Scholar Rock Holding Corporation (SRRK) Q2 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Scholar Rock Management Intro and Second Quarter 2020 Financial Results and Business Progress Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, to Catherine Hu, Vice President, Investor Relations and Corporate Communications. Thank you. Please go ahead.

Good morning, and thank you for joining us on today's call to provide an update on second quarter 2020 financial results as well as an introduction to our newly appointed President and CEO, Tony Kingsley; and CFO and Head of Business Operations; Ted Myles. Yung Chyung, our Chief Medical Officer, will also be joining Tony and Ted on today's call. The webcast slides for this call can be accessed on the Events and Presentations section of the Investor Relations page on the Scholar Rock website. Before I turn it over to Tony, I wanted to note that during today's call, we will be making various statements about Scholar Rock's future expectations, plans and prospects that constitute forward-looking statements. For the purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Scholar Rock's actual results may differ materially from those indicated by any forward-looking statements as a result of various important factors, or fully discussed in the section entitled Risk Factors in our quarterly report on Form 10-Q as well as other important factors in Scholar Rock's future filings with the Securities and Exchange Commission. Any forward-looking statements represent our views only as of today and should not be relied upon as representing our views as of any future date. We disclaim any obligation to update any forward-looking statements unless required by law. Thank you and I will now turn the call over to Tony.

Thank you, Catherine, and thank you, everyone, for joining us this morning. Scholar Rock is at an inflection point. The company's science is beginning to prove its potential clinical utility, our programs are moving quickly toward multiple data readouts, and the company has new leadership to take it to the next phase. Let me tell you a little about myself and why I have joined Scholar Rock at this time. As described on Slide 3, I was most recently President and CEO of Taris Bio, a development stage oncology company, that was acquired by Janssen Pharmaceuticals at the end of 2019. Before Taris, I served as President and COO of the Medicines Company, and prior to that, I headed commercial operations at Biogen. I bring extensive experience in later-stage drug development and commercialization, both of which are rapidly becoming critical to Scholar Rock's success. And I have provided both strategic and operational leadership to life sciences companies in times of great transition and growth. That is the profile that the Scholar Rock Board was seeking to replace our founding CEO, Nagesh. This was a very planned and purposeful transition, and it signals confidence in the future. The fact that I was able to bring on Ted Myles as our CFO and Head of Business Operations almost immediately should also signal to you that this transition is about building for success. Ted has served on our Board for nearly 2 years, and knows the company well. You will hear from Ted shortly. Now let me describe what drew me to Scholar Rock: powerful science, great programs and talented people. I've been impressed with the level of execution and collaboration and commitment to take on tough targets as we work towards the goal of changing medical practice and helping patients suffering from cancer and neuromuscular disease. My conviction on the scientific platform and programs has only increased as I fully immersed into the culture of the company. Now going to Slide 4 in our presentation. My top three takeaways are: first, the scientific platform has produced multiple programs with significant therapeutic potential. Our two most advanced programs, SRK-015 and SRK-181 are advancing quickly, and both address markets that are well-developed and growing very rapidly. There are multiple programs at multiple milestones, and that offers near and long-term value inflection points as well as significant strategic optionality. I can clearly see Scholar Rock's growth potential. The science is highly differentiated. The clinical programs are well-designed. And as you will see on Slide 5, we are moving quickly toward multiple milestones over the next 12 months that will elucidate each program's potential to help patients with serious diseases. I believe this slide captures the breadth and depth of our pipeline and demonstrates the power and productivity of our scientific platform and our talented scientists. It also illustrates the key factors that drove my decision to join Scholar Rock. To start with SRK-015 in spinal muscular atrophy, or SMA, we will be reporting interim results from the ongoing TOPAZ Phase II trial in the fourth quarter, followed by 12-month data in the first half of 2021. Our goal here is to establish SRK-015 as the first muscle-directed therapy for patients affected by SMA. Next we're making rapid progress in building momentum on the DRAGON Phase I trial for SRK-181, a potential therapeutic backbone to cancer immunotherapy. We are advancing to Part A2 of the study this quarter to evaluate SRK-11 in combination with checkpoint inhibitors, and we'll provide an update on dose escalation in the next quarter. We believe we have the power to unlock the key to unlock the better of checkpoint inhibitors. We are the first and only company to specifically target the TGFß1 isoform, which we believe has the potential to improve efficacy while minimizing the risk of adverse events. We believe that SRK-181 has an immense potential to increase response rates to checkpoint inhibitors and change medical care for cancer patients across multiple solid tumor types. In addition to these two clinical assets, there are many potential opportunities for us to extend our science, whether it's additional indications, additional tumor types or treatment settings, or additional growth factors started. And furthermore, we have an important partnership with Gilead around fibrosis, which continues to progress well. This collaboration is another proof point on the attractiveness of our platform and our approach. So with that, I will turn it over to Yung Chyung, our Chief Medical Officer. Yung?

