Conference Transcript - TTRX 2026-02-25

Leland Grishel, Analyst — Oppenheimer

Great. Thank you. And good morning, everyone. Welcome to our first session here at Oppenheimer's 36th Annual Healthcare Life Sciences Conference. I'm Leland Grishel, one of the biotech analysts with the team. We are delighted to have with us as our first presenting company, Tern Therapeutics. We have the company's CEO, Brad Burnham, as well as Chief Financial Officer, Zarez Chowdhury.

Bradley Burnham, CEO

Just to start us off here, I'm going to thank Oppenheimer for inviting us to TURN. I'm going to thank Leland for introducing us and then hearing himself again. I'm sure on Echo was interesting. And I'm sure he'll be back on to moderate. Joining me is Zurich Chaudhary, our CFO, arguably one of the most brilliant financial experts I know. And I'm Brad Burnham, CEO, founder of TURN Therapeutics. I'm also creator of the lead asset that we'll be spending some time

Leland Grishel, Analyst — Oppenheimer

talking about today. My apologies. I'm back. Somehow I must have had the webinar on the background. But it sounds like you're with it. So please go ahead. Sure. I already introduced

Bradley Burnham, CEO

myself and Zura. So I'll just keep going. At our core, Tern is a dermatology company focusing on inflammatory skin disease. Even more specifically, we're focusing on treating inflammatory skin disease where it happens, which is in the skin. We believe strongly that we can actually manage and treat these conditions locally using non-systemic topicals. We have a lot of experience in topicals. Work with the cytokines, work with the signals, a lot of the key upstream and downstream signals, but not necessarily have to subject or give the patient the only option of moving into systemics in the case of moderate to severe disease. We are focusing on moderate to severe eczema as our lead asset. We are mid-Phase II in a randomized clinical trial that I'll speak about later. And I'm looking forward to talking more about the company. We have a history in topicals. I actually was in the medical device field for about a decade as a rep myself. Suffered a hospital-acquired infection that landed me as a chronic wound care patient for about half a decade. Led me to want to innovate in the advanced wound care space initially, which is where the GX03 assets spent a little bit of time. Developed a delivery system that is a bit of the core, a lot of sort of the secret sauce of why we are powerful yet gentle, that is a first-of-its-kind mixture of liquid APIs suspended inside of an oil carrier without an emulsifier. So that's a lot of words. So I like to use the visual of blueberries suspended in a bowl of Jell-O. Our APIs are permanently suspended in those blueberries, and in an oil carrier we like to use petrolatum for the ointment without an emulsifier. So we can use a low weight overall for the formula, but still deliver a very high bioavailability. So our pipeline and lead asset, GX03, which I did just mention, spent a little bit of time in wound care, so it has a lengthy safety history, and we understand the formula very well. It's a really fun 2026 return. We've got a lot of exciting stuff going on. We're in the middle of a moderate to severe eczema trial. It's a very large phase 2, 114 to 120 patients, so we sometimes say a phase three sinus phase two uh we're expecting a moderate i'm sorry we're expecting our interim assessment and our final readout in q2 of 26 so there is some excitement coming up um we also have a phase three ready which we were planning to begin as early as q1 27 toenail fungus program also called onychomycosis and then some undisclosed candidates that we'll discuss later's potential pipeline so while the product spent a little bit of time in the wound care field, which I mentioned, I got some feedback from physicians who, anybody who's been in the commercial sales space knows that you should be listening to doctors when they come up with ideas of what you might want to work on with your technology. It received a lot of case studies, fanfare, feedback, and moderate to severe eczema, which made a little bit of sense to me on the skin basis because severe eczema at its core is disease that has, I'll call it, progressed to severe breech tissue. But important for me to understand why, I had to look into what is eczema. And this slide sort of developed over time. I think of eczema in the chronic inflammatory loop, I call it, as a bit like a dog chasing its tail. When the skin is disrupted, when the skin is colonized with staph aureus, which often happens in eczema when you're in cold weather and it cracks, when it's under distress and the barrier is under distress, it signals what's called IL-36, interleukin 36. It is quite literally the epithelial distress signal that comes off of the skin. Interestingly, it's also the only way we can actually measure epithelial distress in vivo. So that IL-36 signal starts the entire inflammatory cascade in the