Prelude Therapeutics Inc Q3 FY2025 Earnings Call

Good morning, everyone, and welcome, everyone, to the Prelude Therapeutics Investor Conference Call. Today's call is being recorded and is expected to last up to 45 minutes. At this time, I will now turn the call over to Prelude's Chief Financial Officer and Chief Legal Officer, Bryant Lim. Please go ahead.

Thank you, operator. During today's call, we will make forward-looking statements based on current expectations, including statements concerning anticipated discovery, preclinical and future clinical development activities for our product candidates; the potential safety, efficacy, benefits and addressable market for our product candidates and clinical trial results for our product candidates; together with other statements regarding our plans, prospects and expectations. Such statements represent our judgments as of today, are not promises or guarantees, and as you know, may involve risks and uncertainties that may cause actual results to differ from the results discussed in the forward-looking statements. Please refer to our filings with the SEC, which are available through the Investor Relations section of our website for information concerning risk factors that may affect the company. We undertake no obligation to update forward-looking statements, except as required by law. During this call, we will also be referring to certain slides from our corporate presentation that are available on the Investors section of our corporate website under Presentations and Events. Also on this call are Kris Vaddi, Prelude's Founder and Chief Executive Officer; as well as Peggy Scherle, our Chief Scientific Officer; and Sean Brusky, our Chief Business Officer. I will now turn the call over to Kris to kick things off.

