Good day, and thank you for standing by. Welcome to the top line POC data readout of ZL-1102. [Operator Instructions] For participants who dialed into the teleconference, you can access the slides via webcast link posted on the company IR's site. [Operator Instructions] And please be advised that today's conference is being recorded. [Operator Instructions]
Now I'd like to hand the conference over to your first speaker for today, Mr. Billy Cho. Please go ahead.
Good morning, ladies and gentlemen. I'm Billy Cho, Chief Financial Officer of Zai Lab. We are holding this conference call to share exciting news about our early development candidate, ZL-1102. And Dr. Reinhart, Chief Medical Officer at Zai Lab for the Autoimmune and Infectious Diseases Therapeutic Areas, will make a brief presentation and then take your questions.
Turn to Slide 2, please. As a reminder, during today's call, Zai Lab will be making certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are not guarantees of future performance, and therefore, you should not put undue reliance upon them. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we've said. I refer you to our SEC filings for a discussion of risk factors that could cause our actual results to differ materially from those discussed today.
And now I'd like to introduce Dr. Reinhart. Harald?
Thank you, Billy, and good morning and good evening, ladies and gentlemen. Turn to Slide 3, please. As we announced in the press release yesterday afternoon, ZL-1102, our internally developed novel Humabody targeting the IL-17A cytokine and formulated for topical use, achieved proof of concept in a Phase Ib trial in psoriasis patients. ZL-1102 was licensed as an early preclinical candidate from Crescendo Biologics and is our first internally developed drug candidate to advance into full global development.
For background, here is an image of ZL-1102, a Humabody derived from the heavy chain of IgG. Humabodies are much smaller than full-sized IgGs, only 13.2 kilodalton compared to 150 to 160 kilodalton for IgG or a usual monoclonal antibody. Besides size, Humabodies have other favorable features. It can latch on to rather inaccessible epitopes that can have higher receptor affinity and can have noticeably better chemical stability. We took advantage of these special physical chemical characteristics in the design of our proof-of-concept trial.
We wanted to study ZL-1102 as a topical treatment for chronic plaque psoriasis, hypothesizing that penetration of affected skin may be possible with a small biological when directly applied to the skin surface. Animals do not develop psoriasis, and there is consensus in the literature that animal and in vitro models do not fully reflect the disease [indiscernible]. However, it is known that psoriasis is associated with a lot of keratinocytes barrier function, making the epithelial and epidermal layers more penetrable.
We also know about the presence of pro-inflammatory IL-17 in psoriatic skin, and the great results with IL-17 inhibitors, like Cosentyx, secukinumab, that has truly revolutionized the treatment of moderate-to-severe psoriasis. Therefore, IL-17, especially IL-17A, is a validated target for therapeutics.
Our goal is, in this first-in-human proof-of-concept trial, to test whether direct application of an antibody fragment like ZL-1102 can achieve lesion improvement while avoiding those side effects often encountered with systemically administered IL-17 inhibitors.
On the right side of the slide, you will find our top line results. In efficacy data in 51 evaluable patients, treatment with ZL-1102 showed approximately a 45% relative improvement compared to placebo in the local Psoriasis Area Severity Index, or PASI score, of the target lesion at 4 weeks. A trend of increasing efficacy compared to placebo was observed over time.
Anti-inflammatory effects were observed with clear improvement in erythema of the target lesion up to 4 weeks. Clinical improvement in scaling was also observed. ZL-1102 showed consistent clinical improvement in target lesion size, reduction in the area, compared to an area increase in the placebo arm during the treatment period. ZL-1102 also showed consistently higher responder rates over time compared to placebo up to 4 weeks.
The responder rate in this study was defined as the percentage of patients who achieved a greater than 50% reduction in local PASI score of target lesion, measured weekly. The results for PASI score, erythema improvement and responder rate at 4 weeks were maintained after the end of the study at 6 weeks.
