Absci Corp (ABSI) September 2026 Conference Transcript

Okay, good morning everyone. I'm Sean Larman, Head of US Mid-Cap Biotech Equity Research here at Morgan Stanley and welcome to Morgan Stanley's Global Healthcare Conference. Before we commence, to make you aware of some important disclosures, please see those disclosures at the Morgan Stanley Research Disclosure website at www.morganstanley.com forward slash research disclosures. And if you have any questions, please reach out to your Morgan Stanley sales representative. For this session, we have the pleasure of hosting AppSite. We have founder and CEO, Sean McLean, and CFO and CBO, Jack Johnison. Welcome and thank you both for your time today. Yeah, thanks for having us. Maybe just to do me a favour and answer some macro questions before we delve into the guts of it. But I guess just looking at China-originated innovation, do you have a view on that? Has it changed the way you think about your business development and R&D playbook, if at all?

Yeah, obviously there has been a lot of activity in China, and I think it's about how you utilize China. We obviously have an AI platform, and we look at China and just how we scale our infrastructure, and so not necessarily going and buying assets there, But, you know, working with China to be able to rapidly test these hypotheses, get to yes-no answers on new targets, and even looking at, you know, how we could potentially utilize them on the clinical development side. and I think that, yeah, it's been very interesting to see all the activity going on, but we definitely see it as a net positive for the overall space.

Sure, thank you. Next question is redundant for you guys because it's asking, are you implementing AI in your business? So we'll skip that one. The third one, so which policy variable are you most focused on? I'm guessing it's FDA, But thinking about FDA, Medicare, negotiation, MFN, tariffs, et cetera, I'd suggest it's FDA.

But which policy variable are you most focused on? Yeah, I think we're most focused on FDA. I mean, we're in the middle of our Phase I, II trial for pattern hair loss. We're about to initiate a Phase II trial on endometriosis. So we're following all of that policy activity. And I think, as Sean mentioned, we have a strategy to leverage execution in China, not just pre-clinical execution, but to do proof-of-concept work in China and phase two development going forward. So we're following all the developments in Congress and policy-wise from the administration, but we do think there's a significant opportunity there to reduce cost, increase speed, and really leverage Chinese execution.

Yep, wonderful. Thank you, Zach. Now to get into it, so I've got a series of questions here, obviously on ABS-201 in patent hair loss to start with. So the interim phase one across four single ascending dose cohorts in 32 volunteers showed no serious adverse events and an estimated half-life, I think, of at least 65 days. That is a single-dose estimate. How much could it move with multiple dosing and complete follow-up?

Yeah, so far the trial is going very well. We're very happy with the progress, and we're going to be announcing the Phase II efficacy data in December of this year. The recruitment has been going extremely well, and safety profile really good as well, and we're really excited to be announcing this data in December. Okay, so that's the 13-week data coming out in December?

That is correct. Got you. I guess the commercial thesis rests on two or three injections over six months. What is the minimum durability that still supports that profile, and what happens to the pitch if it lands closer to monthly?

First off, I'd say we're very pleased with what we're seeing on the half-life. So it looks to us like it's going to be either two or three injections over six months, so once every two months or once every three months. And that, at least from our consumer research, is a game-changer for the market because the convenience paired with the durability of the effect based on the mechanism I think would be a completely new premium category of therapy for pattern hair loss and resonates extremely well with customers. And when we talk to consumers, we've commissioned a large survey, as you know, they're very dissatisfied with standard of care. So a profile that allows for a very simple injection that infrequently with durable effect is very exciting for that population.

Awesome. Thank you. And we just mentioned that we're looking at the 13-week data in December, so you look at width, darkness, and hair count, if I remember that correctly. And I guess what's sort of the benchmark you think you need to achieve?

Yeah, so we've talked about it all along. This is a directional readout. This is a brand-new mechanism that is being explored. When we first started this study, it was really to be able to show, yes, indeed, we are getting the hair regrowth, and we're hoping to actually see some interesting signals. You look at the ketogen follicle, these dormant follicles that haven't been regrowing hair for a while. If you can actually start to show that you can regrow hair there, I think that that's very exciting. There's no other mechanism out there that's able to show that. So we are going to be reporting on various different parameters. Obviously, the most important is the terminal hair growth, and we'll also be looking at total, so including valus, and then obviously the darkening as well. And so I think it's going to create, I think, a really nice picture as to, you know, what the potential 26-week readout could look like. And, again, everything is going quite well, and we're excited to be able to share that in December.

