Nektar Therapeutics Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 9, 2023

Key Takeaways

  • Implemented a 60% workforce reduction in San Francisco, cutting $30 million of annual operating expenses and extending the cash runway through at least mid-2026.
  • Regained full rights to Respegg with no royalties owed to Lilly and plan to initiate a well-powered Phase 2b study in moderate to severe atopic dermatitis later this year.
  • Phase 1b data for Respegg showed a ~70% reduction in EASI scores at week 12 and maintained low disease activity through 36 weeks post-dosing, differentiating it from IL-13 blockers and JAK inhibitors.
  • Pursuing a strategic partnership for the NKTR-255 IL-15 immuno-oncology program while continuing Nektar-sponsored Phase 2 combination studies with cell therapies and a bladder cancer trial with Merck KGaA.
  • Recorded $89.7 million of non-cash impairments in Q1 (goodwill and leased assets), contributing $0.48 to GAAP net loss per share; non-GAAP loss was $0.25 per share.
AI Generated. May Contain Errors.
Earnings Conference Call
Nektar Therapeutics Q1 2023
00:00 / 00:00

There are 10 speakers on the call.

Operator

Welcome to the Nektar Therapeutics First Quarter 2023 Financial Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer 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.

Speaker 1

Thank you, Crystal, and good afternoon, everyone. Thank you for joining us today. With us on the call are Howard Robin, our President and CEO Doctor. Jonathan Zalewski, our Chief of Research and Development Doctor. Mary Tagliaferi, our Chief Medical Officer and Sandra Gardner, our acting Chief Financial Officer.

Speaker 1

On today's call, we expect to make The timing of the initiation of clinical studies and the availability of clinical data for our drug candidates, the timing and plans for future clinical data presentations, The formation future development plans or success of our collaboration arrangements The expectations following are corporate restructuring and reorganization, financial guidance and certain 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 and many of which are outside of our control. Actual results may differ materially from these statements. Important risks and uncertainties are set forth in our Form 10 ks that was filed on February 28, 2023, 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.

Speaker 1

A webcast of this call will be available on the IR page of Nektar's website at Nektar.com.

Speaker 2

With that said, I would like

Speaker 1

to hand the call over to our President and CEO, Howard Robin. Howard?

Speaker 3

Thank you, Vivian, and thank you all for joining us today. As you know, a few weeks ago, we announced our plans to implement a new strategic plan and cost restructuring at Nektar. I'm pleased to report today that we enacted the plan quickly and that we will begin to see ongoing expense savings starting in the Q3 of this year. The new plan focuses our company more clearly on immunology and importantly also extends our cash runway through at least the middle of 2026. A core element of our new pipeline focus and plan is on the advancement of Respeg We intend to move quickly to initiate a well powered randomized Phase 2b study for Respegg in patients with atopic dermatitis.

Speaker 3

We were incredibly pleased to have regained the rights to this 1st in class regulatory T cell program from Lilly. Importantly, there are no royalties owed to Lilly for this And Respegg now becomes a wholly owned asset of Nektar's. Atopic dermatitis as a target indication for Respegg is attractive To us for several reasons, not the least of which is the strength of the data that has been generated for Respegg in patients with atopic dermatitis. The non topical biologic treatment landscape is significantly growing. The approvals of Dupixent and other IL-thirteen based biologics Have driven this growth.

Speaker 3

In the U. S. Alone, approximately 16,000,000 people are living with atopic dermatitis with 3 out of 4 of these affected by moderate to severe disease. In 2021, biologic sales for atopic dermatitis were close to $5,000,000,000 and sales continue to grow. That being said, atopic dermatitis is a disease area where there is still a very high unmet need for novel biologic treatment options.

