Conference Transcript - AVLN 2026-06-04

Roger Song, Analyst — Simicab Biotech

My name is Roger Song, senior at this cover of Simica Biotech, and it is my great pleasure for our newly IPO-ed company, Evelyn Pharma, and then we have CEO Ling and then CFO Doug here with us. Welcome.

Ling, CEO

Thank you so much. We're so happy to be here.

Roger Song, Analyst — Simicab Biotech

Excellent.

Ling, CEO

All right, Ling, right off the, you know, coming out of the party, and then what's the state of art for Ling, for Evelyn, and then what should we know about the story? and then we can have a conversation sure yeah that sounds good so thanks for the opportunity to be here and present today we did an IPO just over a month ago so really excited this is our first investor conference as a public company so you know really excited for the first one and hopefully it will not be the last we're working here in pulmonary fibrosis so you know many of you may know the disease it is a deadly diagnosis survival is typically three to five years Survival rates in this disease are worse than most forms of cancer. And what is, I think, really shocking to understand about the market is, despite the fact that we have a few drugs approved for the disease, really less than 10% of patients with this disease in the U.S. are taking either of the oral meds that exist today. And the reason so few patients are treated is because those oral drugs are very difficult for patients to tolerate. rate. So patients may start therapy, but they cycle off incredibly quickly. Perfenidone is one that causes horrible nausea and vomiting. Nintetinib is the other, causes horrible diarrhea. And that's layered on top of the symptoms of the disease, which are really characterized by significant cough issues, breathlessness, quite limited exercise capacity. And so we're effectively asking patients with this deadly diagnosis to spend that limited exercise capacity to go back and forth to the bathroom to deal with the consequences of the drugs. So what we're doing at Avalyn is actually taking those same two drugs that are approved and we know work in the disease, but we deliver them to the lung directly with an inhalation. That actually does two very important things to the molecules. So with both drugs, we're able to drop the dose considerably as compared to the oral Perfenidone, as an example, goes from 2,400 mg a day orally to 200, we think, is the right dose with the inhaled. But despite the fact that we're dropping the dose by more than tenfold with both programs, we actually had better exposure in the lung at that much lower dose because we're targeting the correct organ and when you put your drug into the lung and drop the dose hopefully it's obvious that you avoid most of the systemic exposure that you have with the orals we think that is what is now allowing us with this inhale delivery to really resolve those chat those tolerability challenges that prohibit adoption and limit continuation and our data suggests that when we can do that, we actually improve tolerability considerably, make it possible for patients to stay on therapy over the course of years. And the clinical data also suggests that it may also be possible with this better lung exposure to improve efficacy. So we're moving ahead with both inhaled monotherapies. Our APO1 is our inhaled perphenidone. APO2 is our inhaled nitetanib. And then we're also now starting to work on combinations, which I'll come to. So APO1, profanadone, we're underway, wrapping up enrollment now in a large global phase 2B study called the MIST study. We think we'll have that fully enrolled here in the next few months. And once we're fully enrolled, we know then that we'll be just over a year to data. So it's a one-year study, 375 patients, really designed as the first pivotal. So really excited to be now stepping towards a period where we're going to have a massive data read in that program. Our APO2R inhaled nintetinib is also now underway in a global phase two program. And that one's a 12-week study. We think that one will also be fully enrolled and reading out probably by the end of 2027. So that six-month window is going to be really important for us with some great catalysts. And then finally, I spoke to the potential to combine mechanisms. So when we can solve the tolerability problem of the orals, which is currently the rate limiter, it's going to allow us to really do two things. One is to combine these drugs together in fixed-dose combos. That is our APO3 program. We're going to get that into phase one later this year. And importantly, you know, we're hopeful for patients' sake that other companies in the space might succeed with their novel mechanisms. And if they do, we can use these drugs that we have as background standard of care and layer them in loose combination with those oral agents. So I think really what we're up to at Avalon here is not only solving the problem that exists with the current medicines, but also really potentiating this evolution in the treatment algorithm towards one where we can start using medicines in combo. That's very similar to what's happened in other lung diseases like asthma and COPD, like pulmonary hypertension, where we routinely want to put multiple mechanisms together. So is that a good overview?

