Kymera Therapeutics, Inc. (NASDAQ:KYMR) Q4 2023 Earnings Call Transcript

Kymera Therapeutics, Inc. (NASDAQ:KYMR) Q4 2023 Earnings Call Transcript February 22, 2024

Kymera Therapeutics, Inc. beats earnings expectations. Reported EPS is $-0.25, expectations were $-0.44. KYMR 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 morning, and welcome to the Kymera Therapeutics Fourth Quarter 2023 Results Call. All participant lines will be in the listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I’ll now turn the conference over to Justine Koenigsberg. Thank you. Please go ahead.

Justine Koenigsberg: Good morning, and welcome to Kymera’s investor update. Joining me this morning are Nello Mainolfi, President and CEO; Jared Gollob, our Chief Medical Officer and Bruce Jacobs, our Chief Financial Officer. Following our prepared remarks, we will open the call to questions. We ask that you limit your questions to one and a relevant follow-up to allow enough time to address everyone’s questions. Before we begin, today’s discussion will include forward-looking statements about our future expectations, plans, and prospects. These statements are subject to risks and uncertainties that may cause actual results to differ materially from those projected. A description of these risks can be found in our most recent 10-Q filed with the SEC. Any forward-looking statements speak only as of today’s date, and we assume no obligation to update any forward-looking statements made on today’s call. With that, I will now turn the call over to Nello.

Nello Mainolfi: Thank you, Justine. As always, we appreciate everyone joining us for our quarterly call today. This is a particularly exciting call for us, in that we’re reporting from our new corporate headquarters in Watertown, Massachusetts, just down the road from our previous office. Our new building provides added space for our growing team, enabling us to maintain a strong on-site presence as we enhance and scale critical capabilities for our R&D organization, especially in areas like CMC, as well as other development functions. We look forward to the opportunity to welcome those of you who like to visit us at our offices in the future. As many of you know, we’re on-site five days a week. During our prepared remarks, we’ll cover three main topics today.

First, I’ll provide an update on our strategy to build the best-in-industry oral immunology pipeline. Next, Jared will provide an update on our clinical and newly disclosed immunology programs, as well as our two clinical oncology programs. And before we open the call for questions, Bruce will review our financial results. At our Immunology R&D Day in early January, you heard us discuss our strategy for building a best-in-industry oral immunology pipeline of first-in-class highly valuable programs. We believe we’re uniquely positioned to change existing treatment paradigms for immune-mediated diseases with our innovative and differentiated oral degrader medicines. As we reported this morning, with $745 million in cash and a runway into the first half of 2027, we’re well capitalized to continue to support these very ambitious goals.

I thought I’d start with a few comments reflecting on what has led Kymera to our current strategic positioning with an innovative immunology pipeline of oral degraders with biologic-like activity potential. As those of you that have been following us for a long time know, we have been driven by our unique target selection strategy. We’re focused on first or best-in-class opportunities, and in particular, undrugged or poorly drugged targets for which protein degradation is either the best or the only solution. We’re also dedicated to pathways that have strong clinical and genetic validation where there is a clear path to early clinical differentiation. And of course, our focus is on those indications that represent large clinical and commercial opportunities that create significant value for patients and shareholders.

As you all know, we pioneered the first protein degrader program in immunology with our IRAK4 program, which in addition to STAT3 were the initial targets at Kymera when it was founded in 2016. And it was the early clinical results with the IRAK4 program with KT-474, the deep and well-tolerated degradation, the early signs of clinical efficacy which helped us inspire to increase our focus in immunology. Additionally, we believe the activity and fidelity of translation of our TPD platform in the KT-474 Phase 1 trial serves as an important read-through and informs the probability of success of our new STAT6 and TYK2 oral immunology programs. One aspect of the current landscape in immunology that is particularly notable and creates a significant opportunity for Kymera is the dominance in the market of injectable biologics.

These antibody-based therapies have transformed and revolutionized the treatment of immune-inflammatory diseases with what in many cases have been great clinical outcomes for patients. At the same time, monoclonal antibodies, as you know, are injected. They can be costly to manufacture and can be inconvenient for patients. To put this in context, in a recent industry survey, 75% of patients taking biologics said that they would switch to orals with an equivalent profile. We believe this creates a significant opportunities for effective and well-tolerated oral medicines, and in particular, for protein degraders. In fact, while traditional small molecules offer convenience benefits, they frequently cannot match the powerful pharmacology of biologics as they don’t have the ability to block these pathways at the same level.