Sure. Thank you. And when we get to the 26-week data, what sort of hair count are we hoping for? I think it's kind of 30 to 35 would be, you know, best in class. So maybe talk a little bit about that. And then what if you sit in that 20 to 30 range? Is there still benefit in providing a drug that delivers that? Maybe just talk through that a little bit, Sean.

Yeah, I'll let Zach dive into that a bit more. But if you look at how we came to that, you know, 30 to 35, that was actually based off a consumer quant study. And that's, you know, where we saw a very large TAM and there was high demand at 30 to 35. I think that there is the opportunity to, from a biology standpoint, point to even be higher than that. And I think with even recent, you know, Minoxidil studies, even being at, you know, 30 to 35 could even be not only, you know, best in class, but first in class as well. So we're really excited about the overall opportunity, but I'll let Zach kind of talk more about that.

Yeah, I mean, I'll just add that, you know, when we did the survey of 610 and consumers that have pattern hair loss, we had to present them with a target product profile. So we presented them with a profile that was of efficacy, similar to high-dose oral minoxidil, so call it 30 hairs per square centimeter growth in terminal hair count, and then the durability of a couple years based on three injections over six months. And the response to that TPP was enormous. I mean, we saw, like, broad-based response from both men and women saying they would seek out that product, they would choose it as first line, and when we tested some pricing, the feedback we got is we could price this at a significant premium. And so taking that all together, we estimate, at least at that TPP, with that effect size, that's north of a $25 billion TAM in the U.S. alone. Now, if the effect size is higher, I think that TAM goes up. We can price even higher.

Thank you. Maybe remind us of the TAM in the U.S., that the percentage that you view as women, and then I understand that finasteride is essentially unavailable to women of reproductive age, leaving tropical minoxidil as the only option. So do you think that the bar is different or lower for an outcome in women versus men?

I mean, I do, fundamentally do. You saw Veridermix's readout recently, sort of in the low 20s for women, and then a pretty significant portion of those women and in their study experienced hypertrichosis, and that's common for minoxidil, right? You get unwanted hair growth. So the side effect profile and efficacy of minoxidil for women is by far less than ideal, and we see that in our surveys, too. Women are very dissatisfied with standard of care, and we think that's a very underappreciated market in pattern hair loss, and I think that the TPP that we're bringing, this new category of therapy, I think is going to resonate with that market. Sure, sure.

And when you talk to the dermatologists, too, they're seeing actually more women coming in with hair loss problems than men. And I think it just goes to show that standard of care is just really, really poor. And so there is a massive opportunity in the female market in addition to males.

Sure. Just to go off a piece a little bit, but are you aware of studies that show hair loss associated with group 1 uptake? And is that another sort of complementary angle you could sell?

Yeah, 100%. I mean, there's published literature that's coming out. And then, again, you just talked to the anecdotal evidence with these derms. And they're saying, like, 10%, 20%, even more on GLP-1s are experiencing hair loss. And I think it's due to the stress of the body when you're losing that amount of weight so rapidly. And so I think being able to pair ABS-201 with the GLP-1s, I think, is a real opportunity and a big overall synergy.

Sure, sure. 13 weeks might seem a little early to get a decent response in hair growth. I think, you know, minoxidil and finasteride take, you know, 24 to 48 weeks to see a decent What's the risk if you get to the 26-week data and you get a false negative? and how would you frame, you know, potentially, you know, ambiguous data?

Yeah, so as we've said all along, so I guess first off, you hit the nail on the head. Like, you know, we do think that 13 weeks is probably the earliest time point that you could actually start to see hair regrowth given, you know, the growth of hair, and I think you're going to just continue to see a linear, you know, increase from there. And, again, we think that the 13 weeks is directional. I think that there's a real opportunity to see some new mechanisms emerge that other standards of care aren't able to address. And, you know, we're quite excited about what that looks like. And, again, so we're not putting, you know, any sort of firm numbers on there, but we are going to get very quantitative with the overall readouts at the 13-week.