Speaker 3

Most notably, The mechanisms available to patients today after they fail topical treatments overlap and fall into either the category of IL-thirteen based mechanisms or JAK inhibitors. Both mechanisms have limitations on efficacy and both have some notable safety challenges, which include black box warnings with the JAK inhibitor class. Even with the growth in the adoption of these mechanisms, At least 50% of patients don't respond to these therapies at all and many patients see a rebound in their disease after coming off these therapies. This opens a real opportunity for Respegg to be introduced as the 1st regulatory T cell mechanism that is differentiated from these overlapping existing mechanism. The Phase 1b data for Respegg was compelling and set the stage for us to measure the potential for Respegg to be a remit of therapy With longer term disease control and less frequent maintenance dosing, JZ will review the data reported for ResVeg in a few minutes, including the quality and durability of responses we saw in patients.

Speaker 3

Now as we mentioned in our reprioritization plan with a focus on immunology, We'll also continue the development of our IL-fifteen program NKTR-two fifty five in cancer, while we explore strategic partnership options. NKTR-two fifty five is being developed in combination with cell therapies and we believe it could be a valuable adjuvant therapy for companies focused in the area of cell therapy. Our Phase 2 study of NKTR-two fifty five in combination with approved cell therapies, Brianca and Yescarta, As well as the Phase 2 Javelin bladder medley study with Merck KGaA will continue while we seek a development partner. We continue to see great value in NKTR-two fifty five and early data showed its promise as a potentiator of cell therapies that could benefit patients Suffering from very difficult to treat cancers, our goal is to find a strategic co development partner this year. As I've stated earlier, our primary focus is on immunology and to that end, we have 2 preclinical candidates advancing, A TNFR2 antibody program and a PEG CFS-one program, which JZ will discuss in a moment.

Speaker 3

Our goal is to have an IND ready in 2024 for at least one of these programs. We're deeply grateful To our employees for their commitment and dedication to Nektar and the patients we aim to serve, the decisions over the past month to further reduce our headcount have been difficult, But we believe these are the right decisions to maximize the success of Respeg and our immunology programs. We're confident That our focus on immunology is the best path forward to bring important potential therapies to patients and to create value for our shareholders. And now I'll pass the call to JZ to review the programs in more detail.

Speaker 4

Thanks Howard. Starting with Respegg, This is a unique molecule that has shown promising efficacy in multiple clinical trials as a single agent. Our goal with this program is to address the underlying Treg deficiencies and consequent overactivity of effector T cells in these diseases By selectively activating and expanding Tregs, ResTag is uniquely positioned as the most advanced IL-two based Treg mechanism in the clinic with opportunity and potential in a number of autoimmune disease indications. Now Howard touched on one of these indications, atopic dermatitis. Management of atopic dermatitis has a few main goals.

Speaker 4

The first goal is the rapid and efficacious treatment of the acute phase of the flare. And second, Many years, the safety profile is also critically important. The current treatment landscape for patients with moderate to severe disease that requires systemic therapy has 2 major classes of medicines currently approved for standard of care. One class of these target key cytokines to drive the Th2 inflammation pathway. The flagship in this class is Dupixent For dupilumab, which blocks the IL-four and IL-thirteen pathways lebrikizumab, which is expecting approval later this year and the recently approved Adbri both target and block IL-thirteen only.

Speaker 4

While Dupixent is a very successful drug, There is now real world data that describes some of its limitations. One real world evidence study showed the lack of durable efficacy In that, 79% of patients that discontinued Dupixent lost disease control after an average of 4 months and needed to restart therapy. Another real world study showed that 27% of patients taking Dupixent developed moderate to severe conjunctivitis requiring treatment with anti inflammatory eye drops or appointments. The other major class of therapies for atopic dermatitis are the JAK inhibitors. These interfere with T cell activation and thus suppress inflammation in the dermis.

