Ventyx Biosciences Inc (VTYX) 2022 Q2 法說會逐字稿

Thank you for standing by, and welcome to the Ventyx Biosciences Second Quarter 2022 Earnings Conference Call. (Operator Instructions) As a reminder, today's program may be recorded. And now I'd like to introduce your host for today's program, Marty Auster, Chief Financial Officer. Please go ahead, sir.

Thank you, Jonathan. Good afternoon, everybody. Thanks for joining the call today. Welcome to Ventyx Biosciences conference call and webcast. We will be discussing top line results from the Phase I trial of our TYK2 inhibitor, VTX958. As a reminder, you can find the press releases issued today covering the Phase I results from VTX958 as well as our second quarter financial results on our website at www.ventyxbio.com under the Investors tab of the News & Events section.

Before we begin today, I'd like to remind everyone, the conference call webcast will contain forward-looking statements, including statements about the potential on positioning 958 and related market opportunities; the timing of commencement, enrollment and completion of clinical trials; the anticipated timing of release of clinical trial data; and the expected time frame for funding operations and current cash equivalents to marketable securities. These statements are subject to risks and uncertainties that could cause actual results to differ. And please note that these forward-looking statements reflect our opinion only as of the date of this call. Factors that could cause actual results or outcomes to differ materially from those expressed or implied by such forward-looking statements are discussed in greater detail in our filings with the SEC, including our Form 10-Q for the second quarter of 2022, which we do expect to file this afternoon.

Today's call will feature a presentation hosted by our CEO, Dr. Raju Mohan; and our President and Chief Medical Officer, Dr. Bill Sandborn. Following the presentation, we will open the call to your questions. And at that time, Raju and Bill will also be joined by our Executive Chairperson, Sheila Gujrathi; and our Chief Business Officer, Chris Krueger. We're also joined today by a special guest, Dr. James Krueger. In addition to serving on the Ventyx Scientific Advisory Board, Dr. James Krueger is the Director of the Milstein Medical Research Program and the D. Martin Carter Professor in Clinical Investigation at Rockefeller University in New York. Dr. Krueger is a board-certified dermatologist and is recognized as a world-renowned research expert on the pathophysiology and treatment of psoriasis.

With that said, I will hand the call over to Dr. Raju Mohan, our CEO and Ventyx' Founder, to walk you through the slides. Thanks. Raju, go ahead.

Thanks, Marty, and good afternoon, everybody. It's a pleasure to be able to have the opportunity to present the Phase I results. Slide 3, please. Before we talk about VTX958, which is a focus of the call today, 958 is going to go into Phase II trials, and Bill will talk more about this later in the discussion about initiating 3 -- Phase III trials in Q4 of 2022. I really want to highlight our portfolio of small molecule compounds, differentiated molecules, all internally discovered, and we own all rights -- all IP rights of these compounds. So in addition to 958, we have VTX002, S1P1 modulator. This compound is currently in Phase II studies in ulcerative colitis, and we will report top line data for this compound in 2023.

Then for our NLRP3 portfolio, our peripheral compound, VTX2735, it's a potent inhibitor of NLRP3, and we've announced Phase I results in July of this year. We plan to initiate Phase II filed in CAPS patients in Q4 of 2022. In addition, we'll be disclosing additional opportunities for developing this compound also later this year. And finally, VTX3232, this is also in the NLRP3 class. This, however, is a brain-penetrant, a CNS-penetrant NLRP3 compound. This compound is currently in IND-enabling studies. We plan to initiate Phase I trial in Q1 of 2023. So that is a portfolio of small molecule compounds. Let's move to the next slide, please.

So why the excitement on TYK2? So TYK2 is a clinically validated target from 2 angles. One is the established efficacy of biologics, IL-23 and IL-12/23, all targeting clinical efficacy in IBD, in psoriasis, in psoriatic arthritis. And the other target of TYK2 is interferon-alpha and now validated in lupus. So in addition to the biologics that also allocate this target, allosteric TYK2 inhibitors also target the same pathways, IL-12/23 and interferon-alpha, and thus, TYK2 is clinically validated in these targets, not just by the biologics that target these pathways, but also by a small molecule deucravacitinib that have shown efficacy now in psoriasis, psoriatic arthritis and most recently in lupus.

As you know, these are large -- the disease, as we talked about here, are large markets in the autoimmune disease space, totaling close to $50 billion worldwide, and there is clearly a high unmet need for oral agents because this market, as you know, is currently dominated by biologics.

So where does that position VTX958? It is a highly selective TYK2 inhibitor, an allosteric inhibitor. And what we will show you today and what Bill will share with you is the high selectivity of this compound will differentiate this compound from -- compounds that are less selective that have shown -- that profile is borne out in the clinical trials. And the positive Phase I data that we'll show you today will establish the therapeutic window of this profile, demonstrate the excellent safety profile. And this all leads to class-leading target coverage of side of kind of interest and positions VTX958 for success across multiple indications that we have planned to start in second half of this year.

Next slide, please, Slide 5. So right from the beginning, our chemistry strategy is focused on the allosteric domain of TYK2 classic JAK inhibitor catalytic kinase domain. This domain is highly conserved within the JAK family. And while it's easy to get potent compounds, these cross functionally have very core selectively the crossover into all of the entire JAK family, inhibitor JAK1, JAK2 and JAK3. By targeting the allosteric domain, which is much less conserved, one can actually get very high selectivity from this approach, and that's exactly what we have done with VTX958 shown in the panel here.

