase. And I think when you kind of presented the top line induction data in AD, you were sort of benchmarking off of AUX40. Can you just spend a minute talking about why you think that's the right comp for this product? Thank you.

Sure. Yeah. Thanks, Jess. So firstly, as we reported in June, we had 190 people that moved into the maintenance arm. So we think that's a good population. It's actually right in line with what we've modeled. that would cross over. And that modeling was based on other phase two studies and, you know, similar phase two patient populations, similar statistical methods used during induction. And then of course, you know, heavily driven by our phase one data and our phase one results. So we're pretty happy with the number of people that moved into the maintenance portion. And very much to your point, because we wanted to assess two regimens, right? you're basically randomizing them one-to-one. The people that were on placebo, and there was a handful, right? It was less than 30%. Those stay on placebo, but everyone else is on RESPEG, right? And then they're randomized one-to-one on either once a month or once every three-month regimen. So we're right in line with how we designed the study, but we feel pretty good about that. And then to your next question about benchmarking to OX40, For us, it was really informative when we started to very closely compare the phase two studies, the study designs, the patient populations, and other elements. And When we looked at that, we saw that kind of the health authority keeps sort of driving you to more and more rigorous statistical designs, right? As you have more and more entrants, you know, approaching through later stage clinical development. And that's common. All regulators like to do that. It really pushes the bar. And so we noticed that our study design our statistical handling, you know, even our sizes and patient populations and even geographic footprint was really much more similar to the AUX40 Phase IIb studies. The other studies like DUPI, I mean, that was done many, many years ago, well over 10 years ago. Very different, you know, patient population. And Trello, which came next, same, a very different patient population. Also, as you looked at new mechanisms, You know, for us, looking at RESPEC as a completely novel and first-in-class mechanism in atopic derm and looking at the OX40 class, which was novel relative to the LF13s. So we focused that as one of our areas of comparison for those reasons. But, of course, you have to consider all of it as well, and that's why we showed all of the agents that are approved, including the ones in Phase III.

Thank you.

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

Well, thank you, Crystal. Before we close, I want to thank the new and existing investors that supported our recent capital raise. And we are truly grateful for your support as shareholders. I also want to thank our employees for their dedication and extremely hard work. And we look forward to delivering additional data updates later this year and engaging with regulators on our phase three program. So thank you for joining us today and please stay tuned.

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