Speaker 4

JAK inhibitors Show impressive efficacy in atopic dermatitis, but they carry multiple black box warnings making them less attractive for chronic use. Because the JAK inhibitors are associated with these multiple safety risks, the FDA has only granted a label for the JAK inhibitor Patients whose disease is not adequately controlled with other systemic drug products, including biologics. In the clinic, Because of the black box warnings, dermatologists acknowledge that JAK inhibitors are not suited for many of their patients, including individuals greater than 65 years old or those with the comorbidities associated with the black box warden. Like Dupixent, patients that discontinued JAK inhibitors also quickly lose disease control and relapse. Unlike IL-thirteen blockers and JAK inhibitors, which both block their respective pathways, Respegg It's designed to target the IL-two receptor complex and stimulate the expansion and function of Treg cells.

Speaker 4

These in turn suppress the harmful T cells that are driving the underlying pathology of atopic dermatitis. Respegg aims to restore homeostasis in the immune system through the proliferation of Treg cells rather than just blocking effector cells. And consequently, Respegg provides a completely different mechanism of action compared to the other drugs that are currently approved We're under development in the atopic dermatitis space. The Phase 1b data from our first initial proof of concept study in Moderate to severe atopic dermatitis reinforces our conviction in Respek. The 12 week Phase 1b study conducted by Lilly Tested 2 doses of Respek compared to placebo and then followed patients for 36 additional weeks after the last dose of therapy.

Speaker 4

Last September, we presented the interim data from this trial. Respegg demonstrated a dose dependent reduction In eczema area and severity index scores in patients, also known as the EASI score, with approximately a 70% reduction in scores at week 12, The highest dose tested. We also saw a dose dependent improvement in the investigator global assessment for atopic dermatitis and inch responder rates through week 12 of treatment. Consistent with the ResVag mechanism of action, Total Tregs and CD25 Bright Tregs increased versus placebo through week 12. The efficacy observed at 12 weeks of treatment with ResVag is in line with efficacy observed after 16 weeks of treatment with Dupixent.

Speaker 4

But clearly, the most fascinating observation from the study was that when we looked at patients 36 weeks after we stopped dosing ResVag, their skin scores and other measurements of disease activity remained very low. And this is an effect that is not observed with Dupixent. This has us and KOLs very enthusiastic We have now received the final data for this study from Eli Lilly and the study results positively extend the interim results previously reported. In addition, these data include additional efficacy endpoints that were not covered in last year's EADD presentation. To briefly touch on some of these, we observed dose dependent decrease in the percentage of body surface area involvement of atopic dermatitis, also known as BSA, in patients treated with Respek, with patients at the highest dose level reaching a 72% reduction in BSA at week 12.

Speaker 4

As a reminder, BSA continuous measurement that correlates with easing. We also observed dose dependent reductions in 2 patient reported outcome measures, the Dermatology Life Quality Index, also known as DLQI and the patient oriented eczema measure or POINT. In addition, The final data set has data from more patients completing the 36 week observation period. We are very excited about the data obtained in this study. Respegg showed efficacy across all measures of physician reported disease activity and patient reported outcomes, And these effects were durable and maintained after patients stopped Respeg administrations at week 12.

Speaker 4

We look forward to We are excited to see the long duration of sustained response observed in the atopic dermatitis study consistent with this hypothesis. These collected data demonstrate Respegg's potential as a remittiv therapy and support the quick advancement of Respegg to move into a Phase 2b study and atopic dermatitis later this year. We are now finalizing the Phase 2b study, which will be an industry standard Phase 2 study designed similarly to Phase 2 work conducted for approved IL-thirteen and other agents. This will allow us to evaluate multiple dose regimens of Respegg in the 16 week induction period followed by a 28 week maintenance period. We believe the study design will enable data to be better compared to prior Phase 2 studies at a 16 week primary endpoint readout at the end of the induction period.