Thank you, Bryant, and good morning to everyone joining us today. Over the past quarter, we've made several strategic decisions to sharpen our research and development focus, optimize capital allocation, and align our business strategy with programs that offer the highest likelihood of success. These steps strengthen our ability to fulfill our mission of discovering and developing transformative medicines that can significantly enhance patient outcomes in cancer. Importantly, as part of these efforts, we've also improved our financial position, giving us additional cash runway to move our lead programs into clinical development. Looking ahead, our main focus will be on quickly advancing two development candidates that we believe present compelling opportunities for our investors, both expected to enter clinical trials in 2026. The first is a selective inhibitor for JAK2V617F aimed at treating myeloproliferative neoplasms (MPN). The second is a selective degrader targeting KAT6A for ER-positive breast cancer. Both programs address clinically validated pathways with the potential for efficacy and safety differentiation in early clinical development. Furthermore, we believe these molecules will significantly broaden clinical options compared to existing treatments for the cancers we're targeting. Meanwhile, our discovery team has made considerable progress in developing next-generation antibody-drug conjugates, known as degrader antibody conjugates or DACs. Our early-stage DAC program, which targets mutant calreticulin (mCALR) - a very promising target in MPN - shows potential to achieve greater clinical and molecular responses based on our preclinical studies. We look forward to presenting additional data from this program at the American Society of Hematology Annual Meeting in December. I will begin with an overview of our JAK2V617F Selective Inhibitor program, which will also be highlighted in an oral presentation at the upcoming ASH. Due to the embargo on our oral presentation content until the meeting, I will limit my remarks to our approach and the opportunity we see in targeting this mutation as a possible disease-modifying treatment for a large subset of MPN patients. Peggy will then discuss our KAT6A Selective Degrader program, with our lead candidate set to enter clinical trials in 2026. Our Chief Business Officer, Sean Brusky, will provide an overview of the exclusive option agreement with Incyte for the JAK program that we announced last week and our future plans for the JAK programs, after which I will return for closing remarks before opening up the call for your questions. Let me point out the JAK-STAT pathway on Slide 7 of our corporate deck. One of the JAK enzymes, JAK2, plays a crucial role in normal blood cell production by mediating growth factor signaling. The growth factors involved include erythropoietin for red blood cell production, thrombopoietin for platelet production, and GM-CSF for white blood cell production. In MPN, an activating mutation in JAK2, specifically JAK2V617F, leads to unchecked activation of JAK-STAT signaling and hyperproliferation of myeloid, erythroid cells, and platelets, which can result in various forms of MPN, including polycythemia vera (PV), essential thrombocythemia (ET), and the more severe condition, myelofibrosis (MF). Currently approved JAK2 inhibitors inhibit both normal and mutant JAK2 similarly, resulting in effects on normal and abnormal bone marrow function and offering a very narrow therapeutic window. Ruxolitinib, or Jakafi, is the first approved JAK2 inhibitor for MPN. It was transformative for many patients, being the first targeted therapy approved for MF and the only JAK2 inhibitor approved for PV. It is worth mentioning that several members of our team were significantly involved in its discovery and development while at Incyte. It was quite rewarding to see ruxolitinib establish itself as the gold standard in MPN treatment, particularly regarding spleen size and symptom relief for patients suffering from this debilitating disease. However, despite its clinical benefits, ruxolitinib can lead to high rates of anemia and thrombocytopenia, requiring dose adjustments and often limiting its use in patients who are anemic or thrombocytopenic at baseline, as well as needing to optimize dosages for maximal efficacy. Moreover, since ruxolitinib does not specifically target V617F mutated progenitor cells, molecular responses occur at low rates and take years to manifest. Since the discovery of the JAK2V617F mutation in 2004, we have aimed for an inhibitor that selectively targets mutant cells without affecting normal bone marrow function. We envision a molecule that could provide the same transformational impact for MPNs as BCR-ABL inhibitors like Gleevec have for CML. We are enthusiastic about the potential to finally reach that goal through advancements in designing molecules that can directly target JAK2V617F. As shown on Slide 9, the challenge we faced is that the mutation is located in the enzyme's JH2 domain, different from the catalytic kinase domain (JH1 domain) where current JAK2 inhibitors bind. Our scientists managed to design potent JAK2 inhibitors that bind to allosteric sites in the JH2 domain where the V617F mutation is present. We also achieved selectivity over normal JAK2 by directly targeting what we call a deep pocket that contains three phenylalanine residues, including one from the V617F mutation. Using X-ray structure-based techniques, our chemists identified a new series of compounds capable of accessing this deep pocket to selectively target mutant JAK2 rather than the wild-type JAK2 found in normal cells. Looking closely at our lead development candidate, the picomolar JAK2JH2 binder shows significant selectivity for mutant JAK2 compared to normal JAK2. Additionally, beyond its biochemical and cellular potency and selectivity, our lead candidate has the necessary physical, chemical, and pharmacokinetic characteristics to achieve high levels of mutant JAK2 inhibition. In preclinical efficacy and toxicity studies, this molecule outperformed ruxolitinib without adversely affecting wild-type JAK2 and normal bone marrow function. We anticipate sharing further preclinical data during ASH in December; however, I can share that we are well along with our IND-enabling activities, with plans to file an IND in the first quarter of 2026 and to initiate a Phase I trial in the first half of 2026. In terms of prevalence, market size, and potential, the target patient population includes over 95% of PV patients and 50% to 60% of MF and ET patients who are V617F positive. Altogether, more than 200,000 MPN patients in the U.S. could eventually benefit from a JAK2V617F selective inhibitor with disease-modifying potential. We announced last week that we have entered into an exclusive option agreement with Incyte that allows them to acquire the program within a specific time frame while we move forward aggressively with clinical development of our lead candidate and preclinical development of potential backup candidates during that option period. We look forward to sharing more details at ASH. I will now pass the call to Peggy for an overview of our selective KAT6A degrader program.