Thanks, Tony. I want to extend another warm welcome to you and Ted. Thanks to everyone for joining us on this call today, I'm very excited to provide an update on the great progress we are making across all of our development programs. First, I want to say how proud I am of the team's dedication and commitment to advancing our clinical programs and how appreciative we are of the high level of engagement from our clinical trial investigators and study sites despite the challenges of the ongoing COVID-19 pandemic. We continue to make great strides towards important readouts for both the SRK-015 and SRK-181 program. Starting with our most advanced product candidate, SRK-015, which is a fully human monoclonal antibody and a highly specific inhibitor of the activation of pro and latent myostatin. Our goal is to establish SRK-015 as the potential first muscle-directed therapy to promote a clinically meaningful increase in motor function for patients with SMA. As outlined on Slide seven, we view the SMA treatment landscape as being classified into two distinct but complementary therapeutic strategies, SMN upregulator therapies and muscle-directed therapies. Over the past few years, there have been advances in the development of SMN upregulator therapies, also known as SMN corrector therapies, which are aimed at addressing the SMN deficiency in order to prevent further motor neuron deterioration. While the advent of such therapies represents important progress, the primary benefit of such an approach appears to be to stabilize once disease course. Even with early invention, individuals continue to have motor function impairment as complete correction of the disease manifestations is unlikely. Therefore, we believe that a second category of therapies, namely muscle-directed therapy, is needed to aim at driving absolute improvements in motor function. This need for therapeutic advances to go beyond SMN upregulators is highlighted by data from the Phase III CHERISH trial of nusinersen in later onset SMA, as shown on the right-hand side of the slide. Patients treated with nusinersen for 15 months experienced a mean improvement from their baseline of 3.9 points on the expanded Hammersmith Functional Motor Scale, or HFMSE, as shown in green. While this result is certainly viewed as clinically meaningful, there is still significant room for improvement in motor function as depicted by the gray gradient area. Taking a deeper look at the CHERISH trial on Slide eight, it is evident that the improvements in Hammersmith scores predominantly occurred in patients who were treated at a very young age. In contrast, patients who were aged five and older at the time of nusinersen initiation appear to primarily experience a stabilization, with less than 15% able to achieve at least a 3-point improvement, even with 15 months of nusinersen treatment. A 3-point improvement in the Hammersmith score in a given patient is widely considered to be clinically meaningful and a very favorable patient outcome as compared to the usual course of disease. A similar phenomenon of motor function stabilization was observed in the SUNFISH trial of risdiplam in patients with Type 2 or non-ambulatory Type 3 SMA between the ages of 2 and 25, as shown on the right-hand side of the slide. The primary endpoint in this trial use a different motor function scale, the MFM32 score, over 12 months of treatment. While this primary endpoint was met, most patients over the age of five did not obtain a 3-point improvement. This motor function stabilization phenomenon was also observed across all patients in the SUNFISH trial in the HFMSE secondary endpoint, which showed a mean 0.58 point improvement over placebo, which was not statistically significant. To reiterate, SMN upregulators represent an important advance in the treatment of SMA as these agents prevent further motor neuron deterioration and stabilize the disease course. Now the stage is set for the next era of SMA drug development that seeks to drive motor function improvements. Towards this vision, we believe SRK-015 has the potential to be the first muscle-directed therapy in SMA and potentially become the backbone of treatment to any SMN upregulator. With that as a backdrop, let's now turn our attention to SRK-015 and the ongoing TOPAZ Phase II trial. We have made substantial progress on the path towards investigating the therapeutic potential of SRK-015, as outlined on Slide 9. We have formulated a strong translational rationale for investigating myostatin blockade in SMA. We have demonstrated therapeutic effect preclinically in the SMN Delta 7 Mouse model. We have completed a Phase I trial in adult healthy volunteers that showed initial safety; a PK profile that supports the every-4-week dosing regimen we are evaluating in the TOPAZ trial; and importantly, PD data that confirm robust engagement of the target of SRK-015, the latent form of myostatin. Preliminary TD data from the TOPAZ trial demonstrated this target engagement in patients with SMA as well. We are far along on the development path for SRK-015 and look forward to the interim efficacy and safety analysis expected in the fourth quarter. Turning to Slide 10 to review the TOPAZ trial design. This Phase II study consists of 3 parallel cohorts, each evaluating a distinct subpopulation of patients with Type 2 and Type 3 SMA. At the beginning of this year, we completed enrollment of a total of 58 patients in the U.S. and Europe. More specifically, Cohort 1 enrolled 23 patients with ambulatory Type 3 SMA between the ages of 5 and 21. These patients are either treated with SRK-015 as a monotherapy or in conjunction with an approved SMN upregulator. Cohort 2 enrolled 15 patients with Type 2 or non-ambulatory Type 3 SMA, also between the ages of 5 and 21, and all patients are treated with SRK-015, in conjunction with an approved SMN upregulator. Cohort 3 enrolled 20 patients with Type 2 SMA, aged 2 and older, and who had initiated treatment with an approved SMN upregulator before 5 years of age. All patients of the study received IV SRK-015 dosed every 4 weeks for 12 months. The primary efficacy endpoint planned to be evaluated in the TOPAZ study are the