Speaker 4

We have assembled a scientific steering committee for this trial and we are pleased to announce that Doctor. Jonathan Silverberg From the George Washington University School of Medicine and Health Sciences will be the chair of this committee. We are truly excited for Respegg's potential as the 1st in class Treg stimulator and we look forward to initiating this Phase 2b study in patients with moderate to severe atopic dermatitis this year. The Phase 2 top line data reported in lupus earlier this also demonstrated clinically meaningful improvements as compared to placebo across key secondary endpoints including Bicla and LLDAS at the mid dose level. And since we reported the data, we have had time to meet with many thought leaders in the field of lupus.

Speaker 4

Their reaction to our study results has been positive and provided us with many insights. In their feedback, The cell meter is focused on Respegs rapid onset of Bikla and LDAS response, as well as the magnitude of the effect on these endpoints that was observed. There is agreement that the Phase 2b data provide ample evidence to design a Phase 3 registrational study around these approvable endpoints. While we remain very interested in lupus, to be clear, we are prioritizing first The Phase 2b study in atopic dermatitis because it will allow us to rapidly reach a definitive result in a randomized study. We may have the opportunity to revisit the development strategy in lupus once we get the results from this atopic dermatitis study.

Speaker 4

We are extremely excited about ResPag now being a wholly owned component of our pipeline. While our near term focus is on atopic dermatitis, we continue to believe that Respek has broad potential in multiple indications. As development of this program progresses, we will continue to evaluate further opportunities and indications for ResVax. Moving to NKTR-two fifty five. We are evaluating strategic partnership options for the asset While we continue our Nektar sponsored Phase 2 study of NKTR-two fifty five in combination with cell therapies and the Phase 2 Javelin bladder medley study with our partner Merck KGaA.

Speaker 4

NKTR-two fifty five is an agent that engages the full biology of namely natural killer cells, CD8 T cells and immune memory subsets. As a full agonist of the IL-fifteen pathway, It can signal through both cyst and trans presentation of the trimeric IL-fifteen receptor complex. NKTR-two fifty five can be combined with multiple mechanisms ranging from targeted therapies to cell therapies including CAR Ts and even TCR therapies and checkpoint inhibitors to potentially improve the efficacy of these agents. While we continue to see great value in this program with NKTR-two fifty five showing broad potential applicability across oncology indications, We believe prioritizing our immunology programs provides a great opportunity to create value for our shareholders. We believe further development of NKTR-two fifty five with the strategic partner is therefore the best path forward for our program.

Speaker 4

And our goal is to find a partner this year. With this reprioritization, the NKTR-two fifty five studies in combination with DARZALEX Fast Pro in multiple myeloma and in combination with cetuximab in solid tumors are wrapping up as we prioritize the cell therapy and bladder cancer studies. Now turning to our preclinical research program. We are advancing our research pipeline with a focus on autoimmune disease. The first program we are working on is our new PEG colony stimulating factor, also known as CSF-one program.

Speaker 4

PEG CSF1 is a polyethylene glycol or PEG modified version of the CSF1 protein. This molecule was engineered to optimize the receptor interaction and the exposure to selectively modulate the resolution processes of inflammation. We believe this program has applications in a number of therapeutic indications, including acute and chronic inflammation, as well as fibrosis, and we are excited to be ramping up the program. Our second preclinical program is our TNFR2 agonist antibody being developed in collaboration with Biologic Design. TNFR2 is highly expressed on Tregs neuronal cells and endothelial cells And TNFr2 agonism has been shown to potentiate the suppressive effect and overall functional properties of Tregs.

Speaker 4

If absent, it is associated with CNS autoimmunity, while its presence has been associated with protective effects for neuronal cells as well as other cell populations and tissues in the body. The lead antibodies we have identified shows selective Treg binding and signaling, which enables them to be developed specifically for autoimmune disease. We are very excited about this program and its potential to suppress inflammation and promote immune resolution. We plan to file an IND for at least one of these programs in 2024 and look forward to keeping you updated on our progress as these programs mature. And with that, I will turn the call over to Sandy for review of our cost restructuring plan and financial guidance.

