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…

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…

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…

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.…

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.