Aclaris Therapeutics, Inc. (NASDAQ:ACRS) Q1 2024 Earnings Call Transcript May 7, 2024

Aclaris Therapeutics, Inc. beats earnings expectations. Reported EPS is $-0.23835, expectations were $-0.28. Aclaris Therapeutics, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, and thank you for standing by. Welcome to the Aclaris Therapeutics First Quarter 2024 Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Kevin Balthaser. Please go ahead.

Kevin Balthaser: Thank you. I am Kevin Balthaser, Chief Financial Officer for Aclaris. Please note that earlier today, we issued a press release highlighting our first quarter 2024 financial results and other business matters. For those of you who have not yet seen it, you will find the release posted under the Press Releases page of the Investors section of our website at www.aclaristx.com. In addition, we will be referring to a slide deck entitled ITK Portfolio, which can be found on the Investor Presentations page of the Investors section of our website and furnished as an exhibit to our Form 8-K that we filed with the SEC earlier today. Joining me today for the call are Neal Walker, our Interim Chief Executive Officer and Joe Monahan, our Chief Scientific Officer; Wally Smith, our Scientific and Business Development Consultant will also be available for the Q&A portion of the call.

Before we begin our prepared remarks, I would like to remind you that various statements we make during this call about the company's future results of operations and financial position, business strategy and plans and objectives for Aclaris' future operations are considered forward-looking statements within the meaning of the federal securities laws. Our forward-looking statements are based upon current expectations that involve risks, changes in circumstances, assumptions and uncertainties that could cause actual results to differ materially from those reflected in such statements. These risks are described in the risk factors section of Aclaris' Form 10-K for the year ended December 31, 2023 and other filings Aclaris makes with the SEC from time-to-time.

These documents are available under the SEC Filings page of the Investors section of our website at www.aclaristx.com. All the information we provide on this conference call is provided as of today, and we undertake no obligation to update any forward-looking statements we may make on this call on account of new information, future events or otherwise. Please be advised that today's call is being recorded and webcast. A link to the webcast can be accessed under the Events page of the Investors section of our website. I'll now turn the call over to Neal Walker.

Neal Walker: Thank you, Kevin. Good afternoon, everyone. Last quarter, we announced that in addition to various cost cutting measures and an overall review of our business strategy, we were also reevaluating the indication selection for ATI-2138, which is our oral small molecule ITK JAK3 inhibitor. Today, I'm pleased to announce that we have decided to move ATI-2138 forward in a proof-of-concept study in moderate to severe atopic dermatitis. Atopic dermatitis is a Th2 cell driven disease and ITK inhibition blocks T cell differentiation, activation and production of IL-4 and IL-13. In fact, there is extensive literature on the role that ITK plays in regulating the signaling pathways that are central to the production of various cytokines by both Th2 cells and mast cells. Today, we will provide an overview of ATI-2138 and the data we have generated thus far. Joe?

Joe Monahan: Thank you, Neal. ATI-2138 is a covalent inhibitor that targets T cell kinase ITK as well as JAK3. ITK is a kinase downstream of the T cell receptor and is important for the regulation of T cell function, while JAK3 is required for the signaling of cytokines that utilize the gamma common receptors such as IL-2, IL-4 and IL-15. ITK through effective targeting of these 2 critical T cell and cytokine associated pathways provides the potential to treat a broad set of autoimmune diseases. ATI-2138 was generated from our proprietary connect drug discovery platform using structure based drug design, focusing on molecules with high reversible affinity containing electrophiles that target the ATP site cysteine positioned similarly in ITK and JAK3.

As shown in Slide 5, covalency and engagement of Cys442 was demonstrated from the proprietary crystal structure of the ATI-2138 ITK complex. ATI-2138 also binds to and engages Cys909 and JAK3, the only JAK Isoform with this residue in the ATP site. This cysteine in JAK3 has also been effectively targeted by the drug ritlecitinib, which is Pfizer's recently approved therapy for alopecia areata. ATI-2138 differentiates from both ritlecitinib and reversible JAK inhibitors, thereby demonstrating unique pharmacology and best-in-class potential. As shown on Slide 6, ATI-2138 has similar high potency for inhibiting both ITK and JAK3 signaling in contrast to ritlecitinib, which is less potent on both pathways and demonstrates JAK3 biased pharmacology.