Thanks, Kris, and good morning, everyone. Today, I wanted to summarize our efforts that led to the successful discovery of our first-in-class oral KAT6A selective degrader and highlight how this is a differentiated approach to maximize the benefits of a clinically validated target in ER-positive breast cancer. Although multiple agents, including CDK4/6 inhibitors and oral SERDs have been developed for patients with ER-positive breast cancer, resistance to these agents continues to occur. Thus, there remains an important need for additional treatment options that can complement the current therapies in the management of breast cancer. Recent data that Pfizer presented on their KAT6A/B dual inhibitor suggests that targeting the KAT6 protein may provide a new avenue to address this important unmet need. As summarized in Slide 14 in the corporate deck, the data Pfizer presented at ASCO earlier this year demonstrated that their KAT6A/B dual inhibitor in combination with fulvestrant showed impressive activity in a heavily pretreated population of ER-positive metastatic breast cancer patients, with high response rates of greater than 30% and significant improvement in progression-free survival. Based on this, the program is now advancing into pivotal studies. Despite the promising efficacy, the safety and tolerability profile has left room for improvement as investigators noted rates of grade 3/4 neutropenia and dysgeusia in most patients. This has resulted in the majority of patients requiring dose reductions or modifications to address the neutropenia issues. These findings likely suggest that there will be challenges combining with standard of care CDK4/6 inhibitors and, as such, may initially be limited to second or third-line therapy. We believe that the safety and tolerability issues are the result of dual inhibition of KAT6A and KAT6B and that selective degradation of KAT6A provides a real opportunity for differentiation in the clinic. Slide 15 of our corporate deck thematically shows the rationale for selective degradation of KAT6A. KAT6A amplification and overexpression in cancer leads to its increased activity. Because KAT6A regulates the expression of the estrogen receptor, MYC, and other cell cycle genes, its increased activity drives ER-positive breast cancer growth. Although KAT6A overexpression drives cancer growth, both KAT6A and its related family member, KAT6B, are important in driving normal hematopoiesis. Preclinical data demonstrates that loss of both KAT6A and KAT6B results in bone marrow toxicity. Based on this, our approach of selectively degrading KAT6A has the potential to deliver differentiated safety and efficacy over nonselective KAT6A/B inhibitors. As shown in Slide 16, our lead compound is a highly potent degrader of KAT6A with selectivity for KAT6A over KAT6B of greater than 1,000-fold as shown in the middle panel of the slide. We've seen excellent oral PK across all species and compelling in vivo efficacy as monotherapy, as shown in the graph on the right with complete regressions observed at well-tolerated, low once-daily oral doses in a model of KAT6A-amplified ER-positive breast cancer. As shown on Slide 17, we also explored the in vivo activity of our KAT6A selective degraders in additional models that are more resistant to KAT6A/B inhibitors. In the more resistant T47D model, we still observe significant efficacy with complete regressions at well-tolerated doses. Importantly, as shown on the right panel, when we benchmarked against a dual inhibitor, we seem to demonstrate much better efficacy as a monotherapy even when compared to a KAT6A/B dual inhibitor in combination with fulvestrant. Our preclinical data clearly demonstrates that selective KAT6A degradation shows robust efficacy in ER-positive breast cancer models. We next asked if selective KAT6A degradation could mitigate the neutropenia observed with dual KAT6A inhibitors. As shown in Slide 18 on the left, ex vivo experiments with human bone marrow cells demonstrated a reduction in these cells that give rise to neutrophils; whereas we see a very limited effect in this assay with our selective KAT6A degrader. On the right, we ran an in vivo experiment to confirm these results. After 10 days of treatment, we see there is transient neutropenia in the mice treated with the dual KAT6A/B inhibitor, but we have not observed significant neutropenia with our selective compounds. In summary, Prelude has discovered and developed multiple first-in-class, highly selective KAT6A degraders, which in preclinical models show the potential to achieve best-in-class efficacy and to differentiate on safety and combinability early in clinical development. Our lead development candidate has completed dosing in non-GLP studies in rats and dogs and has a favorable tolerability profile and, importantly, no dose-dependent hematologic toxicities were observed. With that as background, we are excited to note that we're on track for an IND filing in mid-2026 with a Phase I start expected in the second half of 2026. With that, I'll now turn the call over to Sean to provide an update on our recent business development activities.

