Ventyx Biosciences - Q2 2022

Transcript

Operator (participant)

Thank you for standing by, and welcome to the Ventyx Biosciences second quarter 2022 earnings conference call. At this time, all participants are in listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star one one on your telephone. As a reminder, today's program may be recorded. Now I'd like to introduce your host for today's program, Martin Auster, Chief Financial Officer. Please go ahead, sir.

Martin Auster (CFO)

Thank you, Jonathan. Good afternoon, everybody. Thanks for joining the call today. Welcome to Ventyx Biosciences conference call and webcast, where we'll be discussing top-line results from the phase 1 trial of our TYK2 inhibitor, VTX958. As a reminder, you can find press releases issued today covering the phase 1 results from VTX958, as well as our second quarter financial results on our website at www.ventyxbio.com under the Investor tab of the News and 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 and 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 timeframe for funding operations in current cash equivalents and 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 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 The 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's founder, to walk you through the slides. Thanks. Raju, go ahead.

Raju Mohan (CEO and Founder)

Thanks, Marty, and good afternoon, everybody. It's a pleasure to be able to have the opportunity to present the phase 1 results. Slide 3, please. Before we talk about VTX958, which is the focus of the call today, 958 is gonna go into phase 2 trials, and Bill will talk more about this later in the discussion, initiating three phase 3 trials in Q4 of 2022. We only wanna highlight our portfolio of small molecule compounds, differentiated molecules, all internally discovered, and we own all rights, all IP rights to these compounds. In addition to 958, we have VTX002 S1P1 modulator. This compound is currently in phase 2 studies in ulcerative colitis, and we will report top-line data for this compound in 2023.

For our NLRP3 portfolio, our peripheral compound, VTX-2735, it's a potent inhibitor of NLRP3, and we've announced phase 1 results in July of this year. We plan to initiate phase 2 trials in CAPS patients in Q4 of 2022. In addition, we'll be disclosing additional opportunities for developing this compound also later this year. Finally, VTX-3232. 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 1 trial in Q1 of 2023. That is a portfolio of small molecule compounds. Let's move to the next slide, please. Why the excitement on TYK2? TYK2 is a clinically validated target from two angles.

One is the established efficacy of biologics, IL-23 and IL-12/23, all targeting clinical efficacy in IBD, in psoriasis, in arthritis. The other target of TYK2 is interferon alpha and now validated in lupus. In addition to the biologics that also validate 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, baricitinib, that has shown efficacy now in psoriasis, psoriatic arthritis, and most recently in lupus. As you know, these are large, the diseases we talked about here are large markets in the autoimmune disease space, totaling close to $50 billion worldwide.

There's clearly a high unmet need for oral agents because this market, as you know, is currently dominated by biologics. Where does that position VTX958? It is a highly selective TYK2 inhibitor, an allosteric inhibitor. 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. The positive phase 1 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 cytokines 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.

Right from the beginning, our chemistry strategy has focused on the allosteric domain of TYK2. Classic JAK inhibitors target the kinase domain. This domain is highly conserved within the JAK family, and while it's easy to get potent compounds, these compounds generally have very poor selectivity. They cross over into all the entire JAK family. They hit 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. Thus, VTX958 has 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 two 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. Really important here, it avoids potential safety risks that are associated with compounds that either hit JAK1 or JAK2 or JAK3, or compounds that are not as selective as VTX958. Slide six, please. 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.

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 has only about a 50-fold selective profile for TYK2 versus JAK1. Just a little bit of a structural lesson in here, and the reason why we've been able to do this is that VTX958 and deucravacitinib both exploit the valine, which is present in the TYK2 JH2 domain. They both bind to it. What we have done with VTX958 is build a compound such that it has a negative interaction with the isoleucine, which is now a substitute for valine in the JAK1 domain, and whereas deucravacitinib can still bind to this isoleucine.

This binding difference between VTX958 and the 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. This is the binding differential for VTX958, 4,000-fold selective for TYK2 versus JAK1. Next slide, seven, please. This has the biggest impact is now on the functional selectivity of VTX958. Functional selectivity in its ability to now hit, selectively hit TYK2-driven cytokines, IL-12, IL-23, interferon alpha. You can see that there with deucravacitinib, they're both bona fide allosteric compounds. They both hit IL-12, 23, and alpha. The difference is most striking is in the right-hand side column, where VTX958 has no affinity for these pleiotropic cytokines. These are protective cytokines that you do not wanna block.