Safety data in 53 evaluable patients showed a benign safety and tolerability profile comparable to placebo with treatment-emergent adverse events that were few in number and mild. Pharmacokinetic studies confirmed lack of systemic absorption of the compound. To our knowledge, this is the first-ever study to demonstrate penetration of a protein biological through psoriatic skin showing clinical response.
Turn to Slide 4, please. Here is an outline of our study design together with relevant entry criteria. Part A of the study enrolled a cohort of 6 patients for safety and pharmacokinetics, followed by a larger Part B, which was a randomized, double-blind placebo-controlled 2-arm study for assessing ZL-1102 efficacy, PK and safety. 11 centers in Australia enrolled a total of 53 patients in Part B.
Entry criteria selected patients with mild-to-moderate CPP, with a suitable lesion by location and PASI score. The percentage change in PASI on day 29 was a key clinical criterion for efficacy. Patient self-applied a 1% preparation of ZL-1102 twice daily for 28 days. For further details, please refer to the clinicaltrials.gov website.
Before we take a closer look at the data, let me start by saying that patient demographics and baseline characteristics were well matched across age, weight height, sex and local entry PASI, which was 8.5.
Turn to Slide 5, please. Like most proof-of-concept trials, this study was made to provide first-in-human data on skin penetration and clinical efficacy. We were also interested in local tolerability of the drug formulation and, of course, the general safety profile. We included a fair amount of PK testing as we were unsure about the degree of transdermal absorption, if any.
This study was not powered for statistical significance. Instead, we hope to see a directional trend supporting a Go/No Go decision. As you know, the PASI score is the most commonly used severity grading system for psoriasis. We use the components of erythema, scaling and induration, each one from 0 to 4, when assessing a lesion. Therefore, the total lesion score can range from 0 to 12. Our average patient had a local PASI of 8.5 at entry.
Clinically, improvement of a placebo were seen by means of percent reduction in local PASI and individual PASI components, responder analysis, lesion size and histologically a reduction in epithelial thickness. Thus, these results consistently show a trend towards improvement over time by various parameters favoring ZL-1102 in every comparison.
As this was a rather short trial, treatment was only 4 weeks. These efficacy results have likely not reached their maximum improvement, and one would expect further PASI changes with longer treatment courses. Adverse events were rare in either arm. There were no premature discontinuations, serious adverse events or deaths.
Local tolerability was excellent as well. There was no systemic absorption. Of over 250 blood samples tested, none tested positive for ZL-1102, all we beneath the limit of quantitation. This may explain why the safety profile was comparable to placebo. As of today, several tests are still pending. Among others, we are still awaiting a transcriptome analysis by RNA-Seq from skin biopsy samples.
Please turn to Slide 6, please. The next slide shows typical before and after photographs of psoriatic skin lesions showing ZL-1102 treatment effect. Case A shows a psoriatic plaque on the leg, which certainly demonstrated signs of improvement in erythema and scaling.
Turn to Slide 7 now, please. Here, you see a lesion in the elbow ulna region, a frequent site for psoriasis. 4 weeks later, redness and the amount of scaling is diminished. Even the size of the affected area has shrunk with topical ZL-1102 treatment.
Turn to Slide 8 now, please. Here is an overview of the currently available IL-17 monoclonal antibodies, many of which have become blockbusters. All our injectables indicated for moderate-to-severe psoriasis only. None are indicated for mild-to-moderate chronic plaque psoriasis. This has to do with the therapeutic index of these agents. While uniquely efficacious, they are also potent immunosuppressive drugs and carry various warnings and precautions, even black box warnings in their labels.
One is about vaccinations, infections, [ TB ] and therapeutic reactivation and other adverse events indicate that this drug class is not entirely benign. For these reasons, we believe our topical IL-17-directed therapy that works directly on the lesion and avoids systemic exposure has great market opportunity.
Turn to Slide 9, please. So to summarize, we envision a significant market opportunity for ZL-1102. Psoriasis affects approximately 125 million people worldwide. Plaque psoriasis is the most common type, affecting 80% to 90% of those with psoriasis. And 70% to 80% of those plaque psoriasis cases are mild-to-moderate, and marketed IL-17 inhibitors are currently not indicated for them.