Thank you, Peggy, and good morning, everyone. Today, I wanted to provide an overview of the exclusive option agreement we entered into last week with Incyte and also discuss our plans as they relate to degrader antibody conjugates. The agreement with Incyte is a time-bound exclusive option agreement for the potential future purchase of our JAK2V617F program assets. The option period commenced upon executing the deal and is structured so that Incyte has up to 15 months with potential for a 3-month extension as needed to exercise its option, no more than 18 months in total. Importantly, Incyte has the ability to exercise its option at any point during the option period. If at the end of the option period, Incyte elects not to exercise its option, Prelude retains full ownership and global rights to the JAK program. At the outset of the option agreement, Incyte paid an upfront fee of $35 million and also purchased $25 million of Prelude nonvoting common stock at a price of $4 per share, amounting to $60 million in total. If Incyte elects to exercise its option, an additional upfront payment of $100 million will be paid to Prelude upon closing of the asset purchase agreement, plus additional downstream milestones and royalties. In fact, the deal includes up to $775 million in additional payments if certain clinical development and regulatory milestones are met, plus single-digit royalties on global sales as our JAK2 development candidates advance. In total, the deal can deliver up to $910 million in cash payments and future milestones to Prelude. Next, I'd like to mention our business development work on degrader antibody conjugates. We've recently amended and expanded the scope of our existing collaboration with AbCellera. This agreement enables AbCellera to use Prelude's proprietary degrader payloads on additional undisclosed antibody targets of interest and importantly, also enables Prelude to license our payloads to other potential partners. The DAC field is really taking off, and degrader payload licensing arrangements have the potential to further expand the impact of this new technology while bringing in nondilutive capital to support our ongoing R&D efforts as the field advances. With that, I want to hand it back over to Kris.

Thanks, Sean. So before opening up the line for questions, I'd like to offer a few additional remarks related to our progress to date and where we expect to go moving forward. As I mentioned at the outset, today marks a transformative day for Prelude. We are a company that is rooted in science and discovery excellence with a mission to develop precision oncology medicines to transform the treatment landscape for patients with cancer. We are energized to be entering 2026 with two lead programs with highly differentiated development candidates, well-understood and clinically validated mechanisms and a clear development path, a strong and experienced team and the financial means to provide a runway for execution into 2027. We look forward to keeping you apprised of our progress and additional updates in the coming months. With that, I'll take some time to answer your questions.

Our first question comes from Reni Benjamin from Citizens.

Congratulations on this deal with Incyte and for reorganizing the company to go after what I think are extremely well-validated targets. I have a couple of questions for you. I guess starting off, can you talk a little bit about how you're thinking about the clinical development of both the mute CALR and the KAT6 programs, especially given that you have competitors that are, I would say, a couple of years ahead of you in development? How are you thinking about the clinical development of these assets? Do you want to be a fast follower into the same indications? Do you want to explore different indications? How should we be thinking about the path forward? And then I have a couple of follow-ups.

Thanks, Ren. This is Kris Vaddi. So as we discussed in the call, our molecule is a very potent and selective inhibitor of JAK2V617F, right? So as a result, V617F positive MPN, which includes myelofibrosis, polycythemia vera, and essential thrombocythemia, are the three indications that we could look at. As in first-in-human study, myelofibrosis, which is the most serious of the conditions, would be certainly one of the most appropriate initial first-in-man studies that we start with. High-risk polycythemia vera or high-risk essential thrombocythemia are additional indications that could be added either from the beginning as part of the dose escalation or once we demonstrate that we have a biologically or pharmacologically active dose. Those are the things that we are currently in the process of finalizing. And so hopefully, we will be underway shortly. So we'll be able to talk about it in more detail.

So you actually answered, please continue.