skin, and it actually leads to some signals that are probably quite familiar. After that, you get your Th2 differentiation, your IL-4, your IL-13. These are, of course, the signals that depict some hits. Obviously, there's a number of other signals in here. ultimately leading to interleukin-31, which is the itching, scratching signal that the body sends off, and that's the one that causes the most patient discomfort, but also causes the patient to scratch the barrier, cause distress again, which signals more IL-36. So, I had a theory that our formula was actually interrupting this IL-36, and I went about testing it. We developed an in vivo model using a Johns Hopkins-developed protocol where they connected this interleukin-36 to atopic dermatitis. We mimicked the exact same model. This is a very well-established, published model. And I wanted to see, in an IL-36-induced environment, if our formula could, in fact, have a clinical reduction in disease severity in atopic dermatitis. So we induced IL-36 using their model. We actually had a 57% reduction in the investigative global assessment over a seven-day treatment period, which was notable and obviously wanted to look into that a bit more. Beyond just having clinical effect, I wanted to know, are we signaling? Of course, knowing the mechanism of action is extremely important, not just to patients. It's extremely important to doctors, obviously very important to investors. We're all interested in certain signals on the market. We did a very large in vivo skin analysis. We looked at the protein expression in the scan. We did histology. Lots and lots of western blot analysis. And we did, in fact, confirm that we inhibit very strongly. This was simply with four days of pretreatment and then no follow-up treatment. We inhibit both alpha and gamma IL-36. And the reason why focusing on this is important is eczema tends to be alpha dominant. Psoriasis tends to be gamma dominant. I was not necessarily totally expecting both, but we were very happy to see both, and also upstream, a huge amount of inhibition in that patient quality of life signal, the IL-31 itching signal, then also some selective IL-4 signaling. So we have both upstream and downstream signaling via a topical. As far as safety, we ran a 53-patient RAPT trial, 48 hours of continuous exposure, then 24 hours of continuous exposure three times a week for three consecutive weeks. This is 53 patients over 580 applications, did not have a single adverse reaction of any kind. So as I mentioned before, we have a great deal of history of the safety of this formula. So a lot of predictability on how that's going to come out in the future, just because it's been on so many people already. And as you can see, we proved that out in this phase one. And this is that trial that is going on right now. So this is active. This is a fully capitalized trial this is uh we're expecting both the interim assessment and the top line data read out in q2 of 26 so they're going to come sort of close together because enrollment is going well and accelerating um we did an adaptive design whereby we wanted to make sure that the interim assessment committee which is an independent committee with its own charter with its own statistical analysis plan and its own statistician can add patients if it sees that there is a signal that sees that we are going to hit our endpoint, but it wants to clean it up. But as far as the endpoints, these are probably things everybody is used to in the atopic derm space. Change in eczema area severity index is the primary secondaries of change in investigative global assessment, as well as the all-important biological signal is the patient itching less, the change in the max itch. So I've been asked, where does this fit in the market? and I really love this slide because it makes you think about, you know, what are our current options at atopic dermatitis right now? And I actually had a dermatologist tell me we don't really have a first-line treatment at the moment that people love. I mean, it's steroids for the most part is typically the topical first line. Then we move into the JAK inhibitors and the PDE4s and some of those have efficacy, of course, but they tend to come with a lot of side effects and especially, you know, some of them even have black boxes on them or serious side effect boxes. And then you get into the injectable systemics. And it's a big, you know, it's a big commitment. It's a big leap to just jump directly to systemic. So our goal is literally to offer people a first-line treatment for eczema that is a topical, non-steroid, non-side effect, localized immunomodulator that treats the disease where it's happening without requiring you to have systemic, I'll call it product, all throughout your body. What is out there as far as topicals right now? We just mentioned the JAK inhibitors before. We have, you know, Vitama, which was a recent drug that came out. We have PDE4 inhibitors, things like Eukriza, and