And thus, VTX958 had selectivity for TYK2 in the allosteric domain versus JAK1. It's about 4,000 fold selective. It has almost no affinity for JAK2 and JAK3. There is no binding to any JAK2 or 2 allosteric domains. There's absolutely no activity via the kinase domain, and no kinase enzyme inhibition has been shown in our assays for any JAK family members. So as a TYK2 inhibitor, targeting the allosteric domain of TYK2 affords inhibitors high selectivity against other JAK isoforms, and very important here, avoids potential safety risks that are associated with compounds that either hit JAK1 or 2 or 3 or compounds that are not as selective as VTX958.

Slide 6, please. So if you look at -- so both deucravacitinib and VTX958 are both bona fide allosteric TYK2 inhibitors. Where the difference comes out is in the binding of VTX958 to the allosteric domain of TYK2 versus binding to the allosteric domain of JAK1. And if I can focus you on the table below, going to the VTX958 column, VTX958 has 4,000 fold selectivity for TYK2 versus JAK1 in the allosteric binding pocket. In contrast deucravacitinib only about a 50-fold selected profile for TYK2 versus JAK1.

And just a little bit of a structural lesson in here. And the reason why we have been able to do this is that in both 958 and deucrava, both exploit the valine, which is present in the TYK2 JH2 domain, they're both bind to it. What we have done with 958 is, build a compound such that it has a negative interaction with isoleucine, which is now a substitute for valine in the JAK1 domain. And whereas deucravacitinib can still bind to this isoleucine. And this binding difference between VTX958 and a steric repulsion with the isoleucine versus deucravacitinib that can bind to it results in this very high selectivity that we've shown for this compound. So this is a binding differential for 958, 4,000 fold selective for TYK2 versus JAK1.

Next, Slide 7, please. Where this has the biggest impact is now on the functional selectivity of 958, functional selectivity and its ability to now hit -- selectively hit TYK2-driven cytokines, IL-12, IL-23 and interferon-alpha. And you can see that there. With deucravacitinib, they are both bona fide allosteric compounds, they both hit IL-12, 23 and alpha. Where the difference is most striking is in the right-hand side column, where VTX958 has (inaudible) for these pleiotropic cytokines. These are protective cytokines that you do not want to block. So VTX958 in all the assays we have run across panel of cytokines has no inhibition of IL-22, no inhibition of IL-10, no inhibition of interferon-gamma, no inhibition of IL-4, no inhibition of IL-6. So far from positive cytokines, all with a single message, we are highly selective TYK2 versus JAK1 and then deucravacitinib, which is -- which has some interaction with JAK1 that ends up in the bidding the entire panel of cytokine IL-22, 10, gamma, 4 and 6.

So coupled with the high selectivity of VTX958 and the safety profile that we've now seen first from nonclinical safety assessment and now from the safety data that Bill will present to you in the subsequent slides really allows us to reach this broad, very big window. In addition to hitting the potent cytokines we talked about IL-23, cytokines that's been implicated in psoriasis, psoriatic arthritis, in Crohn's disease, it really allows this perfect window, the safety profile of this compound is unmatched target coverage allows us to retain safely exposure, higher exposures in Phase II and Phase III studies to them illicit maximum efficacy in these disease indications.

Slide 8, please. So with that, I'm going to hand over to Bill to walk you through the Phase I results. Bill?

Thank you, Raju. And just to remind the listeners, in this platform you need to advance your own slides, and we're currently on Slide 9.

So what are the goals of our Phase I study? It's really to show the safety exposure and the target coverage of VTX958. And specifically to maximize the exposure in the multiple ascending dose cohorts with both QD and BID dosing regimens to evaluate the safety profile through all of the dose cohorts in this 14-day dosing study to determine the target coverage of TYK-mediated cytokines, interleukin-12, 23 and interferon-alpha to demonstrate direct evidence of TYK2-driven target engagement in subjects by validating in vivo and ex vivo pharmacodynamic assays. And I'll note that in Phase I healthy volunteer studies with deucravacitinib, that the results of this panel of pharmacodynamic assays read through very well (inaudible) demonstrated in Phase II and Phase III clinical trials in various indications. And finally, to establish correlation between VTX958 exposure and TYK2 IC90 coverage in terms of hours per day covered.

Next slide, Slide 10. So what's the summary of the data that I'll show you? These really roll up to safety, exposure and target coverage. Firstly, VTX958 was well tolerated across all of the SAD and MAD cohorts, all VTX958 drug-related adverse events were classified as mild. There were no dose-dependent trends in the frequency of treatment-emergent adverse events. And there was minimal off-target adverse events observed with VTX958, and this is relative to other allosteric TYK2 inhibitors, which I will review in a few minutes.

Secondly, VTX958 exhibits class-leading TYK2 IC90 coverage, meaning that we achieved TYK2 IC90 coverage for up to 24 hours with no dose-limiting toxicities. And finally, we saw robust dose-dependent pharmacodynamic activity in ex vivo and in vivo assays supporting the hypothesis that greater pathway inhibition may enable differentiated efficacy in the clinic.

Moving to Slide 11. This is the schema for the single ascending dose part of the Phase I study. VTX958 was administered as a suspension. There were 7 dose levels ranging from 50 to 500 milligrams, 8 subjects per cohort, 6 active and 2 placebo. And each subject received a single dose of VTX958, then had a washout and was redosed this time with an interferon-alpha challenge, and this occurred in each of the 7 dosing levels.

Looking in the lower right, VTX958 was well tolerated through all the 7 cohorts. All adverse events were classified as mild. There was no temporal relationship to dosing. There were no clinical laboratory adverse events of concern. And significant pharmacodynamic effects is measured by interferon response genes and IL-12 signaling following interferon-alpha challenge and ex vivo stimulation was observed. I'm not going to show the detailed results because the multiple ascending dose is really the area of rate-centric.