No, no. I was also going to comment on the KAT6 program. And then, of course, happy to take any further follow-up questions. On the KAT6 program, again, our intent in developing a highly selective KAT6A is to fundamentally ask the question in ER-positive breast cancer where we see a clear proof of concept and clinical validation from Pfizer's molecule. Our hypothesis is based on genetic data and preclinical data that if you can selectively hit KAT6A, you can reduce and avoid the hematological toxicities. So we're going to be focused on the Phase I development, initially obviously as a monotherapy, but rapidly advancing to fulvestrant combinations and really asking the question do we see the differentiated profile that we're seeing in the preclinical studies in the clinic and if so, rapidly move into the combinations with the backbone therapies in ER-positive breast cancer. So we are really going to be focused on ER-positive breast cancer for our KAT6A program.

Got it. Okay. As a follow-up, could you clarify how the Prelude platform and your preclinical work distinguish themselves? Specifically, do the preclinical models indicate improved efficacy, safety, or both for any of these molecules? Additionally, what tests do you conduct during your preclinical evaluations that provide confidence in having a best-in-class drug compared to competitors like Pfizer that are already in the clinic?

Sure. Let me just at a very high level start and say that there are really good preclinical models for JAK. I think that your question pertains to both programs for myeloproliferative neoplasm and of ER-positive breast cancers that we can profile head-to-head against already approved agents or the ones that are moving in clinical development. But for details, I will just turn the question over to Peggy to answer.

Sure. So in terms of the preclinical models, both in vitro and in vivo, we really established a robust number of those models to characterize the compounds. But I think it's more than just the in vivo and in vitro assays. We also spend a lot of time building in the PK properties and really optimize those so that we know we have a molecule that will be optimal in the clinic in terms of covering the target and giving us the selectivity and potency that we will need to really target this pathway. So with KAT6A specifically, I think we have a number of differentiating features. We have KAT6A selectivity over the other family members, and we also took a degrader approach as opposed to an inhibitor approach. We thought that would be a differentiating feature. We can eliminate the protein as you know through degradation. It also helps us build in that selectivity that we think is really critical, the selectivity and potency. So in that setting, I think we have a very differentiated approach for KAT6A over the existing treatment options.

Our next question comes from the line of Roger Song from Jefferies.

Okay. Great. Thanks for sharing additional information around those two new clinical programs. So on JAK2, can you just remind us how the current mutation testing for this mutation currently performs in the clinic? And then how likely you need to do the companion diagnosis as you continue the clinical development? And I have a question around the KAT6 as well.

Yes, absolutely. So V617F itself, now that we have multiple therapies in MPNs that are approved, even prior to that has really become a sort of a standard of care diagnostic test for MPN. In the case of PV, where greater than 95% of the patients are positive to V617F, there is not a huge need for a test. However, in myelofibrosis that do not progress from PV to MF, there are primary myelofibrosis patients for whom it is somewhat critical. Currently approved therapies really are not specific to V617F positive patients, so they don't really require the testing. But in our case, we are going to be relying on routinely used qPCR type testing that is performed as standard of care for these MPNs.

Got it. Okay. And then regarding the KAT6, given this is also a degrader approach, how do you differentiate this degrader approach versus your previous SMARCA2? And then what are the learnings you have applied from the previous degrader to KAT6? And maybe just lastly, you're moving those two programs into the clinical in 2026. With current cash runway, how much clinical data release should we expect in 2026? And then what will be the value inflection point for those data readouts?

Yes. I'll let Peggy answer the first part of the question, and I'll come back to the second part.

Sure. I think we learned a lot from our SMARCA2 program in terms of building in potency and selectivity and also building in, as I mentioned, all those really important PK properties, like oral bioavailability into the KAT6 program. So we really learned a lot from the SMARCA program in terms of building in all those features that you need to optimize the compound to take it forward in the clinic, especially selectivity for the KAT6A over KAT6B protein. We utilized a lot of the knowledge and experience that we gained through the SMARCA program to generate what we believe are really optimized degrader compounds to take into the clinic.