Speaker 5

Thank you, JZ, and good afternoon, everyone. I'd like to first outline the actions we are taking currently in the second quarter as part of our cost As we announced in April, we have reduced our San Francisco based workforce by approximately 60%. Costs related to the restructuring will be paid by the end of June in the second quarter. We now have approximately 55 employees based in San Francisco going forward. On an annual run rate basis, the reduction to personnel represents approximately $30,000,000 a year in operating expense reductions.

Speaker 5

We will have quarterly savings beginning in the Q3 of 2023 and we expect to fully realize these annual savings in 2024. With these reductions in annual operating expenses, as Howard Stated, our plan allows for Nektar to have a cash runway through at least the middle of 2026 with our existing cash on hand. Any cash brought in from partnering or other strategic activities would further extend this runway and bolster the balance sheet. Before I move on to 2023 financial guidance, I will note a few non cash items that were recorded during the Q1 of 2023. First, we recorded a one time non cash charge of $76,500,000 to impair the goodwill that was previously recorded on our balance sheet, primarily from Two acquisitions made over 17 years ago, the 2,001 acquisition of Shearwater Corporation and the 2,005 acquisition of Aerogen.

Speaker 5

In Q1, we also recorded a $13,200,000 non cash impairment, primarily for leased assets. These aggregate non cash impairment charges of $89,700,000 contributed $0.48 to our net loss per share in Q1 2023. Excluding these non cash impairment charges, Net loss on a non GAAP basis for the Q1 of 2023 was $47,300,000 or $0.25 basic and diluted loss per share. I'll now review our 2023 financial guidance. We expect to end 2023 with at least $315,000,000 in cash and investments.

Speaker 5

In the Q2 of 2023, we will have non recurring cash payments of approximately $8,000,000 in connection with our reduction in headcount. We expect our net cash usage to decrease in the second half of the year after these payments are made in June. As I said earlier, this reduction in net cash utilization $70,000,000 in non cash royalties and $15,000,000 to $20,000,000 in product sales. We anticipate full year 2023 GAAP R and D operating expenses will range between $105,000,000 $115,000,000 which includes approximately $15,000,000 to $20,000,000 of non cash depreciation and stock compensation expense. We expect G and A operating expense for full year 2023 to be between $75,000,000 $80,000,000 which includes approximately $15,000,000 to $20,000,000 of non cash depreciation and stock compensation expense.

Speaker 5

For the full year 2023, we expect to recognize restructuring, impairment and costs of terminated programs of approximately $30,000,000 to $35,000,000 $13,200,000 of which is a non cash impairment that I mentioned earlier and was recognized in Q1 2023. Our full year 2023 non cash interest expense is expected to be between $20,000,000 $25,000,000 And with that, we'll now open the call for questions. Operator?

Operator

Thank And our first question will come from Chris Shibutani from Goldman Sachs. Your line is open.

Speaker 6

Hi, good afternoon, everyone. This is Charlie on for Chris. Thank you so much for taking our questions. I understand the excitement for having ResMed back in But just wondering as we're thinking about the restructuring efforts going forward, are you open to the opportunity of potentially partnering Respeg with another pharma partner at Some point or are you happy to keep it in house at this point? And then I have a quick follow-up.

Speaker 3

Yes, good. This is Howard. Good question. At this point, I have no plans to partner it anybody else. This is Nektar's program.

Speaker 3

I think it's a great opportunity for us to see this through to completion. I do see from the data that we Should be able to complete a Phase IIb trial in ectopic dermatitis with success and it will be the first mechanism of its kind And I think set the stage for a new way to treat autoimmune disease. So for now, it's our drug. Hope that answers it.

Speaker 6

Yes. No, that's very helpful. Thank you. And then just quickly, if we think about the timeline for the Phase 2b in atopic dermatitis that was kind of played out just now, Should we be expecting those data to maybe be like a mid-twenty 24 sort of timeline?