Moving now to Slide 12. Here's the schema for the multiple ascending dose study. You can see we studied 5 dose cohorts, alternating BID cohorts at 50 BID, 175 milligrams BID and 350 milligrams BID and in between 250 milligrams QD and 500 milligrams QD. These 5 dose cohorts were dosed for 14 days. There are, again, 8 subjects per cohort, 6 active and 2 placebo. The primary objective was to measure the safety and tolerability and to determine the therapeutic concentration and the dose correlation with target coverage for the TYK targets for both IC50 and IC90 coverage.

Pharmacodynamic analyses were done. These included an in vivo interferon alpha stimulation on day 13 and then transcriptome analysis of TYK2-responsive genes pre and post interferon alpha challenge. And secondly, an ex vivo IL-12/18 stimulation at baseline and at day 10. As I've noted, the interferon alpha stimulation was on day 13. We did that up through Cohort 4. As you'll see shortly, the interferon itself causes a lot of adverse events, so we didn't do the interferon challenge in the final dose cohort.

Moving now to Slide 13, I want to orient you to this. We're really focused on the exposure and target coverage across the cohorts for the 3 TYK2 targets, interlukin-12, interlukin-23 and interferon alpha. When you compare and contrast this to other compounds, make sure that you're really understanding which of these or all of these that are being covered. What you can see here, we'll begin with is just looking at the 2 QD doses. You can see that for IL-12 and IL-23, you have 4 to 6 hours of IC90 coverage and 9 to 14 hours of IC90 coverage or IC50 coverage and just even a little bit more coverage for interferon alpha.

As you go up to the BID doses at 175 and 350, you can see that we have 16 to 24 hours of IC90 coverage for IL-12 and 23 and 24 hours of coverage for IC50 and similar results for interferon alpha. So when you roll this together, we see safety achieved with class-leading TYK2 IC90 coverage. The IC90 coverage lasts up to 24 hours filed, 12, 23 and interferon alpha and the exposures that we demonstrate here approach biologic-like or monoclonal-like suppression of IL-12 and IL-23 pathways.

Moving to Slide 14. So let's transition now to the safety assessment. All of the drug-related adverse events were classified as mild. There were no serious adverse events. No patients discontinued therapy and there were no dose interruptions. There were no dose-related trends in the frequency of treatment of merchant adverse events observed. There were minimal dermatologic adverse events. The skin and subcutaneous disorders were reported in a total of 3 patients in the Phase I trial. That's just 10%. Remember that number as we compare and contrast that to other allosteric TYK2 inhibitors in a few minutes. All of these adverse events were classified as not drug-related. There were no observed infections, cytopenias or lipid abnormalities. And we believe that these data are consistent with a potential best-in-class therapeutic window in the context of the ability to achieve for up to 24 hours TYK2 IC90 coverage with a favorable safety profile.

Slide 15, here are some of the details for the adverse events. We divided the adverse event reporting into pre interferon challenge safety assessment, which goes up until the time of the interferon challenge partway through day 13, and then I'll show you on a subsequent slide the adverse events that occurred after the interferon challenge. Interferon-alpha causes a lot of side effects, so we split this out so you can better see the potentially drug-related side effects.

Walking through this, you can see headaches, soft feces in a smattering of patients, no clear relationship. There were 3 patients that had a skin manifestation papular rash. In the 252-day cohort, there was a single papule on the lower right cheek, judged not to be drug-related. It's mild, resolved with continued VTX958 dosing and did not have any topical therapy to the lesion. This is such a tiny thing that we're really almost dismissing this as being related.

Then there were 2 patients at the 350 BID cohort who had skin papules. One of these were mild papules judged to be not drug-related. Once subject had mild face papules that resolved with continued VTX958 dosing, and again, no topical therapies of lesion. There was a second subject with mild face and trunk papules that improved, but did not completely resolve with continued VTX958 dosing, again, no topical therapies. Finally, there were some patients with dry mouth and abdominal pain. There was 1 patient that had liver transaminase elevations. These were judged as mild and occurred in the context of a COVID-19 infection.

Moving on to Slide 16, here are the adverse events that occurred after interferon-alpha challenge. You can see that they occur frequently in both placebo and VTX958, and they're sorts of things you would expect to see with interferon-alpha. There was 1 patient that had a rise in ALT just after the interferon-alpha dose, which resolved thereafter.

Moving on to Slide 17. Looking at the potentially JAK-related hematologic and chemistry panel findings. There were no changes over time in hemoglobin, neutrophils, lymphocytes for platelets, no changes in creatine phosphokinase and no changes in lipids.

Moving on to Slide 18. So now transitioning from safety to the pharmacodynamic effect. We saw robust dose-dependent pharmacodynamic effects. On the left, you can see complete suppression of all IL-12 signaling. There was a dose-dependent inhibition of interferon-gamma after dual IL-12/18 stimulation at all time points. These data imply complete suppression of IL-12 signaling. And I note that IL-12 and 23 share the TYK2-specific heterodimer IL-12R beta 1. So we believe that this inhibition of IL-12 signaling also indicates inhibition of IL-23 signaling. And you can see the data in the graph below.

Moving to the right side, we also saw a robust inhibition of TYK2 responsive genes, including CXCL10, ISG20 and IFI27. These genes are direct downstream targets of interferon-alpha and display diverse onset, amplitude and resolution kinetics. There's potent exposure pharmacodynamic activity in all 3 genes and the response is dose-related through all the cohorts tested. In the table below, you can see the impact on these TYK-mediated genes expressed as a percentage of inhibition relative to placebo for the 175 milligram BID dose. And what you can see is really a dramatic inhibition through most of the day for all 3 genes.