VTX958, in all the assays that we have run across a 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. A composite of cytokines, all with a single message, we are highly selective TYK2 versus JAK1. DapraSipnil, which has some interaction with JAK1, then ends up inhibiting the entire panel of cytokines, IL-22, 10, gamma, 4, and 6. Coupled with the high selectivity of VTX958 and the safety profile that we've now seen, first from non-clinical 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 therapeutic window.

In addition to hitting the potent cytokines, we talked about IL-23, cytokine that's been implicated in psoriasis, in psoriatic arthritis, in Crohn's disease. It really allows this therapeutic window, the safety profile of this compound, this unmatched target coverage, allows us to safely obtain exposures, higher exposures in phase 2 and phase 3 studies to then elicit maximum efficacy in these disease indications. Slide 8, please. With that, I'm gonna hand over to Bill to walk you through the phase 1 results. Bill?

Bill Sandborn (President and CMO)

Thank you, Raju. Just to remind the listeners, in this platform you need to advance your own slides, and we're currently on slide 9. What are the goals of our phase 1 study? It's really to show the safety, exposure, and the target coverage of VTX958. 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 TYK2-mediated cytokines interleukin 12, 23, and interferon alpha to demonstrate direct evidence of TYK2-driven target engagement in subjects by validated in vivo and ex vivo pharmacodynamic assays.

I'll note that in phase 1 healthy volunteer studies with deucravacitinib, that the results of this panel of pharmacodynamic assays read through very well demonstrated in phase 2 and phase 3 clinical trials and various indications. Finally, to establish the correlation between VTX958 exposure and TYK2 IC90 coverage in terms of hours per day covered. Next 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.

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. 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 1 study. VTX958 was administered as a suspension. There were seven dose levels ranging from 50 to 500 milligrams, eight subjects per cohort, six active and two placebo.

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 at each of the 7 dosing levels. Looking in the lower right, VTX958 was well-tolerated through all of 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. Significant pharmacodynamic effects, as measured by interferon response genes and IL-12 signaling following interferon alpha challenge and ex vivo stimulation, was observed. I'm not gonna show the detailed results because the multiple ascending dose is really the area of greatest interest. Moving now to slide 12. Here's the schema for the multiple ascending dose study.

You can see we studied five dose cohorts, alternating BID cohorts at 50 BID, 175 milligrams BID, and 350 milligrams BID, and in between 250 milligrams qday and 500 milligrams qday. These five dose cohorts were dosed for 14 days. There were again eight subjects per cohort, six active and two 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 TYK2 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-12/23 stimulation at baseline and at day 10.

As I 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 wanna orient you to this. We're really focused on the exposure and target coverage across the cohorts for the three TYK2 targets, interleukin 12, interleukin 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 two QD doses.

You can see that for IL-12 and IL-23, you have 4-6 hours of IC90 coverage and 9-14 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 16-24 hours of IC90 coverage for IL-12 and IL-23 and 24 hours of coverage for IC50 and similar results for interferon alpha. When you roll this together, we see safety achieved with class-leading TYK2 IC90 coverage. The IC90 coverage lasts up to 24 hours for IL-12, IL-23, and interferon alpha. The exposures that we demonstrate here approach biologic-like or monoclonal-like suppression of IL-12 and IL-23 pathways.

Moving to slide 14. 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 emergent 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 1 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.

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's 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. 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, and 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 was mild. It 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. There were two patients at the 350 BID cohort who had skin papules. One of those, these were mild papules judged to be not drug-related. One subject had mild face papules that resolved with continued VTX958 dosing, and again, no topical therapy to the 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 therapy.

Finally, there were some patients with dry mouth and abdominal pain. There was one 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 15 or 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 the sorts of things you would expect to see with interferon alpha. There was one 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, or platelets. No changes in creatinine phosphokinase and no changes in lipids.