Roger Song, Analyst — Simicab Biotech

Yeah, that's a fantastic overview. So I think, Evelyn, the story to me is, you know, I think it's a very valid biology with local delivery or local PK can, you know, for sure, or, you know, highly likely going to improve the safety based on the data and then potentially can improve the efficacy and then the massive opportunity in terms of the market, you know, the patient population. So we zoom in for APO1 and APO2 later. So for APO1, you're running the phase 2B and missed data. So you already have a phase 1B. I think the data, you know, just like I said earlier, so safety looks great. and then nearly half of the audit, kind of a year of interest. And then on the FVC side, stunning, right? So you are stabilizing after four and a half years and five plus years. So one thing we want to caveat is this is mostly in the IPF patient and then misstated in PPF. How should we think about this translation? And then you do have a COP, kind of a small population in the phase 1B. And then maybe walk us through the evidence can support your confidence for the mist on the FEC side? What's the right assumption there?

Ling, CEO

For PPF, you mean? Yeah, okay. It's a great question. So there are two indications in this field. So there's idiopathic pulmonary fibrosis, IPF, and then the newer indication in the space is called progressive pulmonary fibrosis, or PPF. Just looking at the two diseases distinctly for a minute, IPF, idiopathic in nature, meaning we don't understand the reason for the disease onset, that affects in the U.S. about 100,000 patients. PPF, the difference between it and IPF is the etiology. So PPF, we do understand the reason for the disease onset, often driven by an upregulation in your immune response, driven by some kind of antigen in your lung. We often see patients with PPF that have underlying connective tissue diseases. Those translate into becoming interstitial lung diseases. So those are CTD-ILDs. That population is about 180,000 per year in the U.S. And those patients often start to become fibrotic because they've gotten upregulation and some inflammation in their lung that becomes fibrotic. We know the pathophysiology of fibrosis is identical between IPF and PPF. So the distinction we make in the indication is really just about underlying cause of fibrosis. And now clinically, we've learned in the field from some of our colleagues that when you study PPF correctly, and there's a caveat I'll come back to, but when you do study PPF correctly, you actually see the data is literally superimposable between IPF and PPF. So if you think about the oral Nutetinib program, if you put them side by side, very similar efficacy between IPF and PPF, and Neuroendomalast, which is the new BI launch, also very similar. So that's kind of the underlying data that supports it. Now the nuance I described is around how to study PPF correctly. So PPF by nature can be a little bit more heterogeneous in terms of the rate of downward decline in lung function on enrollment. We've learned to control for that thanks to our colleagues at Boranger Ingelheim. time, they created a set of criteria in their in-build study. That was the first study for approval in PPF ever done. And what they do in that study is they look back at patients' historical lung function on enrollment. They make sure that patients are declining with PPF analogous to how an IPF patient declines. So they're picking the right patients to study clinically. When you do that, you get the superimposable data. So we're using that same criteria in our study. So I think all of that combined with the fact that we actually ourselves have PPF data. So in that Phase I-B study you mentioned, ATLAS, we actually allowed in the open-label portion of the study for the inclusion of some patients with different forms of disease with compassionate use in mind. So these were last line of therapy, no other treatment option patients. We had a group of 28 PPF patients come into that study, and we've seen now in both one-year data between IPF and PPF in that study, as well as long-term data that we actually just released yesterday in over four years in IPF and PPF, the same profile, by which I mean we see the same stabilization of lung function in all these patients. So hopefully, Roger, that answers your question. I think that gives us confidence that we've got the right population and right approach here. Did I miss anything? No, that's a great summary.

Roger Song, Analyst — Simicab Biotech

Yeah, no, this is great. And then I have to highlight one thing is that your team has significant experience in the IPF and the PPF clinical development space.

Ling, CEO

And then I think you're the right that's why you know where to refer and then what's the benchmark absolutely yeah I have to I have to say I think we just got the best team in the business I know I'm I know we're biased but an amazing group of professionals that spend their day every day thinking about how we can do better by these patients and I think that's the thing that unites us culturally is we're a company that cares a lot about patients and we really think deeply about them and how to do better by them every day and I'm very fortunate to have built this incredibly high-performing team many of whom and the clinical team came from Borenger-Inkelheim and worked on that oral natetinib program and then oral neuroendomalast So, deep experts in understanding the right sites to study, the right patients to study, the right protocols to write, so really enthusiastic about the potential.