Topical therapies are the standard of care for treatment of mild-to-moderate disease. However, current treatment options provide limited efficacy or have safety concerns with long-term use. To the best of our knowledge, this Phase I study is the first one to demonstrate penetration of a protein biological through psoriatic skin, resulting in a clinical response.
Zai Lab plans to advance ZL-1102 into full development, including registrational studies. We plan to present the complete data from this study at an upcoming scientific meeting and to submit them for publication.
So thank you for your attention. We would now like to turn the call over to the operator to open up the line for questions. I would like investors to limit their questions to ZL-1102 and its clinical program. We will discuss the competitive landscape and our commercial plans for ZL-1102 at a later time. Operator?
[Operator Instructions] The first question is from the line of Michael Yee of Jefferies.
This is Dennis on for Mike. I just have 2 questions. Can you please clarify on the language in the press release when you talk about relative improvement over placebo? And can put some context around that when you look at other topicals for psoriasis. And if you can sort of talk about how you think you can position yourself versus other topicals.
And can you also give some clarity around the next steps? I know you guys mentioned registrational trials, but how would those look like since you probably need to enroll patients outside China? And how confident do you think you could show the same strong execution like you have in China, outside of China?
Yes. Thank you, Dennis. This is Harald. Good question. I do believe we need to be very clear about what we considered our primary efficacy variable, which was percent improvement over baseline. So if you have a baseline PASI, as in our case, of 8.5, we want to see an improvement vis-a-vis the placebo arm that was run in parallel. As you know, in those kinds of studies, you have quite a significant placebo effect, and it needs to be run in parallel just to make sure that we don't over interpret or falsely interpret our data.
In our case, we had good separation from placebo starting at week 2, and it went out to week 4, even out to week 6 for most of the parameters that we've looked at. So percent improvement compared to baseline, that's the primary efficacy variable that we used. And it's the PASI score, local PASI in this case, because we restricted our to patients which had mild-to-moderate disease, in this case, obviously, total body surface area of less than 10%.
Now as far as the competition and the results, it's a bit hard to do a direct side-by-side comparison because most of the studies in this field actually run longer. They run for traditionally 3 months, some to 4 months. And so we can't really directly compare how our data would compare in a similar kind of setting with topical treatment.
However, when you look at data for several other lesion drugs like tapinarof and others, you will see that they also have a quite similar efficacy up to week 4. And week 4 data don't reflect full efficacy. So this is an important point because many of those drugs don't really reach full potential. They don't plateau until month 3.
We were actually very positively surprised to see really responses -- very early responses because in this particular case study didn't allow us to go out to 3 or 4 months. But we were very pleased to see that, not just in 1 parameter but in multiple parameters, we saw a response and separation from placebo.
Now the next part of your question about next steps. As we indicated, yes, this is a global program. We are very happy to take this to the next step and develop this drug further. This will be going into a full global development in multiple jurisdictions. We think we are competitive as I just indicated as far as the early efficacy readout is concerned. And in this particular case, no further studies will further delineate the efficacy and safety and the comparison that we have.
However, let me also say that when it comes to comparisons, we need to be careful to compare apples with apples, topicals with topicals. But in this case, being an IL-17-directed targeting therapeutic, we always look at IL-17 data as well that are being given by subcu route. But please do not mix up these injectables, which have, despite the fact that they have the same target, they do have a different pharmacokinetic profile, clearly. Is that answer your question? Or did you have any other questions about this?
That's very helpful.
The next question is from the line of Anupam Rama of JPMorgan.
Just a quick one for me and a follow-up clarification question. Is there any preclinical work that needs to be completed before global studies can be commenced? And then as a clarification, the Phase Ib, that included patients from China and Australia or Australia exclusively?