Moving on to slide 18. Now transitioning from safety to the pharmacodynamic effects. We saw robust dose-dependent pharmacodynamic effects. On the left, you can see complete suppression of all IL-12 signaling. There was 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-12Rβ1. We believe that this inhibition of IL-12 signaling also indicates inhibition of IL-23 signaling. You can see the data in the graph below. Moving to the right side, we also saw 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 three 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 the 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 three genes. Moving on to slide 19. In summary, we believe that we've demonstrated class-leading target coverage with excellent safety and exposure margins. VTX958 demonstrated differentiation versus tofacitinib and other allosteric TYK2 inhibitors in terms of safety and target coverage in this phase 1 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-20, 12/23 pathways. We note that VTX958 is the only allosteric TYK2 inhibitor to demonstrate safe and sustained coverage of IC90 for IL-12/23 in 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. 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 3 psoriasis dose, achieves IC50 coverage for about 9 hours and never achieves 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. We would expect that fuller pathway inhibition with an improved therapeutic window would be expected to drive to 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. 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.

You can see that both of these have IC50 coverage for part of the day, but no IC90 coverage. Next slide 22. Let's get into the details of the skin adverse events and target coverage a little bit. I'm gonna focus you to the table on the right initially on the second line. These are the deucravacitinib phase one MAD data in healthy volunteers. I'll remind you, this is a 14-day study with an interferon alpha challenge on day 13, so exactly the same as what we saw. In the context of a 14-day study, once you get to 6 milligrams BID or 12 milligrams QD, you're seeing 33%-50% rolled-up skin adverse events. As you go up to 12 milligrams BID, it's almost 80%.

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%. As you look down to the various phase 2 and phase 3 clinical trials, you can see that if you stay at the 6-mg QD dose or 3 mg BID, you can have acne and rash in the sort of 2-4% range. Although with lupus, if you looked at all skin AEs at 3 mg BID, it was still 17%. When you get up to 6 mg BID and 12 mg 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. Then just to remind you, the 6-mg QD dose has 9 hours of IC50 coverage for TYK2 and 0 hours for IC90. Even as you get up to 6 mg BID and 12 mg QD, you're having 18 hours of IC50 coverage and 0 hours of IC90 coverage. Very different coverage than what you see with VTX958, and yet significant dose-dependent dermatologic adverse events. We believe that these data establish robust differentiation versus deucravacitinib. We note that deucravacitinib elicits a dose-dependent and potentially dose-limiting skin toxicities. These skin findings occur with high frequencies at exposures greater than 6 mg per day.

By contrast, that 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 23. I wanna level set you here. This is comparing three different allosteric TYK2 inhibitor phase 1 data. These are 14-day trials in healthy volunteers with a interferon alpha challenge at the back end of the trials. We'll start with VTX958. We looked at total daily doses ranging from 100 to 700 milligrams per day. We saw skin and subcutaneous disorders at 10%. These were papular rash in all three patients. But I'll remind you that one of those at the 250 QD dose was just a single papular rash that was judged not related and resolved under therapy.

Quite low skin manifestations. We had a single patient with elevated transaminases that were mild in the context of a 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, look at deucravacitinib. They studied in phase 1 healthy volunteers, doses ranging from 2 to 24 milligrams of total 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, there was IC50 coverage of 9 hours and IC90 coverage of 0 hours. In the middle, we see the Nimbus compound.

There were a couple of dose ranges looked at, 20-35 milligrams QD and 50-100 milligrams QD. You could see up to 67% acneiform dermatitis, a papular rash, and up to 25% of patients that developed a grade 3 CPK elevation on 20 milligrams. If we consider 30 milligrams as the clinically relevant dose, there's 24 hours of IC50 coverage and about five hours of nice IC90 coverage. Going on to slide 24. 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. With VTX958, at 175 BID, 24 hours of IC50 coverage, 16 hours of IC90 coverage. For that dose and below, essentially no skin findings, no laboratory findings.