Roger Song, Analyst — Simicab Biotech

Yeah, good. And then in terms of this MISTA phase 2B study, and then what is your base case TPP versus upside case TPP based on ALICE data, based on the current drug, you know, give us some Yeah, I'll ask Dr. Wayne.

Doug

Yeah, it's a great question. So our base case has really been to unlock the tolerability challenge with the oral antifibrotics. So if you look at ATLAS, although we did show lung stabilization, which was incredibly exciting, the real value in this category is keeping patients on medicine. So, for example, if we show the same tolerability that we saw in ATLAS, even with similar efficacies, the orals, that's a meaningful opportunity with a very large patient population, too, that either has failed the orals or, quite frankly, is afraid, in some cases, to try the orals. So that is a major opportunity for us. We've tested that extensively in market research with both payers and physicians. And really the upside is if we were to replicate the efficacy data, which would be lung stabilization in 52 weeks, that's what we call the grand slam scenario. We're a meaningful game-changer in the field where, quite frankly, no data has been seen yet in terms of approved products. So we're really excited about the base case, but also the opportunity to achieve that upside case.

Roger Song, Analyst — Simicab Biotech

That echoes earlier, Ling's point, is the local PK, the drug exposure, even a much lower systemic exposure, but it's way higher for the lung, and then we know the disease is in the lung, right? So maybe that can have the upside potential for the increased efficacy.

Ling, CEO

Yeah, I think it's important to say for investors listening, in this space, this is a lung disease. Okay, so we are targeting here the epithelial cells and the alveoli. We actually can measure and understand the lung exposure in this disease. This is different from some other diseases. In pulmonary hypertension, for example, that's not possible. Here you can. So we do what's called a bronchoalveolar lavage. And then we can actually dose the oral drug in healthy volunteers as compared to inhaled. And then we can look at the lung exposure in epithelial lining fluid data to understand if we're in the right dose range. We've done that here, I think, in a really elegant way for the program. And to Roger's point, we do know that we can derive considerably better lung exposure at a fraction of the dose. So the inhaled and intetanib program, by way of example, oral is dosed at 150 mg BID. we think the right dose is either probably two or four migs at that four make inhaled dose we have 27 times better lung exposure than the 150 make oral and when you put so much less into the lung you avoid most of the systemic exposure so in the phase one program for the inhaled intent nib I mentioned earlier diarrhea diarrhea is the AE that is just synonymous with the oral molecule we didn't see any diarrhea in the phase one program because we're dropping the dose so considerably and avoiding most of the systemic exposure. So I think clinically, I would expect that we're probably going to see some diarrhea, just to manage expectations. But if profenidone is any example, it would probably be much lower rates of diarrhea and probably much less severe grades, given the much lower systemic exposure that you have with inhaled delivery.

Roger Song, Analyst — Simicab Biotech

Got it. And then I think I just said the expectation clear. For the safety profile at the base case, you want to replicate ALIS, what you see, but any kind of, you know, kind of a range of the rates you are looking for, you know, compared to the ORO and then ALIS?

Ling, CEO

Yeah, you know, we're doing research now to sort of understand those different questions. It's a great question, and one I think that we don't yet, probably not yet ready to comment on, but as Doug said, our base case for MIST is that we likely will replicate the tolerability profile of ATLAS. Again, in ATLAS with the oral versus the inhaled, we do see the same AEs that you have with the oral, but again, at much lower rates and much less severe grades. And so what that fundamentally unlocks, I think we've talked about here, is the ability to keep patients on therapy. So I think this is worth mentioning for a minute. The oral drugs, you only really have one year's worth of data. FDA requires one year endpoint for primary pivotal. There really is very little long-term data on the orals, very little long-term data in natural history because as I described survival here is typically just three to five years and patients don't come to trials until typically they're a few years into their diagnosis and so there is no long-term data in this space what is I think really exciting to us about the data set that we have is we've been able to keep patients on therapy over a much longer term horizon so in the program we have data in IPF and PPF out beyond four years now and that is I think just really remarkable in atlas patients were actually diagnosed as i said two years before they enrolled so they're actually now six in some cases seven years into their diagnosis and for those that remain in the open label they're still stable in their lung function over that period there's absolutely a responder bias in that long-term data it's not approvable we're not here to pretend it is but just the fact that we have it at all tells us i think that we're doing something quite different in this disease again with patients in mind to hopefully really benefit them and change the course of this disease for themselves and their families.

