Absci Corp

NASDAQ:ABSI

Earnings Call Analysis

Earnings Call Transcript 2024-Q2

[Operator]

Good day, and thank you for standing by. Welcome to the Absci Second Quarter 2024 Business Update Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Alex Khan, VP, Finance and Investor Relations. Please go ahead.

[Alexander Khan, executive]

Thank you. Earlier today, Absci released financial and operating results for the quarter ended June 30, 2024. If you haven't received this news release or if you would like to be added to the company's distribution list, please send an e-mail to [e-mail]. An archived webcast of this call will be available for a replay on Absci's Investor Relations website at investors.absci.com for at least 90 days after this call. Joining me today are Sean McClain, Absci's Founder and CEO; and Zach Jonasson, Chief Financial Officer and Chief Business Officer. Christian Stegmann, Absci's SVP of Drug Creation will also join for Q&A following prepared remarks.

Before we begin, I'd like to remind you that management will make statements during this call that are forward-looking within the meaning of the federal securities laws. These statements involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated, and you should not place undue reliance on forward-looking statements. Additional information regarding these risks, uncertainties and factors that could cause results to differ appears in the section titled Forward-Looking Statements in the press release Absci issued today and the documents and reports filed by Absci from time to time with the Securities and Exchange Commission. Except as required by law, Absci disclaims any intention or obligation to update or revise any financial or product pipeline projections or other forward-looking statements either because of new information, future events or otherwise. This conference call contains time-sensitive information and is accurate only as of the live broadcast, August 14, 2024. With that, I'll turn the call over to Sean.

[Sean McClain, executive]

Thanks, Alex. Good afternoon, everyone, and thank you for joining us for our second quarter business update call. Today, I'm excited to be sharing updates around new and existing partnerships, as well as continued progress on our own internal pipeline of programs. As always, these achievements are a testament to the work our team does each and every day and reflects our platform's differentiated capabilities in AI drug creation for biologics. With our integrated drug creation platforms, unique capabilities in creating differentiated antibody candidates, we believe we offer a valuable proposition to potential partners to work together on therapeutic programs. Along those lines, we are pleased to announce that we have recently entered into a new collaboration with Memorial Sloan Kettering Cancer Center, a leading cancer treatment and research center to jointly develop up to six therapeutic programs. MSK has an incredible record of groundbreaking translational and clinical innovations in oncology. By combining MSK's research expertise with our generative AI drug creation platform, we have the potential to unlock critical advances towards treating these devastating diseases.

We at Absci are proud to be adding another great partner to our list of collaborators. Now, including AstraZeneca, MERCK, Almirall, NVIDIA and others. And we look forward to working with MSK on these important programs. While work continues on our partner programs, we continue to make great progress on each of our internal programs. ABS-101, ABS-201 and ABS-301, and we are working towards advancing at least one additional internal asset program to a lead stage this year as well. Starting with ABS-101, our anti-TL1A antibody. Today, we are excited to share results from our nonhuman primate studies for this program, demonstrating 2x to 3x extended half-life as compared to antibodies in clinical development, and further supporting this program's potential best-in-class profile.

Supporting information for these studies can be found in our newly published corporate presentation on our investor website. We are also pleased to share that ABS-101 is observed to have an increased biodistribution in nonhuman primates as compared to anti-TL1A antibodies in clinical development. This could potentially lead to a therapeutic benefit at steady-state levels and tissue penetration could be achieved faster, potentially without the need for a loading dose. Additionally, CMC studies verified the ability to formulate ABS-101 at a high concentration of 200 mg per ml, which supports further development of a subcutaneous formulation. We continue to advance ABS-101 through IND-enabling studies as planned and are confident in our program's ability to potentially demonstrate a truly differentiated product profile. We remain committed to advancing this program and expect to initiate Phase I clinical studies for ABS-101 in early '25, with an interim data readout expected in the second half of 2025.