We believe and have shown with preclinical and early clinical data that protein degraders have the potential to provide a unique solution with biologics-like specificity and activity, but with the flexibility of oral small molecules. Importantly, because of this profile, we believe that they can potentially reach much broader patient populations, creating significant opportunities for the modalities broadly and for Kymera specifically. So as you think about our immunology pipeline, if we can build a portfolio of molecules that provide comparable pathway inhibition to biologics as we believe we can, but one with the convenience in oral dosing, we believe the potential is enormous. We have a lot happening across our pipeline, including plenty of activities in an early pipeline that we haven’t yet disclosed.

We’re really at the cutting-edge of protein degradation and using this technology to address fundamental clinical commercial needs and opportunities. I believe our unique approach has resulted in one of the most robust, high-value pipeline in the industry. I’m very proud of the continued execution and innovation by our team to support our future growth. I will now pass it to Jared to walk you through in more detail, our clinical and soon to be clinical pipeline. Jared?

Jared Gollob: Thanks Nello. Starting with our IRAK4 program, in the fourth quarter, our partner Sanofi initiated two KT-474 Phase 2 trials, one in hidradenitis suppurativa and one in atopic dermatitis. Enrollment in both trials is ongoing, with top line data expected to be reported in the first half of 2025. Importantly, with the start of these trials and the dosing of the first HS and AD patients that we disclosed late last year, we collectively earned $55 million in development milestones from Sanofi, which we have already received. We and Sanofi are enthusiastic about the potential for this program. In addition to the two initial indications, we continue to discuss and explore additional potential indications, and we will plan to share more details as we are able in the future.

Moving now to our two recently announced preclinical immunology programs. KT-621, our once daily oral STAT6 degrader is slated to enter the clinic later this year. What makes this program particularly exciting is that the IL-4/IL-13 pathway has been exceptionally well validated. KT-621 targets STAT6, which is an essential transcription factor to the IL-4/IL-13 signaling pathway and the central driver of type 2 inflammation in allergic diseases. By degrading STAT6, we believe we can selectively block this pathway fully and importantly, this pathway only potentially phenocopying upstream biologics such as dupilumab. At our R&D Day, we shared what we believe is a very compelling set of preclinical data that supports the high level of enthusiasm and confidence we have in this program.

Specifically, in our preclinical studies, we have demonstrated full inhibition of the IL-4/IL-13 pathway in all relevant human cell contexts, with picomolar potency superior to dupilumab and exquisite selectivity. We also demonstrated very high levels of activity in multiple well-established preclinical models that gives us confidence in the potential of KT-621 to deliver biologic like activity as we advance this program into clinical trials later this year. If we are able to replicate our strong preclinical data in the clinical setting, which is something we have accomplished with our clinical stage programs, we believe KT-621 would be poised to be a best-in-class therapeutic option for multiple indications, representing a multibillion dollar opportunity.

We are currently in the midst of IND-enabling studies and expect to advance KT-621 into Phase 1 testing in the second half of 2024 with data from that study in 2025. We also recently unveiled KT-294, our potential first-in-class oral TYK2 degrader. We believe KT-294 also has a potential biologics like profile, creating an opportunity to treat a range of autoimmune and inflammatory diseases. We believe degradation of TYK2 has the potential to overcome the challenges of small molecule TYK2 inhibitors, which have limitations due to lack of selectivity, limited target engagement and/or lack of potent activity against type 1 interferon. Importantly, we believe TYK2 degradation could allow us to recapitulate the human loss of function biology of near full pathway inhibition of type 1 interferon, IL-12 and IL-23, while also sparing IL-10, representing a best-in-class TYK2 agent.

Our plan is to move this program into first-in-human studies in 2025. Across our immunology portfolio, we intend to present preclinical data from the STAT6 and TYK2 programs at multiple scientific and medical meetings this year, starting with the American Academy of Dermatology Annual Meeting next month. We also expect multiple clinical data readouts from these programs next year. To summarize, in the first half of 2025, we plan to share top line data from the KT-474 Phase 2 trials as well as data from the KT-621 Phase 1 study which, as mentioned, is planned to start later in 2024. So switching gears to our oncology portfolio, we expect additional proof of concept data readouts for both KT-333 and KT-253 this year. Both programs have demonstrated initial encouraging anti-tumor activity in liquid and solid tumors and are progressing through dose escalation in line with our expectations.