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 mg QD, 9 hours of IC50 coverage, 0 hours of IC90 coverage. You see dose-dependent acne, acneiform dermatitis, folliculitis, and rash, especially at doses more than 6 mg QD, so that's dose-limiting. You can see rare CPK and triglyceride elevations in the psoriasis phase 3 trials. We note that there was a failed trial of deucravacitinib at a 6-mg BID dose in ulcerative colitis, and I think I've explained why 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. We think there's still an opportunity to go up as they really showed in their phase 2 trial for some of the more robust outcome measures like PASI 90, where there was a linear dose response across all the doses studied. Finally, with this Nimbus product at a relevant dose of 30 mg QD, 24 hours of IC50 coverage, only 5 hours of IC90 coverage, and they see acne rash and 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. 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.

You can see 85%-90% response rates for PASI 75 outcome measures. Otezla is about a third of that, the PASI 75 in the 30% range. Deucravacitinib is superior to Otezla, but still only achieving a low 50% range, PASI 75. There's a large gap between what is achieved with deucravacitinib at the 6 mg once-a-day dose and what you can see with the biologic therapies. 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 that 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 that you need 4-6 times as much biologic to see efficacy in Crohn's disease as you do in psoriasis. This greater TYK2 pathway inhibition that's required for IBD efficacy, sixfold 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 2 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. 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.

Because of this profile of VTX958 may unlock a major market opportunity in Crohn's disease, which is currently greater than a $13 billion global opportunity. Moving on to slide 27. How do we think about what's next in terms of the development opportunities? We will later this year begin phase 2 trials that will explore a broad range of dose-finding studies, enabling optimal phase 3 dose selection based on the safety and maximizing target coverage. Specifically, we plan to initiate three phase 2 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 2, which could include lupus, given the unique profile of VTX958. These phase 2 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 dose form, and we would of course do a bridging study before phase 3. 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. How does this wrap up? This shows you the landscape of the IL-23 and IL-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 IL-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. It's 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. If we summarize this, VTX958 has this excellent safety profile, class-leading TYK2 coverage, potentially superior therapeutic window compared to anything else in the oral 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.

This is just to make the point that these markets are big, almost 11 million patients in the United States across these indications. 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. As I showed you on the previous slide, we have the opportunity to markedly impact each of these markets. VTX958 will enable clinical differentiation across multiple indications. It 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.

It would be uniquely positioned among TYK2 inhibitors to address Crohn's disease and IBD indications, where IL-12/23 and IL-12 antibodies have proven effective at higher doses than is what you do in psoriasis. I'll stop here and hand it back to Raju to wrap up. Please move on to slide 30.

Raju Mohan (CEO and Founder)

Yeah, I think that's that really sums it up, Bill. Thank you again. You know, I think in the interest of time, why don't we open up the forum to Q&A?

Operator (participant)

Certainly. Ladies and gentlemen, if you have a question at this time, please press star one one on your telephone. One moment for our first question. Our first question comes from the line of Yasmeen Rahimi from Piper Sandler. Your question, please.

Yasmeen Rahimi (Managing Director and Senior Research Analyst)

Good afternoon, team. First of all, congrats to the really stellar data. An outstanding job. Thank you for taking my question. Couple clarification questions. In the MAD portion, when you refer 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. My second question was, you nicely showed cholesterol levels. Did you measure triglycerides and LDL-C? If it was just cholesterol, just one of the biomarkers showing its representation of a long list of lipid biomarkers that were assessed? Two more small questions for you.

Raju Mohan (CEO and Founder)

Yeah. Let me have Bill address the rash ones, but I can speak to the lipids. 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 brevity here, but there was no change at all in any fatty acid compositions. No lipids, no triglycerides, no cholesterol. Bill?

Bill Sandborn (President and CMO)

Yeah. The judgment of relatedness for the 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 two papules seen in the highest dose groups, the 350 BID, could easily be related to the medication. You know, I think the key point is that it was very clean up to that point. Even those two 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 1 healthy volunteers with deucravacitinib, there were a number of cases where the skin manifestations led to early discontinuation of the treatment during the MAD study.

Yasmeen Rahimi (Managing Director and Senior Research Analyst)

Thank you, Dr. Sandborn, and thank you, Raju. The one case where ALT, AST, and GGT increased, and those were classified as mild. I assume mild means nothing over, you know, greater than 2x of the upper limit. Just define what you mean with mild. Did that just occur before they got COVID and it went down, or did they start off with slightly elevated liver enzymes and then once they're on 350, it got increased. Just some color around that.

