Kezar Life Sciences - Earnings Call - Q4 2024 & Study Result

Executive Summary

• Kezar reported Q4 2024 GAAP net loss of $20.2M and diluted EPS of $2.77 loss per share; R&D fell to $16.0M from $22.6M YoY, and cash/marketable securities ended the year at $132.2M.
• PORTOLA Phase 2a topline showed steroid-sparing complete biochemical remissions in refractory AIH: 31.3% (5/16) CR with taper ≤5 mg/day in ITT and 36% (5/14) in the pre-specified steroid subgroup, with no disease flares among CR patients; safety was primarily Grade 1–2 ISRs/SIRs.
• Versus Wall Street: Q4 EPS missed consensus by $0.05 (actual -$2.77 vs -$2.72*); revenue in Q4 was zero vs consensus zero*, while Q3 EPS beat by $0.37 (actual -$2.78 vs -$3.15*).
• Management plans to respond to FDA partial clinical hold and align with FDA/EMA on a potential registrational AIH study; this de-risks the path and frames upcoming catalysts (hold removal, pivotal trial design).

What Went Well and What Went Wrong

• What Went Well

  • PORTOLA efficacy in hard-to-treat AIH with steroid-sparing remissions and durability; “We are encouraged by the safety and efficacy data… durable and steroid-sparing remissions” — Christopher Kirk (CEO).
  • No disease flares among patients achieving CR; biochemical remissions correlated with histologic improvement and better FibroScan elastography in exploratory endpoints.
  • Safety consistent with prior programs: AEs were primarily ISRs/SIRs, all Grade 1–2; opportunistic infections were 0% in both arms.

• What Went Wrong

  • Q4 EPS modestly missed consensus (-$2.77 actual vs -$2.72* estimate), leaving little near-term P&L leverage without revenue.
  • FDA partial clinical hold constraints in PORTOLA’s OLE (e.g., prednisone not below 5 mg/day) add procedural friction ahead of pivotal study planning.
  • Broader program risk backdrop from PALIZADE LN termination due to Grade 5 SAEs in ex-U.S. sites (including one placebo), increasing regulatory sensitivity around zetomipzomib safety in other indications.

Transcript

Cheryl Gradziel (SVP of Clinical Development)

Good day, everyone. My name is Cheryl, and I will be your conference operator today. At this time, I would like to welcome you to Kezar Life Sciences' 2025 top-line data presentation of the PORTOLA phase 2a clinical trial. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session for Kezar's covering sell-side analysts. If you would like to ask a question during this time, and if you have joined via the webinar, please use the raise hand icon, which can be found at the bottom of your webinar application. At this time, I would like to turn the call over to Chris Kirk, CEO and Co-founder of Kezar Life Sciences.

Chris Kirk (CEO and Co-founder)

Thank you, Cheryl, and good morning, everyone, and thank you for joining our top-line presentation from the PORTOLA study of zetomipzomib in treatment refractory autoimmune hepatitis. These are my disclosures. I'm pleased to be joined today by Dr. Craig Lammert from Indiana University, who is a principal investigator in the PORTOLA study and the director of the Autoimmune Hepatitis Association. We're also joined by Gideon Hirschfield from the University of Toronto, an expert in the treatment of autoimmune liver diseases. Let's get to the top-line data from the PORTOLA study. We believe the PORTOLA trial was a successful outcome and perhaps the first successful outcome in a randomized setting in treatment refractory autoimmune hepatitis. This trial enrolled 24 patients, 21 of whom were in a pre-specified subgroup of patients who entered study on steroid therapy.

Within this group, 36% of them receiving zetomipzomib showed a complete biochemical remission with steroid tapering by week 24, compared to none of the patients in the placebo arm. Responses to zetomipzomib were durable, as no flares were reported for any patient achieving a complete remission on zetomipzomib therapy, and complete biochemical remissions corresponded to histologic improvement in patients achieving a complete biochemical remission. Safety of Zeto was quite favorable. The vast majority of treatment emergent adverse events were grade one and grade two and related to injection site reactions and transient systemic injection reactions. There were three serious adverse events in the study: two in the Zeto arm, one in the placebo arm. All were unrelated, and in all cases, the patients finished study. You will hear more from Craig and Gideon, but autoimmune hepatitis is a very complex disorder affecting almost 100,000 patients in the United States.

It's diagnosed through a combination of liver enzyme tests, presence of autoantibodies, and histologic confirmation of inflammation in the liver. Therapy is quite lacking in this disease. The backbone is corticosteroid therapy with layered-in immunosuppressants. Patients are hopefully achieving a complete biochemical remission, which is defined as the reduction in both ALT and AST, as well as IgG levels for those patients who present with elevated IgG within six months of therapy. Though the numbers vary, about 30%-50% of the patients fail to achieve this complete biochemical remission in six months or are intolerant to the immunosuppressant and corticosteroid therapy, and thus are at higher risk for progression to cirrhosis, end-stage liver disease, need for liver transplant, and hepatocellular carcinoma.

As such, treatment guidelines in the United States and Europe focus both on biochemical remission as well as steroid tapering in their guidance for the treatment of newly diagnosed autoimmune hepatitis. Due to the lack of additional drugs to treat this disease, there are no guidance on treatment for patients who have failed to achieve that initial biochemical response. We believe Zeto has a chance to transform the treatment of autoimmune hepatitis. Though this is a disease that is still being studied, there is most assuredly a role for autoreactive Th1 cells, hypoactive Treg cells, autoantibody-producing plasma cells that infiltrate the liver, and overactive antigen-presenting cells, sometimes tissue-resident ones called Kupffer cells, releasing inflammatory cytokines.