Turning to ABS-201, our potential best-in-class dermatology program. ABS-201 is designed for an undisclosed dermatological indication with significant unmet need. For the efficacy of the pharmacological standard of care is not satisfactory. As we advance this program, we see this target as underappreciated, where we could potentially be second to clinic for this target. We continue to anticipate selecting a development candidate for this program later this year. Finally, ABS-301, our potential first-in-class immuno-oncology program. ABS-301 is a fully human antibody designed to bind to a novel target discovered through Absci's reverse immunology platform. We continue to anticipate completion of mode of action validation studies for this program later this year. And as we continue to advance this program, we look forward to further updating you all in the future. For ABS-201 and ABS-301, we plan to share data from preclinical studies either at the end of this year or early next year.

Looking at the rest of 2024, I'm excited for what's to come next. We remain focused on continued innovation and execution on our internal and our partner programs, all with the mission to create better biologics for patients faster. With that, I'll now turn the call over to Zach to walk through our new partnership, our outlook and provide an update on our financials. Zach?

[Zachariah Jonasson, executive]

Thank you, Sean. As Sean mentioned, we are pleased to have recently announced our new collaboration with Memorial Sloan Kettering Cancer Center, a world-leading cancer treatment and research center to discover and develop up to six novel oncology therapeutic programs using generative AI. Under the terms of the collaboration, world-leading research teams from both Absci and MSK will work together to co-develop therapeutics designed using Absci's integrated drug creation platform. We believe this co-development collaboration with MSK will leverage considerable synergies between the two organizations. The collaboration will combine MSK's target research and validation capabilities with our generative AI drug creation platform capabilities to potentially create differentiated antibody therapeutics towards novel oncology targets. Furthermore, Absci and MSK plan to collaborate on the early development of these therapeutic assets in advance of out-licensing or partnering them.

By working with a premier research institution such as MSK on co-developing therapeutic programs, we aim to leverage R&D synergies that could lead to significant value creation through the generation of first-in-class therapeutics addressing significant unmet medical needs. Moreover, such co-development collaboration structures, which include cost sharing, allow Absci greater diversification on a capital weighted basis. Our pipeline of potential new drug creation and co-development partnerships remains robust. Hence, we continue to anticipate signing partnerships with at least three more partners in addition to our multiprogram partnership with MSK during 2024. This will bring us to a total of at least four new partnerships this year.

We look forward to utilizing our expanding set of generative AI capabilities in existing and new partnerships. A particular focus area for existing and potential new partners is leveraging our platform to provide epitope specificity and epitope landscaping at both the local and global level. Our global epitope landscaping capability supports epitope selection by allowing testing and validation of the potency and MOA associated with different epitopes on a given antigen. Our local epitope landscaping capability then enables the identification of desired epitope interactions for potentially improving potency in MLA. That is, once a epitope is selected, our AI model exhaustively samples interface contacts with a designated epitope to further refine potency and MOA. Together, these capabilities offer the potential to enhance potency, reduce biological risk, improve and broaden IP claims and to achieve differentiated MOA for a given program. We believe that these capabilities and others, such as the ability to design tunable selectivity, multivalency and pH-dependent binding make our platform highly attractive to potential partners.

As Sean discussed, our growing portfolio of programs includes three wholly owned assets, ABS-101, ABS-201 and ABS-301, all of which were generated using our integrated drug creation platform. We continue to advance these internal programs according to plan. We also continue to make progress on new internal programs and expect to advance at least one additional internal therapeutic program to the lead stage later this year. As a reminder, our business model is focused on out-licensing or selling our internal programs and co-developed programs following value inflection proof points, anywhere from preclinical proof-of-concept, to Phase II clinical proof of concept.