expanded Hammersmith Functional Motor Scale, or HFMSE in short, for non-ambulatory SMA, and the Revised Hammersmith Scale, or RHS in short, for ambulatory SMA. The HFMSE is a validated outcome measure specifically designed for SMA, is often used in clinical practice and clinical research, and served as the primary efficacy endpoint previously used in the Phase III CHERISH trial of nusinersen. The RHS is very similar to the HFMSE, with some modifications to tailor the assessments to patients who are ambulatory. Let's now walk through our expectations for the 6-month interim analysis, which we expect to receive and disclose in the fourth quarter of this year. We are planning for a robust readout looking across efficacy and safety endpoints. Starting with Cohort 1 on Slide 11. We will be looking at the mean change from baseline in Revised Hammersmith Scale to evaluate if SRK-015 treatment can indeed lead to absolute improvements in motor function over baseline rather than merely just stabilization. We will also evaluate the proportion of individual patients to achieve at least a 3-point improvement in RHS over baseline. To reiterate, a 3-point improvement in a given patient would be unexpected in most patients and is also widely considered to be clinically meaningful. In addition to RHS, we will also be looking at timed motor tests, such as the 6-minute walk test, and 10-meter walk and run, and timed rise from floor. While our base assumption is that SMN correction through an SMN upregulator will be necessary to complement the effect of SRK-015 in this patient population, it would be interesting to see if SRK-015 monotherapy may have any impact. For Cohort 2, we will be looking at the mean change from baseline in HFMSE, and we'll also evaluate the proportion of individual patients retain at least a 3-point improvement in HFMSE over baseline. We will be evaluating additional outcomes, including revised upper limb module, or RULM in short, and the World Health Organization motor development milestones. Cohort 3 enrolled a younger patient population to investigate the potential benefit of SRK-015 in patients who were initiated on nusinersen before the age of 5. We're also conducting dose exploration in this cohort by seeing if a lower dose may still offer meaningful efficacy. We will be looking to see a treatment can lead to a substantial improvement in HFMSE. In addition, we will be exploring for potential differentiation of therapeutic effect between the 2 dose arms, such as the time course in onset of therapeutic effect. Additionally, patients will be evaluated on the RULM and WHO motor developmental milestones. While we are enthusiastic about SRK-015's potential in all 3 cohorts, we should note that each of the 3 cohorts evaluates a different SMA subpopulation, which there are a sizable number of patients and there is high unmet medical need. The demonstration of proof-of-concept for any 1 of these 3 cohorts would, therefore, be an important result to us and would also encourage us to broaden the subsequent investigation of SRK-015 to a broader population of patients, whether via wider age range or in combination with any approved SMN upregulator. In addition, a successful proof-of-concept result in Cohort 3 would encourage us to further evaluate SRK-015 therapeutic potential in the early intervention setting, such as patients with Type 1, SMA or presymptomatic individuals. Furthermore, we believe that a positive efficacy outcome across any of the 3 cohorts would validate the motor function building hypothesis of SRK-015 and support the investigation of SRK-015's therapeutic potential in other neuromuscular disorders for which fast-twitch fiber deficits play a key role. Before turning to SRK-181, I just want to remind everyone that while all patients receive active treatment with SRK-015 in the TOPAZ trial, we are firewalled from the efficacy data. We are eager to see the interim results and look forward to sharing the data with you in the fourth quarter. As a final note, as of August 1, of the 8 patients who have completed the entire 12-month treatment, all 8 have elected to enroll in the voluntary 12-month extension study. Now let's discuss SRK-181, our highly selective inhibitor of TGFß1, which we believe has the potential to increase response to checkpoint inhibitor therapies and may be the backbone of a new era of cancer immunotherapy. Turning to Slide 12. While checkpoint inhibitors have revolutionized the treatment of a wide range of cancers, this therapeutic approach is only effective in approximately 20% of patients. So the central question in immuno-oncology is, what is driving the lack of response to checkpoint inhibitors in most patients? As highlighted on Slide 13, the science in this arena is moving fast and evidence is mounting that implicates TGFß1 as a key culprit in driving primary resistance to anti-PD1 and anti-PDL1 therapy. For example, a similar observation was made by researchers at Genentech that identified an association between increased TGFß1 levels in signaling well-known tumors and the lack of response to checkpoint inhibitor therapy as well as reduced survival outcomes in patients with urothelial carcinoma. Mechanistically, tumors with an immune excluded phenotype, that is to say, tumors in which T cells accumulate around the peripheral nerve tumor but failed to effectively infiltrate into the tumor fragment have been observed to be less likely to respond to checkpoint inhibitor therapy. And TGFß has been implicated in driving this immune excluded phenomenon. These emerging insights have captured the attention of industry. Just last year, GSK and Merck KGaA announced a global alliance to jointly develop and commercialize a bispecific molecule that targets both TGFß and anti-PDL1 -- or and PDL1. And Merck acquired Tilos Therapeutics to develop antibodies that modulate TGFß. As detailed on Slide 14, the therapeutic potential of blocking TGFß towards an aim of overcoming checkpoint inhibitor resistance may be broad across many different types of cancer. Earlier this year, a publication immunity delineated that a substantial proportion of solid tumors exhibit an immune excluded phenotype. And