Moving on to Slide 19. So in summary, we believe that we've demonstrated class-leading target coverage with excellent safety and exposure margins. VTX958 demonstrated differentiation versus deucravacitinib and other allosteric TYK2 inhibitors in terms of safety and target coverage in the Phase I MAD study. VTX958 achieved TYK2 IC90 coverage for up to 24 hours. There's a broad therapeutic window with biologic or monoclonal antibody-like suppression of the IL-12/23 pathways. And we note that VTX958 is the only allosteric TYK2 inhibitor to demonstrate safe and sustained coverage of IC90 for IL-12/23 and interferon alpha.

Moving on to Slide 20, we'll now spend a few minutes looking at the differentiation and development strategy for VTX958. Moving on to Slide 21. So let's think about this profile relative to deucravacitinib and what the opportunity is to differentiate VTX958 in terms of an improved therapeutic window. First-generation allosteric TYK2 inhibitors like deucravacitinib are limited by toxicities. Deucravacitinib at a 6-milligram dose, which is the Phase III psoriasis dose, achieved IC90 -- IC50 coverage for about 9 hours and never achieved IC90 coverage. There's a dose-dependent exposure of skin toxicities, and I'll get more into that in another slide, including acne and rash with deucravacitinib, particularly above the 6 milligram QD dose.

And we would expect the fuller pathway inhibition with an improved therapeutic window would be expected to drive the differentiation of VTX958 versus deucravacitinib, meaning that we'd have greater coverage of the TYK2 IC50 and especially IC90 that could be expected to drive improved efficacy, not only in indications like inflammatory bowel disease where very high doses and IC90 coverage may be necessary, but also improved efficacy in indications such as psoriasis and psoriatic arthritis. And on the left, you can just see the time versus concentration curves for deucravacitinib at the psoriasis dose of 6 milligrams once a day as well as a 12-milligram once a day dose. And you can see that both of these have IC50 coverage for part of the day but no IC90 coverage.

Next slide, Slide 22. So let's get into the details of the skin adverse events and target coverage a little bit. I'm going to focus you to the table on the right initially on the second line. So these were the deucravacitinib Phase I MAD data in healthy volunteers. I'll remind you, this is a 14-day study with interferon-alpha challenge on day 13, so exactly the same as what we saw. And in the context of 14-day study, once you get to 6 milligrams BID or 12 milligrams QD, you're seeing 33% to 50% rolled up skin adverse events. As you go up to 12 milligrams BID, it's almost 80%. And across all of the doses that were studied, it's 42% of patients. I'll remind you that I showed you a few minutes ago that our rolled up skin manifestations with VTX958 are by contrast 10%.

Then if you look down to the various Phase II and Phase III clinical trials, you can see that if you say it's a 6 milligram QD dose or a 3 milligrams BID, you can have acne and rash in the sort of 2% to 4% range. Although with lupus, if you looked at all skin AEs at 3 milligrams BID, it was still 17%. But then when you get up to 6 milligrams BID and 12 milligrams QD, you're getting often in the 8%, 9%, 10% range, acne and rash in the lupus trial where they reported all of the skin manifestations together, you can see it's 34% of patients with both of these doses.

So -- and then just to remind you, the 6 milligram QD dose has 9 hours of IC50 coverage for TYK2 and 0 hours for IC90. And even as you get up to 6 milligrams BID and 12 milligrams QD, you're having 18 hours of IC50 coverage and 0 hours of IC90 coverage. So very different coverage than what you see with VTX958 and yet significant dose-dependent dermatologic adverse events.

So we believe that these data establish robust differentiation versus deucravacitinib. We note that deucravacitinib [analysis] a dose-dependent and potentially dose limiting skin toxicities. These skin findings occur with high frequencies at exposures greater than 6 milligrams per day. And by contrast, the VTX958 demonstrates the potential for a best-in-class therapeutic window, meaning that we've achieved high TYK2 IC90 coverage without frequent skin adverse events.

Next slide, Slide 23. So I want to level set you here. This is comparing 3 different allosteric TYK2 inhibitor Phase I data. So these are 14-day trials in healthy volunteers with an interferon-alpha challenge at the back end of the trials. And we'll start with VTX958. So we looked at total daily doses ranging from 100 to 700 milligrams per day. We saw skin and subcutaneous disorders, that 10%. These were papular rash in all 3 patients. But I'll remind you that one of those at the 252-day dose is just a single papular rash that was judged not related and results under therapy. So quite low skin manifestations, and we had a single patient with elevated transaminases that were mild in the context of the COVID infection.

If you look at the clinically relevant doses of 175 BID and 350 BID, we have 16 and 24 hours of IC90 coverage, respectively, and 24 hours of IC50 coverage. Now let's -- on the right was deucravacitinib, they studied in Phase II -- Phase I healthy volunteers doses ranging from 2 to 24 milligrams of full daily dose. The overall skin and subcutaneous disorders were 42%, including rash 20% and acne 13%. At the relevant clinical dose of 6 milligrams QD day, there was IC50 coverage of 9 hours and IC90 covered to 0 hours. In the middle, we see the Nimbus compound. There were a couple of dose ranges looked at 20 to 35 milligrams Q day and 50 to 100 milligrams QD. You could see up to 67% acneform dermatitis, a papular rash and up to 25% of patients -- the patients that developed a great CP3 -- CPK elevation on 20 milligrams. If we consider 30 milligrams of the clinic-ready relevant dose, it's 24 hours of IC50 coverage and about 5 hours of IC90 coverage.

Going on to Slide 24. So here, we're stepping away from just focusing on healthy volunteers to the totality of the opportunities and available data and focusing on the clinically relevant doses. So with VTX958 at 175 BID, 24 hours of IC50 coverage, 16 hours of IC90 coverage for that dosing below essentially no skin findings, no laboratory findings, and we believe this represents a best-in-class therapeutic window, not only for inflammatory bowel disease, but also the opportunity to leverage and maximize the dose response in psoriasis and psoriatic arthritis above what was achievable with deucravacitinib because of the limited therapeutic window.