Speaker 3

Yes. Look, we're going to start that study as soon as we can. It's to take a few more months to finalize the design and get sites set up. I would say that you're looking at somewhere in the range of 14 to 18 months complete that study from the time we start. So, as soon as we start it, we'll give everybody a more thorough update.

Speaker 6

Okay, great. Thank you so much for taking our questions.

Operator

Thank you. Our next question comes from Jerry Gong from Mizuho. Your line is open.

Speaker 7

Hi, this is Jerry Gong on for Marigold Steen. Thanks for taking our question. Just two quick ones from us. For the Phase 2b study in top of derm, are you planning to conducting a different set of analyses Different patients with the maybe prior to TEGSIN, JAK or other cytokine use and one could go on NKTR-two fifty five. Can you give any color on the type of partnership Nexmo might look for, like would a Lilly type of deal be interesting?

Speaker 3

Well, okay, let me take the second half first and then I'll give it over to JZ to answer your first part of your question. I think Look, we're focused right now, I think we need to focus, we need to make sure our cash runway runs through at least the middle of 26. I'm comfortable that we can do that. And that means we're going to focus right now on atopic dermatitis because it's an enormous market, certainly much larger than the cell therapy market. And I do think that that's where we need to focus and I think ResBag has not just the potential to treat atopic dermatitis, but if we're successful there, The potential for that type of mechanism in various autoimmune disorders is kind of exciting.

Speaker 3

I do think for NKTR-two fifty five, I can't tell you what that will look like yet. Obviously, it'll be in combination With a cell therapy, whereas obviously what we're doing with Respeg is active as a single agent. We have to explore carefully what that deal would look like. I think it could be a joint collaboration, it could be a license deal, don't know yet. Certainly all the cell therapy companies are talking to us because I do believe they feel that IL-fifteen is going to be important in potentiating cell therapies.

Speaker 3

So lots of discussion, lots of potential. It could be a collaboration, it could be a license, don't know yet.

Speaker 4

Okay. And hey, Jerry, this is JZ. So in response to your first question, the study design is being finalized now and we still have Wait for the feedback that we get from the health authorities, but I can give you a little bit of color. We're planning to enroll approximately 280 patients. We will have multiple dose regimens that we'll evaluate in the induction phase.

Speaker 4

And then in the maintenance phase, we'll also be looking at very infrequent Dosing regimens. And the purpose of this design is really to springboard from the things that we learned in the Phase 1b study. So there we saw that strong and long durability of effect, which we believe in the maintenance arm can allow us to access very, very low And as we get closer to later this year, closer to kicking out the study, we will give another update. We will unveil the design of the study, some of the key endpoints that we're measuring and all of the additional features. So please stay tuned for that.

Speaker 4

It will be coming up soon.

Operator

Our next question will come from Jessica Fye from JPMorgan. Your line is open.

Speaker 8

Hey, good afternoon. This is JL for Jeff. So a couple of questions from us. First of all, For your kind of strategic decision to partner on 22,255, just wondering if this is something new After you kind of regain the full ride of Respec or was it always on the table for 4,255. And then on your cash runway, is there any extra color that you could kind of conceptualize for us?

Speaker 8

For example, Does your current cash runway to at least mid-twenty 26 kind of budget in completing the full Phase 2b study for Respek? And does it also kind of budget in your 255 study, right, with Cell therapy in Phase 2, I believe that's currently active. And I think you kind of announced some new programs just now. And how much cash runway have you budgeted for those preclinical studies assuming some of them can move into the clinic? Thank you very much.

Speaker 3

Okay, good. Very good questions. Look, we were look, when we've been working as an immuno oncology company and an immunology Of course, 255 was an important component of our portfolio and I still think NKTR-two fifty five, IL-fifteen has an important role in immuno oncology. That said, we need to focus and we need to focus where the opportunities are largest and the opportunities to have a novel mechanism are And that's Respegg. So will we keep working on 255?