we, ourselves, conducted analysis of human tumors through the TCGA database, and found that the TGFß1 isoform was the predominant isoform in most solid tumors. So an exciting therapeutic hypothesis has now emerged. Blockade of TGFß, particularly TGFß1, has the potential to overcome checkpoint inhibitor resistance. And thus, this combination therapy approach has the potential to substantially increase the response rates to immunotherapy. Turning to Slide 15. There are several approaches to targeting TGFß, whether through a ligand trap, bispecific or through nonselective antibodies or small molecules. We believe SRK-181 offers a unique and potentially optimal approach to targeting the TGFß1 pathway. SRK-181 is a fully human monoclonal antibody designed to bind to and for the activation of latent TGFß1 with minimal or no binding to the latent TGFß2 and latent TGFß3 isoform. Because of its selectivity for the TGFß1 isoform, SRK-181 may offer the potential to increase the therapeutic window by avoiding toxicities associated with nonselective TGFß inhibition. In addition, we view having an anti-TGFß1 agent as a distinct molecule rather than be physically linked with a checkpoint inhibitor, potentially could offer advantages over bispecific approaches by enabling pairing of SRK-181 with a checkpoint inhibitor that may be more aptly suited for a given tumor indications as well as enabling the optimization of dosage for each individual component of the combination therapy. Turning to Slide 16. The rationale for investigating SRK-181 therapeutic potential in immuno-oncology is strong. The body of evidence implicating TGFß1's pivotal role in checkpoint inhibitor resistance continues to grow. Momentum in the scientific field is accelerating, and we believe that our SRK-181 program is well positioned to pursue and investigate this exciting hypothesis. There is a selective inhibition of the TGFß1 pathway, SRK-181 offers the potential to overcome the toxicity associated with nonselective inhibition of TGFß, and therefore, the potential for a greater therapeutic window to permit more robust dosing against those targets. And preclinically, we have observed the inhibition of the TGFß1 pathway in combination with anti-PD1 therapy leads to significant antitumor responses in multiple mouse tumor models. Now let's turn to the DRAGON Phase I trial on Slide 17. We commenced dosing in this trial in the second quarter and are encouraged by the engagement of the trial investigators and the pace of the trial progression, particularly against the backdrop of the COVID-19 pandemic. Let's walk through some of the highlights of the DRAGON trial design, which drew upon significant input from oncology thought leaders and clinical trialists, and which offers the potential for early and frequent efficacy and safety readouts. The trial is enrolling patients with locally advanced or metastatic solid tumors, and is comprised of 2 parts. The part A dose escalation portion of the trial will evaluate SRK-181 as a monotherapy as well as in combination with anti-PD-1 or anti PD-L1 therapy. The part B dose expansion portion of the trial will evaluate the antitumor activity of SRK-181 in combination with anti-PD1 or anti-PDL1 therapy in 4 parallel tumor cords. Slide 18 provides a more detailed look at Part A of the DRAGON trial. We have been advancing dose escalation of SRK-181 as a single agent in part A1 of the trial. As Part A1 and Part A2 of the trial are designed to progress in a staggered fashion, we expect to initiate Part A2 of the trial this quarter to evaluate SRK-181 in combination with anti-PD1 or anti-PDL1 therapy. Part A2 will follow a 3 plus 3 dose escalation design. While the primary focus of this portion of the study is on evaluating the safety of SRK-181, there is a potential for observing early efficacy single. To illustrate, each enrolled patient will have to have a documented history of checkpoint inhibitor resistance, defined by a lack of response at any time to anti-PD1 or anti-PDL1 therapy. If a given patient goes on to subsequently have an antitumor response upon combination treatment with SRK-181, that result would not be consistent with the expected clinical course and could be attributed to the addition of SRK-181. As a result, we could potentially observe efficacy signals even with relatively small patient numbers. Moving to Part B of the DRAGON trial on Slide 19. This will consist of 4 parallel cohorts, each enrolling up to 40 patients with primary resistance to checkpoint inhibitors to evaluate the therapeutic potential of SRK-181 in combination with anti-PD1 or anti-PDL1 therapy across multiple solid tumor types. For non-small cell lung cancer and urothelial carcinoma, we will be enrolling patients who have demonstrated primary resistance to pembrolizumab. And for melanoma, we are planning to enroll patients who have shown primary resistance to either pembrolizumab or nivolumab. Again, if we observe antitumor responses following combination treatment with SRK-181, then we believe the therapeutic effect may be attributable through the addition of SRK 181. We believe this Part B design allows potential for a rapid path to proof-of-concept with multiple opportunities for efficacy signals across multiple tumor types. Given the high unmet need in the context of patients with primary resistance to checkpoint inhibitors, a strong proof-of-concept signal could also support an efficient drug development path towards the longer-range goal of registration. We are pleased with the progress to date in this trial. Despite the impacts of the ongoing COVID-19 pandemic, we are moving expeditiously. We plan to provide an update on dose escalation progress in the fourth quarter this year and are planning to initiate Part B in the first quarter of 2021, with antitumor efficacy and safety data expected started in 2020, starting in 2021. Before I turn it over to Ted, I want to thank the team, our study investigators and site staff, as well as all the patients participating in our clinical trials. Together, I hope we can work towards achieving our aspiration of transforming medical care for individuals suffering from SMA and cancer. Ted?