Roger Song, Analyst — Simicab Biotech

You call MIST as a phase 2B. What is the next step? Is the base case running another pivotal, or how likely this will qualify as a pivotal?

Ling, CEO

Yeah, that's a good question, and it's one that we ask ourselves all the time. So our plan is this division of FDA has always been quite conservative. We're talking about CEDAR in the pulmonary division, so we expect that we will likely have another pivotal to do when MIST completes. MIST is really effectively designed as one of the Pivotals as I mentioned 375 patients 90% powered we're doing dose ranging versus placebo my I think our expectation is that that phase 3 that will follow will probably be similar to MIST in terms of size and scope and design and so that's our base case plan having said that you know you you probably remember Marty Makari talking about single pivotal for approval pathways he's gone now and so I think we're gonna have to wait and see how things change over the course of the next year but you know our plan is that when we have the data back from MIST which will be you know about a year or so from now we'll then go have a conversation with FDA about depending on what that data profile looks like what that means for the program and whether there could be a possibility of filing early but I think we're a team that always just wants to under promise and over deliver and not the converse so I think we're best served by keeping the base case that I described in place and having that conversation with FDA with data in hand.

Roger Song, Analyst — Simicab Biotech

Awesome. Okay, good. And then we save the FDA discussion for another hour. So in terms of the competitive landscape, it is a very active drug development space. Which is great. Which is great. And then as equity analysts, we follow the competitive landscape always pretty closely. People always ask the question. But to me, this is not too complicated because you are trying to become the new background therapy or backbone therapy versus many other IPF, PPF new drug is targeting new target, new MOAs, that kind of stuff. To me, it's easier to say you are not necessarily compete too many competitors. So maybe tell us how you think about this IPF, PPF space and then where the APO1, APO2 is fitting to the future landscape.

Ling, CEO

Yeah, great. Thanks for the question. One of my favorite topics. So maybe let me talk a little bit about the market itself and And then maybe I can ask Doug to kind of comment on the competitors and how that's playing So when you think about the market, I mentioned about 300,000 patients just in the U.S. diagnosed. When we dollarize the market using the lowest brand pricing in the marketplace today, it's 150,000 per patient per year. If you just do the multiplication, that's a $42 billion market today. That number assumes every patient is on one drug, never mind combos. We've seen in other lung diseases like PAH patients are now routinely on three sometimes four background therapies. If patients in this market start to become on multiple mechanisms that 42 billion will double triple the numbers get pretty silly pretty quickly so but just focusing on 42 billion today. OFEV is the largest commercial product in the space today that's the oral nintetinib it's about a four billion dollar drug globally we think about three billion in the U.S. So that's my math. You can sort of do it in your head. Three billion to 42 billion, they're effectively reaching less than 10% of patients over the course of the year, right, because of how hard it is to tolerate. So when we talk, when we think about the competitive landscape, I think the first fundamental point is this is a massive market that is untapped. There is plenty of space for multiple different companies to be successful, and that is exactly the lens through which we see this competitive universe. So perfenidone and nintetinib are background standard of care. All the companies that are looking at novel mechanisms today are looking at them on top of profanidone and nintetinib. And so we're setting this market up for an evolution in the algorithm towards combinations. So neuroendomalast is the new BI launch. It was studied on profanidone and nintetinib. Actually does better when you combine that with profanidone and nintetinib. So it speaks to our potential. We're solving background so that now we can hopefully take patients on inhaled profanidone or or nintetinib or both, layer on top of neuroendomalase when it's appropriate, we'll leave docs to figure out how to do that, and evolve the market to a place where we can actually do better by patients overall. So that is, I think, exactly what we're up to. But Doug, what did I miss?

Doug

No, I think it's all great points. I think as we think about the later stage programs, so that would be, of course, United, InsMed with the troposinols, as well as the LPA1 antagonists, and these are all opportunities to combine. And we think we're the company that's going to set that standard, really with the backbone therapy, elevating that profile. And, of course, we've seen the market evolve, too, with neuroendomalase pricing at an annual gross price of $200,000. We'll see, of course, how United thinks about pricing with Tyveso and IPF and PPF.