We have demonstrated over nearly two decades' worth of research, including clinical trial biomarker data from patients with lupus and lupus nephritis, that zetomipzomib can impinge upon both the innate and the acquired immune response and has a mechanism of action fitting for the biology of AIH. In addition, data from our lupus nephritis trials suggest that Zeto can induce rapid anti-inflammatory responses with steroid sparing and without a significant risk for immunosuppression. To understand the role of Zeto in patients with autoimmune hepatitis, we conducted the PORTOLA study. We enrolled 24 patients in the United States, randomized two to one to receive either Zeto or placebo.

All patients had to start study on a minimum of 20 milligrams a day of prednisone, up to a maximum of 40 milligrams, with a recommended steroid taper to 5 milligrams per day to conform with treatment guidelines and potential for further steroid tapering through the final 24 weeks. There was an open-label extension that was available to some of the patients for an additional 24 weeks of treatment. Patients could be enrolled to the PORTOLA study if they had elevated ALT despite at least three months of standard of care therapy or had relapsed from prior complete biochemical remission. All patients had to have biopsy-proven disease with an HAI or Ishak score of five or higher at study entry, with biopsies taken no longer than six months from the start of screening.

We tried to exclude cirrhotic patients in this trial by isolating ourselves to Child-Pugh class A patients. Because this was the first randomized trial in second-line AIH, we were not quite sure how to create a hierarchy of primary efficacy endpoints. We decided to focus on biochemical remission. Our primary efficacy endpoint was the normalization of ALT, AST, and IgG, as I described before. As a key secondary endpoint, we wanted to understand those treatment targets of steroid taper with biochemical remission because we believe this will be important in future studies of Zeto and AIH. As mentioned, we wanted to understand the difference between patients who entered into screening on steroid therapy versus those who were taking steroids newly again in the PORTOLA study.

Finally, because six months of treatment, we were unsure what would happen to liver health, we decided to focus on histology and FibroScan as exploratory efficacy endpoints. Of the 24 patients randomized to the PORTOLA study, eight were randomized to placebo, 16 to Zeto. One patient in the placebo arm was randomized but not dosed because they developed a UTI that required antibiotic treatment. In the Zeto arm, there were three patients who discontinued on study, one for a grade two unrelated AIH flare. That patient was treated as a treatment failure in our ITT analyses. One patient with a grade two related hives and finally a grade one related fatigue in an elderly patient. Of the 20 patients who completed the double-blind treatment period, 16 were eligible to roll over to the OLE, as the final four patients were ineligible due to the FDA partial clinical hold.

Of those 16, 14 chose to enroll into the OLE. Five have completed, and this is an ongoing portion of the study. There are still two patients within the open-label extension. The demographics of the patients from the PORTOLA study are fairly typical for a patient population in the United States: slightly older, white, and female. The duration of AIH ranged from relatively recently diagnosed to patients dealing with their AIH for multiple decades. The biopsies were, in general, taken at or near the time of screening. All patients had inflammation by their Ishak score. You can see on the left-hand side highlighted that their ALT levels at baseline felt fairly well-balanced. On the right-hand side, you can see that most patients were autoantibody positive.

As per protocol, all patients were on at least 20 milligrams a day of prednisone at study start, though they were not necessarily there at the beginning of the study. Immunosuppressants included azathioprine and mycophenolate. There were a handful of patients taking calcineurin inhibitors, a few patients who were taking multiple immunosuppressants reflecting the difficult-to-treat disease, and finally, six patients who reported no immunosuppressants besides the corticosteroids that they were taking as they entered study. As mentioned, some patients may not have been on the protocol dose of 20 milligrams of steroid at study start. This led us to understand what were the historic values for both disease severity, as measured by ALT, as well as the corticosteroid dose as they entered screening.

What you can see on the left-hand side are the mean ALT values for patients that we could get within three months of the start of screening. The dotted lines represent the upper limit of normal. You can see that the mean ALT in the Zeto patients is about twofold higher than those in the placebo arm. On the right-hand side, you can look at corticosteroid dose as they entered screening. The majority of patients assigned to the placebo arm happened to be on lower doses of corticosteroids than the protocol-mandated 20 milligrams at study start, which meant that they had to be escalated during the screening period to that 20 milligram dose that included all three of the Zeto patients who ultimately achieved a complete biochemical remission.

On the other hand, within the Zeto arm, the majority of patients were already at 20 milligrams a day of corticosteroids at study start, including all but one of the complete biochemical remissions within this group. This suggests that perhaps we enrolled a slightly more refractory patient population to the Zeto arm of this study. Now, looking at the ITT population, on the left-hand side is the complete response rate independent of steroid taper. You can see that half of the Zeto patients achieved a complete biochemical remission. When we look to the middle, where we believe the clinical importance is, which is complete remission plus a steroid taper to 5 milligrams or less per day, you can see that 31% of the Zeto patients had achieved this biochemical remission. Only a single patient in the placebo arm was able to achieve a remission with steroid taper.

We were also very pleased to see that almost 20% of the Zeto patients were steroid-free by the end of 24 weeks. The responses to Zeto are durable. The median duration is almost seven months. With the OLE ongoing, this number may increase over time. Of the placebo patients who rolled over to the open-label extension and received zetomipzomib, one placebo patient who entered into the OLE not in complete remission achieved that with steroid taper during the OLE. Two placebo patients who had achieved biochemical remission without significant steroid taper saw a 50% reduction in their daily steroid dose. There were no disease flares in any patient who achieved a CR on Zeto, whether or not they achieved it during the double-blind period or in the open-label extension.