Thank you, Yung. Like Tony, I'll start by describing why I made the decision to join Scholar Rock. This is a dynamic time for Scholar Rock. The company is growing and advancing quickly, and we are just months away from some important clinical data readouts, which, if positive, could lead us to potentially initiating a registrational trial as early as next year, subject to feedback from regulatory authorities. I'm excited to apply my expertise as a senior financial and operational executive at late-stage clinical and commercial stage biopharmaceutical companies to Scholar Rock as we advance our important clinical programs. Ultimately, the goal is to commercialize our therapies so that we can help the broadest set of patients in need. I look forward to partnering with Tony, Yung and the rest of the executive team to begin the long-range strategic planning necessary to execute our ambitious plans. Furthermore, I had the honor of serving on Scholar Rock's Board of Directors for nearly two years before joining as CFO and Head of Business Operations last month. This gave me a clear view into the many accomplishments of the company and is also why I have a high degree of confidence in the scientific platform, the clinical programs and the team's ability to execute. Now let's turn to Slide 21 to highlight second quarter GAAP financial results. Revenue in the quarter was approximately $4 million and was exclusively related to the Gilead collaboration. R&D expense was approximately $17 million in the second quarter compared to $14 million in the prior year quarter. The year-over-year increase can be attributed to the ongoing TOPAZ SRK-015 trial, a payment to Specifica for the delivery and acceptance of a customized antibody display library, as well as higher personnel-related costs. G&A expense was approximately $6 million compared to just about $5 million for the year-ago quarter. This year-over-year increase was primarily the result of personnel-related costs and professional services. Net loss for the quarter was about $19 million, for a net loss of $0.65 per share. This compares to a net loss of $12.5 million or $0.48 per share for the quarter a year ago. To summarize, our spending for the second quarter and the first half of 2020 was aligned with our plan and is focused on advancing our clinical development programs, investing on our research and discovery platform with ambitious with ambitions to generate many more clinical stage products in the future, and investing in G&A capabilities that can support our expanding R&D infrastructure. As of June 30, 2020, we had cash and cash equivalents and marketable securities of approximately $141 million versus $157 million at the end of 2019. Our current operational plan points to a runway that extends into the fourth quarter of 2021. To wrap up my comments, we believe that we have a productive scientific platform, and we'll continue to invest our drug discovery efforts to feed the pipeline. We have two ongoing clinical trials. SRK is on the cusp of important value-creating milestones. SRK-181 is moving quickly towards clinical data, as well as we believe it has immense potential to change the treatment landscape for cancer patients. And on top of these clinical programs, we have a lot of optionality in terms of next indications. Simply, there is a lot going on and many great programs for us to invest in. Now I'll turn it back to Tony for some closing remarks. Tony?

