Ventyx Biosciences, Inc. (NASDAQ:VTYX) Q1 2023 Earnings Call Transcript May 14, 2023

Operator: Good afternoon, ladies and gentlemen, and welcome to the Ventyx Biosciences First Quarter 2023 Earnings Conference Call. At this time all participants have been placed on a listen-only mode, and the floor will be open for your questions following the presentation. [Operator Instructions]. As a reminder, this conference call is being recorded. I would now like to turn the call over to Dr. Marty Auster, Ventyx’s Chief Financial Officer. Please go ahead.

Marty Auster: Thank you, Angela. Thank you everyone for joining us today. And good afternoon. Welcome to Ventyx’s Biosciences conference call and webcast, where we will be discussing our first quarter 2023 financial results and providing a business update. As a reminder, the company’s most recent investor presentation can be found on our website at www.ventyxbio.com, under the Investors tab in the News & Events section. Before we begin today, I’d would like to remind everyone that, this conference call and webcast will contain forward-looking statements about the company, including without limitation statements about the anticipated timing of commencement, enrollment and completion of clinical trials for product candidates, the anticipated timing of release of clinical trial data, and other information about our product candidates, the market opportunities for product candidate and the expected time frame for funding operations with current cash equivalents and marketable securities.

These statements are subject to risks and uncertainties that could cause actual results to differ. Factors that could cause actual results or outcomes to differ materially from those expressed and/or implied by such forward-looking statements are discussed in greater detail in our most periodic reports filed with the SEC, including our Form 10-Q for the first quarter which ended March 31, 2023 which we anticipate filing later today. Please note that these forward-looking statements reflect our opinions only as of the date of this call and we undertake no obligation to revise or publicly release the results of any revisions to these forward-looking statements, in light of new information or future events, except as required by law. With that said, I’ll hand the call now over to Dr. Raju Mohan, Ventyx’s Founder and CEO.

Raju, please go ahead.

Raju Mohan: Yes. Thanks, Marty. So good afternoon to all again and thank you for joining Ventyx’s first quarter 2023 financial results conference call. Let me briefly run through this afternoon’s agenda. And given that we just had our call in late March, I’ll be brief and keep my comments focused on high level business update. Bill Sandborn, our President and Chief Medical Officer will then provide updates across our pipeline programs in a bit more detail. Finally Marty will present an overview of our first quarter 2023 financial results before we open the call for Q&A. As I always like to remind our audience, the foundation of Ventyx is our mission to bring differentiated safe and effective oral medicines to large immunology markets and markets with high unmet medical need and are currently dominated by injectable biologics.

With 2023 shaping up to be a transformational year for authentics. We’re off to a great start. Our team is executing across the board with five and a repeat five phase two clinical trials now ongoing across our wholly owned pipeline of internally discovered small molecule drug candidates. So with VTX-958, we remain confident that we are developing a potential best in class allosteric TYK2 inhibitor. Based on class leading target coverage and safety that we observed in phase one we see great potential to not only establish a differentiated profile in psoriasis and psoriatic arthritis, but also to be a first mover among TYK2 inhibitors in Crohn’s disease, where we believe our ability to achieve trough IL-23 IC-90 coverage will be particularly important.

We have three phase two trials now underway in black psoriasis, psoriatic arthritis, and Crohn’s disease. And Bill will discuss these in more detail during his section in his comments On the development of an extended release tablet for QD dosing to 958 we continue to make progress towards the target profile the TPP and we remain confident that we will have optimized once daily tablet to advance into phase three trials in 2024. As we have previously disclosed and discussed our development strategy for this path incorporates an iterative process that allows us to sequentially evaluate multiple prototype formulations in humans. We look forward to providing a more detailed update in the early part of early second half of 2023. With our S1P1 modulator VTX-02, we believe we will be the first to truly explore the full potential of this mechanism in ulcerative colitis.

And our aspiration for this asset have always been very clear, which are to demonstrate efficacy, and moderate to severe you see patients, ulcerative colitis patients, that is unambiguously differentiated from both across the market as opposed to and is competitive with what’s superior to levels achieved by biologics. This efficacy profile, if achieved, should position VTX002 as a potential class leading safe oral agent in ulcerative colitis. And again, bill will provide more color on the progress of this trial. Beyond these lead programs, we continue to advance our novel and NLRP3 inhibitor portfolio, including our peripheral in NLRP3 inhibitor VTX2735, which is now in phase two trials in caps patients and a CNS penetrant. NLRP3 inhibitor VTX3232, which is expected to advanced into Phase One studies this quarter.