ATI-2138 is selective for JAK3 with no meaningful crossover to other JAK Isoforms. The restricted expression of JAK3 to hematopoietic cells coupled with the lack of crossover to other JAKs may result in improved safety profile for ATI-2138 relative to broad spectrum reversible JAK inhibitors. Clear differentiation from the covalent inhibitor ritlecitinib is demonstrated in human old blood studies shown on Slide 7. The panel on the left compares ATI-2138 and ritlecitinib in ITK dependent anti CD3 stimulated interferon gamma production, while the right hand panel compares 2 compounds in JAK3 dependent IL-2 stimulated interferon gamma release. ATI-2138 is 44.4 times more potent than ritlecitinib in blocking ITK dependent cytokine production and 5.44 more potent in the JAK3 dependent readout.

The comparable whole blood potencies of 2138 on ITK and JAK3 translated to similar impact on the respective PD readouts in the human SAD and MAD studies. In contrast, at the FDA recommended 50-milligram QD dose of ritlecitinib for alopecia areata, Exposures would be expected to inhibit JAK3, but have little impact on the ITK pathway. Now why is ITK an important target? Slide 8 demonstrates the current understanding of the role of ITK in T helper cell differentiation and activation. Of the TEC kinases, ITK alone is required for the differentiation and activation of Th2 and Th17 cells and ITK knockdown or inhibition results in skewing of T helper cells from the Th2, Th17 phenotypes to the Th1 T reg phenotypes. ITK inhibitors have the potential as effective oral drugs to treat diseases driven by Th2 and/or TH17 cells, such as atopic dermatitis.

ATI-2138 has demonstrated activity in a number of preclinical immune inflammatory disease models. Oral activity at various doses of ATI-2138 in rat adjuvant induced arthritis is shown on Slide 9, evaluating ankle swelling on the left and histology on the right. Similar strong activity is observed with doses in 5 and 15 milligrams per kilogram BID as well as 30 milligrams per kilogram QD. Activity was also observed in the adoptive T cell transfer model of colitis in the mouse as shown on Slide 10. ATI-2138 formulated in CHOW protected optimal and distal colon as well as the ileum from inflammation to a greater extent than the anti-IL-12p40 antibody. Preclinical studies supported the advancement of ATI-2138 into Phase 1 SAD and MAD clinical studies as summarized on Slide 11.

The drug was generally well tolerated had favorable PK characteristics and demonstrated dose dependent modulation of ITK and JAK3 pharmacodynamic readouts. Slide 12 shows the PK characteristics of ATI-2138 from the MAD study. Exposures following the final dose on day 15 of the med study are shown on the left and dose proportionality is shown on the right. Linear PK is observed with ATI-2138 following 2 weeks of dosing, with steady state dose proportionality observed for both Cmax and AUC. Slide 13 shows the pharmacodynamic results across the 2-week dosing period in the MAD study. The left panel is measuring the inhibition of ITK dependent IL-2 mRNA following ex vivo stimulation in blood, the middle panel JAK3 dependent interferon gamma production and the right panel interferon gamma production following dual stimulation of the TCR and JAK3 pathways.

ATI-2138 demonstrated dose and time dependent inhibition under all stimulation conditions. 50% to 90% inhibition of the PD readouts was observed with doses from 5 to 40 milligrams BID. Slide 14 shows exposure response analysis from the 3PD readouts and compares the translation from preclinical human whole blood analysis. These data demonstrate a strong concentration dependent correspondence between EC50s from both the SAD and MAD clinical studies and in vitro human whole blood studies across the 3 stimuli. As expected, similar potency is observed for the ITK pathway, JAK3 and dual stimulation inhibition. Finally, exposures generated from the 5 milligrams to 40 milligrams BID dosing were sufficient to provide blockade of both pathways. Successful completion of the Phase 1 studies effectively positioned ATI-2138 to advance into Phase 2.