Thank you, Ted. To close, I want to say how impressed I am with the progress the company has made, especially against the backdrop of this ongoing pandemic. Coming back to Slide 22, the next six quarters are filled with a number of important R&D milestones that will continue to elucidate the potential of our programs and our scientific platform. We are very much looking forward to providing updates from both SRK-015 and SRK-181 in the fourth quarter. And based on our achievements with our scientific platform, I'm confident that we can take on some of the toughest targets of medicines so that more patients get benefit. I want to thank my colleagues with their hard work and dedication to the many patients who are awaiting our therapies. And I also want to thank our shareholders for their support and time this morning. I think we can now turn to Q&A, operator.

Thank you, sir. [Operator Instructions] I show our first question comes from the line of Michael Yee from Jefferies. Please go ahead.

Hi good morning, thanks guys and congrats, Tony, on the new role. Looking forward to this. Maybe two questions for Yung. On 015, you might think that Cohort 3 would be the group you could see the greatest effect given the most youngest patients. But in that group, you also see a lot of improvement with Spinraza in the CHERISH study. So maybe you could just delineate how you think about a 3-point improvement in Cohort 3 versus Cohort 1 and 2? In other words, how do you delineate your expectations between those groups? And then on 181 and TGFß, are you expecting you could actually see responses even at low doses and dose escalation in data that we're going to see later this year? Thank you so much.

Hi, Mike, yes. So starting with your first question about thinking about discerning efficacy in the context of the various cohorts, yes, so for Cohorts 1 and 2, certainly, patients aged five and older -- or started nusinersen age five and older, the primary evidence indicates that the background expectation would be that it's disease stabilization, right? Motor function stabilization rather than absolute gains. So what we're going to look for there is for mean change from baseline that indicate an absolute improvement in motor function rather than a zero-point change in that context. But the key analysis there will be to see what proportion of patients achieve at least a 3-point improvement from baseline given that data from the Phase III trials in nusinersen as well as now risdiplam, so it's rare to see individual patients achieve a sizable improvement, such as less than 15% in the CHERISH trial. So we would think it would be exciting if a substantial proportion of patients in SRK-015 achieve a 3-point or greater improvement from baseline. That would be consistent in an otherwise expected course. Now for Cohort 3, as you point out, patients who are started on nusinersen at age -- young age, i.e. before the age of 5, they do see some improvements over baseline. It's not just motor function stabilization. So what we're looking for there is to see substantial improvements in motor function, above what you might generally observe with nusinersen, both in terms of the amount as well as over time, right, because there's data now indicating just the directive of what that curve looks like in terms of an improvement on nusinersen. It's not like this dramatic improvement, like that just because it's very rapid, there's a steady improvement so you can just track on that. And in addition, a key part of this Cohort 3 analysis is we're doing some dose exploration, right? We're looking to see if a dose, low-dose arm may offer efficacy too as well as the high-dose arm. And then we'll see if there's any differentiation between the 2 arms, such as in the time course of effect, which can inform the dosing strategy in the future. And then finally, we're going to look for effects upon other outcome measures such as the revised upper limb module and the WHO motor milestone. As a reminder, on the WHO motor milestone side, that's a very high bar to see efficacy. Even in the nusinersen CHERISH study, they do not show a significant improvement in effects on WHO motor milestones, and approximately only 20% achieved 1 milestone gain. So I think there's a variety of different ways in Cohort 3 to evaluate for therapeutic effects from SRK-015 on top of nusinersen. With regards to your question, Mike, about looking for efficacy in the context of dose escalation, I think our base assumption is that it's really Part B where we're really going to explore for the efficacy potential of combining SRK-181 with checkpoint inhibitors. The advantage there is we're looking at multiple different tumor types with sizable numbers. We're looking at a population where patients have experienced primary checkpoint inhibitor resistance. So now in combination, if you start seeing efficacy, even relatively small numbers, it's exciting, right? Because each patient would not be expected to otherwise have a clinical response given the prior history of checkpoint inhibitor resistance. So we'd be excited from that. Now with Part A, yes, I mean, we are going to look and explore for potential efficacy. This would be more of an upside pleasant surprise. I think, but the advantage is we do have the opportunity to take a look to see if it's possible, right, because like in Part A2, the study population there are patients who tried checkpoint inhibitor, didn't have a response, and now we can see what happens in combination. But again, our base expectation is really Part B is where we're going to look for efficacy signals. But again, as you know, in oncology, we're just going to continue to track and see what happens in dose escalation.

Our next question comes from Do Kim from BMO Capital.

This is Jameson on for Do. Two on 181 from us. First one for Yung. Could you elaborate a little bit more on expectations for us on that data that will be presented by year-end? The amount of patients, type of biomarkers and how we should interpret that as a potential read-through for the full readout in 2021? And then the second question for Tony maybe. Given that the 181 study is targeting a wide variety of tumor types, significantly large opportunity in that checkpoint-resistant market, could you tell us your thoughts on the commercial strategy and how you see the program being developed going forward?