Speaker 3

Yes, but I do want I do think we've just changed our mind at this point Over the past years and have decided that as an immunology company, we would like to find a strategic partner for NKTR-two fifty five. And that's to allow us to fully exploit our skills in immunology. Now to the second part of your question, Our cash runway through at least $26,000,000 includes the full cost of a 2b study in ectopic dermatitis. That full cost is in there. It's Approximately $60,000,000 that is fully accounted for in there as is the cost of continuing The NKTR-two fifty five studies to gain a partnership as well as the IND filing for those two programs.

Speaker 3

So that's all in The cash runway through 2026. If we do any other deals or any other opportunities in there that will just add, As Sandra said earlier, that will just add to the length of our pipe our length of our cash runway. Hope that answers it.

Operator

Thank you. And our next question will come from Greg Harrison from Bank of America. Your line is open.

Speaker 9

Hi, there. This is Mary Kate on for Greg. Thank you so much for taking our I guess in terms of the Respegg program, how are discussions going with regulators regarding the development of Respegg in Maybe just looking at the program as a whole here, what other indications beyond AD and lupus do you think would benefit from this treatment? Thank you.

Speaker 3

Okay. Those are good questions. I will turn that over to JZ to give you a good answer.

Speaker 4

Yes. Thanks, Howard. Yes, thank you for the question. So the agency, of course, has seen the totality of all of the studies that have been put forward so far. And that includes the Phase 1b study in atopic dermatitis, where of course there was feedback on the protocol and multiple discussions With the FDA on that study.

Speaker 4

In terms of the Phase 2b study, as I mentioned earlier, so we're finalizing that study protocol We will be seeking health authority feedback on that protocol very, very soon. So then we'll get that additional kind of information that will allow us to finalize protocol to start the study later this year. In terms of the scope of indication, so far Respegg has been Evaluated in a number of indications, there was activity that was seen in atopic dermatitis as we've discussed. There was activity in a Phase 1b study in psoriasis. We saw clinical activity in lupus.

Speaker 4

In ulcerative colitis, The study was stopped early, but not efficacious in that indication. But one of the things that gives us insight in is a range of different Kind of immunological settings where we know Tregs are important and we know that either Treg dysfunction or the absence Of a Treg compartment controlling conventional or effector T cells is a challenge. So there are a range of additional indications that we're thinking about. There's a number in the Th2 spectrum of diseases. Obviously, atopic dermatitis is atopy of the skin.

Speaker 4

There are multiple other atopic conditions of other organs that are definitely something that we're thinking a lot about. There are some neuro inflammatory diseases that we think about as well, and others. And so there's definitely a very wide spectrum, Both biologically and with this novel mechanism to consider multiple indications. As we reiterated on the call and as Howard just mentioned, focus It's critically important. So besides focusing on our immunology pipeline, we're prioritizing our Phase 2b study in atopic dermatitis.

Speaker 4

As we move forward that study and as there's data from that study, we expect in the future that we'll be expanding the program as well.

Speaker 9

Great. Thank you so much.

Operator

Thank you. And our next question will come from Dana Graybosch from SVB Securities. Your line is open.

Speaker 9

Hi, thank you for the question. I'd like to understand how you're thinking about the therapeutic window for Respeg. Specifically, in the lupus study, you also had a dose response in tolerability or safety. And the highest dose, I think is close to the dose where you saw the greatest Treg increases and efficacy in ATD and seem pretty intolerable on lupus. So how are you navigating that in your Phase 2b?

Speaker 9

Thank you.

Speaker 3

Well, I'll turn that over to JZ for a more thorough explanation. But the effects of these Of a Treg mechanism is somewhat different in different diseases. And JZ, do you want to comment further on that? Yes.