Turning now to our financials. Revenue in the second quarter of 2024 was $1.3 million as we continue to progress our partnered internal programs concurrently. Research and development expenses were $15.3 million for the 3 months ending June 30, 2024, compared to $12.1 million for the prior year period. This increase was primarily driven by increased lab operations, including direct costs associated with IND-enabling studies for ABS-101 and an increase in stock compensation expense. Selling, general and administrative expenses were $9.3 million for the 3 months ending June 30, 2024, compared to $9.4 million for the prior year period. This decrease was due to lower personnel costs and continued reductions in administrative costs, offset by an increase in stock compensation expense.

Turning to our balance sheet. We ended the quarter with $145.2 million in cash, cash equivalents and short-term investments as compared to $161.5 million as of March 31, 2024. We continue to enhance our focus on high-value proprietary internal programs and co-development arrangements while also seeking high-quality drug creation partnerships with industry leaders who can bring talent and complementary expertise. We believe focusing on these initiatives to build a diversified portfolio of partnered programs rather than simply pursuing a higher volume of programs, best positions us for further success in the future. For 2024, we continue to expect a gross use of cash, cash equivalents and short-term investments of approximately $80 million, including the expected costs associated with completing the IND-enabling studies for ABS-101 with a third-party CRO. And based on our current plans, we believe our existing cash, cash equivalents and short-term investments will be sufficient to fund our operations into the first half of 2027.

Altogether, we are very encouraged by the progress we have made on our internal programs and confident in our ability to execute on these and our partner programs over the course of 2024 and beyond. With that, I'll turn it back to Sean.

[Sean McClain, executive]

Thanks, Zach. The past few months have demonstrated our continued progress across all aspects of our business, advancing our internal programs, executing on our partner programs and signing additional partnerships with companies who see the value of our platform capabilities. As we continue to execute over the course of this year, we see a number of potential catalysts in the next 6 to 12 months and beyond. We look forward to updating you all along the way, including at our 2024 R&D Day to be held on December 12th, in New York City. With that, I'll turn the call back over to the operator to begin Q&A. Operator?

[Operator]

[Operator Instructions] In the interest of time, we ask that you please let yourselves to one question and one follow-up. -- our first question comes from Steven Mah with TD Cowen.

[Poon Mah, analyst]

I had a question on ABS-101, the nonhuman primate data. When you're saying that the 2x to 3x additional half-life and the bioavailability, is that based on head-to-head data that you use from competitor molecules? Or is it based on publications on the clinical competitors?

[Sean McClain, executive]

Yes. Great question, Steve. So it is a head-to-head comparison with the clinical competitors. And Christian, do you want to dive into the details on that?

[Christian Stegmann, executive]

Yes. Thank you, Sean, Absolutely. We have indeed compared ABS-101 with two competitor molecules that are in clinical development. This is RVT-3101 and MK-7240,so the Riovant molecule and the Merck molecule. And we could see in our study head-to-head that we have seen a two- to three-fold improvement in plasma half-life of ABS-101 over these two molecules. Does that answer your question?

[Poon Mah, analyst]

Yes. I guess, you got the sequences of the antibodies from their patents then? And then you express them yourself to do the head-to-head studies?

[Christian Stegmann, executive]

That's correct. Yes.

[Poon Mah, analyst]

Okay. Got it. All right. And then a quick one on the Memorial Sloan-Kettering partnership. Can you give us a little bit more detail on the level of the code development that your scientists and the MSK scientists are going to be working on? And also if there's any IP sharing details you can share? And then if MSK is going to be providing any patient real-world data or other data genomics, genomic profiling or proteomics?

[Sean McClain, executive]

Absolutely. Zach, I'll let you take that.

[Zachariah Jonasson, executive]

Sure. Yes, Steve. We're really excited about this partnership with MSK. It's a -- you think of this as a 50-50 cost-sharing co-development platform where we're going to look at six different programs. MSK will be bringing a lot of validation around novel targets. So that validation work could encompass all of the areas that you referenced. We will jointly decide on which programs to nominate into program development for us to work on from the drug creation side and then would be collaborating throughout that process, including once we have a drug candidate to advance those through IND-enabling and potentially through Phase I development. Does that answer your question?