The last question is, what's sort of the dose ranges you're planning to go into your psoriasis study and into your Crohn's study, or at least discuss all that. Thank you for taking my questions.

Bill Sandborn (President and CMO)

Yeah. For the patient where there was COVID, you know, 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. The second case, as I indicated, was a mild elevation that occurred immediately after the interferon alpha challenge. In terms of doses, I think we're not prepared to outline exactly today the doses we'll take into phase 3, but it would take into account the totality of the efficacy and/or the safety data and the target coverage. We anticipate exploring doses that cover most of the day for IC90.

Yasmeen Rahimi (Managing Director and Senior Research Analyst)

Thank you, Dr. Sandborn, and congrats again, team.

Bill Sandborn (President and CMO)

Yeah. Thanks, Yas.

Operator (participant)

Thank you. Our next question comes from the line of Michael Yee from Jefferies. Your question, please.

Michael Yee (Managing Director and Senior Biotechnology Analyst)

Hey, guys. Thanks for the question and 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 purportedly will get approval soon. So, you know, 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? Maybe Bill can answer that or anyone on the team can answer that. Thanks.

Raju Mohan (CEO and Founder)

Yeah. Thanks, Mike. What a surprising question. The good news is, you know, less than four weeks from now, we'll be on the other side of it. Anyways, a good question on that. Maybe Martin Auster. Maybe, Marty, you wanna take this one?

Martin Auster (CFO)

It's my chance to get some exercise in. Hey, Mike, thank you for the question. It's obviously, as we all know, deucravacitinib ran a really nice phase 3 program with the 6-milligram QD dose where they showed superiority on efficacy to Otezla and showed a really nice safety profile. That leaves us probably similar to you know their Bristol in terms of optimism about the approvability of that drug. I think right there's already a pretty clear differentiation in terms of the regulatory path from what you've seen with, like, JAK inhibitors, obviously in psoriasis, where there's been a couple setbacks for JAKs looking at that indication. I think there's already pretty clear signs of differentiation from regulators around this TYK2 class versus JAK inhibition.

Obviously, like you, we're, you know, eagerly waiting to see what that label looks like. Obviously the more, or the less restrictive the label, we think the faster the TYK2 class is going to kinda gain ground within the $20 billion-plus psoriasis market. We're obviously, you know, very excited about the prospects there, and our advisors and our KOLs are incredibly optimistic about TYK2s in psoriasis as well. We're looking for that update as you are. Is there anything else you wanna add, Bill?

Raju Mohan (CEO and Founder)

I think that's great, right? We'll see what happens in less than four weeks.

Michael Yee (Managing Director and Senior Biotechnology Analyst)

Thank you.

Operator (participant)

Thank you. Our next question comes from the line of Josh Schimmer from Evercore ISI. Your question, please.

Josh Schimmer (Managing Director)

Very detailed, helpful overview. Maybe first, the phase 2 trials, if you could get your thoughts on expected size and duration.

Raju Mohan (CEO and Founder)

Yeah. Bill?

Bill Sandborn (President and CMO)

I don't know that I'm gonna give the exact details, but you know, the track record for how to do this is pretty well laid out with deucravacitinib. Psoriasis phase 2 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, you know, that'll be appropriately powered and give a range of doses. In terms of duration, we're anticipating sort of that 16-week range for psoriasis and psoriatic arthritis and probably a 12-week range for Crohn's disease. We anticipate extension programs for each of those indications as well.

Raju Mohan (CEO and Founder)

Thanks, Bill.

Josh Schimmer (Managing Director)

Excellent. Then, slide seven, where you showed the IC50s for VTX958 versus deucravacitinib. I would've thought that there's decent enough selectivity for deucravacitinib. The Th1 cytokines over the protective cytokines in order to provide, you know, good efficacy coverage without safety concern. 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-10 for deucravacitinib. Can you discuss, you know, first, do you think the IL-10 inhibition is likely underlying some of the deucravacitinib toxicity? Why would IL-10 specifically be an outlier in that it's more sensitive to deucravacitinib than some of the other cytokines that you've shown on that slide? Thank you.