Now, looking at the patient population that we had pre-specified, those who entered in on study on corticosteroid use, you can see that we have an almost 60% complete response rate in the Zeto arm. Most importantly, those Zeto CRs, patients are able to taper their steroids. None of the placebo patients who entered on study with background steroid therapy were able to achieve a CR with steroid taper to 5 mg or less per day. In terms of exploratory analyses, on the left-hand side, I'm showing you the histology data broken out by patients achieving complete remissions or those achieving either treatment failure or no response. You can see in both the Zeto and the placebo arm, biochemical remissions correlate with histologic improvement, the dotted line representing the remission score by the HAI.

You can see that there are a handful of patients who achieve complete remission or achieve histologic remission in this study within six months of treatment. This is very intriguing to us and possibly indicates that zetomipzomib is a disease-modifying agent for the treatment of autoimmune hepatitis. FibroScan data is shown on the right, also indicating that with zetomipzomib treatment, there is an improvement in elastography findings. Turning to safety, all patients had at least one treatment-emergent adverse event. The majority of AEs on study were related to injection site reactions seen both in the placebo and Zeto arm from the subcutaneously administered drug. Systemic injection reactions, which are a sequelae of events that onset between 8 and 24 hours after dosing and resolve within 48 hours, showed higher numbers in the Zeto arm, but all were grade one and grade two.

There were three discontinuations, as I described earlier. There were three serious adverse events, one in the placebo arm, two in the Zeto arm. They were all considered unrelated to study drug, and all patients were able to complete study. There was one grade three infection at influenza B in the Zeto arm. That patient was able to continue treatment and finish study. Overall, infections showed no signs of immunosuppression or risk for infection with zetomipzomib treatment. There were no opportunistic infections and, of course, no deaths in this study. When you put the PORTOLA safety data in context with our previously completed trials in patients with polymyositis and dermatomyositis, as well as patients in lupus nephritis, you can see that Zeto has shown a consistent and tolerated safety profile with long-term administration in patients with very complex autoimmune disorders taking one or more immunosuppressant therapies or corticosteroids.

This suggests that Zeto can be safely administered and chronically so to patients with autoimmune diseases. We are very excited about the data in AIH. This is a poorly served patient population, definitely in need for new agents, and there are very few in clinical development. The response rates we see with just six months of therapy in a patient population that had failed prior treatment or relapsed from prior remissions is quite impressive. When you put it in context with the safety information, we do believe that there is a path forward for Zeto in the treatment of patients with AIH.

Looking at our data from lupus nephritis, both the MISSION and the PALISADE study, where we saw high levels of complete renal response with steroid tapering in these patients, I do believe that we have an agent that is a novel and effective therapy to induce anti-inflammatory responses in patients with complex autoimmune disorders in a way that is neither immunosuppressive as well as allows the patient to taper their steroids. With that in mind, I'm going to turn it over to Dr. Craig Lammert, who's going to walk you through his experience on the PORTOLA study. Craig, please take it away.

Craig Lammert (Associate Professor of Medicine)

Thank you, Chris. It's my honor to be with you all this morning to review the PORTOLA study and my experience within the disease of autoimmune hepatitis as well. Next slide.

In my perspective of autoimmune hepatitis, I've mentioned that it's a bit like immunologic chess. Let me explain somewhat more, as it's probably more even clinical chess. What we see at least with AIH over the course of the past 70 years, we have often taken a very simplistic approach to the treatment of these patients, utilizing therapies that have not changed over that duration as well. Often patients telling us that they are the nail, we are the hammer, requiring large doses of corticosteroids, medications that haven't changed for ages, but also medications that have significant side effect profiles. As a part of my role in the PORTOLA study, I also head the Autoimmune Hepatitis Association. This is a patient advocacy group that I started back over 15 years ago that includes over 9,000 patients across the United States as well as international members as well.

What we've heard from patients time and time again, treatments have not changed, nor have our response rates changed as well. In fact, patients often are seeking for steroid-free medical therapies, but also looking for medical therapies that maybe deviate from the oral standard of care, meaning moving to more infusional or injection-based therapies. Many patients with this disease are often jealous of some of our other autoimmune diseases that have a whole array of therapeutics at their disposal, provided this mode of transmission. PORTOLA matters. I think what I've highlighted thus far is that we've had limited therapeutic options. This is also specific and even wider in the amount of patients that have hard-to-control disease, meaning unable to meet critical biochemical endpoints to prevent disease progression, fibrosis progression.

This includes patients that have continued increased AST, ALT, and IgG despite being on significant doses of corticosteroids, but also baseline standard of care, which again, we've used for years. We have seen very little advancement beyond this overall approach. As Chris said earlier, there's few agents that are currently in development. PORTOLA very much leads the field when it comes to this. My experience at PORTOLA Indiana University has actually been quite good. I wanted to highlight that I enrolled four patients in PORTOLA over the course of the past year and a half. Two patients of mine entered the double-blind treatment period as well as moved into open-label extension. I had one patient, which was a type 2 AIH patient that was randomized to DBTP and entered OLE but discontinued because of a related grade one adverse event of increasing shortness of breath.

However, this was in the setting of a patient with asthma since the past few years and actually had increasing requirements of her inhaler even before enrolling into the PORTOLA study. I also had one patient that was discontinued in the double-blind treatment period as well related to a grade 2 AE of hives that started at week 13. Next slide. To see a little bit more of the resolution, I wanted to present a case of mine that was a patient that had complete response on zetomipzomib. And just briefly, I'll highlight some of the clinical details. He was a 66-year-old white male who I had diagnosed with autoimmune hepatitis in 2022. What was really important about this gentleman was he was also overweight. There was a struggle of diagnosis because of the concern for fatty liver disease versus autoimmune hepatitis.