[Poon Mah, analyst]

Yes, that does. Thanks.

[Operator]

Our next question comes from Kripa Devarakonda with Truist.

[Srikripa Devarakonda, analyst]

I have a question about the ABS-101 nonhuman primate data. Obviously, the totality of the data and the totality of the profile of the drug that is important. And you laid out how the drug compares with the other drugs and different metrics. But I was wondering if you were to pick characteristic of the drug that you think will be tough to replicate for a competitor and help maintain the differentiation, which ones would you point to?

[Sean McClain, executive]

Thanks, Kripa. Christian, do you want to take that?

[Christian Stegmann, executive]

Yes, absolutely. Great question. So I think in a nutshell, the totality of the data in the way we differentiate from competition is -- is -- is the combination of attributes we have combined here in overall to achieve a best-in-class profile. So what we mean by best-in-class profile, we have achieved a very high affinity of both the TL1A trimer as well as the monomer, we have achieved significant plasma half-life extension over competitors. We've achieved very good CMC properties that allow us to formulate this molecule at 200 mgs per ml. And then finally, we have also worked on the immunogenicity profile, which will hopefully lead to lower antidrug antibody rates in clinical development. So overall, I think it's the combination of different attributes all addressing liabilities of the competitor molecules that will make ABS-101 a highly differentiated asset.

[Srikripa Devarakonda, analyst]

Got it. And then you mentioned the 200 milligram per mil concentration, which is pretty high concentration. I was just wondering if, while you were designing the molecule itself, was there anything that was engineered to be able to give you this high level of solubility of the protein?

[Christian Stegmann, executive]

Yes, absolutely. The -- the artificial intelligence engine we have built at Absci clearly aids us in improving developability properties of all our antibodies. So in essence, we are really leveraging artificial intelligence to basically improve our antibody profile, and that certainly includes CMC properties that allow us these high considerations.

[Operator]

Our next question comes from George Farmer with Scotiabank.

[George Farmer, analyst]

Also with some more questions on the 101 NHP data. Can you talk about toxicity and how high you dose in these animals. I'm assuming this is part of your GLP1 -- GLP tox studies, is that right? And also you mentioned a number of partnerships that you're counting on closing this year. Can you give us a ballpark estimate of how much cash you think that will bring into the company?

[Sean McClain, executive]

Yes. Thanks, George. Christian, do you want to take the first one, and then Zach, do you want to take the second one?

[Christian Stegmann, executive]

Absolutely. So yes, you're correct. Our GLP toxicology studies are currently ongoing, and we will disclose the results of the study once they are -- once they are concluded, and we have aligned on the publication strategy for those. We have not yet disclosed the doses of these -- of these studies.

[Zachariah Jonasson, executive]

Sure. And I can -- I can address the second question. So we don't have guidance on cash inflows through partnerships, but we do have guidance on bringing in three additional partners in addition to the MSK partnership this year. Some of those would likely be multi-program partnerships. And those could range from more traditional drug creation partnerships that have upfronts and milestones as well as development milestones and royalties. Two arrangements that are like what we've done with MSK, which are co-devs, or co-development programs.

[George Farmer, analyst]

Okay. Great. And one more -- Sorry, Sean, go ahead, yes.

[Sean McClain, executive]

I was just going to say, yes, we've given guidance on the four partnerships. This is one out of the three, so we do expect another three to be announced from now through the end of the year.

[George Farmer, analyst]

Okay. Yes. Great. And then regarding the MSK partnership that you have, does MSK have publication rights? And can we expect that they'll be kind of actively public -- publishing papers on the fruits of this collaboration? Or is that going to be restricted in some way?

[Zachariah Jonasson, executive]

That all flows through the joint steering -- Go ahead, Christian.