Raju Mohan (CEO and Founder)

Bill, you wanna take that?

Bill Sandborn (President and CMO)

For the dermatology adverse events, we do think that those are off target and not on target. The reason for that is, as I pointed out, the dosing profiles that have been done in inflammatory bowel disease for the IL-12/23 inhibitors are very high, and there's just no signs of dermatologic adverse events. Likewise, the approved product for lupus, or type 1 interferon antibody, also doesn't show any skin side effects. 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 is a little hard to tell, and no one knows for sure, but we see them as being off target.

Raju Mohan (CEO and Founder)

Yeah. Josh, you know, you and I have talked about this before. There's some indication that IL-10 and IL-22 act as effectors on barrier integrity, so direct effects on filaggrin and loricrin, and also on some microbial defense. There's clearly a link that can be established. Now, as Bill said, you know, is it something that's directly linked to JAK1? You know, but certainly you can explain it through targeting IL-10 and IL-22.

Josh Schimmer (Managing Director)

Got it. Thanks very much.

Operator (participant)

Thank you. Our next question comes in line. Appreciate it. Thanks for From Credit Suisse. Your question, please.

Tiago Fauth (Director of Equity Research Small/Mid Cap Biotechnology)

Question. Just two quick ones for me. The first one is again, now that you have line of sight on running three phase 3 trials for VTX958, you also expect to run a phase 2 for CAPS, VTX2735. 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 2s across the board? How you're thinking strategically about that development? Just on the modified release formulation, just curious if you can provide any additional detail as of now on what technologies are you using to try to get that BID exposure with the QD or oral dosing, again, kind of combining the benefits of the safety profile and the 24-hour coverage. Thank you.

Raju Mohan (CEO and Founder)

Yeah. 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, you know, we're aiming for multiple formulations to go into a human studies, and we'll start to share data as early as first half of 2023. Our non-clinical data here and then including animal PK and other in vitro studies looks very promising, and that feeds into the design of the protocol. Very confident we'll have an update for you folks in first half of this year. I'm not gonna go into the CROs, but we're working with some highly experienced people and a great compound to work with, right?

I think that's the answer on the MR. In terms of the financing question, look, we're as Martin Auster put out in his earnings release, we're well capitalized with over $250 million at the end of Q2. You know, frankly, rolling in from phase one, the team has a laser focus now on executing in our phase two trials. As William Sandborn said, we're starting three phase two trials this year in TYK2 alone. We're targeting a proof of mechanism for our CAPS trial, looking at our indications. You know, we are capitalized into the second half of 2024. Now, you know, with these targets that are, you know, number one, address large markets, diseases with high unmet need and, you know, really of interest to pharma.

Not just TYK2, but without exception, TYK2, S1P1, and then NLRP3. They're really of interest to pharma. As we move along, you know, we'll look at every and all opportunities that present themselves, be very thoughtful about them. Those, as you know, will include non-dilutive options such as strategic partnerships that, you know, as and when they come. We have the luxury of having complete ownership of our compounds. They're all internally discovered and, you know, we'll look at every opportunity to strengthen our capital position in the, you know, the coming months and quarters. Maybe Marty has something to add to that.

Bill Sandborn (President and CMO)

Sure. Thanks, Raju. Yeah, I would just add, Tiago, we have a great deal of flexibility, obviously, in what we do going forward. The cash balance that at $258.4 million into Q2 actually can get us to meaningful data readouts for our S1P and ulcerative colitis, for our VTX958 for our psoriasis, potentially for data readouts in psoriatic arthritis and Crohn's, as well as the VTX2735 CAPS program. There's a lot of robustness built into sort of the data readouts we'll see off that capital position.

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 2 into phase 3 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.

Tiago Fauth (Director of Equity Research Small/Mid Cap Biotechnology)

Awesome. Now congrats again on the update, and thanks for taking the question.

Operator (participant)

Thank you. Our next question comes from the line of Sam Slutsky from LifeSci Capital. Your question, please.