Roger Song, Analyst — Simicab Biotech

But a lot of opportunity to grow this category, and so we're excited about that. yeah i just think for patient's sake again just coming back to always patients we need more mechanisms for these patients to do better by them so it's just through that lens i don't we don't see this as being competitive you know we genuinely hope that that we can actually do better together with different companies that are working in this space yeah so and one thing we noticed for those new mechanism and they do studying the patient without without the background and then but you know, as you pointed out, Lim, and for the patient on background therapy, combined with the mechanism, the effect size is even bigger. So that's an encouraging to see, which means the background therapy is still, or backbone therapy, is still very valuable for the patient.

Ling, CEO

Exactly right. And it's interesting, because you see that same phenomenon both in the neuroendomalase So neuroendomalase does better in combination with profenidone and intetanib, as does it appears triprostanol. So based on the U3R data. So really exciting, again, to speak to the potential to combine.

Roger Song, Analyst — Simicab Biotech

So how do you think about the future, the payer landscape? Because right now you say, you know, branded drug, 150, we may have, you know, or generic for both of the brands. So how ready is the payer to, you know, reimburse a party pharmacy? I think PHD, PHLD is very good analog here. So what have you, now, based on your conversation with the payer, the work you have done, so are they ready to do this kind of for IPF, PPF?

Ling, CEO

Yeah, I mean, all that Doug comment. It does appear, just before Doug comments, just to say as a threshold conversation, you know, payer access depends on changing the profile of the market, right? So I think depending on the data that we have, it will perhaps make those conversations even easier than Doug might describe.

Doug

So we've done a fair amount of payer research. And of course, prior to the Neuron Dome last approval and launch at the $200,000 annual price point, that band between $150,000 to $200,000 is something that we, you know, looked at from a market research standpoint. A lot more to come as we think about, you know, with Frank Salisbury, our head of commercial coming into the company, optimizing the phase three design in terms of outcomes that would be very important for payers. We think there's ample room to grow from a value perspective for payers. You look at other ultra-rare respiratory drugs, whether it's cystic fibrosis or PAH, you're talking north of $300,000 for those products. Each, yeah, from an annual cost. So perhaps when you think about pulmonary fibrosis with the prices that were established with Esperit and Ofeb back some time ago innovation is on the rise and of course we have to show that value proposition to the payers and are quite confident that both the base case and the upside case can have significant value to the payers how much the neurondomilast combined with the nintatinib so far you do know the use case early days how much early days when we looked at the iqvia ims prescription base and follow neurondomilast it doesn't look like substantial erosion from OFEV. So I think it's, of course, the excitement in the field of having another mechanism is long awaited. So we're seeing some nice uptake. But of course, you know, it's early days and we'll continue to follow. I think with the orals, the challenge is when you combine, you're exacerbating the tolerability with diarrhea in particular, with OFEV and neuroendomalast. So I think that's the Achilles heel, so to speak, with the oral category right now.

Ling, CEO

Yeah, just to say a little bit more about that, oral nitetinib is already very difficult on diarrhea as a monotherapy. Neuroendomalase, primary AE, also diarrhea. So putting two meds that both cause diarrhea to get together may be challenging in the real world, but we're going to have to watch and see what happens.

Roger Song, Analyst — Simicab Biotech

That's why inhaled aversion address those kind of GI is very critical.

Ling, CEO

Exactly right.

Roger Song, Analyst — Simicab Biotech

Exactly right.

Ling, CEO

For lung disease. Yeah. I just think it's important to always come back to that. So, you know, we're not trying to drive inhaled delivery for, you know, something that's not related to the lung. This is a lung disease.

Roger Song, Analyst — Simicab Biotech

One thing I have to mention is you do have another inhaled version of the background therapy, you know, but they are using different formulation, DPI. So how do you think about that? And then, you know, that's probably the only, I would say, direct competitor to you. Do you agree with that?