For KT-333, our STAT3 degrader, we shared data at ASH in December demonstrating early signs of anti-tumor activity at doses that were generally well tolerated and associated with substantial STAT3 knockdown in blood and tumor. Our preclinical to clinical translation showed strong objective responses in both CTCL and in Hodgkin’s lymphoma, as well as induction of an interferon gamma response in tumor and blood that pre-clinically was shown to enhance the response of solid tumors to anti-PD-1 drugs. We believe this supports KT-333’s potential to address both hematological malignancies as a single agent and solid tumors as a potential novel combination therapy with anti-PD-1 or other targeted therapies. Our intent is to complete dose escalation in the Phase 1a study in 2024, at which point we will share the trial results and disclose our plans for the next phase of development for the program.

And lastly, KT-253, our MDM2 degrader. This is another really exciting program. Arm A of the Phase 1a in solid tumors and lymphomas is ongoing, and in November we reported clinical data demonstrating evidence of target engagement in p53 pathway activation, as well as initial anti-tumor activity and a lack of the traditional hematological toxicity seen with small molecule inhibitors. We also announced that we commenced enrollment in Arm B for patients with high grade myeloid malignancies, including AML. For both arms of the study, enrollment is progressing in line with our expectations. Like with STAT3, we expect to complete dose escalation in 2024, at which point we will disclose our plans for the next phase of development for the program. As part of our development plans later this year, we also expect to present comprehensive preclinical and clinical translational data across liquid and solid tumors that will inform a patient selection strategy for KT-253 in ongoing and future clinical studies.

I’ll now turn the presentation over to Bruce for a review of the Q4 financials. Bruce?

Bruce Jacobs: Thanks, Jared. I’ll quickly review the fourth quarter financial results, and you can certainly reference the tables in the back of the press release today. As Nello mentioned, with the advancement of 474 into the Phase 2 trials in HS and AD we earned $55 million in milestones from Sanofi. We received $40 million of that in the fourth quarter, the other $15 million, which was recorded as receivable at year end, that payment was received in the early part of 2024. These milestones were added to the total consideration received under the Sanofi collaboration, with a portion recognized as revenue in the fourth quarter and the remaining in deferred revenue. At the end of the quarter our deferred revenue balance total on the balance sheet was approximately $54.7 million.

That reflects partnership revenue that we expect to receive over the next several years, excluding the receipt of any potential future milestones. And then quickly, with respect to operating expenses, R&D for the quarter totaled $53 million. Of that, about $5.3 million was non-cash stock-based compensation. The adjusted cash R&D spend of $47.7 million, excluding that stock-based comp was up 13% from the comparable quarter a year ago. On the G&A side, our spending for the quarter was $14.2 million, of which $5.6 million was non-cash stock-based comp. And that adjusted G&A spend of $8.6 million, again excluding stock-based comp, is a 5% increase year-over-year. And then finishing up with our cash balance. As stated earlier, at the end of 2023 it was $436 million, including the $300 million of net proceeds from our equity offering last month and the $15 million that I referenced from Sanofi that was received early this year.

That brought our unaudited cash and equivalent balance as of January 9 to approximately $745 million. That is expected to provide a runway into the first half of 2027, and it will enable us to deliver the next stage of growth and data readouts, including, as Jared mentioned, the KT-474 Phase 2 data, our oncology proof of concept results this year, and then several critical and clinical inflection points for our STAT6 and TYK2 programs. So that’s what we had for you today in terms of prepared remarks. And now we’d be happy to answer any questions. Operator?

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Q&A Session

Operator: Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Vikram Purohit from Morgan Stanley. Please go ahead.

Vikram Purohit: Hi, good morning. Thanks for taking our questions. We had two, both on immunology. First, so you alluded to in your prepared remarks potential pipeline expansion for 474. To the extent possible, I was wondering if you could speak a bit about what’s going to feed into that decision and how the data sets we get in the first half of next year for HS and AD might be related to how you think about with Sanofi, where to go next with this molecule? And then a similar question for 621 and 294. What will you be assessing from the initial clinical data we’re going to be getting next year to help prioritize indications for subsequent development in I&I indications? Thank you.