So with that, I’ll hand the call over to Bill Sandborn for a more detailed pipeline update, Bill?

Bill Sandborn: Thank you, Raju. And good afternoon, everyone. I’m excited to provide a brief pipeline update today and to highlight recent achievements across our portfolio. I’ll begin with VTX958. As you are all aware, we are now well underway with three phase two trials of VTX-958, including the serenity trial and moderate to severe plaque psoriasis, the harmony trial in moderately to severely active Crohn’s disease, and then tranquillity trial and active psoriatic arthritis. Across this program, we believe we will be the first to explore near full suppression of the TYK2 pathways with the top dose and each of the three trials expected to achieve approximate trough IC-90 coverage of interleukin-12 and interleukin-23. So we are really pushing towards biologic like suppression of the interleukin-23 pathway.

And we expect this to translate into differentiated efficacy closer to that observed with the anti IL-23 antibodies. This is our expectation not only in plaque psoriasis and psoriatic arthritis, but also in Crohn’s disease where we continue to see a tremendous unmet need for a safe and effective oral therapy, and where we believe our class leading therapeutic window may afford us a strong position relative to competitors. Looking more closely at the psoriasis market, we remain very excited about the commercial opportunity for orally delivered small molecules to gain both market share versus legacy biologic therapies, as well as to continue to drive expansion of the treated population within the 28 billion projected 2023 global psoriasis market.

We are particularly optimistic for the potential of the TYK2 inhibitor class and point the strong signs of early uptake for so TYK2 the first approved TYK2 inhibitor with indications of strong early share gains relative to both biologics and less effective oral options. We expect that the market opportunity for oral therapeutics and TYK2 inhibitors, specifically to continue to expand and coming year in the coming years. With the potential for greater TYK2 target inhibition to drive an enhanced efficacy profile, which we think will be a strong determinant of the projected total market share potential for and within the TYK2 class. As Raju mentioned the team has done an excellent job getting the VTX958 phase two program up and running over the past six months and we’ve made tremendous progress in enrolling the serenity plaque psoriasis trial.

As we’ve stated previously, we are on track to report top line data in the fourth quarter. We’re looking forward to carrying this operational momentum into the other VTX-958. And phase two trials including the Tranquillity trial in psoriatic arthritis and the Harmony trial and Crohn’s disease. And we continue to expect top line results from both of these trials in 2024. Shifting to VTX002 our S1P1 receptor modulator in phase two development for ulcerative colitis. I think Raju put it well when he said that the goal here is to be the first to truly explore the full potential of this mechanism and ulcerative colitis. This is similar to the story with VTX-958, where we talk about achieving differentiated coverage of the target pathway. You will recall that we previously shared data From our face to open label extension trial demonstrating that our high dose of 60 milligrams is achieving steady state absolute lymphocyte concentration or count reductions in the range of 70 plus percent compared to approximately 50% for a transfer, mod and symposia, and we believe that this differentiated pharmacodynamic effect will translate into improved efficacy in ulcerative colitis.

And if we take a step back and look at the landscape and ulcerative colitis, this is a large market currently dominated by a lot by biologics, which achieved placebo adjusted clinical remission rates of around just 10% or slightly higher. And the anti TNF alphas, the alpha four beta seven integrin, inhibitors, and so on, all share this characteristic, there is a significant opportunity for a safe an oral therapy that can exceed this efficacy benchmark. Based on our conversations with physicians, we fully expect the S1P1 class will grow robustly, as suppose he continues to build volume. Meanwhile, the potential approval of [indiscernible] is expected later this year. If we can achieve our target product profile with VTX002, which is placebo adjusted clinical remission of around 20%.