For deucravacitinib at the relevant dose of 6 milligrams 2 day, 9 hours of IC50 coverage, no hours of IC90 coverage, you see dose-dependent acneiform dermatitis, folliculitis and rash, especially doses more than 6 milligrams QD. So that's dose limiting. You can see rare CPK and triglyceride elevations in the psoriasis Phase III trials. We note that there was a failed trial of deucravacitinib at a 6-milligram BID dose and ulcerative colitis. And I think I've explained why that they really wouldn't have the IL-12 and 23 coverage that you would expect to see for efficacy in inflammatory bowel disease. More on that in a moment. And we think there's still an opportunity to go up as they really showed in their Phase II trial for some of the more robust outcome measures like IC90 where there was a limit -- a linear dose response across all the dose of the study.

And finally, with this Nimbus product at relevant dose of 30 milligrams QD, 24 hours of IC50 coverage, only 5 hours of IC90 coverage, and they see acne rash skin manifestations. There's been a case of neutropenia, CPK elevation and triglyceride elevations. They currently have no active programs that we're aware of in inflammatory bowel disease.

Moving on to Slide 25. So let's look at the sort of commercial opportunity here. We've thought of the biologic compounds directed against interleukin-17 and IL-23 as currently sort of the best-in-class compounds for psoriasis, and you can see 85% to 90% response rates for PASI-75 outcome measures. Otezla is about 1/3 of that PASI-75 in the 30% range. Deucravacitinib is superior to Otezla, but still only achieving low 50% range of PASI-75. So there's a large gap between what is achieved with deucravacitinib with the 6 milligram once a day dose and what you can see with the biologic therapies. So their aspirational target for VTX958 is to close that gap because of our superior target coverage where we can cover IC90 for much of the day.

Moving on to Slide 26, focusing on IBD. We know from biologic agents at higher doses, and we think that reads through to higher target coverage is required for Crohn's disease. You can see here for Skyrizi, Tremfya and Stelara, they need 4 to 6x as much biologic to see efficacy in Crohn's disease, as you do in psoriasis. And this greater TYK2 pathway inhibition that's required for IBD efficacy from biologics suggests that higher exposures will be required with other drugs as well for efficacy in Crohn's disease versus psoriasis. I already noted that deucravacitinib Phase II in ulcerative colitis failed at the 6 milligrams BID dosing, but we know that despite the fact that dose is already associated with skin side effects, that there's 0 hours of IC90 coverage. So this is sort of an expected result. Higher doses of VTX958 may approach biologic or monoclonal antibody-like suppression of the IL-12 and 23 pathway. And because of this, this profile of VTX958 may unlock a major market opportunity in Crohn's disease, which is currently greater than the $13 billion global opportunity.

Moving on to Slide 27. So how do we think about what's next in terms of the development opportunities? We will, later this year, begin Phase II trials that will explore a broad range of dose-finding studies, enabling optimal Phase III dose selection based on the safety and maximizing target coverage. Specifically, we plan to initiate 3 Phase II trials in the fourth quarter of this year in psoriasis, Crohn's disease and psoriatic arthritis. We're also looking at additional indications in Phase II, which could include lupus, given the unique profile of VTX958. These Phase II trials will be dosed with an immediate release or IR tablet. A modified release formulation is in development to approximate the BID exposures with the QD solid oral dosage forms. And we would, of course, do a bridging study before Phase III. There's precedent for this. This was done with Rinvoq and Xeljanz and other drugs, and we see it as a straightforward proposition.

Moving on to Slide 28. So how does this wrap up? This shows you the landscape of the IL-23 and 17 biologics and the oral agents, Apremilast, deucravacitinib and the aspirational target product profile for VTX958. We see very strong efficacy for psoriasis in IL-23 and 17, as we've already discussed. And we believe that with our target coverage, VTX958 could do similarly. We see strong psoriatic arthritis treatment with those agents as well, and we anticipate the same for VTX958. For Crohn's disease, we think that anti-IL-23 is probably best in class. You can't really use anti-IL-17 in Crohn's disease or ulcerative colitis, not applicable to Apremilast. We don't know yet for deucravacitinib, but based on the data I showed you earlier, I would speculate that the studies looking at 6 milligrams BID or 12 milligrams once a day are unlikely to be effective in Crohn's disease, whereas we expect that VTX958 will have a biologic-like effect, same story for ulcerative colitis and finally for lupus.

So if we summarize this, VTX958 has an excellent safety profile, class-leading TYK2 coverage, potentially superior therapeutic window compared to anything else in the world classes. There's a unique opportunity in inflammatory bowel disease, and we're well positioned to capitalize on several biologic-dominated autoimmune markets.

Slide 29. And this is just to make the point that these markets are big, almost 11 million patients in the United States across these indications. And on the right, as Raju said earlier, almost a $50 billion global market, this is dominated by psoriasis, Crohn's disease and ulcerative colitis, with smaller contributions from psoriatic arthritis and lupus. And as I showed you on the previous slide, we have the opportunity to make -- to markedly impact each of these markets. So VTX958 will enable clinical differentiation across multiple indications, has the potential to offer a differentiated clinical profile in psoriasis, psoriatic arthritis and lupus by dosing to levels of TYK inhibition that are greater than that -- that can be achieved with competitors with a more narrow therapeutic window. We'll be uniquely positioned among TYK inhibitors to address Crohn's disease and IBD indications where IL-12/23 and IL-12 antibodies have proven effective at higher doses than it is what you do with psoriasis.