Nello Mainolfi: Thanks, Vikram. So maybe I’ll start. So with 474 it’s just a bit more challenging because, as you know, this is in collaboration with Sanofi, so we’re not in the liberty to disclose several things around decision making and timing. But as we said in the past, the reason why we built this program several years ago, actually, we said today that IRAK4 and STAT3 were the first programs in 2016-2017. So the idea around IRAK4 degradation is the opportunity to generate and develop a broad anti-inflammatory drug with a good tolerability profile. So in our goal, there’s always been this possibility and high probability to move beyond skin indications. And we’ve disclosed some of the other potential indications that one could go after.

It could be respiratory, could be rheumatology, it could be GI. So I think when we’re ready with our partner Sanofi to disclose the path forward, we’ll be happy to do so. Obviously, personally, I don’t believe that if a skin indication will inform necessarily the probability of success of this drug in other type of diseases. But obviously, confirming the safety and activity in longer-term Phase 2 studies will bolster confidence to then move into other indication. Maybe that’s high level how I would characterize it today. For STAT6 and TYK2, I think it’s early for us to comment on decision making beyond early clinical studies. I mean, these are – we could spend hours talking about your question, maybe just high level. With STAT6, we’ve been saying now for a few months – it feels like a few months, but it’s actually two months.

The value proposition is an oral degrader that can match the biologics like activity of upstream monoclonal antibodies such as the dupilumab. We’ve shown with our preclinical data that we can match that type of phenotype. Some would argue we’re more potent than it in some context, but maybe we don’t have to go there. So we have a pretty exciting blueprint of development plans in front of us. I think we, as we’ve done with all the other programs, for us, it’s imperative that we go into humans and demonstrate this beautiful translation that we’ve seen with other programs of target knockdown, predictable safety, predictable PK/PD. And then we have this, I think, very elegant biomarker strategy that we’ll be talking about later in the year that I think will allow us to validate the ability to match the type of pathway inhibition that upstream biologics do.

And for TYK2 briefly, again, this is a well characterized mechanism. We know what other TYK2 inhibitors are missing, which I would say are several things. Some are selectivities, all are target engagement depth, and some are ability to block all the other scaffolding functions. And so what good looks like for us is a loss of function like phenotype. And we know what that looks like based on human genetics. And that’s what we want to confirm in Phase 1. And then once we’re there, Jared and his team will be happy, I’m sure, to share more details about the late development plan.

Vikram Purohit: Got it. Thank you.

Operator: Thank you. The next question is from the line of Michael Schmidt from Guggenheim. Please go ahead.

Unidentified Analyst: This is Paul on for Michael. Thanks for taking our questions. Mine are on KT-333. So the first one is on your bar for pursuing a development in solid tumors. I believe that the ASH data had about a third of the patients with stable disease. So would higher rates of stable disease and biomarker data be sufficient to advance the program into combinations? Or would you really need to see some objective responses to sort of commit to evaluation in solid tumors? And then second is just how does your thinking now for STAT3 and autoimmune fit into your current pipeline? And are you waiting for 333 data to evolve further before making further commitments? Thank you.

Nello Mainolfi: So maybe, Jared, do you want to take the first one and then I’ll make comments on the second one?

Jared Gollob: Sure. I think with regarding your question on the bar for solid tumors, as you noted, we have had some patients who have had prolonged stable disease. And that of course is of interest to us. And we continue as we enroll patients onto the study and continue to dose escalate, look for opportunities for bringing on solid tumor patients that can give us a better idea as to what our activity will be as a monotherapy in solid tumors. I think all along we’ve been guiding that we expect that ultimately, if we move this into solid tumors, it would be as a combination approach, especially anti-PD-1 combination is something we’re very interested in based on our promising preclinical data and based on what we’ve shown with our biomarkers, that we can induce this interferon gamma response in tumor and blood, which can actually facilitate responses to anti-PD-1.

We’re also looking at additional targeted agent combinations pre-clinically. So I think what will inform moving forward with solid tumors will be a combination of what we continue to learn pre-clinically with combination studies and whether we do see continued signals of some sort of activity as a monotherapy, either stable disease or even preferably major responses. With regard to major responses, we are seeing those in hematological malignancies, including Hodgkin’s lymphoma and cutaneous T cell lymphoma. And that continues to be of interest to us. And we’ll continue to bring on patients onto the ongoing Phase 1a study to further explore activity there as well.