Or better than we believe there’s an opportunity for VTX002 to become a class leading drug in ulcerative colitis. And as we mentioned in the press release, enrollment in the phase two trial of VTX002 has continued to progress very well. So we’re excited about this program. And based on a 13 week primary endpoint, we are on track to report top line data in the second half of 2023. Finally, I’ll briefly touch on our portfolio of novel oral NLRP3 inhibitors. On our last earnings call, we announced that we have initiated a phase two proof of concept study of our peripheral NLRP3 inhibitor VTX 2735 and familial cold autoinflammatory syndrome syndrome, or FCAS, which is the most common subpopulation of cryopyrin-associated periodic syndrome or CAPS.

With our CNS penetrant compound VTX3232 we expect to initiate a phase one trial on healthy volunteers this quarter. Our goal is to position both of these NLRP3 inhibitors as phase two ready clinical candidates by establishing a differentiated profile in terms of safety pharmacokinetic and pharmacodynamic activity. We believe that there is a wide range of high value indications for future development of both our peripheral NLRP3 inhibitor VTX2735, and our CNS penetrant molecule VTX3232. On the peripheral side mechanism such indications include cardiovascular, dermatologic and rheumatologic diseases. With regard to NLRP3 inhibition in the CNS. There’s a strong biologic rationale to potentially address devastating neurodegenerative diseases such as Parkinson’s disease, and Alzheimer’s disease, among others.

In summary, this is a very exciting period for Ventyx. And our portfolio of novel small molecules. Execution has been strong across the pipeline. And we’re very much looking forward to announcing top line data for VTX958 and VTXoo2 in the second half of this year. Before we move on to Q&A I’d like to hand the call back to Marty for a brief discussion of our financial results, Marty?

Marty Auster: Thank you, Bill. You’ll find details from our financial results for the first quarter and in March 31 in our press release and believe the 10-Q filing is also hit on the website. And I’ll summarize those results here. R&D expenses were 35.4 million for the first quarter of 2023, compared to 17.4 million in the first quarter of 2022. This increase reflects the advancement of our pipeline in the later stages of clinical testing, including execution of the ongoing phase two trial of VTX02 and ulcerative colitis and the phase two programs for VTX-958 and psoriasis, Crohn’s disease and psoriatic arthritis. As we previously mentioned, we continue to expect R&D expenses to increase directionally throughout 2023 with some quarter-over-quarter variability expected as our phase two trials progress and as we conduct our CMC activities in preparation for the potential launch of phase three trials 002, 958 and 2024.

G&A expenses in the quarter were 7.1 million versus 5.3 million in the first quarter of ’22. And the net loss in the first quarter of 2023 was 38.9 million, compared to 22.7 million for the first quarter of 2022. Cash, cash equivalents and marketable securities totaled 376.9 million as of March 31. This reflects an increase in from our end of year cash and equivalents balance of 356.6 million and reflects proceeds from the sale of stock on our ATM facility, which occurred during Q1 offset by our first quarter cash fund. And we continue to believe that our current cash equivalents and marketable securities are sufficient to support plant operations into 2025. With that, we conclude our prepared remarks for this afternoon’s call. I’ll turn the mic back over to Angela to begin the Q&A session where I’ll be joined by Raju and Bill.

Operator?

Q&A Session

Operator: The floor is now open for questions. [Operator Instructions] Our first question is coming from Michael Yee with Jefferies. Please go ahead.

Operator: Thank you. Our next question comes from Yasmeen Rahimi with Piper Sandler.

Operator: Your next question comes from Derek Archila with Wells Fargo, please go ahead.

Operator: The next question comes from Alex Thompson with Stifel. Please go ahead.

Operator: Next question comes from Chris Shibutani with Goldman Sachs. Please go ahead.

Operator: The next question comes from Emily Bodnar with H.C. Wainwright. Please go ahead.

Operator: Our next question comes from Sam Slutsky with LifeSci Capital. Please go ahead.

Operator: Thank you. I would now like to turn the call back to Dr. Raju Mohan for some closing remarks.

Raju Mohan: Yes, well, again, thank you all you know, we just a spoke a few weeks back, it’s always great to get together with you all and address the questions very thoughtful and appreciate the interest in our programs. And so let’s, we’ll see you guys again in a few months. So thanks again all and thanks to the team.

Operator: This concludes today’s Ventyx Biosciences first quarter 2023 earnings conference call. Please disconnect your line at this time and have a wonderful —