Thank you. Maybe a little bit on the side. So prolactin receptor antagonism is the first new mechanism in antigenetic alopecia for three decades or so. I guess beyond the ex vivo scalp work, what human evidence supports prolactin as a driver of patent hair loss?

Yeah, so we actually just released some genetic data in the last earnings, which actually showed from the UK biobank, men that had increased levels of or SNPs that drove increased levels of prolactin receptor actually had more severe patterned hair loss. And so we are seeing that increase in receptor within the actual follicle is driving pattern air loss from a population genetics level, which is actually really, really quite interesting to see. And our team was able to publish that work just recently. So I think that that's pretty strong genetic evidence. in addition to the mouse study, the primate study we did, as well as the human exevo data.

Okay, thank you. The scalp data point to follicle regeneration and stem cell restoration. Is durability off treatment part of the claim, and would you expect to see it at 26 weeks?

We're really excited about the regenerative effect that this drug could have. If you looked at the stump-tailed macaques, one of the things that got us most excited was not only did you get full hair regrowth at six months, you also got repigmentation. And then four years post-treatment, they continue to regrow their hair. And one of the phenotypes that you see in individuals that are losing their hair as it miniaturizes, they're actually losing the stem cells within the follicle niche, and you get a decrease as well. and collagen-17A, which attaches the stem cell to the niche. And what we've seen is blocking the prolactin receptor actually replenishes that stem cell niche, increases collagen-17A. And once you have that, you have the ability to kind of rebuild all that machinery. And once it's rebuilt and you're off drug, it's obviously going to slowly decrease over time. You know, balding takes quite a bit of time to actually see the full effects. And so that's why we believe we're going to get this regenerative effect, because we're affecting the stem cell nation. And, again, there's no other drug out there, monoxylfinestride, that touches the stem cell nation is able to replenish it.

I'll just add to that, too. In the clinical trial and the headline trial, We're going to follow each of these patients a full year after their final dose, and we'll be taking hair measurements. So we're actually going to be able to track this durability post-treatment. Got you. Thank you, Zach.

This is a systemic antibody in an injection where, I guess, the other options are pretty inexpensive generics. What's the bar for safety here, and what do you think you need on the label to be commercially viable?

I mean, I think we're in a great position. with respect to safety. I mean, you saw we released the interim data from the FAD portion looking at safety back in June, looked clean. More to the point, too, human genetics supports the safety. There are case reports in the literature of individuals who have loss of function mutations in either the ligand or the receptor, the prolactin ligand or the prolactin receptor. Those individuals are perfectly healthy. They only present to clinicians because the females can't lactate. but otherwise completely healthy, no sexual dysfunction, including they've done family tree analysis, males also fully healthy. So this looks to be a very attractive mechanism. We don't see any mechanistic reason to think there's a safety issue. And then the molecule we have based on this ADD data looks to be safe as well. So we think we're in a good position.

Wonderful. And this patent hair loss is largely a cash pay market. So how do you think about potential reimbursement, and what sort of pricing assumptions do you think?

Yeah, so we think this is an enormous cash-pay market. We don't plan on having reimbursement, although I think it will qualify under HSAs in the U.S. In terms of pricing, we have tested some pricing in the field with consumers. We can't comment on the exact numbers, and we probably won't announce, obviously, the actual price until the day we launch. But I can say that we believe, based on the TPP we think we're tracking towards, that we will price this at a premium and that consumers are very interested in this TPP and will seek it out at a premium price.

And how do you frame your position against potential emerging competition like Veridermix for you?

At the end of the day, Veridermix is hitting on a mechanism that's well-known. I mean, if you go to Hemp's and Herds, you can get oral monoxidil. So that is current standard of care, and this is something that is brand new. I think it's, again, talking about the regenerative effect, being able to potentially meet or exceed efficacy of Minoxidil having the durability. I think that there's a ton of upside to current standard of care. And additionally, I think patients are going to likely do combos as well. I mean, given that, you know, how cheap Minoxidil is, you know, you could see someone, you know, taking 201 plus Minoxidil. I think these patients are just so desperate to get any sort of hair regrowth. and the mortgage is so massive that I think patients are going to be using all the tools out there and all the drugs to be able to regrow their hair.