However, because of a past medical history of autoimmune disease, but also liver tests that were much higher than what I thought would be consistent with fatty liver disease, we did some extra testing and found that he had an elevated antineutrophil antibody as well as some other markers consistent with autoimmune hepatitis. His ALT and IgG prior to screening was 242 and 978, which actually is normal. Medications, once we diagnosed him with autoimmune hepatitis based on biopsy, was MMF, which is mycophenolate mofetil, on top of prednisone. Throughout the course of his diagnosis and treatment up until the PORTOLA study, he had been on variable doses of medications as well as MMF as well as steroid utilization throughout that period.

He had not received or achieved biochemical remission with steroid taper despite we had had to escalate his medical therapies, leaving him in this window of high liver tests, but also high treatment with standard of care. His baseline common medications at study entry was MMF and prednisone. His biopsy was consistent with autoimmune hepatitis but had an Ishak score of 5. And interestingly, too, much like we would expect because of marked inflammation at diagnosis, his baseline liver stiffness score was elevated at 24.7. Next slide. Just to highlight his clinical course throughout PORTOLA, this figure here shows the liver tests, AST and ALT on the Y axis, as well as on the right Y axis, IgG and glucocorticoid dose. This is according to timeline, baseline being 0 at study entry and then the subsequent weeks thereafter in OLE.

As you can see, his AST and ALT beyond baseline dramatically reduced even by week 4, but also becoming normal at week 8. With this, you can see then he had concomitant steroid reduction as well. His IgG remained stable throughout the study course. Then seen also by the end of week 24, he was down to no corticosteroids. Because we had a slight lag in moving over to OLE, we did see an increase in his liver tests between weeks 26 to 36, but quickly reduced on OLE after reinitiating study protocol. Other pieces of note, his Ishak score, as I said, at study entry was a 5. However, at Ishak score at 24 weeks, this would be six months after study entry, was an Ishak score of 6. Next slide. This patient was able to achieve complete remission with steroid taper to 0 milligrams per day.

He maintained this actually throughout the OLE, as was highlighted in the prior slide. This was incredibly exciting for this patient, particularly because of his history of obesity. The steroids were a therapeutic approach that he was very eager to get away from. The other interesting piece is that he was able to maintain his clinical or biochemical remission with no flares and remained off of steroids throughout the OLE as well. He experienced a grade one related ISR and SIR. Beyond PORTOLA, I'm happy to report that he has not had any rebound in ALT values. This is despite continuing on with his baseline CellCept or mycophenolate mofetil and has not required any corticosteroids beyond this as well, up to now six months beyond OLE. Next slide.

My other clinical observations just to highlight that I do think zetomipzomib is the real deal and has the potential to transform the stagnant landscape of autoimmune hepatitis. We have seen now in patients that respond very quick, durable responses without any flares. We have now had the ability to see and taper off corticosteroids completely, which again highlight thematically exactly what patients want, but also in the clinic with more knowledge about this disease, more investigators are understanding this clinical importance as well. Patients did not see rebound in the transaminases beyond PORTOLA with six months of follow-up. This suggests that extended treatment of zetomipzomib could have modified impacts on autoimmune hepatitis in the months to come after coming off study. I do want to point out that my patient I highlighted before did not see a change in his HAI Ishak score.

I believe, as we have seen, that this disease is very heterogeneous under the microscope. Based on where we biopsy patients, it could highlight what we see in terms of the histologic activity. It may be that we ultimately need follow-up biopsies that are much further beyond six months to see more of a generalized reduction in inflammation in multiple liver biopsy sites throughout the hepatic parenchyma. Following liver enzymes are a priority for AIH. We know this from historical data that normalization of liver tests are related to better long-term survival and outcomes. This includes liver transplant-free survival. This is clinically meaningful responses to patients and hepatologists alike. I am delighted to say that it appears to be tolerable and no major safety signals were observed during the PORTOLA study or at my site as well.

Again, I will say that the impact of this top-line data is totally aligned with patients' interests and again highlights a very few or a few key pieces. This means intermittent dosing that is non-oral and steroid-sparing with clinical improvement in hard-to-control AIH patients. Thank you, Chris.

Chris Kirk (CEO and Co-founder)

Thank you very much, Craig. I really appreciate that. To try to put the PORTOLA data into more context, I'd like to turn it over to Gideon Hirschfield to talk to us about AIH treatment landscape and how Zeto might fit in. Gideon, I'll let you take it from here.

Gideon Hirschfield (Professor)

Thank you, Chris, and thank you, Craig. I'm pleased to be here because I really do want to emphasize the importance to our patients of the fact that in autoimmune hepatitis, we can and should do better.

I'm a clinician scientist and I look after all autoimmune liver disease and I have an interest in developing better therapies for our patients. Next slide. I want to sort of recognize and showcase to you that the patients that you were talking about in this clinical trial are real and reflect what we see in our clinical practice. In Toronto in 2024, there were nearly 600 patients with autoimmune hepatitis coming to our program across a number of physicians. These patients were, you know, on average 57 years old, majority were female. There's a high burden of cirrhosis. Importantly, you can see there's a high use of corticosteroids. Over 50% of our patients were on prednisone or budesonide. There's a high use of non-specific immunosuppression.

Although this is a rare disease, it's not infrequent and that reflects the 100,000 people living in the U.S. with autoimmune hepatitis. It's a lifelong disease with a high burden of end-stage liver disease and, importantly, a low use of advanced therapies. Next slide. This means there is an ongoing significant unmet need for people living with autoimmune hepatitis, chronic autoimmune, unresolving inflammation. We don't know the cause, but we do know it responds to immunosuppression. We do understand it is a complex interaction of genes and environments without knowing the specifics. Fundamentally, I do believe we're confident to say that there's dysregulation of T cell function and then associated cytokines, chemokines contributing to inflammation. Plasma cells are a frequent and relatively specific feature of autoimmune hepatitis and develop from activated B cells with help from CD4 T cells. It's clear.