Yes. So for the first question on the update on dose escalation. So yes, so in the fourth quarter, we're anticipating for any update on progress in dose escalation. So in other words, how far along we've gotten in the dose escalation process. And obviously, that will include making sure that there's no major safety signals that would limit dosing. In terms of, one thing I should point out is we do anticipate, given the progress we've been observing to date, that we will be starting the combo dose escalation, Part A2 this quarter. Part A1 and A2, as a reminder, are staggered. And so we anticipate providing some updates of where we stand at dose escalation in fourth quarter, heading towards a goal of initiating Part B in the first quarter of next year with expectations of seeing, sort of seeing clinical response and safety data in 2021.

Thanks, James. This Is Tony. So on commercial strategy, I mean, look, let's be clear, task 1 is the DRAGON trial and what's ahead of us. We need to prove the case here. Having said that, our thinking is that this drug, if it performs as we think it could, could be a backbone therapy. There's reasonable, you could use it across multiple checkpoint inhibitors. We'll obviously be exploring and use it across multiple tumor types. So that's an exciting set of possibilities. You could start to imagine things like you start in primary resistance. Is there a chance to expand the checkpoint, et cetera, continue to add things across different tumor types. So there's potentially a big, exciting development plan here with a really exciting kind of set of commercial possibilities attached to that. But job one is to get DRAGON done and start to get some of this efficacy. But we're thinking about it in a very big way.

Our next question comes from the line of Madhu Kumar from Baird.

So we'll start with the kind of big picture question about SRK-181. So you have these, you got the dose escalation and the dose expansion cohorts. So kind of the big question to Tony is, how far do you go with 181 on your own versus kind of looking for a collaboration or a partner to kind of more broadly really test this drug in the TGFß inhibition in a kind of broader array of I-O combination studies?

Yes. Thank you. Good question. So look, oncology is a big space. And as I just laid out, there's a potential for this to be a very big drug with a lot of ways to take it in clinical development. We would certainly be open to partnering in development on the product as I think more naturally would be, given the potential size of this and how big and committed the oncology space is. Look, it's all a question of timing, obviously, which is you want to engage in those discussions from a position of strength. I think we have a task ahead of us, and we have some funds to do it to add some value and get some proof of concept. So we'll certainly consider partnering. And a lot of people, it's interesting. This is, there are a lot of big players in this space and a lot of people interested in what we're doing because it can be enabling to the whole checkpoint effort. So very open to that, but the question is the right time. I think our first task at hand is to generate some more data and strengthen our hand.

And then more micro question on 181. So to go to Part A2 this quarter, is that decision based on kind of just safety data you've seen from the amount of therapy dose escalation? Is it based upon safety and PK data? It's kind of like you reached a PK where you think you're starting to see drug exposures that you, that will make sense to combine with PD1. Like can you kind of tease out what is the how to think about the dose escalation of A2 given what you might have now seen so far in A1 from DRAGON?

Yes. So just taking a step back, so I think the way we've designed and selected the doses was informed by where we believe, based upon modeling and the preclinical data, about where we anticipate the potential therapeutic effect range would be if our hypothesis is true, and then making sure that we had drug coverage above that just to provide us additional buffer, right? And so the way we approached it is, now, you're going through part A1, it's staggered in Part A2. We want to make sure that there's no dose toxicity challenges that would preclude us from escalation. So it's primarily a safety-driven decision-making process. And so then as you progress along, we'll be evaluating all these other parameters, of course, like PK as well as biomarker. But the primary thing in terms of making dose escalation decisions is driven by safety because we're trying to push the dose to get it as high as we can, because until proven otherwise, we want to carry the highest dose forward and make sure that we're well into the therapeutic range that we hypothesized could lead to the effects we hope to see.

Okay. And then in 015, in the healthy volunteer study, can you remind us, did healthy volunteers see muscle growth on myostatin inhibition therapy? Kind of if you think about the genetics of myostatin a lot, so did you see any change in muscle mass in those healthy volunteers?

The healthy volunteers? So our focus both for the Phase I trial as well Phase II is actually on motor function, particularly fast-twitch fiber function. So that wasn't a focus of ours. So I think the key thing here is, remember, as opposed to, say, rodents, humans have a much more mixed balance proportion of fast-twitch and slow-twitch fibers. And given that the myostatin has a preferential effect in fast-twitch fibers, you can imagine a muscle -- individual muscle, which is [indiscernible], can affect the fast-twitch fiber, but then there will no effect in the slow-twitch fibers, or minimal effect, it'd be harder to detect something. So yes, while there are folks who have focused on that, our focus is really on the fast-twitch fiber function. That really is why we're excited about the SMA hypothesis and the potential in SMA given the prominent contribution of fast-twitch fiber atrophy and fast-twitch fiber [indiscernible] and mechanism of action. That's why we think it really makes sense to evaluate SRK-015 to see if we can drive fast-twitch fiber function improvements that we will measure directly through the Hammersmith scale and other clinical meaningful outcome measures to see if our hypothesis is true.