Sam Slutsky (Senior Research Analyst)

Hey, good afternoon, everyone. Thanks for the questions, and congrats on the data. A couple for me. For the IC90 coverage, you mentioned that's consistent across cytokines of interest being IL-12, IL-23, and interferon alpha. I guess, as we interpret data.

Raju Mohan (CEO and Founder)

Sam, you're fading out. Operator, can we maybe shift to the next one and come back to Sam?

Operator (participant)

Certainly. One moment for our next question. Our next question comes from the line of Jeff Jones from Oppenheimer. Your question, please.

Jeff Jones (Managing Director and Senior Analyst)

Good afternoon. Thanks for taking the question, guys, and congrats on the data. I guess two questions, three questions from me. Is your development strategy on 958 impacted at all by whether deucravacitinib gets a quote-unquote "clean label" or not? So does that sort of impact your study designs or otherwise? In terms of the SLE indication, are there gating items in terms of your decisions to move forward? Obviously, three phase twos takes you a long way on 958 with that, even without SLE in the short term. I guess the third question on the S1P program. Can you give any further clarity, you know, around the timeline beyond 2023? Is there any reason to think first half versus second half? Can you provide anything beyond the 2023? Thank you.

Raju Mohan (CEO and Founder)

Yeah. The label question, lupus and S1P1. Let's just start with Bill. You want to just take it?

Bill Sandborn (President and CMO)

Yeah. 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 limitation of use restriction. As long as that's the case, then it, you know, really wouldn't impact our thinking about the design. In terms of SLE 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, you know, 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. We think lupus is a very attractive indication in due course, but that's sort of how it played out. We will plan to update our S1P program sometime, you know, later in the year. What I would say is we're making really good progress now with recruitment.

Raju Mohan (CEO and Founder)

Thank you.

Jeff Jones (Managing Director and Senior Analyst)

Great. Thank you very much.

Operator (participant)

Thank you. Our next question is from Sam Slutsky from LifeSci Capital. Your question, please.

Sam Slutsky (Senior Research Analyst)

Can you guys hear me?

Operator (participant)

Yes.

Raju Mohan (CEO and Founder)

Welcome back.

Sam Slutsky (Senior Research Analyst)

Yeah, thanks. Two for me. For IC90 coverage, you mentioned that's consistent across cytokines of interest, which are IL-12, 23, and then interferon alpha. As we're interpreting data from others, do you know if IC90 data are always inclusive of each of these cytokines, or is it just sometimes a few of them?

Raju Mohan (CEO and Founder)

I think IC90 depends on your, you know, hitting the target. Starts with IC50, and you can stop at IC90. We know from deucravacitinib, from their published data and various papers and so on, what their IL-12 coverage is. As Bill said, IL-23 has to be deduced because there is no human whole blood assay for IL-23, and the same is for interferon alpha. BMS has published their IC50 and IC90 on alpha. For other folks, you know, we've seen interferon alpha data perhaps on a poster from Nimbus. No, the answer is no. You don't blanket cover all of the cytokines with the same potency, the same. Each of them has their own threshold. We certainly hit IL-23 more potently than we do IL-12, and the same goes for alpha.

When we do IL-12, very comfortably also hitting IL-23 and interferon alpha in the same assays right now. Okay, that's that. Next one.

Sam Slutsky (Senior Research Analyst)

Next question is just general kind of PK/PD questions. Is there any data yet with VTX958 on whether there's a food effect, DDIs, QT prolongation, or just anything else notable?

Raju Mohan (CEO and Founder)

We don't expect any cardiovascular effects with this molecule thus far, but of course, we'll do a formal cardiac QT study in the future. There's no hints of any changes right now in any abnormal or cardiac function from what we've seen thus far, and we do very careful monitoring in our studies. You know, what we're gonna do is we're gonna disclose our entirety of our PK/PD data at a later discussion. It's really not, you know, there's no impact on our phase 2 strategy. It's gonna be a big data dump that we'll do of course in a meeting, an appropriate forum there.

You know what I would like to do is let's see if there's any more questions in the queue. Okay. Let's give him Jim Krueger an opportunity to weigh in as well. Yeah, go ahead with the question, next question. Jim, so Operator, is there another question in the queue?