The first indication in which ATI-2138 will be evaluated is atopic dermatitis. The rationale for which is shown on Slide 15. The dual TCR JAK3 specificity of ATI-2138 effectively positions it for treatment of atopic dermatitis. The important role of ITK and Th2 cell differentiation and activation, coupled with the efficacy observed with the biologics targeting the Th2 cytokines IL-4 and IL-13 supports the potential for ATI-2138 as an oral alternative to these biologics. Additionally, inhibiting JAK3 should add complementary efficacy through blockade of IL-2 and IL-4 signaling, as evidenced by the efficacy of a number of JAK inhibitors in atopic dermatitis. The design of the atopic dermatitis study is summarized on Slide 16. This study will be an open label 12 week 15 patient study to examine the safety, PK and early signs of efficacy of ATI-2138 in patients with moderate to severe atopic dermatitis.

In addition to the clinical readouts, there will be a heavy emphasis on PD markers of pathways and disease in this study. Moreover, we plan to demonstrate the importance of ITK inhibition as a differentiating feature of our molecule. In summary, as shown on Slide 17, ATI-2138 is a potential best in class dual inhibitor of ITK and JAK3. Non-clinical potency, activity, ADME and safety studies supported moving the compound into clinical development. The positive data from the SAD and MAD Phase 1 studies provided clinical support to advance ATI-2138 into a proof-of-concept Phase 2 study in moderate to severe atopic dermatitis. Aclaris is expanding our efforts in the ITK pathway beyond ATI-2138 with discovery efforts focused on next generation ITK inhibitors.

While ITK has been of interest to pharmaceutical companies for over 20 years, it has proven to be a difficult to drug kinase as evidenced by the efforts outlined on Slide 19. The research described on this slide have focused on ATP competitive inhibitors and due to poor biochemical efficiency and pharmaceutical properties, they have not advanced in clinical development. More recently, covalent inhibitors of ITK have been described with the Corvus CPI-818 in early clinical development. Our next generation efforts are focusing on selective inhibition of ITK and eliminating crossover on JAK kinases as shown on Slide 20. Selective targeting of ITK should provide effective modulation of both Th2 and Th17 cell functions with the potential of treating atopic and Th17 driven diseases as summarized on Slide 21.

Human and mouse genetic data, as well as pharmacological inhibition strongly supports a role for ITK in T cell biology and pathophysiology. This coupled with the fact that dysregulated T cells are involved in a number of immune inflammatory diseases validate selective inhibitors of ITK as an approach to treat a broad range of indications.

Neal Walker: Thank you, Joe. I'll now turn it over to Kevin to discuss our financial highlights for the quarter.

Kevin Balthaser: Thank you, Neal. We continue to maintain a strong balance sheet with a robust cash balance and 0 outstanding debt. We ended the first quarter with cash, cash equivalents and marketable securities of $161 million, which was compared to $182 million at year-end. Our cost containment initiatives are on track and progressing nicely. Of our total cash expenditures in the first quarter, approximately $14 million was related to nonrecurring payments, including discontinued research and development programs, severance benefits for individuals impacted by the reduction in force announced in December, and payments owed to third parties related to the upfront amount received under the Sun Licensing Agreement. Activities associated with discontinued programs and the reduction in force are expected to be substantially completed by the second quarter of 2024.

As a result, we expect our cash expenditures on a quarterly basis for the remainder of the year to be significantly reduced when compared with the first quarter without giving effect to any potential business development transactions. We continue to evaluate business development opportunities across our portfolio of assets to be a source of non dilutive capital in the near-term. With that, I will now turn the call back over to Neal for closing remarks.

Neal Walker: Thank you, Kevin. We are pleased to provide you with a portfolio update on our decision to shift to atopic dermatitis as the first proof-of-concept indication for ATI-2138. As a reminder, we are still in the process of reviewing various strategic options moving forward and look forward to providing additional updates in the near-term. Kyle, we would now like to pull for questions.

See also

15 States with the Lowest Homeless Populations Per Capita in the US and

12 Best Artificial Intelligence Stocks to Buy Now According to Wall Street Analysts.

To continue reading the Q&A session, please click here.