Sure. Okay. So we've got 13-week data in December. 26-week data is guided to 1H27 or... Yes. Yeah, early 27. Early 27. So beyond those data points, So what sort of gating factors do we have? What are the signposts for further clinical trials and ultimately the regulatory path to market?

Yeah, look, as soon as we have the 26-week readout and the safety data, we will go to the FDA with the file in IND to begin registrational studies. Now, what's really interesting about this program and the headline trials, even as we start to initiate registrational studies, that's our plan, in 27, we'll still be collecting this follow-up durability data from the headline trial. So there's a lot of data readouts we can provide to investors along the way, and we think this program is really exciting because we'll be showing durability, we'll be showing effect size, and then we'll be starting the registrational campaign.

Sure, thank you. Any sense you're willing to provide of how big the clinical trial might have to be and any sense on cost?

So we haven't released guidance around the size of the trial. we know that we'll need roughly 1,500 patients for a safety database across all of the clinical trials. I can't comment specifically on cost other than to say that pattern hair loss trials, the per-patient cost is quite attractive relative to other large indications. We've internally estimated that on a per-patient basis it's in the neighborhood of $60,000, $70,000 per patient, which, as you know, is probably a third of what an IBD trial would be. and they recruit very quickly. So the ROI on the clinical development program here is enormous. It's not like anything I've ever seen. The trials recruit quickly, they're inexpensive, and they have objective endpoints that are accepted by FDA, and then there's a huge market with very dissatisfied patients with standard care.

Assuming all goes well and ultimately FDA approval, how do you envisage the drug gets into patients' hands?

Yeah, so we think that it's ultimately going to be the patient seeking out the dermatologist or seeking out telehealth companies. I mean, you see that with the GLP-1s. It is the patients seeking out the physicians and wanting to get on these GLP-1s. And I think that same type of demand you're going to see with ABS-201. So whether you want to call it direct-to-consumer or kind of a patient-first focus, we see that as being critically important, and I think being able to partner with these telehealth companies and really also learning from what Lilly has been doing with Lilly Direct and being able to get access to patients in the most efficient way. And I think access is changing. I also think that AI plus the GLP ones is really allowing patients to come along with the journey. Patients can start to become their own scientists, can become more engaged with the science and the biology and their own health. And I think that that drives kind of a different type of patient engagement. And so the HCPs are going to be extremely important. But in addition, being able to partner through telehealth companies and kind of having this DTC model is going to be, I think, very important as well.

Sure. And this is a physician-administered therapy?

No. So this will be, at the end of the day, at home. Now, some patients may actually want to go in to their physician or their dermatologist, so that is definitely an option. But what we're planning on is having ultimately an auto-injector that could be sent to the patient, and it could be, again, an experience where they're able to do this at home. They can go have a virtual telehealth appointment with their doctor and have, you know, just 201 sent to their house and administer there. And so I think that convenience factor, I think, is critically important.

Sure. Thank you, Sean. Before I move on to endometriosis, is there anything I didn't ask about the antigenetic alopecia side of the equation that I should have?

I think we covered all of the important topics for pattern hair loss. I guess I'll just end with, yeah, we're excited for the upcoming data release in December.

Awesome. Thank you. So moving on, the Phase 2 for endometriosis starts this quarter with proof-of-concept data in the second half of 27. What is the design, primary endpoint, and trial size?

So we're going to release more about the trial design in the coming weeks, but you can think of it as being a very robust trial. I think, as you know, our CMO at APSI comes from Vertex, and he executed the Vertex pain trial. So fundamentally, the endometriosis studies, or all endometriosis clinical studies are pain trials. So we'll be constructing a trial that's well-designed and well-powered.

Sure. I guess sort of looking historically in this area, multiple programs have struggled to separate on pain endpoints. What makes a non-hormonal mechanism more likely to work?

With this particular mechanism, we have already seen in the clinic with HMI-115 phase 2 data at the highest dose that did show efficacy. Now, we think that they left a lot of efficacy on the table, and based on our profile having the receptor occupancy that we have, we do believe that we will be able to, I think, achieve not only the efficacy that HMI-115 saw, but I think a greater decrease in overall pain. And just to really emphasize what Zach was saying, we do have Bronzi who ran the Drenavix late-stage clinical development, which was a really important pain study. and I think we're really set up for success here and given the preclinical work as well as the clinical data so far, we're very excited about this mechanism and the upcoming readout here.