Yes. Let me answer the second part of your question first. This was a study conducted totally in Australia. No participation of Chinese patients. Again, phase of Part A and Part B all done in Australia at 11 centers. As far as the preclinical work, the preclinical work was mostly done at our place, in this case, at Zai in China. And if that -- and so that's finished. It is almost finished. We have done and already initiated some remaining toxicology studies and safety studies in animals, but we are on our way to an IND filing. And we will not have to finish any additional work from all we can see.
Our next question is from the line of Yigal Nochomovitz of Citibank.
I had 3 quick ones. What's the longer-term strategy for 1102? Are you planning to retain global rights? Or are you planning to partner potentially for late-stage development?
Second, could you just quickly remind us what the royalties and milestones are that you owe to Crescendo on this asset? And third, are there any other dermatologic indications beyond psoriasis where 1102 could have application?
Yes. Thanks, Yigal. Maybe I'll take the first 2?
Yes. Please go ahead.
And then I'll give you the third one. Yigal, on the first question, that's a great strategic question I think for us and you as well. Our plan is to continue to execute well and get Zai Lab to a stage and scale pretty quickly where we have all of the menu at our disposal in front of them, so we can make sure we can make the right decision to create value not only for, I think, our shareholders, but most importantly to the patients.
So we have -- we don't have a firm decision at this moment, but we want to have the full optionality. So we could do ourselves and have the scale though we probably do so, we can partner out or enter into a more maybe perhaps strategic deal, structured deal, where multiple products are involved. So we want to have all that -- all those options available to us.
As to your second question, in terms of the partnership with Crescendo, the deal terms, we are quite modest. And therefore, we actually didn't even have to disclose the terms as they reviewed the material, and that was in 2018 and our company is a lot bigger now. So basically, there is an upfront component. There's a royalty component, but they're quite low, given that we partnered -- we brought in this Humabody technology so early on and has to do a lot of work led by Harald and the internal team at Zai. And Harald, do you want to take the third one? Third question?
Yes. For the third part of your question, clearly, we felt that the psoriasis indication was the one that one should pursue first, given the almost overwhelming data that exist for IL-17 as a validated target. But you're correct. There are other indications one could possibly pursue. We don't have it currently really planned out, but we could look into other like atopic dermatitis. Although here, the data for IL-17 are just not as strong. So we will have to evaluate all these issues as a topical preparation clearly lends itself to be tested in other indications as well.
Our next question is from the line of Jonathan Chang of SVB Leerink.
First question, could you provide some insight on the treatment rates for mild-to-moderate chronic plaque psoriasis, both in China versus the U.S., EU? And what's your sense for the percent of patients that will need a novel therapy beyond the conventional options?
Okay. Billy, do you want to take the first part, I'll take the second?
Well, Harald, I was going to -- if you're comfortable, please. Please take the question.
The treatment rate, it's really fairly high because the suffering that comes along with psoriatic lesions is quite significant. So the treatment is dependent on the severity of the disease. It's dependent on the success rate, and it's also dependent on the availability of really potent medicines in their overall side effects.
Now when we talk about the treatment rates, you have to remember that, especially for mild-to-moderate psoriasis, these treatments are not satisfactory. And I'm saying this despite the fact that steroids are obviously very efficient, but they cannot be really used long term given all their side effects, that these are side effects exposed locally on the skin, which means atrophic skin as well as systemic side effects, which makes it next to impossible to use a highly potent steroids in certain classes for any length of time.
So in this particular area, you will see that mild-to-moderate psoriasis is underserved because patients are sometimes frustrated with the available options that are not sufficiently active efficacious or have safety issues. So there is niche for us, and we see the niche here coming in from an efficacy side and mainly also from the safety side, local tolerability being one, but systemic tolerability much more so. Because most of the other topicals are absorbed and will have systemic side effects of some sorts or other. And that's been clearly borne out by all the other categories of topicals that have been selling too far.
Got it. And second question, can you comment on any investigator reported improvement in patient symptoms such as pain and itching in general and more specifically in treated versus untreated lesions?