[Christian Stegmann, executive]

Oh. Go for it, Zach.

[Zachariah Jonasson, executive]

Yes, I was going to say that has to be done in joint collaboration as well. So we have a joint steering committee that oversees the partnership, and so publication decisions we run through that committee.

[Sean McClain, executive]

Okay. But the plan is to be able to publish the work in the future.

[George Farmer, analyst]

Great. Thanks very much.

[Zachariah Jonasson, executive]

But -- although, to your point, George, I think we'll work with them to be careful about publishing too early. But yes, so there is -- it's a decision that's made jointly, but to Sean's point, we do want to publish on some of the great science we'll be doing there.

[Operator]

And our next question comes from Vikram Purohit with Morgan Stanley.

[Unknown Analyst]

This is Morgan on for Vikram. So we had one on ABS-201. Do you anticipate disclosing the target upon choosing a development candidate later this year?

[Zachariah Jonasson, executive]

Yes. We do plan on disclosing the target once the development candidate is selected either at the end of this year or beginning of next year.

[Operator]

And our next question comes from Scott Schoenhaus with KeyBanc.

[Scott Schoenhaus, analyst]

I wanted to quickly ask on 101. You mentioned in your release that it was observed to have an increased biodistribution in nonhuman primates. And then you say this could lead to faster penetration basically. When will you have a readout on that? Or when will you be announcing more on that specific attribute?

[Sean McClain, executive]

Yes. Thanks, Scott. Christian, I'll let you take that.

[Christian Stegmann, executive]

Yes, absolutely. So what we disclosed today are nonhuman primate data. And obviously, these data are usually quite translational into the human setting. However, of course, there are caveats. These are not humans. We think the ultimate proof on the pharmacokinetic properties will be in the clinic. So we will observe during our first in human studies, the actual pharmacokinetic properties in Humans. And we think these data will then be very telling regarding the biodistribution properties, which we now think are quite promising based on the nonhuman primate data. Does that answer your question?

[Scott Schoenhaus, analyst]

Yes. And then a follow-up on the partnerships. Just generally speaking, team, I guess, Sean and Zach -- would you say from last quarter, the demand environment or the end markets are accelerating or same or worsening, both in large pharma and midsize and the small biotechs? Just trying to get a sense of the landscape here.

[Zachariah Jonasson, executive]

Yes. I think that what we're seeing is pharma and great institutes like MSK are looking for differentiated technologies such as what Absci developing. I think one of the things that got MSK excited about what we're doing here is being able to start to drug some of these undrugable targets like GPCRs and ion channels using our AI drug discovery platform. And that's what we're seeing in discussions with -- with large pharma and biotech as well. And I think if you can start to have -- show that AI can be highly differentiated and ultimately create differentiated assets, whether best-in-class or first-in-class, that is really driving discussions even, I would say, in a backdrop that has been tougher for biotech. And so I think that, that's really exciting to see that kind of regardless of the environment, we are seeing high interest just given the differentiation we have in our AI platform.

[Operator]

And our next question comes from Lee Chen with HC Winway.

[Unknown Analyst]

This is [indiscernible] for [indiscernible]. I have a question regarding the breadth of the potential of your epitope capabilities. So should we think about it as a disease prognostic capabilities? Or do you think there is certain disease indications that your platform is particularly good at identifying? And related question is that in the future, how we should -- how should we think about the partnership focus? Is it more on oncology and cyto --cytokines, where you have discussions regarding additional therapeutic areas?

[Sean McClain, executive]

Yes, absolutely. So we really see this as disease agnostic. Really the input to our model is the structure of the target, whether that's experimentally derived through, let's say, cryo-EM [inndiscernible] crystallography or it is computationally derived through, let's say, [ alphafold ]. You take that structure of the target and you feed that into the model and then you can then specify what epitope you want be the antibody to bind to and then the models able to then design the CDRs that will buy into that particular epitope of interest, allowing you to start to test some of these hypotheses that have been difficult to test in the past just because of the lack of being able to generate antibodies. And so that's where we really see this as disease agnostic. And you can even see that in our partnerships with AstraZeneca we're focused on oncology, with Almirall it's focused on dermatology. And we have some discussions around neuro programs. And so the technology really expands across different indications. And then with your last question, Christian, do you want to address that?