Speaker 4

Thanks, Dana, for the question. We've seen with even low dose IL-two and I know you're familiar with the literature That across different disease indications, low dose IL-two has a different kind of performance and there's different Kind of sensitivity of the underlying immune dysfunction and how low dose IL-two works. One of the things We learned from the study in lupus patients, right, is that the high dose, which we've studied before in multiple settings From healthy volunteers to patients with mild lupus to patients with psoriasis to patients with atopic dermatitis and patients with ulcerative colitis, We really didn't see systemic toxicities and issues with that dose level in those other patient populations. But in the moderate to severe lupus patients, we saw more intolerability in that setting. So one of the hypotheses that we have is really related to the nature of the disease.

Speaker 4

In the lupus patients, you have much more of a systemic Th1 disease, Whereas in atopic dermatitis, it's different. It's a Th2 kind of a disease. So even though the same dose level Efficacy at that dose level as well as tolerability. Now one of the things that gives us comfort moving forward in the atopic dermatitis A2b study Is that we've already studied that same dose level, the 24 micrograms per kilogram in the Phase 1b, which is essentially analogous to the 1800 microgram flat dose. We've already studied that dose level in the Phase 1b study.

Speaker 4

And looking at the efficacy profile relative to the tolerability profile, right, it looks like a very reasonable and encouraging, if positive kind of a risk benefit profile from that small study. So we're comfortable continuing using that dose level In patients with atopic dermatitis and yes, so it's really patient population and disease indication difference. It's really not uncommon for many, many reasons.

Speaker 9

Great. Thank you.

Operator

Thank you. And our next question will come from Boris Peaker from TD Cowen. Your line is open.

Speaker 2

Hi. This is Han Fei Hsu for our speaker. Thanks for taking our questions. I have one for Respac. So Lily decided to return the asset.

Speaker 2

Just wonder if you could give a little color for the reasons behind. And also you had some feedback, positive feedback from the key opinion leaders. What does that make you feel confidence Can you move forward with this asset?

Speaker 3

Okay. Certainly a good question and Pretty reasonable. Look, Lilly has other priorities in atopic dermatitis. And when we took The Respegg data in both lupus and in ectopic dermatitis to the various key opinion leaders, every key opinion leader That reviewed the data believe that Respegg is promising therapeutic and needs to be advanced in the clinic to help patients. So I think we were very comfortable when we went to some of the true thought leaders in atopic dermatitis and the true thought leaders in lupus and had them look at the data.

Speaker 3

They were very impressed with it actually. I think Lilly, we were very excited to get Respek back from Lilly. I think they made a business decision that doesn't reflect the inherent value of Respeg. Instead, it really reflects their strategic direction where Respeg Would have been a potential competitor to their anticipated and soon likely to be approved other therapy in atopic dermatitis. So I think there's lots of reasons for them giving it back to us, but I wouldn't say Lack of efficacy for the drug is one of them.

Speaker 3

I hope that answers your question.

Speaker 2

Thank you. That's very helpful. My second question is just general question. As your company now shifting to immunology folks like biotech, So what have you done in terms of your organization that you expertise wise, what have you done to make it a TOSCO were a successful transition.

Speaker 3

Okay. Since JZ is running that part of the organization, I'll let him answer that. Go ahead, JZ.

Speaker 4

Yes. So through the years, we've been bringing in staff with expertise in both drug discovery and drug development In immunology indications, so we've been actually bringing that in. And then when we have areas of either capability or another gap, Then obviously, we get help like others do, from outside experts that help us reinforce some of our decision making and thoughts. Besides that, collectively, within the team that's been developing the pipeline, there are many, many years of experience And working in the immunology fields, across multiple diseases, multiple kinds of immunology settings. And that's across many companies, and particularly in large pharma, where there was a lot of expertise there in the company.

Speaker 4

Thanks.

Speaker 9

Thank you.

Operator

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

Speaker 3

We thank you everyone for joining us today. And again, I want to thank our employees for their commitment and focus Through some of these difficult and challenging times, which we're all seem to be having in biotech these days, we look forward to sharing our progress the development of ResBag with everybody, so please stay tuned. I think there's a lot of potential for this molecule. Thank you very much.

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