It's clear from the work that we've done in Canada. It's clear from the work that Craig's done in the U.S. It's clear from the work done by the European Reference Network in Europe that there's significant morbidity and mortality associated with disease progression and complications. In fact, our standard of care, corticosteroids and immunosuppressants, are associated themselves with significant side effects and much disheartenment from patients who want better and more targeted therapies. Next slide. When we look after our patients, we're therefore in this cascade where we have this concept of making a diagnosis, thinking about our therapies, but knowing that we have limited choices, recognizing that most patients could do with better treatment but never get to specialist care. There's an opportunity for a new therapy that's targeted and used in more secondary and community practices is very important.

When we listen to our patients, their quality of life and their opinion on the use of our current treatments shows that there is a need to do better. Next slide. We have real-world challenges in autoimmune hepatitis when I go to clinic. I am going to clinic later on. I have limited options, as you have heard. I have to tell my patients about the adverse effects of corticosteroids and immunosuppressants individually and together. Tolerability. Some of our patients will not take corticosteroids. You heard about the difficulties of managing, you know, metabolic syndrome, weight, diabetes with corticosteroids, our patients and their risks of osteoporotic fractures, cosmetic and symptoms. We see it not infrequently, particularly with a population of patients in their 50s, 60s, and beyond, malignancy as a side effect from our treatments. We also see a lack of durable response.

Relapse rates on treatment withdrawal are real. This leads to the risk of disease progression and the need for advanced therapy such as transplant and/or, you know, treatment of hepatocellular carcinoma and portal hypertension. Next slide, please. What we have really, when we think about the patients that come to clinic, are some people who've got very potent disease. We've got some people where the drugs are ineffective, and we've got some people where the treatments are intolerable. Our opportunity is to develop new therapies that reliably induce durable remission that are safe and tolerable and, importantly, are on label. Clinicians want to use on-label therapies for patients with autoimmune disease, and that includes autoimmune hepatitis. Patients and clinicians would like to have corticosteroid agents, and we don't have them at the moment.

We want therapies that we know are disease-modifying and targeting the, you know, the complex T cell-B cell interaction and immunoregulatory changes we see in AIH. This really is in stark contrast to our patients' IBD, rheumatoid, lupus in terms of therapy choices. At present, there's limited agents in development, which gives more opportunity, as you've heard from the data today, for this molecule in development. Next slide. You know, Zeto has opportunity to add value as a novel targeted therapy in autoimmune hepatitis. It has broad immunomodulatory activity, which will target that complex AI pathophysiology, you know, B cells, T cells. There's a lack of non-specific immunosuppression. It addresses a very important clinical need of corticosteroid sparing. It has the potential to be disease-modifying. We now have data from an important phase two trial that Dr.

Lammert's one of the leaders in first proof of concept showing that there's clear efficacy signals in hard-to-treat refractory and relapsed patient population. This suggests that we can also think about the translation of corticosteroid sparing and durable response in a refractory population to ultimately potential first-line therapy. Next slide. With that, I'll thank you for your attention to listening to me advocate for people living with autoimmune hepatitis. I'll hand back to Chris.

Chris Kirk (CEO and Co-founder)

Thank you very much, Gideon. For Kezar, our next steps are to take these incredibly compelling results from the PORTOLA study and respond to the FDA Division of Hepatology and Nutrition over their partial clinical hold on the PORTOLA study. We hope to do that as quickly as possible.

Pending removal of that hold, we will be able to work with both the FDA and EMA to align on what we believe would be a potential registrational study of zetomipzomib in AIH. We believe in the next trial, the biochemical remission with steroid taper, as you've heard, will be a key endpoint within that trial, as will assessments of histologic improvement and signs of disease remission. We look forward to later in the year presenting full data from the PORTOLA study, including the matured OLE data. With that, I want to thank everybody for their attention. I want to thank Craig and Gideon for their participation in today's webinar, all of the sites in the U.S. that participated in this study, and of course, the patients and their caregivers for the sacrifices they made to help advance the field of treatment in patients with AIH.

With that, I will stop and turn it back to you, Cheryl, for questions and answers.

Cheryl Gradziel (SVP of Clinical Development)

Great. Thanks, Chris. We will now move to our question and answer session. If you have joined via the webinar, please use the raise hand icon, which can be found at the bottom of your webinar application. In order to be mindful of time, please try to limit yourself to one question each. When you are called on, please unmute your line and ask your question. We will now pause a moment to assemble the queue. Our first question comes from Matt Phipps from William Blair. Matt, if you would like to unmute yourself and ask your question.

Matt Phipps (Group Head–Biotechnology)

Hi. Okay. Thanks. Hey, Chris, congrats on the data. To the physicians, thank you for the additional context. Maybe for Dr. Lammert, obviously, there have been concerns with Zeto and lupus nephritis.

Maybe you can just give a little more experience on just describing some of the SIRs and how you manage patients with those. If you just have any concerns of any read-through from the safety events in the lupus nephritis trial to the AIH population.

Craig Lammert (Associate Professor of Medicine)

Yeah, thank you, Matt. I appreciate the question. Speaking to the four patients at our center that were again randomized, let me speak most specifically to the injection site reaction. This is something that we did see. In fact, it remained to be quite minor throughout the course. In fact, in some instances, our research team that was providing the injections were actually able to perform the injections with care and also even post-injection compresses to those patients that may have had a previous injection site reaction. These were often quite small. There was some mild induration, some mild redness.