then, of course, we have steroids. So we don't have anything that I would call, you know, highly, just super safe that people love jumping on in the beginning, something that I say, you know, cool, I want to start are treated by eczema topically, and we hope that we can become that first-line treatment. As far as the market, we all know this is a huge market, and there's a high unmet need. A large portion of the population has eczema, and moderate to severe causes a lot of distress, so we're targeting the moderate to severe population. The other indication that doctors started giving us feedback about was toenail fungus or onychomycosis. We actually had a study published by one of the leading key opinion leaders in this field. His name is Dr. Dan Davis. He was president of the American Podiatric Medical Association, 100-patient clinical trial using the GX03 formula once or twice daily, and he had an unbelievable 70% efficacy with once daily application, 85% efficacy with BID applications. So if you're familiar with this market, you know that those are very large signals on the topical side. I went out to understand why it was working so well in his study. I like to know why, not just because. And the formula, because it's petrolatum-based, because it's lipid-based, and these tend to be lacquer or water-based, is in fact penetrating the nail. And we ran an established in vivo model where we inoculated a nail with fungus, and we wanted to see if we could penetrate and eliminate the fungus. and we did in fact become the first topical to actually successfully penetrate the noun and eliminate 12 to 18 percent of the fungus in just two weeks. These are the current topicals on the market. Penlac came out in the early 2000s, six and a half percent effective. Keridem was part of the Anacor acquisition. Jublia is the last of the branded topicals. It actually loses its patent in this year, 2026. None of these break 20 percent efficacy, so most people tend to jump on the systemic drugs, which we will talk about. In fact, only 15% of the affected population actually seeks assistance with their tonal fungus because they just don't like their options. They tend to end up on the oral Lamisil pill, which as most people know and a lot of people have been on, has a number of systemic side effects. So this total available market is a bit, i'll call it a subjective when you consider the fact that that few people actually go to the doctor and there's only one branded product left this is an unbelievably large market and the fact that we have so much predictive data as far as how it will work out we're excited about that phase three uh these two signals these two mechanisms of action these two uh inflammatory cytokines in the body obviously prime us for some other very interesting indications hydranita supertiva is one that i have a great deal of interest in because it's at its core it's an inflammatory skin disease that's you know triggered by a high amount of bile burden it's very similar to eczema in that sense and of course in the aisle 31 space chronic pruritus itching patient discomfort we think that we can help with that we have like i said an exciting year coming up we have our interim assessment and our top line readout as well as the initiation of the phase three in both onyco and eczema um our financial highlights we are a very low burn company we pride ourselves on that in fact because we outsource like choreographers we we like to utilize vendors as often as possible we like to keep our burn low it keeps us adaptive we've raised a lot less than most companies have thus far and built everything you've seen here we have over seven patent Patent families, 17-issue patents, everything from compositions and methods all the way through types of treatment, coverage in the U.S. and outside the U.S., and the last but not least, I think about this group of, I call them oracles around me that I've built over the years, and I occasionally put a pinch myself that I get to text message these people and ask them questions. I did not come from old school pharma, so I surrounded myself with just the absolute smartest people I could find. Those two in the upper left corner, Arthur and Andrew, Arthur Golden is the senior most M&A attorney at Davis Polk Wardwell. He's been sort of the leading M&A biotech lawyer of all time. He's been my mentor along with Andrew since 2019. Martin Dewhurst ran McKinsey Life Sciences Global. Ken Kester is the head of CEPI, Center for Epidemics Preparedness Institute. Even recently, we announced that we brought on Dr. Robert Redfield, the former CDC director. He's helping us with regulatory. He ran a regulatory agency that is a sister of the FDA, so we believe we have a lot of strategic work that we can do with him and a couple of our scientific advisors among many. And I'm just going to say thank you at this point and open it up for questions and hope that I gave Leland enough time left. Thanks so much, Brad. That was a great,