Operator (participant)

Oh, yes, absolutely. One moment for our final question. Our final question comes from the line of Edward Tenthoff from Canaccord Genuity. Your question please.

Xin Wei (VP of Biotech Equity Research)

Hi. This is Xin Wei, I'm for Edward. Thank you for taking my questions, and congratulations on the positive data. The first question that I have is still about the dose for the phase 2 studies that's about to initiate later this year. From your slide just presented, you said the trials will explore a broader range of doses. Based on this phase 1 data today, we see the two 175 and 350 BID doses seems to be pretty good. Could you please share more color on why you would like to explore a wider range of doses? I have a couple shorter questions later.

Bill Sandborn (President and CMO)

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

Xin Wei (VP of Biotech Equity Research)

Okay. Thank you. For the phase 2 studies, what are the key parameters that will be monitored both on the targets coverage part and also on the general monitor of patients' progression?

Raju Mohan (CEO and Founder)

Bill?

Bill Sandborn (President and CMO)

Well, I think the path is pretty well-trod. I see for psoriasis, the PASI 75 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 sub-study to study the translational medicine aspects in skin biopsies. That's all pretty standard. For psoriatic arthritis, it's the ACR20 and 50 and 70 and the typical things. 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. We will be, you know, studying 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 anticipate that.

Xin Wei (VP of Biotech Equity Research)

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

Raju Mohan (CEO and Founder)

Yeah. Good. Thank you. We've guided folks that we'll start all three trials in the fourth quarter this year. We've also guided folks that our first trial will be in psoriasis. There's no priority among one or the others. We're planning to start all three trials, and we're capitalized to do so. Stay tuned.

Bill Sandborn (President and CMO)

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

Xin Wei (VP of Biotech Equity Research)

Thank you.

Raju Mohan (CEO and Founder)

Yeah. Thank you. You know, we've got, of course, our IBD expert here in-house, Bill Sandborn. I'm gonna invite Jim Krueger, who is a, you know, KOL in the dermatology space. Maybe Jim could you give your thoughts on a phase one data that you just had a chance to see and put the data in context of, you know, you've worked with a lot of drugs, you've worked with biologics and certainly with small molecules. Maybe you can put thoughts on this.

James Krueger (MD, PhD)

I mean, I think what we've seen here are perfectly sensible, maybe even predictable, outcomes based on what we know about.

Raju Mohan (CEO and Founder)

Jim, we're losing you. Your audio, if you may wanna stop.

James Krueger (MD, PhD)

The selectivity. 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. All very, very encouraging, and it makes, frankly.

Raju Mohan (CEO and Founder)

You're still not coming through.

James Krueger (MD, PhD)

Yeah, I really don't know what to do other than scream and just say it's fascinating data that are, I think, highly encouraging.

Raju Mohan (CEO and Founder)

No. Take your time. Just take it. Just relax. You know, technical stuff happens.

James Krueger (MD, PhD)

I don't think it's on my end. I hope not. Just say I think, you know, I think that it's working extremely well for what's likely to happen.

Raju Mohan (CEO and Founder)

No, it's not. You know what? You're not coming through. I did hear you say it's fascinating data. We're very excited by it.

James Krueger (MD, PhD)

Yeah.

Raju Mohan (CEO and Founder)

You know what? Always believer in second chances. Maybe just give you one more chance here. Try again.

James Krueger (MD, PhD)

Okay. I don't know if you can hear me. Am I-

Raju Mohan (CEO and Founder)

Yes.

James Krueger (MD, PhD)

Am I coming through?

Raju Mohan (CEO and Founder)

Yes.

James Krueger (MD, PhD)

Well, okay. As I say, I think that the data portend very well for what's gonna happen in psoriasis, and they make a lot of sense. They make maybe more sense than some other small molecule studies that I've seen.

Raju Mohan (CEO and Founder)

No, no.

James Krueger (MD, PhD)

No?

Raju Mohan (CEO and Founder)

Not working. Let's stop now, and you know, there'll be ample opportunities for folks to interact with Jim. Again, Marty, you wanna sum up here?

Bill Sandborn (President and CMO)

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

Raju Mohan (CEO and Founder)

Yeah. Thank you.

Operator (participant)

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