Beyond that, we did not see any other challenges with this, at least at our research center. From the other data from the lupus nephritis, I actually did not see any other concerning features or any of those issues that came up in our population at Indiana University. Again, generally, again, supports the overall theme that this was well tolerated. In terms of any other adverse events, they were actually all quite minor and, again, specific to that patient.

Chris Kirk (CEO and Co-founder)

Matt, if I could add to that, within the PALISADE study and lupus nephritis, more than 85% of the reported systemic injection reactions were also grade one and two, as 100% were in the PORTOLA study.

The patients who had the most significant systemic injection reactions within the PALISADE study, including, unfortunately, two patients who passed away, there were confounding features, including systemic infections likely involved in those fatalities, thus aligning the overall SIR severity and rate with our prior studies in lupus and LN, as well as the DM and PM trials.

Matt Phipps (Group Head–Biotechnology)

Thanks, Chris and Dr. Lammert. This one maybe is for both Chris and the physicians. I guess, you know, there were three patients on the Zeto arm who achieved that biochemical remission but did not achieve the steroid dose target. I don't know if you have any information on maybe why the steroid dose wasn't tapered. I know it wasn't mandatory. I guess maybe also the physicians could just comment on how they decide to taper steroids, especially if a patient has biochemical remission.

Chris Kirk (CEO and Co-founder)

I'll start and then turn it over to Craig and Gideon to follow up. I'll have you recall that the protocol did not mandate a steroid taper. It was suggested in consult, designed by work with the principal investigators, but a suggested taper. Physicians, as we could see, were mostly driven by what they were seeing biochemically as they made choices about reducing the patient's steroid dose. In future studies, it's possible that we will mandate a steroid taper. Craig, do you have anything to add to that as well on PORTOLA?

Craig Lammert (Associate Professor of Medicine)

Yeah, maybe just speaking to clinicians. Again, we're human. I think having a suggested taper was important. I also think that this highlights the kind of real-world approach to autoimmune hepatitis. In having hard-to-treat patients, these are the patients that we treat with the utmost care.

Again, some of these patients may have had already prior loss of remission. In fact, we are less aggressive to mobilize or reduce corticosteroids, which in fact is the issue in these patients as well. I would like to say that this approach with a more mandated taper would be an important strategy in the future. I think it just coincides again with the real hardware truths of AIH management. Maybe Gideon has more to say.

Gideon Hirschfield (Professor)

Yeah, I think that that's what we have to overcome. That's where this data is important because it actually helps us design a better phase three registration clinical trial.

What we will have to do to help the community of people living with autoimmune hepatitis in the clinical trial setting is lose that heart and emotion that Craig just described of how we manage the individual patient and raise the bar about the rigor and the protocol approach to the treatment in the constraints of the clinical trial duration so that we can overcome this barrier and demonstrate clearly, because we all did exactly the same thing, the benefits we think we can show with new targeted therapies. I think the community is now getting to the point where they will be happy to do that in the context of a clinical trial. They'll say, for the duration of the clinical trial, these are the rules.

This is what I'm going to do because it's the only way we're going to demonstrate the efficacy clearly. If we do that, then the gates open to label therapy in autoimmune hepatitis. That's actually what we want. We have to, you know, we have to let go a little bit of our inherent physician protectionism for our patients with autoimmune hepatitis and, you know, really be sort of more agnostic and very trial-driven.

Cheryl Gradziel (SVP of Clinical Development)

Great. Thank you, Matthew. Our next question comes from Divya Rao from TD Cowen. If you'd like to unmute yourself and ask your question, please.

Divya Rao (VP)

Hi, team. This is Divya on for Phil. Let me add my congrats on the exciting data in AIH. I guess I have a question for the physicians.

On the trial itself, it looks like the infection rates in the placebo arm was a bit higher than in the Zeto arm. I was curious, you know, how you're thinking about that. And also, if that's somewhat expected, you know, in patients just on prednisone.

Chris Kirk (CEO and Co-founder)

If I could just do a quick answer, just to put in somewhat context with our larger safety database, the overall infection rate for both Zeto and placebo arms has been pretty consistent in the randomized trials that we've performed in LN, DM, PM, and here in PORTOLA. These are small numbers. We take the apparently reduced infection rate on the Zeto arm with a bit of a grain of salt, but something that we'll continue to follow up on. I'll turn it to you, Gideon, to talk more.

Gideon Hirschfield (Professor)

Yeah, I agree. It doesn't stand out to me.

I do think it's a real issue with the current standard of care, which is under-recognized, but is better reported in clinical trials. Unfortunately, it's not particularly well reported in clinical practice because we don't note down all these little events that occur outside of our office in the primary care and at another. I actually think that's one of the significant unmet needs for our patients and why therapies such as Zeto are, you know, have the potential to again add benefit to patients who are struggling with this sort of burden of infections from the drugs that we use. It didn't stand out as a clinical concern or, to Chris's point, I think the numbers need to be extended.

Craig Lammert (Associate Professor of Medicine)

Maybe just to echo a few of those points that Gideon just made, you know, beyond not tracking these small events, I just want to reiterate the importance that corticosteroids are probably one of the biggest risk factors for infectious complications as well. In fact, quite good data at even low dose and what we are calling physiologic dose of corticosteroids have been linked to hospitalizations secondary to infection. Again, another part of that unmet need that Gideon highlighted just recently.

Divya Rao (VP)

That's helpful. Thank you.

Cheryl Gradziel (SVP of Clinical Development)

Thank you, Divya. Our next question is from Maury Raycroft from Jefferies. If you would like to unmute yourself and ask your question, please.

Maury Raycroft (Managing Director and Equity Research Analyst)

Hi, can you hear me?