Yes. With regard to your question on how far the cash takes us, as we said, we are currently on track to file IND for the JAK program in the early part of '26 and initiate the trial in the second quarter. So for that program, we will be in dose escalation. Until we get into the clinic, we have certain projections in terms of how many dose cohorts it might take to get to the levels that we would expect the pharmacological activity, but I can't provide exact guidance until we actually start to enroll patients. We think we'll be well underway in the Phase I program, and we'll keep the Street obviously updated with any progress we make. With regard to the KAT6 program, again, the major milestone is really successfully completing IND-enabling studies and opening up the IND and starting to enroll patients. So in terms of actual clinical updates, we probably have to wait into 2027 to be providing them. But in terms of progress into the clinic, obviously, we will update as we advance in 2026.

Our next question comes from the line of Robert Burns from H.C. Wainwright.

On the deal with Incyte. Just a few for me, if I may. So obviously, the KAT6 competitive landscape, when we look at that, there's numerous players in the space, not just Pfizer, obviously. I see the differentiation with the selective KAT6A degradation. So I was curious, for those more selective inhibitors or degraders that are in the landscape, how are you looking at them from a competitive landscape threat perspective? And then my second one would be, obviously, we're also seeing a lot of companies go straight from Phase I when they see encouraging efficacy straight into Phase III. Is that something that you would also consider? And are there ways that you could expedite the development time of that compound?

Yes. In terms of the selectivity of the selective inhibitors that have been profiled, at least the ones that we've seen to date, they do show selectivity that mitigates some of the bone marrow toxicity that we also see. I'd say with the degrader approach, it really allows us to have more robust efficacy compared to even the selective inhibitors. We think that there's a different biology associated with degrading the protein because it is part of a complex than just inhibiting it. We think that's really beneficial from the efficacy point of view. So I think there will be differentiation from the selective inhibitors, but I think they also provide additional abilities to mitigate some of the bone marrow toxicity.

Yes, I can just follow up on that. Again, fundamentally, the whole concept of degraders, right, that are currently being developed across multiple targets is the idea that you just get much deeper target engagement. Given the potency of our KAT6A molecule and the PK properties that the team has built in, it should allow us to very rapidly get to the levels of target inhibition that would differentiate our molecule versus others. I think that is a very important aspect of it because the sooner you get there in the clinic, the faster we can move. To answer your second part of the question, yes, there's a lot of learning from the data that's out there in terms of PV as well as combinations. We would be looking to actually do more combinations early in the development because ultimately, we want to get to earlier lines of therapy, which currently are not being pursued by the existing clinical stage inhibitors. We would be looking to generate that data and to confirm some of the preclinical hypotheses we have.

Can you just talk a little bit about the genesis of kind of why and how the deal with Incyte took place, given that they have their own inhibitor already in the clinic? Is it something that was ongoing for a while? Is this something once the new CEO took over that discussions started? Anything that would give us a clue as to how this nice deal came about?

Yes. Thanks, Ren. So as we were thinking throughout 2025 and even late '24 in terms of capitalizing the company and funding the programs that we had ongoing. Both JAK2 and KAT6A programs made significant advances, and we were really anticipating that they would be moving into the IND-enabling phase in this calendar year, as well as the SMARCA2 program that was moving forward in the clinic. Obviously, companies of our size would always be looking at business development as one of the options to fund the really important programs. So we've been in discussions with several companies for both KAT6A and all the programs. Incyte is a leader in the MPN space. There were several other companies that were very interested in the program as well. At the end of the day, when we looked at all the options that the company had, the option agreement with Incyte was, we believe, the best option to not only bring the capital that we need into the company, but also put the program in the hands of a company for whom it is fundamentally a core strategic area. They would move aggressively through the clinical development and also commercialize the product if we're fortunate to get to that point. We're excited to be working with Incyte in moving this program forward. With regard to your other question about their own program, we really don't have visibility into that. However, we hope that our novel chemical space that our scientists discovered to create our molecules would find a place ultimately in patients' hands and the market. Thank you, everyone, for your time, and have a great day.

This concludes today's conference call. Thank you for participating. You may now disconnect.