I'll stop here and hand it back to Raju to wrap up. Please move on to Slide 30.

Yes. I think that really summed it up, Bill. So thank you again. And I'm going just a time when we open up for Q&A.

(Operator Instructions) Our first question comes from the line of Yasmeen Rahimi from Piper Sandler.

First of all, congrats to the really stellar data, an outstanding job. A couple of clarification questions. In the MAD portion, when you referred to some of the skin rash that it wasn't related to the drug, how do we know it's not an on-target effect? If you could just elaborate a little bit there.

And then my second question was, you nicely showed cholesterol levels. Did you measure triglycerides and LDLC? It was just cholesterol just one of the biomarkers showing this representation of a long list of lipid biomarkers that were assessed. And then 2 more small questions for you.

Yes. So let me have Bill address the rash ones, but I can speak to the lipids. So we did measure triglycerides. There was no change. We looked at LDL cholesterol. There was no change. There was no change in any lipids or cholesterol in the study. We just highlighted cholesterol for remedy here. But there was no change at all in any fatty-acid competitions, no lipids, no triglycerides, no cholesterol. Bill?

Yes. The judgment of relatedness with rash is really done by the investigator, so it's sort of up to them. I take your point and don't disagree with you that the 2 papules seen in the highest dose group 350 BID could easily be related to the medication. But I think the key point is that it was very clean up to that point. And even those 2 cases, one completely resolved under continued therapy and the other partially resolved. If you go back and look in detail at the dermatologic adverse events in the Phase I healthy volunteers with deucravacitinib, there were a number of cases where the skin manifestations led to early discontinuation of the treatment during the NAV study.

The one case of where ALT, AST and GDT increased and those were classified as mild, I assume mild means nothing over -- greater than 2x of the upper limit. Just define what you mean with mild? And then did that just occur before they got COVID and they went down just to kind of -- or just the start up with slightly elevated liver enzymes? And then so once they're on 350, it's got increased? Just some color around that. And then the last question is, what -- where they got COVID and they went out just to kind of -- or did they start out with slightly elevated liver enzymes. And then once they're in 350, it's got increased. Just some color around that. And then the last question is, what sort of the dose ranges you're planning to go into your psoriasis study and into your Crohn's study? Or you can discuss all that.

Yes. For the patient where there was COVID, you can often see a low level of enzyme bouncing around. But the rise really occurred in the context of about when the COVID infection started. And the second case, as I indicated, was a mild elevation that occurred immediately after the interferon-alpha challenge.

And in terms of doses, I think we're not prepared to outline exactly today the doses will take into Phase III, but it would take into account the totality of the efficacy and the safety data and the target coverage. And we anticipate exploring doses to cover most of the day for IC90.

And our next question comes from the line of Michael Yee from Jefferies.

Congrats on the great data. Maybe just a question for Bill or the team. Now that you have all this great data in hand, I know a lot of people are turning to the class as a bigger picture and deucravacitinib -- will get approval soon. So any thoughts around how to think about the scenarios with what that class label might look like and how we should think about the implications for second-generation TYK2s, particularly with a much better coverage, but also in the context of risk benefit in these types of indications versus, say, psoriasis. So maybe Bill can answer that or anyone on the team can answer that.

Yes. Thanks, Mike. And what a surprising question. The good news is less than 4 weeks from now, we'll be on the other side of it. But anyway, it's a good question on that. Maybe Marty Auster, maybe Marty, do you want to take this one?

It's my chance to get some exercise in. Mike, thank you for the question. So obviously, as we all know, deucravacitinib ran a really nice Phase III program with the 6 milligram QD dose, where they showed superiority on efficacy to Otezla, which showed a really nice safety profile. That leaves us probably similar to Bristol in terms of optimism about the approvability of that drug. I think right there, there's already a pretty clear differentiation in terms of the regulatory cost from what we've seen with like JAK inhibitors, obviously, and psoriasis where there's been a couple of setbacks for JAK looking at that indication. So I think there's already pretty clear signs of differentiation from regulators around the TYK2 class versus JAK inhibition.

Obviously, like you were eagerly waiting to see what that label looks like, and obviously, the more -- or the less restrictive the label, we think the faster the TYK2 class is going to kind of gain ground within the $20 billion for psoriasis market. And we're obviously very excited about the prospects there, and our advisers and our KOLs are incredibly optimistic about TYK2s in psoriasis as well. So we're looking for that update as you are. Is there anything on that, Bill?

I think that it's a great rig. So we'll see what happens in less than 4 weeks.

And our next question comes from the line of Josh Schimmer from Evercore ISI.

Very detail helpful overview. Maybe first, the Phase II trial. So if you could get your thoughts on expected size and duration?

Yes, Bill?

I don't know I'm going to give the exact details, but the way the track record for how to do this is pretty well laid out with deucravacitinib. So psoriasis Phase II trials are generally in the phase of about 200 patients, and psoriatic arthritis trials are something in that range as well. For Crohn's disease, we'll do something that will be appropriately powered and different range of doses. In terms of duration, we're anticipating sort of that 16-week range for psoriasis -- psoriatic arthritis and probably a 12-week range for Crohn's disease. We anticipate extension programs for each of those indications as well.

Excellent. And then on Slide 7, where you showed the IC50s for 958 versus deucravacitinib. But I would have thought that there's decent enough selectivity for deucravacitinib, the Th1 cytokines over the protective cytokines in order to provide good efficacy coverage without safety concern. But the IL-10 looks like an outlier from that framework. It looks like it would be actually pretty challenging to inhibit the Th1 cytokines without also inhibiting IL-22 for deucravacitinib. So can you discuss, first, do you think the IL-10 inhibition is likely underlying some of the deucravacitinib toxicity? And why would IL-10 specifically be an outlier and that it's more sensitive to deucravacitinib than some of the other [cytokines] you've shown on that slide?