Cheryl Gradziel (SVP of Clinical Development)

Yes,

Chris Kirk (CEO and Co-founder)

we can.

Maury Raycroft (Managing Director and Equity Research Analyst)

Okay. Okay, I'll add my congrats. Maybe just starting off, question for the KOLs, just if they can talk about clinical meaningfulness of the data.

Chris Kirk (CEO and Co-founder)

These are refractory patients with respect to the biochemical responses, steroid tapering, and durability as well.

Craig Lammert (Associate Professor of Medicine)

Maybe, Gideon, let me go and put on the perspective of the nonprofit that I represent. I highlighted this in my talk. Again, this is everything. Everything from the clinical effectiveness and meaningfulness of reduction in liver tests that we know drive disease fibrosis progression, but also then minimizing the utilization of corticosteroids. We hear this time and time again from patients. In fact, I think many of us had not realized that, unbeknownst to us over the past 20, 30 years, upwards of 30% of our patients are requiring low-dose to intermediate-dose corticosteroids to modulate this disease to make us feel better because liver tests were better. Meanwhile, our patients were developing hypertension, dyslipidemia, diabetes, increased weight gain.

These patients have changed with these therapies that we're currently utilizing. That's why we're so excited above and beyond this. In terms of clinical meaningfulness, potentially to be a game changer as we target these populations that have tremendous unmet need and not just abnormal liver tests, but corticosteroid dependency.

Gideon Hirschfield (Professor)

I agree. When I look at the population studied, what I see is a population of patients where the clinician enrolled them into the study because they were struggling to maintain the control of their disease. They didn't have the options that they wanted among standard of care. You know, that's a population that I think we could define better in a phase three clinical trial. We've learned a lot. When the data becomes more available, I think, you know, people around the world will help contribute to the right population.

To see within this population, this effect in this group of patients, particularly with the corticosteroid reduction in use, I think is showing that the drug has moved the needle biologically in those patients. Now, you know, the challenge is just to then come up with a registration trial where we can really clarify the starting point and the endpoint. I believe that's possible. I believe you saw that the histology can help in that manner. I believe that these patients that took part, you know, there were patients who clearly were better off, to Craig's point, where their burden of treatment had changed and shifted, which is, you know, in this challenging population who went to the study is a success.

Maury Raycroft (Managing Director and Equity Research Analyst)

Got it. Maybe as a follow-up, it's a good segue to my follow-up question.

Just since there's no regulatory precedent in AIH, based on the effect size you're seeing here on some of the measures, what would be your expectations on how an optimal phase three study could be designed in regard to endpoints, size, and duration?

Chris Kirk (CEO and Co-founder)

I'll start and have Craig and Gideon add to that. As you point out, Maury, there is no regulatory guidance or precedent to help determine what a registration-enabling study would look like. We do believe that biochemical remission with steroid taper is an important feature. We understand that histologic improvement can help bolster the biochemical data, particularly in studies of durations around six months to a year.

Quite frankly, we have to work with the FDA and EMA to come to an alignment on what will be an impactful and informative trial and one that has a high chance of technical feasibility for enrollment in the U.S. and elsewhere across the globe.

Cheryl Gradziel (SVP of Clinical Development)

Thanks, Maury. Our next question is from Derek Archila from Wells Fargo. Please go ahead and unmute yourself and ask your question, please.

Derek Archila (Managing Director, Co-Head of Therapeutics Research and Senior Biotechnology Analyst)

Hi there. Congrats on the data. Thanks for taking the question. Just two from us. First, I just wanted to understand the impact of the patient's disease duration and potential responsiveness to therapy. It appears, again, in the Zeto arm, these patients maybe had a more recent diagnosis than placebo. Just wanted to understand that impact. Just to follow up, I know Dr.

Lammert, you know, he mentioned that two of the patients in the OLE, you know, at least from the patients that he enrolled, you know, came off due to AEs. It looks like there was a total of five patients from the Zeto arm and two from placebo that stopped from in the open label extension. I just wanted to get, you know, more clarification on those patients. Thanks.

Chris Kirk (CEO and Co-founder)

Sure. Let me answer overall, and then I'll let Craig answer for the patients at his site. Overall, the range of time since diagnosis was fairly evenly balanced. Even though the median time is different in the placebo and Zeto arm, the ranges are the same. These are small numbers. There was no statistical difference in the duration of disease in these patients between the two arms.

The OLE is still ongoing, and we have yet to clean the data from the OLE. For those patients who've discontinued, there are currently things in the EDC, such as patient decision or investigator decision. This will get clarified as we progress forward to closing out the OLE later in the mid part of this year. We will be able to provide more granularity on that at a future medical meeting. I'll let you speak to your particular patients, Craig, that were on the study.

Craig Lammert (Associate Professor of Medicine)

Yeah, thank you. Of the four patients that we had, again, two of ours did not discontinue. We did have two terminations. One was in OLE week eight. This patient had asthma, again, diagnosed in 2022.

Actually, preceding this, had three separate adverse events, flu and influenza diagnosis on two other separate occasions, but not in the proximity of the AE of the shortness of breath. It was her concern that she was having increased inhaler utilization throughout the course of this and also may have been a seasonal piece. This was more of an abundance of caution in utilization of this. The other patient that terminated, this was at week 14. This was due to a grade 2 hives. Also, the patient had a grade 1 swelling of the face and some perioral tingling. Again, this was remedied quite quickly with utilization of over-the-counter medications as well. With that and abundance of caution, we decided to stop that patient as well.

Derek Archila (Managing Director, Co-Head of Therapeutics Research and Senior Biotechnology Analyst)

Got it. Thank you.