Ling, CEO

Yeah. So that's right. So when we think about inhaled delivery, to me, we have to always think first about the patient population that we're serving. So this patient population, as I described earlier, talking about a patient that's older, they're sick, they're frail often, and they don't have a ton of inhalation capacity. They have very shallow breathing. We see in the symptoms of the disease, cough is an issue in 70% of these patients. So when we think about inhaled delivery here, you know, we want to think about what the patients can actually dose, right? And we also have to think about the particle size. So here, when we're trying to reach the alveoli and the deep tissues of the lung, we need to create a particle size that will get there. That has everything to do with the technology that you use. Not every inhaler is capable of delivering the particle size that you need to get to the right part of the lung. So with that in mind, we're using, now I'm glad we brought it, we're using a hand-held nebulizer, so I'm holding it if you can see it, and hopefully you can see this gentle mist that comes out of the top. What's nice about this platform, in my opinion, is this does not require a single breath to You put it in your mouth, you breathe in and out using your normal breathing pattern for about eight and a half minutes twice a day with profanadone, about the same with nintetinib. So it doesn't rely on a single breath, right? You're using eight and a half minutes worth of breathing to dose the drug. And because it's so gentle and such fine particle, it's not a drug that requires a vigorous inhalation. So a dry powder inhaler that Roger mentioned, that requires a to dose. I can do that because I've got reasonably healthy. I've only got mild asthma.

Roger Song, Analyst — Simicab Biotech

That's exactly the thing you're going to do.

Ling, CEO

I have mild asthma, so it's like allergy season. But that's exactly what happens. And I've got reasonably healthy lungs. So the issue, from my opinion, with a dry powder inhaler is that it's going to be challenging for these patients to dose. I'm sure there's a segment of this market that can dose with a DPI. The question that we're kind of asking ourselves is how many patients that is, how big is that segment? but certainly everyone can dose with a nebulizer and I just from a clinical perspective prefer something where I can reliably rely on time to dose so that if someone coughs if you're using a single inhaler if you cough it right cough again you cough it right back out you're not getting enough drug on board to have a clinical effect perhaps so you know there are different strategies out there you know but ours is really to I think consider the patients first and I think this is the right approach. It's really also the only option for profanidone. So the volume of drug we need with profanidone is such that we need to use an inhaler that has that capacity. This does. And because we want to combine them, you know, that also helps. We need to keep nintetinib in the same device platform so that we can combine them. If we put them in two different device platforms, it makes combining them much more challenging, just much longer path. So that's the plan.

Roger Song, Analyst — Simicab Biotech

Awesome. All right. So I know we spend most of the time on APO1, but a lot of the discussion applied to your APO2 as well. The only thing is the aura phase two is also kind of ongoing. The data readout timing is similar to the MIST, but it is a bit shorter time, a shorter kind of an endpoint, and also it's SQS. So maybe the question is how confident you are for APO2 can next step can also be the pivotal.

Ling, CEO

Yeah, we designed it with that in mind exactly. So in APO2, we decided to do a 12-week dose-ranging phase 2A study. It's 160 patients, so still a large phase 2 done in most of the same countries we're doing with profanidone, many of the same sites relying on the relationships that we've built. And our view is that we're looking in that study at two doses versus placebo. When we looked back at the oral nintetinib program, you actually see in all of their phase 2 and phase 3 studies compelling separation of the doses at between four and six weeks. By 12 weeks in that program, it was definitive. So our view is that with a phase 2a and inhaled mintetinib, given that oral data, we think 12 weeks is enough to pick the right dose. And then because it's large enough and powered, we think that single dose is likely to be able to move forward straight into a phase 3 program. Very similar, by the way, with what nirondomilast did. So shorter duration phase 2 into single pivotal for approval. They did one in IPF and one in PPF and came to market with both. So, you know, our view is that we'll have to, again, have a conversation with the agency when it's wrapped up, which will be in late 2027. But our view is that we've designed it such that that should be possible.

Roger Song, Analyst — Simicab Biotech

Wrap up the whole session. What's the cash? What's the runway?

Doug

So we've just over $400 million of cash in hand, so a great outcome in terms of upsizing the IPO. that funds us into 2029 so great capital to build the pipeline and really think about multiple phase threes for our base case so one phase three for APO one one phase three for APO two and then finishing the phase one for APO three so we're excited about the next 12 to 18 months ahead.

Roger Song, Analyst — Simicab Biotech

Excellent I think that's a great start and then I look forward to continuing the watching your success. Alright thank you Thank you so much Roger. Thanks everybody for coming