Yes. Okay. Good point. Thank you so much. Pain and itching is usually a symptom much more associated with atopic dermatitis. No, we didn't record this because the PASI doesn't make use of those 2 dimensions. So we didn't measure it in this study, maybe something to consider at a later point in time. We stuck with erythema, scaling, induration, which are the 3 components of new PASI. And that's the one that makes it the easiest to compare to other therapies out there as well. So good point, we didn't measure pain or itching.
[Operator Instructions] Next question is from the line of Seamus Fernandez of Guggenheim Securities.
So guys, I'm a little kind of confused by this relative improvement estimates. Typically, what we see with a vehicle around topicals in plaque psoriasis is something in the range of a sort of 6% to 11% placebo response, with really no improvement from vehicle over time in any meaningful way and certainly not at 4 weeks. So I'm confused by this relative improvement metrics. And I was just hoping you could help us understand it a little bit better.
If the comparison to tapinarof is the right comparison, that's helpful. But just wanted to get a better understanding of the -- I just want to understand why the actual rates aren't being presented here, whether it be on the PASI score itself or the differences of the 2-point change, which is required by FDA on the IgA. So just wanted to get a better understanding of what's being presented here.
And then separately, as we think about the opportunity for other potential biologics, it doesn't appear that the breadth of the opportunity for this product would be similar to some other potential programs in development that are also pursuing atopic dermatitis. However, it would seem like you would have the capability to develop a separate and unique biologic potentially with -- that could look an awful lot like Dupixent. Just wondering what other biologics you have in mind for your topical -- for this topical delivery and development program.
Yes. Thank you for the question. I totally understand that we did not bring out all the data that exists currently, but follow me on this one. So the percent improvement was the primary efficacy variable at day 29. We started out with a local PASI score in both arms, averaged out to 8.4. In one arm it was 8.5 -- in the one arm it was 8.4 and the other one's 8.6.
So at day 29, we saw an absolute reduction in those numbers, and the separation was a total of 7.9 percentage points between the 2 arms. Now this is, as I said earlier, a placebo-related comparison because placebo activity does occur in these kinds of trials because of the attention patients do get, the treatments that are being monitored and the compliance is being monitored. Now in the placebo arm -- you're referring to a placebo response of 6% to 7%, I don't think that is what you see in topical mild-to-moderate psoriasis.
It's 6% to 13%...
Yes. Usually, you see those small numbers when you go to more severe psoriasis. If you go to others, obviously, the numbers go up because the placebo effect is larger. But you're right, there is a significant number of patients that do response to just placebo or vehicle treatment as in our study too. We saw a 17% rough number. I would have to verify, and we can get back to you.
So there was this separation of about 45% relative between placebo and active at day 29. As far as the other indications, I'm really not at liberty to talk about those. We spoke a bit earlier about other dermatologic indications. We have the right to the compound as such, and we are looking into other potential indications in which this drug, which is a Humabody, a very small fragment here of VH, VH fragment could be possibly used beneficially. We are very much interested in exploring that. It might do some more plaque trials. But I think at this point in time, we don't want to speculate.
Great. That information is super helpful, though, on the differences between placebo and control.
Next question is from the line of Yang Huang of Crédit Suisse.
I have 2 questions. So as we know, there are 2 kind of novel and kind of based small molecule topical treatment in FDA review. One is tapinarof, another one is PDE4 inhibitor. So can you quickly comment on what kind of pros and cons between biologics-based topical treatment and small molecule-based topical treatment?
Yes. Thank you for the question. You're absolutely correct. Tapinarof or benvitimod in development, it's a topical treatment. And we do believe it is a very good drug overall. We have seen some data on it from the consortium studies. But let me say this, we have very similar data early on as they have as far as efficacy.
The second is we bring up what is the big difference here to ours. The biggest difference between a small molecule that penetrates the skin and has systemic side effects per se or can develop give rise to systemic side effects, it's really the difference between our molecule and theirs. So for -- yes, tapinarof, it's actually you have to separate the 2 version space. Benvitimod, which is a different formulation. But tapinarof is indeed a systemic side effect that's been noticed. And it's not surprising, but it's quite noticeable in that particular drug because it causes all kinds of dermatitis and folliculitis.