Cheryl Gradziel (SVP of Clinical Development)

Thank you, Derek. Our next question is from Mitchell Kapoor from H.C. Wainwright.

If you'd like to unmute yourself and ask your question, please, Mitchell.

Mitchell Kapoor (Director and Senior Biotechnology Analyst)

Hi, everyone. Thanks for taking the questions. The first one, maybe for the physicians and the safety profile for these types of patients in AIH, can you just give us context of what's tolerable for the overall population? And then more specifically, could you talk about if there's any subsets of patients, given that it's a heterogeneous disease, any subsets that have a higher disease burden that would be more tolerable of an elevated AE profile and just how it looks across different patients you've seen?

Gideon Hirschfield (Professor)

I mean, for me, you know, I don't see anything that jumps out that would be a reason for patients not to want to use this drug. I think in this population, they're already on a reasonable burden of immunosuppression.

That comes with, you know, significant AEs, just that they're not recorded or reported in clinical practice. Nevertheless, you know, patients with advanced portal hypertension, I don't think they were necessarily included in the study we would be cautious about. I think that's actually no different to actually any of the clinical trials we do in advanced liver disease and in autoimmune liver disease where we're cautious. You know, I think that, you know, what's challenging is that the disease can be heterogeneous. What that means is we can see an age range and we can see a different individual tolerance to different side effects. We can see young people who are very averse to steroids. They do not want to use them at all. You know, they may have friends who are receiving treatments for IBD where they know they get biologics.

They really ask us why they're not getting biologics for their disease when they can see that other people are getting biologics for their colitis or their Crohn's. They are managing the side effect profiles of those biologics through infusion centers or home use, you know, very well. You know, I'm not underestimating the fact that we need to gather more data. That means, you know, longer duration, more patients. I don't see any reason why this group of patients would see the current adverse event profile as anything that would stop them from wanting to take part in future studies.

Craig Lammert (Associate Professor of Medicine)

Yeah, that's right. Again, just to highlight a few things Gideon said, the tolerability issue has been part of the challenge of this disease to this point.

We have not realized the importance of that 15%-20% of patients that are intolerant to standard of care. That probably balloons much more if you include corticosteroids within that measure as well. I do believe there are probably subsets of patients that have worse overall disease and are harder to control. In fact, by study design, this is by choosing these patients is really setting quite a high bar. Again, that is where the intersection of patients' desires and clinical unmet needs are. This is why we are perfectly poised to at least approach this and hopefully in the future registrational trials as well.

Mitchell Kapoor (Director and Senior Biotechnology Analyst)

Great. One more, just wanted to ask, maybe this is for each of you in different ways, but the efficacy over time, you know, could you talk about the separation from placebo versus Zeto?

If, you know, the trends we're seeing may imply that beyond the study period, if you were to treat these patients longer, you would see even further separation with some better efficacy even in the Zeto arm.

Chris Kirk (CEO and Co-founder)

Before we turn it over to the physicians, let me just quickly say, Mitchell, we haven't reported out time to response in either of the groups just yet. We definitely are looking at that and we'll put that in the top line presentation. We have, of course, talked to you about the durability of response with a median duration of the CR in the Zeto arm of approximately seven months. I'll turn it to you, Gideon, first.

Gideon Hirschfield (Professor)

It is a slow disease, I think.

To your point, I think the likelihood is that's what you will see as you give drug for longer and have longer follow-up and you have the opportunity to, you know, have fixed tapering of corticosteroids in a way that's, you know, controlled. That's actually what we see in clinical practice. We don't rush this disease. I mean, I think one of the important aspects of when we treat this disease, we definitely do not treat it like asthma. This is not a disease where you give them a short, sharp course of corticosteroids for two weeks or one week and, you know, asthma or COPD. This is actually, you know, about longer duration therapy, longer use, and then seeing the benefits. I think, you know, Craig kind of alluded to it, really.

I recognize his anecdote, but he demonstrated a patient who seems to have gone into longer-term remission. You know, that makes sense immunologically in this disease that we see that from a clinical perspective. I think we would be optimistic that in the right study setting, you'll be able to see those benefits for patients.

Craig Lammert (Associate Professor of Medicine)

Yeah, just to follow up, I think the design, despite, you know, I should say that I contributed substantially to the protocol development of this study, but it was ambitious. Ambitious, though, the fact that we've hit what we thought we could hit is even more reassuring. I would expect more clinical improvement beyond the six-month window. You know, we know disease is slow, as Gideon has highlighted. Not only is disease slow, you know, histologic changes are slow, inflammatory cell populations leaving are slow.

Again, that's something as we consider into the development of registrational study, I think we have to consider, you know, these are also key things that, you know, the regulators are also very well aware of, but reiterates the importance of an important biomarker, at least in helping. Again, clinical biochemical remission is important. We think in addition of subtracting corticosteroid use is helpful for that. At the end, we may not be able to get away from histologic endpoints. Again, these are all things that we'll be weighing as we design these next step clinical trials.

Mitchell Kapoor (Director and Senior Biotechnology Analyst)

Great. Thank you all and congrats on the data.

Cheryl Gradziel (SVP of Clinical Development)

Thank you, Mitchell. There are no more questions at this time. I'd now like to turn the call over to Chris Kirk for closing remarks.

Chris Kirk (CEO and Co-founder)

On behalf of all of my incredibly hardworking colleagues at Kezar, I want to thank you for your time and attention today. Thank you to the analyst for your great questions. Appreciate the time, Craig and Gideon, that you've spent describing your experience with PORTOLA as well as putting the trial results into context. We're excited for next steps and look forward to keeping everybody informed on how the AIH program for Zeto progresses. Thank you all very much.