Okay. And then one last one, about 015. So given the preclinical data you have, combining the SMA mouse models with an SMN modulator, do you think six months will be enough time from myostatin inhibition to improve motor function? And do you think you'll get greater improvements at 12 months versus six months? Like how are you thinking about the kinetics of myostatin inhibition improving motor function?

Yes. So this is a 12-month study, right? But with that said, it is quite biologically plausible and conceivable that we may see therapeutic effects at six months. And so given pre-clinic, we do observe effects in a short course of time with treatment, and so certainly, because of that, we want to investigate the potential that SRK may -- 015 may have benefits at the six-month time point. So that's why we're doing the internal analysis to see, do we see the effects at that time point. But as you point out, it is a 12-month study, so we intend to kind of carry it forward, too.

Thank you. Our next question comes from the line of David Nierengarten from Wedbush Securities. Please go ahead.

Hey thanks for taking the question. On the patients who have completed the 12-month treatment period for 015 in TOPAZ, could you tell us how many were monotherapy patients or in, I believe, that would be Cohort 1 and monotherapy?

Yes. So we haven't broken out just in terms of where those patients are. But I think at a high level, I think there have been 8 patients who have completed the 12-month treatment period. And all 8 have opted in to continue forward. Obviously, it's early in the rollover opportunities for extension, for [indiscernible] extension, but we certainly are encouraged that to-date, there continues to be good patient engagement as well as clinical trial investigator and site engagement across the whole study.

[Operator Instructions]. I show our next question comes from the line of Marc Frahm from Cowen and Company.

Congratulations on the new roles across the team. Maybe just focusing back on the DRAGON update, just to be clear here on what to expect. Is it going to be just focused on kind of enrollment status? Or are you also likely to share whatever data you do have already on, say, PD markers and those types of analysis as well.

So yes, so I assume you're referring to the fourth quarter update. Yes. So in terms of the fourth quarter, the primary focus is just to provide an update of where we stand in terms of justification, how far we've advanced both in our Part A1, Part A2. And obviously, as part of that, it would be, just to make sure that there's no major safety signals, right? And then as part of, as we continue to go through dose escalation, we do, we will look at PK. And we are exploring various biomarkers. And so certainly, we will be exploring that as well. Now in terms of when we might anticipate efficacy data. Our expectation is that, that's going to be more of a 2021 event. As we talked about earlier, our base assumption is that really Part B that will really interrogate efficacy. Now is there upside potential from the dose escalation? Sure. Yes. And certainly, we will be, we set up a study so that we have the potential to detect an early efficacy signal. But our base assumption is that, really, it's part B that we'll be looking for the efficacy. And that's it. Yes.

Okay. Great. Very helpful. And then thinking about the TOPAZ update before the end of the year, I guess one of the therapeuticals you listed was having a substantial portion of patients get a 3-point increase on the various scales. I guess, can you give a little bit more granularity there as to what you'd define as substantial? I mean, are we talking 10%, 20% of patients getting that? Or are we talking about more like 50% plus getting to that level?

Yes. Yes. So I think, again, there's 2 ways we're looking at it, right, for both cohorts 1 and 2. One is looking for a mean change for baseline, right, given the natural history data that's available, the data for nusinersen of patients who are aged 5 and older at the time of initiation, and now, there's risdiplam data using a different endpoint with MFM32 as well as HFMSE, all consistent observation that patients who are started at nusinersen age 5 and older, the primary benefit is more motor function stabilization rather than absolute improvement. So our goal here is to see if we can have a mean change from baseline that shows absolute improvement, not just a 0-point stabilization. So we're really looking for that improvement. Now as you point out, there is a key analysis here, which is to look at what subset of patients or percentage of patients are able to achieve at least a 3-point improvement from baseline. And to provide a little more context around that, remember that from the CHERISH study, right, for patients who are starting nusinersen at the age of 5 and older, it was rare to see anyone achieve that. In fact, it was less than 15%. And so what we're looking for is a substantial proportion that's considerably north of that to, because we would believe that would be very exciting, right, because that would not be expected given the otherwise course of disease even in setting of nusinersen treatment.

I show no further questions in the queue at this time. I would like to turn the call over to Mr. Tony Kingsley, President and CEO, for closing comments.

Good. Thanks all for joining. Exciting science. We're moving fast. We've got a lot of data potentially coming out in the next quarters. So we're going to get back to work and pursue our destiny. Thank you guys for joining this morning. Look forward to following up with you.

Thank you, sir. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.