Sure, thank you, Sean. And Lily recently took a $40 million stake and they placed a rep on your endometriosis advisory board. Does that carry an option right of first negotiation or governance rights?

No, it does not. So this was a $40 million investment, what I'll call tickets to the game. They have no rights to the asset on both pattern hair loss as well as endometriosis. This was an opportunity for us to get to know each other. I think we had very much mutual respect for what each of us was building. I think Lily's interest was in both pattern hair loss as well as endometriosis. endometriosis. And given the extensive work that they have done in pain and the women's health franchise that they're building out, we thought having them sit on the endometriosis ad board would be really beneficial for us. And so it's been a great relationship and partnership so far.

And again, I think it's great for us because we get to build that relationship, but there's no of strings attached at all in that wonderful thank you I'm moving on to the the platform in that the partnering model so you cite two programs from AI design to IND in about two years at roughly 15 million dollars each you know against interest industry benchmarks of the four to six years and more than 50 million what is included and excluded the 15 million includes all the work to generate a DC so a drug candidate and then to take that through high-end enabling studies, so to make it phase one ready. And Atlas is described as an agent-eat discovery engine. Where has it already changed the decision rather than accelerated a step you would have taken anyway?

Yeah, it's really fascinating where things have gone over the last nine months. I mean, I remember when the first agents came out in December of last year, and nine months later, I feel like it's like 10-plus years of development, and we've developed out ATLAS, this co-scientist. We're looking at new novel targets, and it's looking at literature, single-cell sequencing data, the genomics data out there, all of our internal data. And what we're seeing is that it's extremely good at being able to propose new hypotheses on targets. And again, this is all data that has been out there, and I look at it very similar to how we look at prolactin. Prolactin data in biology has been out there. No one actually acted on it, and the more and more we dig into this, the more we're like, wow, there's so many different aspects that prolactin affects, and it's not just a women health hormone for lactation. and, you know, it's involved in so much more, there's got to be other low-hanging fruit out there. And, you know, that's what we're seeing, like, these agentic AI workflows actually being able to do is, like, what are those low-hanging fruits that are out there that we should be pursuing? And so, you know, we're seeing for, you know, different indications, like, five-plus targets emerge that are really quite exciting. And you have this alpha, this insight. And, you know, other companies are going to have these insights as well. And what we've really focused in on is, like, how do you actually execute on those insights? How do you scale the biology to get to yes-no answers of those 5 to 10 targets in that indication? Which of those should we be taking into the clinic? And then additionally, how do we actually scale and industrialize the clinical development? And I think that's where, you know, China has really come into play for us, you know, being able to run trials at a tenth of the cost. You can, you know, now start to take more risk in the clinic and you can, you know, instead of one, you know, one target, you can do, you know, five to ten targets. And you can actually start to collect that data and start to build these world models. And even if you assume a success rate of 10% to 20%, you still have one to two targets progressing. And I think this is the exciting piece, is figuring out tying AI with China to really industrialize biotech. And, you know, I mean, I see it, everyone sees it, you know, we're hitting a data bottleneck. and we have to figure out ways to get human data to find the next new targets for these diseases and I think that that's going to be really where the frontier lies and that's why we're so focused on how do we scale clinical development to be able to get that data and kind of start to build some of these world models for other indications that we're excited about and kind of age-related and anything kind of direct to consumer.

Thank you, Sean. That's a wonderful answer. Just in the interest of time, just skip forward to a couple of balance sheet questions. So, you know, cash are around 200, funds operations into the second half of 28, but the phase 2 endometriosis start will push burn above the current 27 million a quarter. Does that runway hold through both ABS 201 readouts?

Yeah, well, so it's going to take us all the way through the headline readout. So we'll see the 26-week data as well as the year follow-up. And then, as you know, our goal is to start an endometriosis phase 2 study this year. That would bring us through the interim readout, at least. Awesome.

In the interest of time, did I not ask anything I should have? I think we covered everything. Wonderful, gentlemen. Thank you, Sean. Appreciate your time. Thank you, John.