[Christian Stegmann, executive]

Sure. Can you remind me of your last question?

[Unknown Analyst]

Yes. It's more about in terms of future partnerships fully. Should we think about oncology and cytokine focus or it can also include other potential disease areas?

[Christian Stegmann, executive]

Oh yes, absolutely. So we view cytokine biology really as the first frontier for AI-driven disruption of the biologics market. And we are -- we deeply believe that this is really just the first frontier. We are actively working on addressing various -- various path mechanisms with various biologic modalities really fully leveraging artificial intelligence for drug creation. So absolutely, we are convinced that we can tackle difficult targets, as mentioned, GPCRs and other difficult targets as well.

[Sean McClain, executive]

Yes. And I would say with our own pipeline, really where we're focused, and we're continuing to stay focused as in immunology and oncology. And so I think the pipeline programs that you're going to start to see come to fruition, we'll be really focused on immunology as well as oncology. But again, in partnerships, we plan to expand outside of that.

[Unknown Analyst]

Thank you for the clarification.

[Operator]

Thank you. Our next question is the follow-up from Steven Mah with TD Cowen.

[Poon Mah, analyst]

Thank you for taking the follow up question. And this question is just more in response to a prior answer you gave, where you said that the MSK got excited because you can do druggable targets with your Gen I -- Gen AI platform. My understanding is that MSK doesn't have any other AI drug development partnerships within the industry and I'm not 100% sure if they have any other non-AI drug development partnerships, but it seems pretty rare for them. So just curious, if you can disclose, did MSK come to you with some targets in mind? Or was the genesis of the deal with them, was it through your BD?

[Sean McClain, executive]

Yeah. Zach, do you want to talk about that, the partnership?

[Zachariah Jonasson, executive]

Yes, sure. Yes. So Steven, this came through the BD interactions, and it started as just a conversation around how we could collaborate in their interest in how we could deploy against some of the novel targets that they're discovering and validating at MSK. And I -- to my knowledge, this is the first partnership they've done with an AI company. And I think -- I think they're very excited about it. We're very excited about it. And the second part of your question is did they come with initial targets? And the answer there is no, really, this is sort of a real understanding of how these two capabilities could fit together. So we're starting that process now and starting to look at targets with them, and that's just kicked off because we just signed the partnership. But really, the genesis -- this is just understanding how these two platforms could be really synergistic. So we're going to go through the process now selecting targets together and advancing those together.

[Sean McClain, executive]

And I think the [indiscernible].

[Poon Mah, analyst]

[indiscernible] Sorry. No, go ahead, Sean.

[Sean McClain, executive]

Yes. I think a lot of the targets that they are seeing that are emerging are more difficult to drug targets like GPCRs and I think having this capability. I mean, I think it's a really, really nice synergy. I mean they're bringing the oncology expertise, the disease biology, the target biology and then we're bringing our AI expertise and the antibody design to be able to develop first-in-class, best-in-class oncology assets. And then obviously, being able to work with them on taking this through a Phase I, I think, makes a ton of sense. And so I think the synergies that we have here, I think, are going to be really important for not only the success of this partnership, but even with our own oncology pipeline, I think we're going to be able to leverage this -- this partnership to progress our own pipeline as well.

[Poon Mah, analyst]

Okay. Thanks for the color. And congrats on the partnership.

[Sean McClain, executive]

Thanks, Steve.

[Operator]

I'm showing no further questions at this time. This concludes today's conference call. Thank you for participating. You may now disconnect.