But for the other one, which you mentioned, which is the PDE4 inhibitor, that's, I assume, you're thinking of apremilast, if that's the one. A well-known entity from its pedigree, it's a PDE4 inhibitor like apremilast, Otezla, just this time as a cream. We think the way of applying it is great because we do believe the topical treatment. We also need to realize that it's not purely efficacious, and we can be talking about something that is absorbed and has systemic levels.
So I think the jury is still out. The market to determine. We will have to do more studies. And -- but one thing is also clear, we are the only one in our drug class. There's no other protein that has ever shown efficacy and penetration of psoriatic skin lesions. So knowing what IL-17 antagonists can do, this is a logical consequence or a drug for remission phase. And I think that's one of the nice features, and not being absorbed is another added benefit because pathology is really in the scheme.
Okay. Great. So I have a quick follow-up. So now we have this drug based on IL-17 antibody mechanism. So is there kind of a way or kind of we can adopt this as a platform technology trying to make other biological jobs into a topical treatment. And for example, for TNF-alpha for other biologic drug and then make for kind of potential other indications, not just IL-17 or applying to other biologic drugs?
Yes, that's a very interesting thought and a super good question. I do believe we are just opening the door here for these kinds of approaches. Being the first one is obviously nice. But again, we don't know how much the principle holds up for other applications because a lot depends really on the nature of your molecule. So I'm not the scientist to ask these details, but I can tell you, we are very happy with the results. And we are very happy to see the absorption and the results coming through early on is also a very nice feature. So I think you're right. There may be other proteins, other fragments that would, from now on, be more scrutinized for efficacy by transdermal application.
Our next question is from the line of Mike Lu of Goldman Sachs.
This is Mike calling for Ziyi. So just a quick question here. I'm sure you've looked into this. So just wondering about the PK and PD of the drug. Have you looked at the penetration and the bioavailability of this drug?
Yes. Thank you. This is -- Mike, this is -- this is -- was one of our many unknowns when we started out this proof-of-concept trial. And that's why we did this Part A, Part B sequential treatment setup. The Part A was truly [indiscernible] PK of systemic absorption. We couldn't, however, measure it. And so maybe our tests are not sensitive enough, but I doubt it.
But we wanted to make sure that we didn't have a drug that does potentially have a high exposure. Again, none of that was known before. None of us had any data or guidance how a protein would behave in psoriatic skin, not approaching -- or Humabody or an antibody of that size. So this is unchartered territory, and we checked it out and very pleased to say there is no systemic absorption.
So as far as PD, this drug class as such has sort of a hysteresis curve in response. You don't see a response right away. But when it finally kicks in, it does stay and hangs around for a while. We like to think that this has something to do with the intracellular mechanisms and signaling that's being affected here, which does take a bit of time.
We saw efficacy starting week 2, and that was seen in the responses of patients compared to placebo. From week 2, week 3, week 4, week 6, we have clear evidence that the responder rate increases over placebo in a very consistent fashion. So there is this effect which, in this case, we start with a slight lag, but not very long, and then has an extended PD effect, which carries out beyond the last treatment. The last treatment in our case was day 29. If we see on day 42, still a good treatment effect and separation from placebo clearly.
Thank you. And that concludes our question-and-answer session. Now I'd like to hand the conference back to Mr. Billy Cho for closing remarks. Please go ahead.
Thank you, operator. I would like to thank everyone for spending time with us today. We hope you gained a deep appreciation of the value potential of ZL-1102 as well as our global research internal development capabilities. We look forward to giving you a further update on ZL-1102 as well as the rest of our broad innovative pipeline on a regular basis. This will be end of the call. Thank you again.
Thank you. And this concludes today's conference call. Thank you for participating. You may now all disconnect.