Bill, do you want to take the...

Well, for the dermatology adverse events, we do think that those are off-target and not on-target. And the reason for that is, as I pointed out, the dosing profiles that have been done in inflammatory bowel disease for the IL-12 and IL-12/23 inhibitors are very high, and there's just no signs of dermatologic adverse events. And likewise, the approved product for lupus for type 1 interferon antibody also doesn't show any skin side effects. So it's difficult to believe that those dermatology off-target -- or adverse events are on target, meaning they must be off-target. Whether they're exactly JAK1 or something else, as you're pointing out, I think it's a little hard to tell and one knows for sure, but we see them as being off-target.

Yes. And Josh, you know, you and I have talked about this before. There's some indication of IL-10 and IL-10/22 axis effects on (inaudible). So it affects on -- direct effects on Philogen and Neurocrine and also on some microbial defense. So there's clearly a link that can be established. Now as Bill said, is this something that's directly linked to JAK1? But certainly, you can explain it through targeting IL-10 and IL-22.

And our next question comes from Tiago Fauth from Credit Suisse.

So just 2 quick for me. So the first one is, again, how would you have a line of sight in running 3 Phase III trials for 958. You also expect to run a Phase II for CAPS for 2735. I'm curious if your plans have changed at all or evolved in terms of potential partnerships. Or at what point do you start to run into resource issues? Is this something that you can endeavor to take all the way across the finish line for the Phase IIs across the board? How you're thinking strategically about that development? And then just on the modified release formulation, just curious if you can provide any additional details as of now on what technologies are you using to try to get the BID exposure with the QD oral dosing again, kind of combining the benefits of the safety profile and the 24-hour coverage.

Yes. So let me take the modified release first. It's pretty straightforward. We're working with a terrific CRO, a tremendous experience in developing modified formulations. We have multiple -- aiming from multiple formulations to go into human studies, and we'll start to share data as early as first half of 2023. So our nonclinical data here and including animal PK and other in vitro studies, it looks very promising, and that seems into the design of the product. So very confident we'll have an update for you folks in first half of this year. So I'm not going to go into the CROs, but we're working with some highly experienced people and a great combo to work with, right? So I think that's the answer on the MR.

In terms of the financing question, so look, we're -- as Marty put out in his earnings release, we are well capitalized over $250 million at the end of Q2. And frankly, rolling in from Phase I, the team has a laser focus now on executing in our Phase II trials, starting 3 Phase II trials this year in TYK2 alone. And we're targeting a proof of mechanism for our CAPS trial, looking at other indications. And so we are capitalizing for the second half of 2024.

Now with these targets that are, #1, address large markets, diseases with high unmet need and really of interest to pharma, not just TYK2 but without exception TYK2 S1P1 and an RP [treater] really of under interest of pharma. So as we move along, we'll look at every and all opportunities that present themselves, we're very thoughtful about them. And those, as you know, include non-dilutive options such as strategic partnerships as and when they come. So we have the luxury of having complete ownership of our compound, they're all internally discovered and we'll look at every opportunity to strengthen our capital position in the coming months and quarters. But maybe Marty has something to after that.

Sure. Thanks, Raju. Yes, I would just add, Tiago. We have a great deal of flexibility. Obviously, what we do going forward. The cash balance of $258.4 million into Q2 actually can get us to meaningful data readouts for S1P1R ulcerative colitis for RP treatment in psoriasis, potentially for data readouts in psoriatic arthritis and Crohn's as well as the 2735 CAPS program. So there's a lot of robustness built into sort of the data readouts, we'll see off that capital position. And again, as we're looking to kind of continue to expand that runway, so we don't have any delays or hiccups in moving from Phase II into Phase III over the next couple of years, we'll be looking to sort of bolster that through a combination of different things, including potential for equity financing, potential for strategic partnerships.

Our next question comes from the line of Sam Slutsky from LifeSci Cap.

Congrats on the data. A couple for me. For the IP90 coverage, you mentioned that's consistent across cytokines of interest being IL-12, IL-23 and interferon alpha. I guess as we interpret date... (technical difficulty)...

Operator, can we maybe shift to the next one and come back to Sam?

Certainly. And our next question comes from the line of Jeff Jones from Oppenheimer.

Congrats on the data. I guess 2 questions -- 3 questions for me. Is your development strategy on 958 impacted at all by whether deucravacitinib gets a "clean label" or not. So does that sort of impact your study designs or otherwise? In terms of the SLA indication, what is sort of -- are there gating items in terms of your decisions to move forward? Obviously, 3 Phase IIs takes you a long way on 958 with -- even without SME in the short term? And I guess the third question on the S1P program. Can you give any further clarity around the time line beyond 2023? Are we -- any reason to think first half versus second half? Or can you provide anything beyond the 2023.

Yes. So the label question, lupus and S1P1. So let's just start with Bill.

Yes. So I think the label probably doesn't materially impact our thinking. Our belief is that it's certainly possible that there will be a black box warning. We think it's not very likely that there will be a line of use restriction. And as long as that's the case, then it really wouldn't impact our thinking about the design.

In terms of S1 lupus, as you saw with the markets in the last slide, the largest markets are psoriasis and inflammatory bowel disease. Psoriatic arthritis is third and lupus is smaller, although that is frankly probably partially a lack of effective therapies and we could anticipate that to get bigger over time. We have a lot on our plate, and we need to choose some of it before we move on, but we think lupus is a very attractive indication in new course, but that's sort of how it played out. We will plan to update our S1P program sometime later in the year. What I would say is we're making really good progress now with recruitment.