Leland Grishel, Analyst — Oppenheimer

great overview um i have a few questions here and so you know as as you run the phase two uh eczema study with gx03 um you know would you be able to help us frame you know what you see as a clinically and commercially meaningful outcome you know as you um contemplate itch um easi durability safety and and how that that you know that bar those bars compare to the systemic

Bradley Burnham, CEO

biologics that you're looking to displace um i i'm just actually going to jump in and just focus on the word displace for one second i don't necessarily think that anybody should go out there and say i'm going to replace dupixent i think that that would be that would be a bold statement i'm going to say that but i can say that we can be an adjunct to dupixent um or an option prior to jumping on dupixent because we are non-systemic so we'll begin with that i'm not correcting you i just i think that's an interesting point that we don't have to necessarily be used instead of we can be used as an adjunct to or as a loading therapy to that being said i do think that we will match the biologics in terms of efficacy on the skin and give people that option to actually use that if they don't want to make the leap now there's always going to be those people that don't want to use the topicals but when you think about that first line option especially in the pediatric population which i would love to explore it feels like this would be something that people would try before it becomes more of an overall severe problem throughout the body. Eczema typically is not all over the body. It starts in a place and spreads, and if you can treat it locally, you don't necessarily need to treat it systemically. So as far as answering your question, we expect to be equivalent to systemics in both EASI and itch.

Leland Grishel, Analyst — Oppenheimer

DR. terrific. And you have an interim assessment, just kind of putting the impact on the ultimate p-value there. You know, how is that designed? What can the committee, you know, sort of say there from, you know, from its recommendation and the outcomes? It would be great for you to share with us kind of more about, you know, the interim assessment overall for the study. Sure. A lot

Bradley Burnham, CEO

of people have probably heard the term interim analysis before, which is where you actually get sort of an answer to your trial ahead of time but at the same time you lose some of your p-value but there is this very interesting adaptive technique that the FDA is actually encouraging now where you have a whole separate statistician come in a whole separate charter and some independent people that literally sort of lock themselves behind the door they take a look at your data and they say okay you designed this study properly you were going to hit your end point and they give you three responses. The first one being, keep going. You don't need to add any more patients. You have the proper sample size. Now, with an indication like eczema, it does have a history of having a placebo effect. Even though I overpower this trial because I'm neurotic and I like to actually overpower trials, I wanted to give the interim committee the right to as much as double the sample size if they are seeing a strong likelihood that we will actually have a successful trial. So if they say no patients are needed the trial is designed properly a strong signal even with the initial sample size we are expecting that you will have a statistically significant positive result if they say keep going add a few more patients it's also a positive outcome either one of those things means that they're seeing the likelihood that we will see a successful trial but they might want a little bit more of statistical precision just to sort of clean up any noise that might be around the statistical significance and then there is the option of futility which stopped the trial everything is collapsing sort of on the mean and we are not seeing any likelihood

Leland Grishel, Analyst — Oppenheimer

that this will be successful yes this is the uh the so-called ssre that we've seen in uh in a few

Bradley Burnham, CEO

trials in um we don't lose any p-value which is a wonderful option i think people should be taking

Leland Grishel, Analyst — Oppenheimer

advantage of this as often as possible yeah yeah yeah yeah no it's uh it's a good feature to build in and so if we um you know if we see positive data mid-year uh in eczema you know how are you thinking about the phase three design and the cost for that study? And would you partner a rail license versus, you know, do that on your own? So I believe in always moving forward, no matter

Bradley Burnham, CEO

what. I think the people that stop and sort of put a for sale sign on their company are not doing their shareholders the best service because I believe biotechs get acquired, not sold. We are going to do everything that we can to get this product to patients as fast as possible. I think that a strong signal that is the fact that we just brought in a guy like Dr. Redfield to help us work with the FDA to try and, you know, get this to patients quickly. That being said, we are not averse to partnering this asset. We recognize that if a large pharma came along with a much bigger infrastructure that could get this to patients quicker, it would actually be a disservice not to. So, we are in a very strong position to keep pushing this forward. That being said, we're open to all options.

Leland Grishel, Analyst — Oppenheimer

Wonderful. Great. I don't see any questions in the queue here, so just want to thank you, Brad, and Zarez for joining us, and again, my apologies for the earlier IT glitch, but I think things have gone off otherwise without a hitch, and look forward to seeing everyone at one of our next sessions here at the conference.

Bradley Burnham, CEO

Thank you for moderating, thank you for the good questions, and thank you everybody who listened.

Leland Grishel, Analyst — Oppenheimer

Super, take care.