And our next question is from Sam Slutsky from LifeSci Capital.

Two for me. So for IC90 coverage, you mentioned that it's consistent across cytokines of interests, which are IL-12/23 and interferon alpha. As we're interpreting data from others, do you know if IC90 data are always inclusive of each of these cited clients? Or is it just sometimes a few of them?

I think IC90 depends on your hitting the target starts with IC50 and you can stop at IC90. So we know from deucravacitinib, from their published data and various papers and so on, what their IL-12 coverage is. And as Bill said, IL-23 has to be reduced because there is no human whole-blood asset for IL-23. And the same is interferon alpha, BMS has published their IC50 and IC90 on alpha. And for other folks, we've seen interferon alpha data perhaps in a poster from Nimbus. But no, the answer is no. We don't like it to cover all of the cytokines with the same potency, the same -- each of them has their own threshold. And we certainly hit IL-23 more potently than we do IL-12, and the same goes for alpha. So when we do cover 12, very comfortable we're also getting IL-23 and interferon alpha in the same assays right now. Okay. So that's it. Next one.

Yes. And then next question is just general kind of PK/PD question. Just is there any data with 958 on whether there's a food effect, BDI, QD prolongation or just anything else notable?

Yes. So we don't expect any cardiovascular effects with this molecule thus far, but of course, we'll do a formal study, therapeutic study in the future. There's no hints of any changes right now in any abnormal cardiac function from what we've seen thus far, and we do very careful monitoring in our studies. And then what we're going to do is we're going to disclose our entirety of our PK/PD data at a later discussion. It's really not -- it's no impact on our Phase II strategy. It's going to be a big data dump that we'll do in a meeting at an appropriate forum there. But what I would like to do is let's see if there's any more question on that. Okay. The statements give Jim Krueger opportunity to weigh in as well. So yes, on a question, next question. Jim, so operator, is there another question in there?

Yes. Absolutely. One moment for our final question. And our final question comes from the line of Edward Nash from Canaccord.

This is (inaudible) on for Edward. Congratulations on the positive data. The first question that I have is still about the dose for the Phase II studies that about 2 initiates later this year. From your slide just presented, you said the trials will explore a broader range of doses. And based on this Phase I data today, we see the 2 -- 175 and 350 BID doses seem to be pretty good. So could you please share more colors on why you would like to explore a wider range of doses? And I have a couple shorter questions later.

Well, generally, you'd like to explore some less effective doses as well as what you think with optimal dose or doses would be. So that's part of the dose range. We actually are anticipating in psoriasis studying both QD and BID doses. So there will be a range of doses there, which is typical for Phase II trials.

Okay. And for the Phase II studies, I guess, what are the key parameters that will be monitored both on the target coverage part and also on the general monitor of patients' progression?

Well, I think the path is pretty well (inaudible). I see for psoriasis the PASI-75, which is a typical outcome measure. We think with the robustness of our target coverage that we're interested in seeing how we would differentiate on PASI-90 and PASI-100 as well. We plan a substudy of -- to study the translational medicine aspects in skin biopsies. So that's all pretty standard. For psoriatic arthritis, it's the ACR 20 and 50 and 70 in the typical things. And again, we're very interested in seeing how we might differentiate with the more robust outcome measures in Crohn's disease. The outcomes are clinical remission and endoscopic improvement and endoscopic remission, and we will be setting all of those things. With Crohn's disease, you have the opportunity for biopsies and that, of course, gives you the opportunity for translational medicine studies as well we do at this.

That's very helpful. Very last question from me, I promise. So among the 3 indications, are there any order of priority from the company that -- which one would be the most, I guess, the resources are going to -- yes, the priorities.

Yes. So good. Thank you. So we've guided folks that we'll start all 3 trials in the fourth quarter this year. And we've also guided folks that our first trial will be in psoriasis. And there's no priority amongst one of the others. So we're planning to start all 3 trials, and we're capitalized to do so. So stay tuned.

As a father, I'm going to say I love all my kids the same.

Yes. Thank you. So we've got, of course, our IBD expert here in-house, Sandborn, but I'm going to invite Jim Krueger, who is a KOL in the dermatology space. And maybe, Jim, could you give your thoughts on the Phase I data that you just had a chance to see and put the data in context of -- you work with a lot of drugs, you work with biologics and certainly with small molecules. So maybe you can comment on this?

Sure. Sure. So I mean I think what we've seen here are perfectly sensible, maybe even (technical difficulty)...

Jim, we're losing your audio. You do want to start...

And the activity, maybe I'll just speak up a little bit. I'm not quite sure how I can increase the mic volume. I'll just sit close to the computer. So (technical difficulty)...

You're still not coming through.

I really don't know what to do, other than scream. I just say it's fascinating data that are (technical difficulty)...

No, no, no. Take your time. Just relax. Technical stuff happens.

Okay. I don't think it's in my end. I hope not. I think the (technical difficulty)...

No, it's not -- you know what, you're not coming through. Sorry. I did hear you say fascinating data. We're very excited by it. And we'll -- look, you know what, I always believe in second chances. Maybe I'll give you one more chance here. So try again.

Okay. I don't know if you can hear me. Am I coming through?

Yes.

Okay. So as I say, I think that the data portends very well for what's going to happen to psoriasis and they make a (technical difficulty)...

No, no. Not working. So let's stop now, and there'll be ample opportunities for folks to interact with Jim. Well, again, Marty, you want to sum up here?

No. I just -- thank you, everyone, for joining us today. Obviously, Raju and Bill did all the heavy lifting here. Thank you so much. And Jim, thanks for joining us as well. I appreciate it, and we're available to follow up with your questions post call. Thank you.

Yes. All right.

Thank you. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.